steal my ideas #1

Everyone seems to think that execution > ideas. I don’t agree.

Ideas are just easier to come by. Execution requires more education, experience, and time. More on this next week…

I have so many notebooks full of ideas. They’re not doing any good just sitting there, and I definitely don’t have enough time in this one life to execute on all of them.

So, moving forward, each Wednesday I’m going to write about an idea I’ve been thinking about.

You have three options:

1. Comment and tell me how amazing my idea is
2. Comment and tell me everything I missed
3. Start the company?

I’m going to use a due diligence methodology that I came up with called B-SMART.

First, I’ll provide some Background on the opportunity. Then, we’ll dive into Strategy. Next, I’ll give you some “napkin numbers” on the Market (size, growth, etc.). After this, let’s take a look at Analogs (aka comparables). Then we’ll take a look at Risks. Lastly, I’ll quickly discuss what Technology is required.

Background

Ok, this is totally random, but I’ve been thinking a lot about estate sales recently.?

What is an estate sale you ask? In essence, it’s a liquidation of physical assets conducted by a company on your behalf. Some states require regulations for this, others don’t.

Typically estate sales are a result of the 3 D’s:

• Death
• Divorce
• Downsizing

It’s really a wild-west out there, with over 15,000 estate sale companies that are mostly “mom & pop” operations. These companies operate as the “middle man” in a market between buyers and sellers.?

A fragmented market with minimal technological sophistication screams OPPORTUNITY to me.

Of course, it’s not that simple…

Strategy

How would I go about attacking this market??

It’s certainly tempting to jump directly into a managed marketplace model where the end-customer recognizes your brand as the estate sale company. However, I think it makes more sense to enter the market as a B2B provider for existing estate sale companies.

They have 2 core problems, representing each side of the marketplace:

1. Get leads for sales
2. Get buyers to show up to the sale

The first problem is really the bottleneck here. There are plenty of people that are willing to show up to the estate sale, and the sales typically are able to liquidate 70-80% of the items.

I think the strategy here is to focus exclusively on building a strong funnel of leads, and then helping customers find service providers that are a good match.

How to build that funnel?

1. Lawyers – they are usually involved for 2 of the 3 D’s (death, divorce)
2. Realtors – they are often involved in all 3 D’s

I would go find all of the relevant law firms as well as all of the realtors in a given market and give them business cards to hand out to their clients.

There are two ways to make revenue on this approach:

1. Charge an annual membership fee for estate sale companies
2. Charge a placement fee to consumers (can position it as a deposit)

There are a few companies that already play in this space, such as estatesales.net and estatesales.org. However, their UX is sub-par.?

Most people that have to do an estate sale are also dealing with a ton of other stressors (see: 3 D’s). I think there’s an opportunity to create a beautiful, streamlined user experience that is intuitive for individuals trying to figure out how to sell their stuff.

Over time, you could move towards a managed marketplace model where the customer never has to interact with a 3rd party estate sale. Instead, you are the estate sale company and are employing and training people on the backend to run the sales.

Market

Ok, so I mentioned earlier that there are 15,000 estate sale companies.?

Those companies do 31 sales on average per year.

That comes out to 465,000 sales conducted each year.

With a $100 placement fee, the TAM for this market comes out to $46.5M. Including membership fees of $100/mo, this brings the TAM up an additional $18M to a total of $64.5M.

That’s not big enough…

Here’s where it gets interesting though.

Every year, about 3.3M Americans die.

Assuming that only a third of those individuals have sufficient physical assets to merit an estate sale, we get a total of 1.1M potential estate sales.

This leaves 635,000 potential estate sales that are not being conducted each year.

Based on the $100 deposit fee, the total market jumps to $128M. This is still not huge, but more appetizing (also, it doesn't account for the total market of divorces and downsizings).

A few more notes on this market:

• It has grown 650% over the past 15 years
• The American population is getting older, meaning more people are going to die, meaning more people are going to have stuff to liquidate
• Millennials and Gen Z love buying second hand goods

Analogs

I always find it useful to think about comparable companies in other markets to see how they grew. For this case, we’re looking for one-time (or infrequent), high-value, and personal purchasing decisions.

I came up with 4 categories:

1) Vacation websites (e.g., AirBnB)

• Purchasing decisions are infrequent
• Dollar spend is medium to high
• Decisions are somewhat personal – more than hotels, but at the end of the day it’s still a place to sleep

2) Car buying websites (e.g., Carvana)

• Purchasing decisions are very infrequent
• Dollar spend is very high
• Decisions are highly personal – the type of car you buy is dependent on your lifestyle, individual desires, etc.

3) House buying websites (e.g., OpenDoor)

• Purchasing decisions are rare
• Dollar spend is extremely high
• Decisions are super personal – you literally have to live there

4) Home services websites (e.g., Angi)

• Purchasing decisions are somewhat infrequent
• Dollar spend is medium
• Decisions are based on quality – reviews are more important than personal preferences

A couple notes and learnings:

• Caravana and OpenDoor largely removed the human element involved in those buying decisions. I don’t think this is entirely possible for estate sales, because at the end of the day someone has to come to your house to set it up and price items and conduct the sale
• AirBnB is an interesting analogy because the type of stay you book is highly dependent on your desired features. Similarly, the type of estate sale company you work with depends on your values: family-oriented vs. professional, speed vs. profit, etc.
• Home services are clearly the best comparable, with Angi being a leader in the space. However, estate sale decisions are more personal than home contractor decisions because the human element matters more with selling a loved one’s items vs. fixing a toilet

Risks

Competition. The biggest risk I see is the presence of existing incumbents (estatesales.net and estatesales.org) that offer a comparable service. Although the user experience is not optimal, it wouldn’t be technologically challenging to improve it.

Demand. Although Millennials and Gen Z like buying secondhand products, their general preference is experiences > stuff. This presents a demand-side risk. If there aren’t enough people to buy the stuff, the industry as a whole will suffer.

Barriers to Entry. These don’t really exist for the type of business I’m proposing. Anyone could theoretically work with lawyers and realtors to build a strong funnel and then help consumers find the right estate sale company to work with. The key here would be to move quickly, and to build a strong and trustworthy brand.

Technology

I think you could build this business with a single typeform survey.