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The market may be shifting but Ben Kinney is not slowing down.
Kinney is the founder and owner of Ben Kinney Companies, a collection of enterprises that includes multiple Keller Williams brokerages, and Place, a firm that provides tech and back office support for real estate professionals who want to run their own firms.
Kinney’s companies have been chugging along since the early 2000s, but just last fall Place hit a major milestone: After raising $100 million in Series A financing, the company achieved “unicorn” status with a valuation of at least $1 billion.
Less than a year later, Kinney is still expanding and looking for new opportunities despite a market that looks very different now compared to 2021. And next month he’ll appear on stage at Inman Connect Las Vegas to discuss his process and how he has managed to thrive even amid potentially challenging times.
Kinney recently chatted with Inman about his Connect appearance and the market, saying that a recession appears likely at this point. But he also argued that a downturn doesn’t mean real estate professionals can’t thrive.
The conversation below has been edited for length and clarity, but here’s what he had to say:
Inman: Let’s start with the market. How is the market doing and what are you seeing from your vantage point?
Ben Kinney: I think the experts, the investors, the private equity VCs believe there’s a 100 percent chance we’re going into a recession. Just 100 percent chance. From my perspective that isn’t necessarily a bad thing. As a real estate professional I’ve been asked for years, “is the real estate market good?” And my answer for many years has always been, “it depends on who you are.” For the last 7 years, it’s been really great for sellers. And for the next three years or two years or four years, maybe it’ll be much better for buyers.
It’s that in between time when markets are shifting when everybody tends to freeze and do nothing. And that can last a month or it can last a year. And that’s what we’re coming up to, that kind of eye of the storm where it just feels like nothing is happening.
I believe interest rates are going to peak over 7 percent. Affordability is at an all-time low. People are going to look up for a while and say I don’t know if this is a good time and be worried about a price decline.
And then maybe in six months or nine months or a year, they’re going to look up and say, “I’m still making babies. I’m still getting married. I’m still getting divorced. I’m still changing jobs. I still want to get out of this state and go to that state.” And real estate will start to move again just like it did in 2009, 2010 and 2011 as it started to change.
The challenge we have is we’re coming into that time in our normal hot season. So if the end of the summer slows down, and we go into a normal fall and winter which is always slow, we could be looking at nine to 12 months of what feels like like December.
Many people who have asked me what do you do. And I’ve said, “pretend your worst month in your last 24 months is your new average month.”
Do you think that applies across the board? If you’re an investor or someone in tech, do you need to be planning in the same way?
It’s not a surprise, based on all the layoffs and fundings that have stopped and people’s inability to raise money, that investors are coming back and say that we used to invest in revenue growth but because of an impending recession we want more solid companies so we can invest in EBITDA or net income or at least break even companies.
So all these companies that have never — justifiably because that’s what their investors told them to do — focused on breaking even or making money are having to pivot their entire strategic plan. And that’s going to cause some chaos for a while. It’s going to shake up the market.
I think Warren Buffett said, “when the tide goes out you see who is wearing swim trunks.” A lot of people get exposed in these shifting environments.
When the tide goes out it shows who is wearing swim trunks, but also some people get swept away so to speak. Do you think we’ll lose companies amid what’s going on right now?
I do think there were companies that were built on poor fundamentals or companies that were built on the understanding of a hot market. Like, people who make multiple offer software. They’re going to have to pivot, because maybe you don’t need that going forward. Or people who have buy-before-you-sell offerings.
They’re going to have to pivot their offerings. And if they can’t pivot quick enough they’ll be eliminated.
We’ve also seen an influx of big money, with the Opendoors and the Compasses and those kinds of companies that grew thanks to huge investments. Do you think that’ll continue?
Certain companies have gotten large enough to the point that they have enough revenue and they have enough capital that if they fail it’s solely because they didn’t pivot and change quick enough.
But most of these big companies, you can already see it in their layoffs and their changes of offerings, that they are preparing for a worst case scenario. I call it apocalypse planning. Preparing for the zombies to show up. And in that situation, you would do something very different. You see these big companies doing that and they have a lot of big money backing them and they’re most likely not going to want to walk away from that investment.
It’s the ones in the middle that worry me. They’re going to get acquired or they’re going to get shutdown. Or they’re going to tighten their shoe strings and grind their way through it.
You mentioned this idea of apocalypse planning. Talk to me about how you built resilience into your companies.
We had a blessing that for a long time I thought was a curse. It’s that we didn’t raise money. And because we didn’t raise money I had to fund the investment. My co-founder Chris [Suarez] and I, we had to fund the investment into our companies. So any money we lost came out of our own retirement account or our own bank accounts or out of the profits of our other businesses.
Because of that, we had to run a business that broke even or made a profit. So when we went out and raised capital last year, we deposited all that money in our bank account and we looked at each other and said, “why don’t we just keep running a profitable business and not use that money unless we absolutely have to.” Or, save it for opportunities to get into business with great products and great companies that run into a tough time in the future.
So we just set a standard that we will not lose money. And that gives us a little bit of longevity.
If I had a company that started off venture funded and my investors said, “spend the money we’ll give you more and when you’re done spending that we’ll give you more,” I might have been trained into a different mindset and might have thought that would go on forever.
I just wasn’t lucky enough to raise money early in my venture. So it always came from my pocket. So I treat every dollar like it’s my dollar, even after the minority investment we received.
You mentioned layoffs and pivots. Are you having to tighten your own belt at all?
We are hiring at the moment based on the increase in profit that we make each month. We decided that we are going to have a 10 or 11 percent EBITDA. So if we can generate revenues above that, we use that additional money to cover our new hires.
Looking forward, what does the future look like for your companies? What exciting things do you have on your plate?
I think when the real estate market is good, everybody thinks they’re a genius. Every tech company, every real estate brokerage, every real estate agent, including us. But when the market shifts there are unique opportunities to partner. And to help people and companies that wouldn’t have been open to it during a hot market.
I think what I’m most excited about is the partnerships and the customers that truly are going to need what we offer to survive tough times. And when you help people survive tough times, the good ones tend to stay loyal to you through the next cycle of better times. That’s probably what I’m most excited about. Talent is more available. Tech acquisitions are going to be more available. And our customers, top real estate professionals, are going to be more open and trusting of our brand that we call Place.
