Allison James Business Plan Real Trends

8/2/2019 Allison James Business Plan Real Trends

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ALLISON JAMES ESTATES AND HOMES BUSINESS PLAN

I. Executive Summary

Allison James Estates and Homes is the leading virtual real estate brokerage in the country. Byproviding total backend support for both their Realtors and Brokers, without the financiallydraining costs of a brick and mortar operation, we give our Realtors superior support and theability to keep one-hundred percent of their commissions. The companys corporate office handlesall of these functions from a single location, with minimal staff, due to a proprietary backendsystem that was developed internally. In less than four years of operations, the company hasgrown to over five-hundred Realtors currently operating from thirteen states. The companysgoal is to leverage its platform and expertise across all states and potentially even internationally tobuild a world-class real estate organization. Allison James Estates and Homes is uniquelypositioned to be the leading player in the virtual real estate brokerage space a market segmentthat is still in its infancy but one which we expect will be embraced by a significant number of real

estate professionals in the near future.

Our Vision: To build one of the leading residential real estate brokerages in the country byliberating our Realtors, brokers, and customers from the old and tired model of brick andmortar offices with financially ruining overhead. Allison James Estates and Homesbelieves that with the right partners and management over the next decade they can grow toa minimum of 25,000 Realtors and to as many as 100,000 Realtors.

Our Mission: To build Allison James Estates and Homes into one of the leading real estatebrokerages in the country by providing todays professional Realtors with what they havealways wanted: the ability to run their business as theirbusiness with little interference

from the Broker, but complete support when it is requested and required.

Keys to Success: To treat the Realtor with respect and as the customer of the brokerage,and to deliver to the Realtor a superior support system that is there when they need orrequire it. We will accomplish this by continuing to provide our already proven businessmodel while giving the Realtor the opportunity to keep 100% of their own hard-earnedcommissions for a small monthly support and E&O fee.

The company is led by CEO James A. Crumbaugh III, COO Matthew R. Crumbaugh, andDirector of Realtor Relations Virginia Crumbaugh.

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II. Company Description

Created, organized, incorporated, and founded by James A. Crumbaugh III in the summerof 2007. Opened for business on January 3, 2008.

Company background: James A. Crumbaugh III, after operating and then selling a six-office Prudential franchise with 200 Realtors at the peak of the market, realized that thedays of the profitable brick and mortar operations was a thing of the past. Technology hasallowed all Realtors to act independently from the brokers office environment. ARealtor no longer needs the office fax, computer, phone system, or copier; most havehome offices with all these tools yet the typical brokerage remains stuck in the old model.Furthermore, Realtors can also get almost all of their training from their local Board ofRealtors and specialized training from dozens of venues. As a result, they feel cheatedthat a broker takes up to 50% of their commissions. As the virtual business model becomesmore accepted, we believe the brick and mortar operations (with the exception of specificlocations such as on the beach or a ski area, for example) will cease to exist. It is our belief

that this process will accelerate over the next decade. All Realtors know that any day ofthe week they can now find a company that will give them 100% of their commissions; asthey become comfortable with this business model, more and more will abandon the oldmodel and make the move.

Allison James Estates and Homes has found that our Realtors report that we have a bettersupport system than the brick and mortar environment that they came from. We take greatpride in delivering superior service to our Realtors. We believe that our approach ofhiring high-quality Realtors and providing them with superior service, while also givingthem 100% of their commissions, has set us apart from all the other companies in themarket. Due to this, yet despite our limited budget, we are having great success recruiting

from some of the largest and best-funded national brands; almost half of our Realtorscome from Keller Williams, followed by Re/Max, Prudential Real Estate Affiliates,Coldwell Banker, and CENTURY 21.

The Companys headquarters are located in Punta Gorda, FL. Brokers and sales associatesare currently licensed to operate in thirteen states: Arizona, California, Florida, Iowa,Maryland, Massachusetts, New Hampshire, New York, North Carolina, Texas, Virginia,Washington, and Washington DC.

o Although we only have one central location, there are states that require an office to

maintain operations. We have found that an executive office meets theserequirements and our experience to date is that we can satisfy these states

requirements for as little as $130 a month using this approach.



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III. Market Analysis

The residential real estate industry has shrunk in this challenging economic environmentfrom over 1.3 million Realtors at its peak in 2006 to barely 1.0 million Realtors today.Most of the current major brands have shrunk in line with the national declines, though

some have suffered worse than others. As detailed in Appendix E, we believe that theRealtor base will remain at or only slightly above the current numbers for the foreseeablefuture. We also believe that the longer the current housing market challenges continue, thegreater the opportunity Allison James Estates and Homes will have to strengthen itsposition as the leading virtual real estate brokerage in the country. In our opinion, even atthis moment in time, our model is appealing to at least 80% of the existing Realtors witha third of them primed to make the move to the virtual model if an appealing andrecognizable option becomes available in their marketplace. As our name gets establishednationally and Realtors become comfortable with this model generally and Allison JamesEstates and Homes specifically, we believe we can expect a continued explosion of growth.

