From Shunchi to see how a dark horse-type enterprise can last forever

Recently, Sun Hongbin sold 55% of Sunco China's shares to Hong Kong Road King Infrastructure. From a certain point of view, this means that the myth of a "dark horse" in the real estate industry has temporarily come to an end. More than two years ago, Sun Hongbin, the helm of Sunco, declared that Sunco would surpass Vanke within three years and become the No. 1 company in the industry. This sentence may still be remembered by many people in the real estate industry at the moment when Sun Hongbin sold Shunchi to Hong Kong Road King Infrastructure. Today, however, all of this seems to be passing away with the wind. "Real estate hackers" may have come to a staged end.

From the beginning, rapid development, to today's "sold", Sunco can be regarded as the epitome of many fast-growing companies in China. From such a "dark horse", we can reflect on the success and failure of many companies , The inner gene between quick success and long-lasting foundation.

Internal reasons for the rapid development of Shunchi

The secret of Shunchi's rapid development is not complicated. The basis for its rapid development at the beginning was that when other developers were still waiting and watching due to the total land price of recruiting, auctioning and listing, Sun Hongbin used the time value of the land to make full use of real estate futures and make full use of the land price. With the condition that the land installment payment cycle is as long as 2-3 years, the project is started with as little capital as possible and the development speed is accelerated, mainly relying on the sales payment to cover all the expenses. It maintains a growth rate several times higher than the industry average, thanks to its seizing the opportunity to change the land supply method, maximizing the leverage of capital by shortening the development cycle, and expanding the plate by rolling development. An astonishing increase in sales receipts has been achieved.

To sum up, the business model of Shunchi, the real estate "dark horse", has three main points: First, use the leverage of capital to leverage large capital with small capital as much as possible. Payment terms often become an important consideration for many real estate companies when deciding whether to acquire land. The lower the proportion of the first payment of land transfer fees, the better. The land price obtained by Shunchi is often much higher than the land price when the land was transferred by agreement and the starting price, but the starting price of the land often implies the psychological bottom line of the government, which makes Shunchi possible for the first time in fact as long as The delivery of a very low percentage of the land price can meet the psychological bottom line demand of the local government, so that the project can actually be started with as little funds as possible. Second, extend the payment cycle. After Sunco has acquired the land through recruiting, auctioning, and hanging, it will try to lengthen the payment cycle as "reasonably" as possible. On the one hand, it actively renegotiates prices with the government and farmers; on the other hand, it improves its bargaining power with design and construction partners. Third, shorten the real estate payment cycle. Sunco adopts the method of "exchanging cost for time". Before acquiring the land, Sunco always conducts a survey for several months or even a year and forms a development plan, which makes the time from land acquisition to submission of the plan. greatly shortened. Parallel operation is adopted, that is, under the premise of ensuring the project time, the various operations are carried out crosswise.

The foundation of all this series of operations is based on Shunchi's control of capital flow. From this chain, we can see that cash flow can be described as the lifeline of Shunchi. Once there is a problem with cash flow, Shunchi will will be vulnerable. In fact, we saw that Sunco was finally forced to sell its equity because of cash flow problems. On the second day after Shunchi changed its owners, Shan Weibao, the buyer of Shunchi, Chairman of the Board of Directors of Road King Infrastructure, said that the total amount of land fees owed by Shunchi and the balance of bank loans was as high as 4.6 billion yuan. This is information disclosed to the public by the new owner of the company, and the true delinquency is likely to be greater than that. The direct cause of Shunchi's failure is these arrears. It can be said that before the country implemented strict macro-control, the local government and Shunchi reached a certain "tacit understanding" of interests. Once the country's strict macro-control was introduced, this fragile The interest relationship will be disintegrated, and Shunchi will be passive. In fact, when purchasing land, Shunchi and the local government reached a win-win "consensus": Shunchi tries its best to bid a high price when the government land is recruited, auctioned, and listed, which is conducive to maintaining the prosperity of the city's real estate; After acquiring the land at a high price, the government is in arrears with the land price, which is conducive to maintaining the capital cycle of Sunco.

