The Problem LoanBright had grown too fast for its own good. The company, which generates sales leads for mortgage lenders and brokers, had five years of rapid growth and made the 2005 Inc. 500 list with three-year revenue growth of 659.4 percent and 2004 revenue of $4.5 million. LoanBright, based in Evergreen, Colorado, sold the homebuyer data it collected on its website. Originally, its clients were small brokers and individual loan officers. By 2004, however, the company had shifted to major clients such as Wells Fargo (NYSE:WFC) and Quicken Loans. The big companies had stringent demands, requiring leads that fit highly specific criteria. LoanBright's website didn't generate enough traffic to find leads that fit. By September 2005, LoanBright had lost money for nine consecutive months and seven employees had to be laid off. Russell Straub, the company's founder and CEO, gathered his management team, and they decided the company should start targeting the little guys again. A desperately needed $500,000 was raised in December from outside investors in return for 20 percent of LoanBright, and the five top executives took pay cuts as they tried to turn things around.
What the experts said Don Peppers, founding partner at Peppers & Rogers Group, called going downmarket "a great idea" and suggested giving clients "the first 100 leads with a money-back guarantee." Asaf Buchner, an online financial services analyst at Jupiter Research in New York City, said LoanBright's strategy would work only if bigger competitors stayed away from the small-player market. Bryan Chupp, vice president of marketing at LendingTree, said LoanBright was "generating too few leads."
What's Happened Since In February 2007, LoanBright had its first profitable month in two years. "We were $3,000 in the black, which beats bleeding $50,000 to $60,000 a month," says Straub. The company hit a record revenue month in July, with more than $650,000. Wells Fargo and Quicken Loans are still clients, but Straub says 99 percent of the company's accounts are smaller guys. Most of the leads LoanBright passes on to its clients generate revenue of under $10.
What's Next Despite the slowing housing market, Straub says he expects 2007 revenue to top $9 million. The downmarket focus is more labor-intensive and the clients can be needy and exacting, but Straub says he is happy with LoanBright's direction. And the pay cuts? They lasted almost two years. By this May, all senior managers were back to their 2005 salaries.