Our potential market size is therefore essentially any and all of the one million Realtorsnationally, assuming we are open in all areas. In just the markets we currently operate in,there is a base of 400,000 Realtors doing business so our upside potential even at thismoment is tremendous. Our pricing is neither the lowest nor the highest of the virtualbusiness models we have come across. We do, however, believe strongly that we have thebest support system in place. We have grown to thirteen states and over 500 Realtorswith practically no advertising. With an increase in agent-focused, branded advertising(through such venues as Realtor.com, the state and local Realtor associations, variousconferences, and advertisers such as RIS Media and Inman, for example), which wouldcost $20,000 a month or more, we could greatly accelerate our market share.

Allison James Estates and Homes at this point in time only hires the experienced Realtor.Our typical Realtor has ten years in the business and closes over six sales a year very



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comparable with the national average yet with an operating model that has a fraction of thefixed costs most others have. This focus on experienced and productive Realtors isanother differentiating factor when we compare our company to other virtual brokers, whohave typically struggled to attract and retain productive agents.

We currently operate with 525 agents and brokers in thirteen states (Arizona, California,Florida, Iowa, Maryland, Massachusetts, New Hampshire, New York, North Carolina,Texas, Virginia, Washington, and Washington DC). Although we expect to succeed in allregions, currently leading our growth is California, which almost doubled in Realtorcount over the last year (with our San Diego operations coming in with 96% growth overthe last year). Virginia is our second hottest market while Florida is our second largestmarket.

IV. Competition



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There are currently no competitors to our virtual real estate brokerage model on a nationallevel, nor are we aware of any potential competitors soon to appear. There are similarprograms but they are smaller firms with a singular, local-market presence. We stillconsider traditional brick and mortar offices and larger, franchised brokerages to be ourmajor competitors.

We believe our reputation is our strongest asset as of this time. Most of the similar modelsto ours hire anyone with a license and their production per Realtor is often less than twosales per year; the companies appear to want to stockpile as many Realtors as possiblewho will pay the basic monthly fee without paying attention to production this lack ofquality is the greatest reason why the business model has not grown as fast as it should.Allison James Estates and Homes, however, made a decision from day one to build abusiness model that was in many ways fashioned after Re/Max in the sense that we believewe can be a disruptive force challenging the status quo.

The virtual business model currently has less than 5% of the national market share of

Realtors. Our focus is to attract or acquire 2% of all Realtors nationally by the year2020; this is nothing more than a continuation of the 150% per annum growth rate we haveenjoyed over the last three years and is less than the 13% monthly trend-line sinceinception. After only 3 years of existence, we are number three in the Florida locationwhere the corporate office is and the number one listing company in San Diego.

We are confident that we will be able to continue to grow market share by attracting the topteams and Realtors in every region that we open in. Our focus will continue to be onorganic growth, however, there are numerous acquisition opportunities available to us andour growth and name recognition could be substantially accelerated with targetedacquisitions (some examples are detailed in Appendix H).

Our biggest challenge to growth is finding the right broker to build around and helpingthem to a good monthly income quickly. As we add affiliate businesses, such as title,escrow, mortgage, and homeowners insurance, our brokers can participate in this additionalprofit which will help to achieve those goals.

V. Marketing & Sales Strategies



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The company is currently licensed to operate in thirteen states but does so without anyphysical offices. Our over 500 sales professionals work remotely, keep 100% of theircommissions, and are given the choice of one of three compensation plans:

o Plan A : the associate pays us $2,950 per year up front along with a $395 annual

errors & omissions fee (which is waived for their first year).

o Plan B : the associate pays us $295 per month along with an annual E&O fee of

$395 (which is waived for their first year).

o Plan C : the associate pays us $35 per month plus $260 per transaction plus $35 for

E&O coverage per transaction. This plan accounts for almost 37% of our revenues. Many agents on this

plan should be on one of the other two plans but remain here, presumablydue to the condition of the market and resistance to annual contractcommitments.

As stated previously, we believe our support system to be superior to any other virtualbrokerage and comparable to the best available to traditional bricks and mortarbrokerages. At the same time, we give the Realtor 100% of their commission whiletreating them as our customer with respect. Our Realtors have become enthusiasticsupporters of our company and are a key asset as we look to continue our growth; everymonth in our eMagazine, we list testimonials from our Realtors praising our supportsystem and value proposition.

As we have grown we have found that top Realtors in most areas are initially attracted toour concept. The key to our success is to recruit well-known talent; when a top Realtor

or a top team joins us, it is often like dominoes falling with the other good Realtorsapproaching us in droves. We believe that the best way to expand rapidly into new areas istoo acquire one-hundred percent brokerages. They have sprung up like locusts but wehave found that few are profitable and many are looking to sell because they based theirbusiness model on a brick and mortar environment yet their agents demand 100%compensation. We have proven that a physical location for the experienced Realtor is nota requirement and is not even a determent.