The logic of Shunchi's "defeat"

It can be said that the rapid development process of Shunchi is a gamble. Shunchi is also a race, racing against the country's overall macro policy and credit policy, it is "bet" on the country's macroeconomic policy, if the country's macroeconomic policy is introduced late or not, then Shunchi will bet Won. However, the fact is contrary to Sun Hongbin's wishes. The irrational real estate market has finally ushered in strict national policy regulation. It can be said that the failure of Shunchi is the failure of opportunism.

In addition to reflection, we should not only ask: Why is the gambling logic of "opportunists" such as Shunchi able to succeed again and again? Perhaps, this requires us to reflect on the shortcomings of the system. It can be said that it is precisely because of various flaws in our system that opportunists like Shun Chi are given an excellent opportunity. In fact, we can conclude that there are blockbuster dark horses in the market every year, but most of them are often like shooting stars in the sky, shining from the sky, and it can be said that they "come in a hurry and go in a hurry". Is the short-lived high-profile debut destined to be the home of a dark horse like Shun Chi? In the process of enterprise development, is it possible for those "dark horses" who boldly seized the opportunity to stabilize and develop steadily, and gradually become the convincing leader of the entire industry? The answer is yes. In fact, whether it is from domestic companies such as Lenovo and Vanke that have the right opportunity to become bigger and stronger, or from the list of the world's top 500 companies, we can all see such examples.

How can a dark-horse enterprise be built to last?

After Sun Hongbin sold Sunco to Hong Kong Road King Infrastructure Company, Sun Hongbin still maintained the position of chairman of Sunco and was also the boss of Sunac. It can be seen that Shunchi and Sun Hongbin are making a comeback. The issues that Sun Hongbin and Shunchi have to consider now are the matching between the development speed of the enterprise and management, the relationship between quality and speed, corporate governance, the company's development strategy, corporate culture and so on. The reintegration of Sunco and the development of Sunac depend most critically on the company's mechanism and team.

Actually, it is not difficult to see that Sunco's early development can be described as "one person has the final say". For a fast-growing enterprise, a good corporate governance structure and management team are the most important to the enterprise. Many successful Chinese companies listed overseas in recent years have often experienced changes in management during their development. At the right time, the board of directors of the company chooses the right management to control these companies. At the same time, these companies have formed a good mechanism, so that these companies are easy before and after the company goes public. Behind this is a solid company. good governance structure and a well-complimented management team.

For a "dark horse" enterprise with the goal of achieving a century-old foundation, the company must continue to grow from an entrepreneurial company to a company with mature management, a company with a sound system and a sound corporate culture. It can be said that the precipitation of corporate culture is the best weapon for a "dark horse" company to resist market risks. An enterprise without culture is a company that does not go far from historical experience. From this point of view, Shunchi and Sun Hongbin still have more lessons to make up.

How can China's dark horse companies ensure a long-lasting foundation? The author believes that the most important point is that when an enterprise transitions from the entrepreneurial stage to a mature management enterprise, it must match the core concept of the enterprise, the development model of the enterprise, and sustainable development. As Collins, the author of Evergreen, said: To become a far-sighted company, you must first determine the company's core philosophy. We found that short-lived companies often lack core concepts and core values, resulting in very weak corporate cohesion. In an instant, defeat is also an instant." Second, once the company has established good values, the company must also decide what form of progress it wants: the pursuit of an aspirational Boeing-style goal? Or is it like 3M becoming an ever-growing, ever-evolving tree? Or a Mariotte-esque self-improving machine? We should consider all three, as well as any other approach you can plan. Finally, and most importantly, the organization must be aligned in order to stay core and stimulate progress.

From The Economic Observer.