Reffkin's advice to leaders: 'Focus on creating value for agents'
After a year of upheaval in the industry, the Compass CEO and co-founder aims to make the company cash flow positive and is leaning into culture and community.
- Reffkin’s top goals for Compass in 2023 are becoming free cash flow positive and helping agents grow their businesses.
- Compass was named a Fortune 500 company in 2022, becoming one of the youngest companies to make the list.
- "We’re an in-person business built on collaboration," said Reffkin, who believes a focus on community can be a competitive advantage.
Editor's note: Each year, the Swanepoel Power 200 recognizes the most powerful and influential leaders in residential real estate. In this series of SP 200 Inside Look interviews, we're diving deeper and learning about these top leaders' aspirations and accomplishments, and the opportunities they see in the year ahead.
The pandemic sent homebuyers and sellers scrambling to stage virtual showings and remove the human touch from the real estate journey. Compass CEO Robert Reffkin says that now is the time to reconnect.
"We're an in-person business built on collaboration, and Compass can be one of the leaders in showing other companies how to get back to what made us great before Covid," Reffkin said in an interview with Real Estate News about his strategy and focus in 2023.
"Reigniting culture and community" is a priority for the Compass founder, who was recently ranked No. 8 on the Swanepoel Power 200 list of the most influential people in real estate. Reffkin sees opportunities "to lean into culture and community as a competitive advantage. This is something I'm very excited about," he said.
But his first priority is creating value for agents and the company. His goal is for Compass to be "free cash flow positive for the full year," meaning that the publicly traded company is generating enough cash to support itself and reinvest in growth.
That has meant cost-cutting measures, including three rounds of layoffs starting in June 2022. Reffkin said he does not anticipate additional layoffs, and third-quarter earnings showed signs the company may be on track to get out of the red.
Compass also will be subleasing some of its expensive office space in Manhattan for more cost reductions as remote work has become the norm for many employees. "I would expect that a lot of companies are looking to do this, and if they aren't, they are missing an opportunity," he said.
A year of challenges and achievements
While 2022 was not the year that Compass or the industry wanted, Reffkin said he found a lot of value in approaching the shifting market through a problem-solving lens.
Despite the challenges of layoffs and profitably, Reffkin noted that Compass achieved "incredible things" in 2022: It became a Fortune 500 company, ranked No. 1 for closed sales volume, built an integrated tech platform, led in agent retention, and helped agents grow their businesses despite the downturn.
On that last point, Reffkin emphasized, "The sole purpose of a brokerage is to make its agents more successful. If a brokerage is not doing that then they don't deserve to exist. We've worked hard to create a mindset where agents don't work for Compass — we work for agents."
Innovations driven by — and for — agents
Many of Compass' investments, whether in technology or consumer specializations, help both the company and its agents — and are spearheaded by the agents themselves. Consumer programs include Compass Concierge, which covers the upfront costs for home improvements to yield a higher sales price, the company's Sports & Entertainment division and Compass Ranch & Land.
"The beauty of Compass is that all of our ideas come from agents," Reffkin said. "These are the types of services that brokerages need to provide to stay competitive. It goes beyond technology or brand; if you can't provide services that your agents need, you will be at a disadvantage."
One of those essential services is the company's agent platform, which cost nearly $1 billion. Reffkin noted that Compass is the first residential brokerage to build an integrated, end-to-end, cloud-based platform that allows agents to go from "first contact to close all in one place."
"The heavy investment phase of that platform is behind us and now our agents can reap the benefits of it while we continue to improve it over time," said Reffkin
Gaining credibility, creating value as a public company
Compass became publicly traded on the New York Stock Exchange in April 2021 when the market was still booming. Going public brought a new level of scrutiny from investors and required Compass to provide a higher degree of transparency, but Reffkin welcomed that openness.
"There are a lot of benefits to being a public company, and a main one is credibility," Reffkin said. "Investors are particularly interested in how we can continue to help agents grow their business, and some of their ideas have incredible potential."
As for the increased exposure Compass receives as a public company, Reffkin isn't concerned about potential naysayers, instead remaining focused on agent success.
"My advice to leaders in real estate would be to focus on creating value for agents," said Reffkin.
"Everything else is noise, and anything that is speculated about your company from those outside your company is most likely not fully informed. Markets change and opinions change, but value is long term," he said.