A deep breath

John McGrath was never one for school. He dreamed of becoming a professional footballer – and had a bit of talent – before his plans evaporated.

“I failed abysmally at school, which cut off most further education options, and then subsequently I had two collapsed lungs, which took away my sporting dreams because I could never play contact sport again,” McGrath recalled.

“I had those two events happen within a couple of months of each other and then I didn’t know what to do. I didn’t have the marks for a lot of careers, so I went down to a careers advisory centre and literally went from A-Z looking at every career available and how it could match my desires and goals and talents.

“I came across real estate, which was interesting to me because I never saw myself working in a sedentary role in an office. I had to have something which was fairly mobile and would have me out and about and meeting people.”

After studying real estate for two nights a week, McGrath realized that he made the right call.

“The thing that was important to me was that it had to be ‘meaningful’ – I knew I wanted to get into something and try and be the best at it,” he said.

“It had to be something I had to have a sense of pride about. I knew real estate as an asset was important.

“The last thing that was important to me was the ambition that at some early stage I would want to start my own business. I needed something that wouldn’t be too capital intensive and just grow it from there.

“A lot of people said to me that I was silly for wanting to be a real estate agent – that agents were all sleazy and you can’t trust them. I saw that as the opportunity, because I knew that wasn’t how I wanted to do business in my career. It’s an important industry and I couldn’t find anyone with a good word to say about real estate agents, so that was a marriage made in heaven for me. I had a great opportunity to do something different.”

After working for six years in the industry, McGrath started his own business at the age of 24.

“While I had been in it for six years, I was still relatively young in those days to be starting my own business,” he recalled.

“I felt like I had reached the glass ceiling – I had a lot of ideas about how I thought real estate could be done better, and I was keen to implement them.

“I offered to invest in the business I was working for, but that was to no avail. I had a desire to build something special and different and there was no opportunity where I was working, so I had no other option but to start my own business.

“I started working from home in the early stages. After a few months when I hired my first employee that became problematic, so I moved to a serviced office, and the irony of the whole thing is that six months later the boss of the company I had offered to buy into ended up selling me his business. It had a very small premises but it was a starting point for me.”

After growing the business for seven years, the company opened its second office.

“I think we grew quickly from the primary position, but certainly I am a very conservative person at heart – I don’t like debt and I recognized that I was lacking in both capital and experience in the early days of the business,” McGrath admitted.

“I just grew it from the single office and then seven years later we opened our second office on the north shore.

“About four to five years after that I ended up with 10 offices. I went from one to two offices in seven years, and then in the next four years we had opened 10. That got to a point where I felt I had to review the business structure, because having 10 company owned offices, and maintaining the level of service I wanted to maintain, while still achieving the growth appeared to be challenging.

“I reviewed the other option, which was a franchise type network, and then made the switch. Since we have done that we grew from 10 to 41 offices in the last four years.”

McGrath describes the move to a franchise model as “one of the better business decisions I have made”.

“I saw that growth was an important part of our future, not just as a commercial reality. I think when you are doing well and you’re good at what you do, it’s hard to restrain it and say ‘we’ll only go into a couple of communities’. You actually want to expand it and take it to new logical markets.

“To do that would be capital intensive, and I have a dislike for debt – I prefer to run it on cashflow. If I do gear the business up it has to be at extremely low levels. The sleep at night factor is important to me when I am running this business.

“Franchising made sense because it gave the opportunity to expand without increasing debt levels and at a reasonably progressive rate.  We could move into new communities and engage with the local talent and IP that already exists with people, rather than try and re-invent the wheel.”

Despite the rapid growth, McGrath has remained devoted to ensuring the quality levels are maintained.

“I’m a great believer in the saying that only the paranoid survive,” he said.

“I’m mindful that we have to keep improving everyday. More importantly than that – because after all a number is just a number – we have maintained and in some cases enhanced the quality as we have grown in scale.

“Even today, I go into the business looking to improve it and crank it up better than it has been for the last 20 years. Of course you get to a point where your brand is better known in new communities, and you see that happening. But in real estate you’re only as good as your last sale – what you did five years ago is irrelevant.”

While McGrath may be reluctant to dwell on history, when you look around the real estate industry today with its glossy magazines and flash websites it’s difficult to remember what it was like beforehand. But in many ways the industry owes a lot to McGrath and his innovations in this area.

“I am a great fan of marketing – I love great ads and I love clever marketing,” McGrath said, when asked about the origins of McGrath Magazine.

“It has always been a hobby of mine. I like design and beautiful things. I like clever marketing strategies. It sounds boring but I would rather read a book on marketing or a book which showcases great ads than a novel. 

“The magazine sprung from an idea I had one day, when I hated scribbling multiple addresses down for people to look at. I thought about how I could make it easier, so the next week I turned up at an inspection and I’d stapled all the brochures from the other houses into one little booklet. 

“The next week I got it taken to a local printer and made it with a cover so it looked a bit more professional then eventually we went out and got to 15,000 magazines a week that we publish. It’s a very strong and important part of our marketing strategy to attract out of area buyers. 

“Like most ideas that end up looking pretty good down the track, it started off as a small idea that has just been polished over the years.”

McGrath also invested heavily in the early days of the internet.

“I knew it was going to be a game changer,” he said.

 “We took the risk of investing pretty heavily during the early days of the internet, and I think it paid off. We developed a following and we achieved a certain position by punching well above our weight in the early days of the internet. 

“We’ve taken many calculated risks that haven’t worked, but that was one that worked well. Today it probably delivers 75% of our buyer enquiries through that channel.”

After several decades of running his own business, McGrath said the most important lesson he received was to trust his intuition.

“Midway through our short history we were doing sales and property management, and I saw strata management could be a really good fit for our business,” he said.

“It ticked every box that said it would be a smart add-on to our business. We found a business that we liked and met the owner. In the due diligence phase there was definitely a different chemistry and culture between the two businesses, and there was a part of me that intuitively said there was a problem, but I looked at the spreadsheets and the plan and didn’t trust my intuition. 

“In the end it was like trying to mix oil and water, we invested in it and a few years later we had to sell it back for a significant loss. The moral of that story for me is that your intuition is an incredibly evolved part of all of us and as a business owner the only times I have genuinely come a cropper has been when I have gone against my intuition.

“You can mount a good argument for whatever you want to do, but you have to look at it internally and make sure it is a strong fit or work out if you are just trying to make yourself fall in love with an idea.”

Trusting his instincts has   driven McGrath to form a growth plan which is simultaneously ambitious and conservative.

“We would like to be the world’s number one real estate company in quality, but not quantity,” he said.

“Some of our major competitors have close to 1000 offices, but we’re not at all interested in that scale. Somewhere between 50 and 60 offices will cover most of the markets in Australia that we want to cover. 

“Our focus is on the ACT, New South Wales and Southern Queensland. The obvious question for most people is about Melbourne, but Melbourne is not on our 18 month plan. We are looking at it though. 

“Melbourne is an interesting market – it has been dominated by independent boutique real estate. It’s been very hard for franchise operations and we are mindful of that. We know that it has some of the best agents in Australia. If and when we move to the Melbourne market we will want to have ironed every wrinkle out of our game and be at our very best, because we see that as the top of the mountain of Australian real estate.

“Sydney and Melbourne are two of the toughest markets to crack. We also see Perth as a really important market, but we’re focused on the east coast.”