Decision Making
Growth Analysis
Since the launch of Dig, LLC’s application in Jan 2017, it has seen a steady increase in total and paid subscribers. The growth rate of paid users has reached a peak of 83% of total users in the first quarter. However, second and third quarter growth rate has shown a slight decrease while the percentage of total users is still increasing at a steady pace. For the upcoming fourth quarter, Dig, LLC is keeping a sustained rate of about 23% for paid users. Figure 1 illustrates the active and paying subscribers since the release of the application.
As Real Estate Sales Agents and Brokers slowly discover the new tool, Dig, LLC is still projecting a higher demand for their application in the upcoming calendar year. To prepare for the increase in demand, Dig, LLC has designed, architected and built their application, using Google Cloud platform, to automatically scale-up as needed. Furthermore, the market for the app will continue to climb as Dig, LLC increase their marketing campaign to reach all the RE Sales Agents and Brokers in the Northeast Florida (NEFL) Region. According to Florida Department of Business and Professional Regulation (DBPR)(myfloridalicense.com, 2017), there are currently 480,000 active agents in NEFL. Dig, LLC’s goal is to reach at least eighty percent of the total market equalling to 384,000. If Dig, LLC fails to meet the demand, the "opportunity-lost" is $2.9m for Enhanced Users and $3.8m for Premier Users. Opportunity lost calculations and assumptions are shown in Figure 2.
Figure 1: Dig, LLC Subscriber Growth Rate
Figure 2: Dig, LLC Subscriber Packages
References
Lepp, D. (2017). 5 Big Benefits of Design Thinking. Retrieved from http://www.drewlepp.com/blog/5-big-benefits-design-thinking/
Mckeown, M. (2014 Jul 10). Useful diagram combining design thinking + lean-start-up + agile for innovation. Retrieved from https://twitter.com/maxmckeown/status/487342722190409728
Moon, G. (2014 Apr 9). Here’s Why You Don’t Need A “Content Marketing Strategy.” Retrieved from https://coschedule.com/blog/content-marketing-strategy/
MyFloridalicense.com (2017). Real Estate Public Records. Retrieved from http://www.myfloridalicense.com/dbpr/sto/file_download/public-records-RE.html
Slade, S (2016 Dec 23). Remote Hiring: Tips for Finding Successful Employees. Retrieved from https://startupnation.com/manage-your-business/successful-remote-hiring/
Symington, S. (2017 Aug 8). Zillow Group Sets New Traffic and Revenue Records. Retrieved from https://www.fool.com/investing/2017/08/08/zillow-group-sets-new-traffic-and-revenue-records.aspx
According to Symington (2017), Zillow’s Premier Agent Revenue grew 29.7% to $248.6 million in their second-quarter earnings report. He also claimed that Premier Agents who have been a customer for over one year climbed 49% (Symington, 2017). For the third quarter, Zillow is expecting a one-year growth of roughly 22.7% with revenue estimated at $273 million to $278 million (Symington, 2017). Dig, LLC will be competing with the Agents wallet share as Zillow plans to capture more of the market share. Although each company serves the Agents differently, both groups are going after the same customers.
Personnel Analysis
Dig, LLC’s long-term strategy is to keep personnel, including management, as lean as possible. The management team will consist of the CEO/Founder and CIO/Co-founder. Dig, LLC will outsource the following functions initially - accounting, marketing, sales, application/web developers, data scientist, cloud architects and graphic/web/UI designers. Each of the roles will go through a trial period (will vary based on positions) or a project to determine if they fit Dig, LLC's culture. Slade (2016) explained that trial projects or trial period allow for issues to come to light before either part is deeply invested. As Dig, LLC expand their business and territory, they will re-evaluate if hiring would be beneficial to the company.
Figure 3: Dig, LLC Initial Personnel Chart
Operation Analysis
Dig, LLC uses Lean Startup and Design Thinking principles on all aspects of the business - application development, sales, finance, and marketing. Build, Measure, Learn is at the core of Dig, LLC’s culture. Ruffolo (2015) explains that this means the main activity of a startup is to transform an idea into products or services, measure your metrics for audience response, and determine whether you need to pivot (change something) or persevere (continue on). Every process within the loop should accelerate feedback. Furthermore, Dig, LLC integrates Design thinking into their business process to focus on end customers and create value while solving real problems. Lepp (2017) claims that Design Thinking introduces a new way of thinking about the problems and questions we face in our world. It steps outside of the traditional boxes with visual thinking, creativity, and innovation to find new solutions to the same old issues. Since the launch of Dig, LLC’s app, they have made numerous iteration and updates based on the early user's feedback. Figure 4 illustrates Dig, LLC’s business process.
Figure 4: Design Thinking and Lean Startup Principles (Mckeown, 2014)
Cash Flow Analysis
Dig, LLC’s founder and co-founder bootstrapped the business instead of finding outside investors. They have invested $100,000 of their own money to control and to develop the business without having to focus on pleasing and appeasing the funders. Additionally, they have designed the company to generate cash flow quickly, with paid subscription options, and not burn through their cash reserves before gaining any market traction. Dig, LLC will consider seeking outside funding as they expand their territory outside of Florida. Figure 5 displays Dig, LLC’s current balance sheet ending on September 30, 2017.
Figure 5: Dig, LLC Balance Sheet - End of September
Sales Analysis
Dig, LLC utilizes the lean startup principle in their marketing strategy. As Moon (2014) suggests, in an age where data and metrics are readily available, there is no excuse for running a marketing strategy based on a written and pre-meditated schedule. We need to learn to improvise. We need to learn to build, measure and learn. Figure 6 illustrates Dig, LLC’s marketing approach. Furthermore, Dig, LLC is focusing on northeast Florida region, for a minimum of one year, before expanding to other areas of Florida. They intend to learn as much as possible in this part of Florida to continue to improve their analytics applications.
Dig, LLC is using a subscription-based tiered pricing model for their application shown in Figure 7. It comes in three levels - Basic, Enhanced, and Premier. The Basic tier offers high-level market trends with one neighborhood level analysis. The Enhanced level includes the Basic features plus additional neighborhood analytics. The Premier level includes all the features from Basic and Enhanced with unlimited neighborhood analytics.
Figure 6: Marketing Strategy (Moon, 2014)
Figure 7: Dig, LLC Pricing Model
Risk Analysis
Dig, LLC understand that to accelerate growth you have to take risky opportunities - opportunities that will increase sales and revenue. However, the company firmly believes in applying the Lean Startup approach to reducing the risk and uncertainties of expanding too fast to other regions or quickly introducing too many new features in their application. Dig, LLC will continue measuring and learning from its current subscribers in the Northeast Florida market but will also investigate the opportunities in the Orlando Region. Figure 8,9, and 10 exhibits the calculations and decision analysis that Dig, LLC explored in their board meeting in the third quarter.
Figure 8: Risk Analysis Assumptions and Calculations
Figure 9: Decision Tree
Figure 10: Decision Table
Although the risk analysis for Orlando is showing an additional revenue, Dig, LLC’s management will not expand to the Orlando region. They will review the opportunity again at the beginning of the calendar year after a thorough review of the current market. The company's plan as of this writing is to continue to increase market share in NEFL and introduce one new feature based on the existing customer’s feedback.