Startup operations: My reflections

Map out operations along with the business model

A couple of months ago, I wrote about reviving Rentobase.

Just to preface by noting that the challenges I have had with Rentobase have not been due to techno issues. Code is and will always be the least of my worries.

The way I imagined v2 of Rentobase was simple. At the most basic level, I thought it was just a matter of:

  • Finding the properties,
  • Listing them on a website
  • Potential tenants pay for inspection
  • Close the deal with the landlord or property management company.

I did not take time to think deeply about the entire sophistication of the operations due to the following reasons:

  1. I’m an outsider to the property industry (except as a tenant - putting aside the properties managed by my parents)
  2. I was ignorant of the intricacies of the industry.
  3. I was blind to the operations of service businesses.

As a personal reflections, I have in the past written about how domain expertise is the moat, https://luigimorel.com/blog/domain-expertise/. To think that I would go back to ruminating about the same topic is a bit ironic. But, I digress.

The property market, as I would come to learn, is one that’s very reliant on trust:

  • trust that the broker would take you to exactly the house you saw on the website
  • trust that the broker would not take you for a mugging with the aim to strip you of your personal belongings.
  • trust that you would not be tricked into paying money to some other party that’s not the property owner.

With Rentobase, I realized that I could not guarantee that any of the above scenarios would not happen partly because of:

  • the business model
  • human nature and the complexities that come with it.

Pitfalls of the business model

After being outside looking for properties on my own, as per Paul Graham’s advice of “doing things that do not scale”, I quickly realized that eventually the output and success of the business would be limited by:-

  1. the number of hours I’m outside looking for the properties, and,
  2. the human capital involved (a.k.a myself and other property agents).

This is utterly unscalable. But, there’s a workaround that I found out.

Every neighbourhood in and around Metro Kampala has a “broker for houses” signage (normally on electricity poles). Then, a thought occurred that I could utilize these brokers as property agents to handle the finding and uploading of properties on the platform.

The above would solve the scalability issue in terms of finding properties but it would not solve the reliance on third parties for inspection and the discovery of properties.

I believe in controlling 100% of the business operations, especially for platform businesses, to ensure:

  • quality of the service offered to the customers
  • the overall trustworthiness of the platform (this is a cascading issue - one scammed customer leads to an overall loss of trust in the platform and a loss of customers)

The above were issues that I chose not to ignore and decided that it was not operationally feasible to run Rentobase as a platform business since there are leakages and results that I did not have direct control over.

So, for the second time, I am closing down Rentobase and will be moving on to other business experiments.

I will keep experimenting, learning, feeling stupid until I eventually a business that is operationally feasible and scalable. I will keep you posted on the progress of my experiments.