The Buzz with Andrew Florance of CoStar

Andrew C. Florance founded CoStar Group, Inc. in 1987, fundamentally changing the way commercial real estate professionals access, use and share property information. Through CoStar, Mr. Florance pioneered the concept of commercial real estate firms outsourcing research functions to a third-party information provider, combining the operational efficiencies of a computer-based information system with the more complete, higher quality and standardized property information produced by the industry’s first independent research organization.

Based on your experience on starting up your own business, what do you think are the critical survival strategies during different developmental stages for small business owners and founders, especially during the economic downturn?

I’m convinced that the single most important factor when it comes to determining whether a start-up ultimately survives or fails is attitude. There are no part-time entrepreneurs. You have to be totally committed and be willing to do whatever it takes to help your business survive another week or another month. I really think that’s what success comes down to.

I can’t emphasize strongly enough just how critically important attitude and commitment are to survival as a small business owner. Many failed start-ups have had great ideas, terrific products and well-funded backers and still didn’t make it. You have to be bound and determined. It’s just like it says in the U.S. Army Survival Field Manual: “Having survival skills is important; having the will to survive is essential.”  Here’s the ultimate authority on survival saying that knowing survival tips is all well and good, but the single most important determining factor in survival success is the individual making the decision to live. I can’t think of more appropriate advice for anyone who is starting up their own business.

Other important advice I can give is to stick to your vision. Most people choose to become entrepreneurs or small business owners because they have an inspiration or a vision for doing something differently — and better — than how it’s always been done. But it takes conviction bordering on stubbornness to buck the system. I can’t begin to tell you how many people over the years have told me my idea would never work. You have to vanquish fear and doubt and stay true to your inspiration in the face of sometimes overwhelming odds. There were many times when my company was on the brink. I remember one week in particular, over 20 years ago, we actually had less than one dollar in the bank and an $80,000 payroll to make. As a start-up there’s always a crisis to deal with. You find yourself in situations that seem absolutely hopeless. But you find ways to survive, and from that you learn and grow stronger as a company.

CoStar has moved its headquarters to Washington, DC this year. Given the high business costs in the Washington Metropolitan Area, in what aspects do you think that the small businesses should take advantage of the area’s abundant business resources to counteract the effects of business costs and how has your company managed to do so?

In every way possible. There are a wealth of programs and resources available to small and disadvantaged businesses in the District. We are fortunate to have strong leadership and a strong commitment to job creation on the City Council. I believe my company is an excellent example of what can be accomplished when businesses work closely with the District’s business development resources to help offset some of the higher business costs and bring jobs into the city.  We couldn’t be happier with our new headquarters location. And I am very proud that CoStar Group has been selected to receive a Downtown Business Improvement District (BID) 2010 Momentum Award for strengthening and diversifying the city’s employment. From what I understand, our move represents the largest number of employees brought into the District by a public or private company so far this year, and is one of the largest such moves by a private employer over the past ten years.

I also think the size and diversity of the commercial real estate stock in the District offers another abundant resource, and one that is often overlooked by small businesses and start-ups. Real estate is a major overhead expense after payroll. But there are creative ways to manage this cost, especially in the current market. Some building owners are willing to take a risk on start-ups and offer space at a discount and subsidize build-out costs with the hope that they will expand as their business grows. There’s also a large amount of sublet space available and many existing businesses have space they aren’t using and would be willing to share for less than the cost of subletting. There are numerous creative ways to control real estate costs that many companies just don’t take the time to do.

Starting as a small business, are there any existing services or incentives that are specifically designed for small businesses or small business start-ups by CoStar?

Yes, the pricing structure for our subscription services is based on the size of the firm, and more specifically on the number of users who access the information. As a result, the huge competitive advantage offered by CoStar’s extensive research and information is extremely affordable to small shops and single practitioners.

By making the same high quality information on commercial property, transactions and market conditions available to all subscribers, CoStar greatly enhances productivity for real estate professionals. We also help level the competitive playing field. With access to the same information as the very biggest firms, smaller firms can focus on competing by providing a special level of attention to their clients. I believe hundreds of small businesses in the commercial real estate sector were encouraged to take the plunge and go into business for themselves knowing that as CoStar subscribers they would continue to enjoy access to comprehensive, high quality information that they need in their day-to-day business.   And several have gone on to be quite successful.

As Founder, President and CEO of CoStar, you innovatively pioneered the informational research services in the commercial real estate industry. What is your definition for innovative leadership and how do you encourage the innovative initiatives among your employees?

To remain successful, every business must continue to innovate. CoStar is no exception. The way we conduct research today — the technology and processes we use — has changed tremendously over the past two decades. Our field research is a good example. We were the first, and to my knowledge still the only, commercial real estate research service to put our professional researchers on the ground to drive the streets and gather firsthand information on activity in the markets we cover.  Our specially equipped research vehicles have high quality cameras, measuring lasers and laptops. They really are mobile research centers. That’s one example of hundreds of innovations, big and small, we’ve implemented over the years. But really we’re not different than any business in this regard. You have to be open to new ideas, new technologies and new ways of doing things. Encouraging innovative, creative thinking is one of my most important responsibilities as CEO.

You are proactive in incorporating the green business/ energy efficiency ideas in the development strategies for CoStar. Any experience that you can share with the small businesses owners/founders?

I’m convinced that the environment is the single biggest issue we all face in the coming years. I’m equally convinced that there is a huge pay-off for businesses, because when it comes right down to it, this is really about running our business more efficiently. There is also the pay-off from your staff and customers. They like to work for and do business with a company that is doing the right thing. They want to work in buildings with healthier air and water and more day lighting, and one that remains comfortable year-round without straining the power grid to the breaking point every summer and winter.

Then there are other pay-offs that you don’t anticipate that directly benefit the bottom line. One of the big pay-offs for us in fielding a mobile research service is that we help keep countless other cars off the road and hours spent behind the wheel that our subscribers would otherwise be doing.

But that isn’t the only big pay-off we’ve had from our green initiatives. A few years ago CoStar replaced about 100 Dodge Ram vans with Toyota Priuses in our fleet of field research vehicles. At the time, we simply were looking to get cost savings from much better gas mileage available from the new hybrids. We had no idea that fuel costs would double in the next couple of years. In hindsight, we looked positively brilliant to anticipate the soaring cost of gasoline, but really we had no idea that was going to happen. We just wanted to run our business more efficiently.

Ultimately the pay-off for all companies comes from continually re-evaluating their operations and looking for more efficient and sustainable ways to produce and deliver services.