Foxtons : Jon Hunt
The Foxtons founder on building one of property’s biggest brands in the midst of a recession
“If you have the urge to do your own thing, then prevailing interest rates, stock market highs and lows, unemployment figures and housing statistics make not a jot of difference to whether your tiny insignificant company will succeed or not.”
When Jon Hunt opened his own estate agency during an economic slump in 1981 he knew it would involve working longer and selling harder than any other agency. It's this dogged attitude which has seen Foxtons survive the rise and fall of the London property market over the last three decades. Jon made his exit with impeccable timing, when he sold the business at the peak of the property market for a cool £390m in May 2007. However, the brand he created has had to weather controversy. But while undercover media reports into its practices may have tarnished the firm's reputation but it remains one of the biggest players in the market.
In 1981, aged 28, together with business partner and school friend Anthony Pelligrinelli, Jon set up a two-person estate agency in London's Notting Hill. Anthony stumped up the £30,000 cash required to run the business for the first year. They hired a secretary, set up an office in an old pasta bar and installed a phone line. They named the company after a village near Jon's Suffolk home.
With little to distinguish Foxtons from the countless competitors in the area, Jon decided to address one of the problematic issues he had with the estate agent Trade – the 40 hour week. Foxtons started opening 76 hours a week including Saturdays and Sundays, closing at 9pm. For the next eight years, Jon worked gruelling 12-hour days, but he was right on the money. The hours fitted with the demands of living and working in London. In fact, even today 40% of the company's viewings are carried out in the evening and at weekends.
“When Foxtons opened in 1981 I had no idea there was a recession going on” he says. ‘I didn't read the newspapers let alone the business pages. We worked 13 days in a row then had one day off.”
At the end of the first year, Foxtons sold a large land deal to Wimpey Homes, which generated a £20,000 fee. This gave the business enough cash to survive the following year, and meant Jon could try a rather radical marketing technique. He temporarily introduced a 0% commission fee, undercutting the competitors who were charging around 2.5%-3%. However, after a year of 0% commission, Jon changed tack completely, and began charging sellers a fee similar to, or higher than the rates his competitors were offering. He'd made a name for himself by charging no commission, and justified this U-turn by promising house sellers he would achieve a better price for their properties – up to 10% higher, in fact.
“We were not cheaper, in fact we were more expensive and we never ever negotiated on our fees,” says Jon. “We set out our stall and 99.9% of our customers were happy to pay our fees to sell their properties efficiently”. This was also the start of Foxton's often-quoted mantra, “our clients expect us to go to war for them”. To sell properties, Foxtons agents, encouraged by Jon, were expected to do whatever it took to get the business, and then sell the property.
As well as Jon's determination and strong work ethic, Foxtons' expansion can also be attributed to a post-recession boom in the UK property market. By the mid to late 1980s, property prices had surged, particularly in London and the south-east. However, the property crash of 1989 left estate agents around the country struggling to sell even their competitively priced properties. For Foxtons, which had focused mainly on residential sales to date, the property crash dealt the business a devastating blow and one that it was completely unprepared for. “During the August 1988-January 1994 recession, Foxtons had no significant lettings department and as a consequence, it barely hung on – we were close to going bust every day,” recalls Jon.
The experience prompted Jon to diversify. His instincts told him lettings would become an equally important arm of the business – so much so that if and when the next recession came, lettings would be able to pay for operating costs. He was right – lettings have boosted the business in the most recent recession to hit the UK.
Marketing prowess Foxtons was also one of the first agencies to really embrace the power of the internet. In 1999 the business invested heavily in its first website as a means of advertising and marketing the business, which Jon says has ‘paid dividends' over time. The 2001 launch of 800 Foxtons branded Minis onto the streets of London proved another massive marketing success for the company.
However in 2006, Foxtons featured alongside two other agents in an undercover BBC documentary that showed alleged underhand sales practices, including faking signatures on documents and footage of staff bragging about having misled clients. Although he admits the company has made mistakes Jon felt the programme was edited unfairly. It wasn't the first time, though, that the estate agent had courted controversy. In 2003, it was accused of destroying rival ‘For Sale' signs outside properties. Over the years, the media has dedicated many column inches to Foxtons' alleged indiscretions. Tales of their ruthless sales meetings are widely reported, but Jon insists they're one of the most successful motivational techniques the company employs.
“To say the lowest income producer gets fired each week is absurd,” says Jon. “Some of my negotiators banked more than £1m a year, in fact one individual banked £2m a year, having spent most weeks never doing a deal. However, most sales people love recognition and if you call out a good set of numbers, everyone is impressed.”
In November 2006, the estate agency hired Credit Suisse to prepare for a stock market listing, with a reported potential valuation of between £300m and £400m. However, there was massive interest from eager buyers and Jon eventually sold the business in May 2007 to BC Partners for £390m. At the time of the sale Jon still owned more than 97% of the business and is reported to have pocketed around £300m from the sale which took place less than a year before the credit crunch began to take its toll on the housing market.
Since Jon's departure, Foxtons has certainly felt the effects of the recession. In January 2009, it emerged the company had breached lending agreements with its banks and BC Partners has since publicly questioned its own decision to buy the firm. Meanwhile, Jon has spent the last year looking to return to the residential market where he made his name and fortune, this time with a foray into the serviced apartment industry. The recent property slump has done little to dampen his enthusiasm. In fact, he believes it has created the perfect time to find the right deals. “At the moment, it is a property man's dream, where you have cash in the pocket and a distressed market,” he argues. Perhaps another recession was exactly what he needed to inspire his next big idea.