As a result, we have had positive agent growth in 47 of the 51 months we have been inoperations (of the four other months, two were flat while the two negative months saw acumulative, national loss of only thirteen agents) this is detailed in Appendix D. When

agents do leave, most are through retirement or abandonment of the business. We lose lessthan 1% of our agents to other companies and we have found that almost all that do leavecome back to us after just one or two sales commissions with another broker.

Other than our name and logo, which are trademarked, we do not currently have anycopyrights, patents, or trade secrets.

VI. Organization & Management



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The company is a C-Corporation with ownership as follows:o 31% - James A. Crumbaugh III (CEO) and Virginia Crumbaugh (Director of

Realtor Relations)o 43% - James A. Crumbaugh III

o 10% - Matthew R. Crumbaugh (COO/Broker Relations)

o 8% - Scott Chamberlin (Sales Associate, California). Restricted shares. Thecompany plans to exercise its redemption rights to buy these shares in early 2012.

o 5% - Edward L. Wotitzky (Legal Counsel)

o 2% - Susan Rossburg. The company plans to buy these shares in early 2012.

Management Profile:o CEO: James A. Crumbaugh III

Forty years in the industry. Top recruiter in the nation for several differentcompanies. Past Chairman or President of 17 different associations andcommittees locally.

o Director of Realtor Relations: Virginia Crumbaugh

Began her real estate career in San Diego, where she went on to become atop title representative with the biggest title company in the country.Managed one of the top Prudential offices in the country. Has personallyrecruited over 1,000 Realtors during her career.

o COO/Broker Relations: Matthew R. Crumbaugh

Started a paint contracting company at age 19; became the biggest suchcompany in the Four Corners area of Colorado, contracting 300+ homes ayear and managing a 30-man team. Joined company in February 2009.

o Legal Counsel: Edward Wotitzky

Managing Partner at Wotitzky, Wotitzky, Ross & McKinley, Attorneys atLaw since 1985.

The Board of Directors:o James A. Crumbaugh III

o Matthew R. Crumbaugh

In addition to the management listed above, the company currently employs three full-timeIT personnel, two full-time administrators, and one part-time assistant,

VII. Financial Resources



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The company has been completely self-funded to date by the Crumbaugh family. There areno bank loans on the company. There is a $50,000 note to Susan Rossburg, an existingshareholder, but the Crumbaughs have agreed to purchase her shares and resolve this notein early 2012. As of October 31, the company owes the Crumbaughs $466,843.

As structured today and with the current market and financial projections (detailed inAppendix F), the company does not require outside financing to run its operations andcontinue to grow. It is, however, seeking an investment and/or partnership in order toprovide both financial and management resources which could greatly accelerate its growthboth in depth and in scope. In short, the company seeks to maintain and grow its market-leading position in the virtual real estate brokerage segment while the segment itself seessubstantial growth. The company believes that an investment of up to $20,000,000 wouldput it in a position to be one of the leading national real estate brokerages by the year 2020and perhaps sooner.

In addition to continuing its successful recruiting strategy, the company would focus newly

invested resources towards expanding and enhancing its technology infrastructure (inparticular, both its external, consumer-facing website and its agent-facing intranet), asdetailed in Appendix G, and to invest in marketing and brand promotion strategies (shownas an increase in Advertising/Marketing Costs from 2012 onwards in Appendix F). Thecompany has also had discussions with several candidates that have expressed an interest inselling to the company; a portion of an investment in the company would be appliedtowards mergers and acquisitions growth. The company believes acquisitions can currentlybe consummated at or below either (i) three times trailing twelve-month EBITDA or (ii)33% trailing twelve-month gross margins. At least four of these discussions are outlined inAppendix H. With funding, these discussions could be accelerated and could, in total, addan additional 1,600 sales professionals and an estimated $1,000,000 or more in incremental

EBITDA.

VIII. Financials



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Several detailed exhibits are attached outlining the companys historical and projected financialperformance. In summary, they are as follows:

Appendix A: Financials . Historical Profit & Loss Statement and Balance Sheet forcalendar year 2009, calendar year 2010, and the twelve months ended (LTM) August 31,

2011.

Appendix B: Summary . Outline of key ratios and figures from financial statements.

Appendix C: Production by State . Closed sales volume, Gross Commission Income,Transactions, and Average Sales Price by state for 2010 and LTM 10/31/11.

Appendix D: Agents by State & Month . Month-end agent count for each month since thecompanys inception detailed by state.

Appendix E: Share of U.S. Market . Managements projections of the U.S. residential real

estate market, its Realtor count, and the companys share of Realtors from 2011through 2020.

Appendix F: Projected P&L . Based on assumptions from Appendix E, managementsprojections of the companys profit & loss statement for 2011 through 2020.

Appendix G: CAPEX . Managements estimates of potential Capital Expenditureinvestments.

Appendix H: M&A . Sample of four existing acquisition targets with estimated purchaseprice and financial impact to company.


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Allison James Business Plan Real Trends