Russ: This is the BusinessMakers Show heard here and seen online at TheBusinessMakers.com. It's guest time on the show and I'm very pleased to have with me Thomas Benford the founder and CEO of I Protest. Thomas, welcome to the Businessmakers Show.

Thomas: Thank you so much for having me, Russ.

Russ: You bet. So let's start. Tell us about I Protest.

Thomas: Well I Protest is a web based service located at I Protest Property Taxes.com that is really designed to empower Texas homeowners who have historically lacked the time, the data or comfort with real estate valuation to protest their assessed values for property tax purposes with the appraisal district to do that for themselves. We've designed and automated a system that allows them to complete that task in less than ten minutes. Takes about three steps and we are really focused on pulling me people into the system. Right now less than ten percent of people actually protest their property taxes, but those who do are unusually successful. About 75 percent of those people who do file a protest win and on average they save about $330.00. And we believe that those are real - that's real value, real dollars for people and families that could benefit from it if they were aware and comfortable with the process.

Russ: Boy, I'll say so. For our audience that's outside of Texas, Texas property taxes are real, real high.

Thomas: Yeah.

Russ: And then it always seems like it's a procedurally onerous process. The only time I've ever protested is a service that made me sign an agreement and then I didn't know what was goin' on and then they would inform me later whether they were successful or not. So you're actually gonna be doing this without me, as the homeowner having to go down to the assessment office in any event?

Thomas: Yes. Well fortunately here in the state of Texas the legislature passed a bill that became effective in 2010 that said starting between 2011 and 2014 all counties who have an online presence have to facilitate online protesting.

Russ: Oh.

Thomas: So we've had a couple of pilot counties, specifically Harris County, which is where Houston is, that started the program back in 2004 and they really saw a ramp up in activity over the following three years and we expect that to happen as well across the state as these counties come online with these online protesting platforms. The issue for many homeowners though, they would like to do it, but they're not sure what they should do, how they should do it and that's really what we provide is a self-contained narrative report that contains all the information and supporting documentation they need to present in order to justify a protest. If that data is not sufficient to support a reduction, we'll tell them up front before any fees are generated. So that's part of the service is discovering do I have a valid case for a reduction and if so, getting the information, structured, detailed in a manner that all I have to do is submit it either online or if I choose to submit it in the mail, I can do that as well.

Russ: Okay. Now you mentioned telling you whether or not you had a case to lower the valuation of your home. Does that mean that I as a homeowner am gonna see data of comparable homes in my neighborhood?

Thomas: What you'll see first is a basic assessment we call it and that will show you where you rank in your neighborhood in terms of taxation in big blocks. Then it will also show you what we believe the data supports as a reduction for you in assessed value. You won't see the actual comps until you proceed and actually have the report, but initially we will make the results of that data accessible and given who our market is, traditionally non-consumers, we believe that's where the real value is for them. Giving them a lot of data and charts may not really help them to understand the situation any better. So we try to filter through it and give them the bottom line. This is what we believe the data supports as a reduction for you.

Russ: Wow. So let's say I'm a homeowner and I'm pleased to go and protest my property taxes online through your system. How much does it cost me?

Thomas: Well the price is $39.95 and that's once you decide to purchase the report. The results of that are guaranteed. If you don't' get a reduction and we've told you that there's data to support it, we will refund the money fully because we're confident that the data that we have is correct and the process is fairly transparent once you understand it. So we provide the service for money back guarantee for $39.95.

Russ: Wow. $39.95, right?

Thomas: Yes.

Russ: Okay. And that made me understand it better. So I go online. I said "Okay, here's my home and here's the present valuation in the county tax records. Do you think I have a case?" Then your company goes out and sorta' looks around the neighborhood and comes back and says yes or no.

Thomas: Right. They don't even have to have the record. If they have their address we can go query and pull the record for them and say, "This is what you're assessed at and this is what we believe ________ argument ________ _______ --

Russ: So if you get an affirmative answer, yeah, you should. There's nothing to lose other than maybe you'll have $39.95 out of your wallet for a brief period because even if you don't win you get it back, right?

Thomas: About $40.00 in working capital.

Russ: Okay.

Thomas: ______ 60 days. That's a good investment.

Russ: Yeah, it is. It's real good. So your expectations are that people that say yes are gonna sign up and that you're gonna win essentially a reduction. Now I know some of the services that I've used before, the contract was they'll split with you the reduction. Are you doing anything like that?

Thomas: No. Personally I believe that there's a fundamental disconnect in that value proposition. That the fee that I receive is really a function of the magnitude of the mistake the appraisal district made, whether the reduction is a dollar or a million dollars, my work is really the same and that's to establish the value. So we're trying to create a cultural transparency and we want people to feel that we're not in a business to take advantage of their compromising situation. We provide a service. We get paid for providing that service. So our fee is flat. There will be no surprise bills coming from us after we are aware of what your reduction is.

Russ: Real, real cool. Alright. Talking with Thomas Benford, the founder and president of I Protest. We'll be back with more with Thomas after this. You're listening to the Businessmakers Show heard here and seen online at thebusinessmakers.com. This is the Businessmakers Show heard here and seen online at thebusinessmakers.com and continuing on with Thomas Benford, the founder and president of I Protest. Thomas, I'm curious. What triggered the idea to go into the property tax protest business. Online I might add.

Thomas: Well in 2010 a friend of mine asked me to assist him with constructing some of the arguments that he would be presenting for the appraisal districts and in that process I discovered that it was fairly lengthy to pull the sales comparables and then to try to go to the appraisal district's website and pull uniform and equal comparables because they really don't make it easy to search their databases. What I discovered was it took about the same amount of time to construct a protest for $150,000.00 house as it took to construct a protest for a million dollar or $2 million commercial property. It became evident to me that this was the research that a lot of people don't do it and I discovered well, it's probably 'cause it is fairly time consuming and you need to know what the data is, where to get it, how to put it together in order to be effective. It also made it apparent to me why do so few people actually protest. As you said, there's an industry here in the state of Texas of property tax consultants who pursue representation of homeowners and commercial property owners and they tend to be on a contingency fee basis. I split a portion of the savings with you. Well, if I am a property tax consultant and my time is limited, there are diminishing returns to pursuing a certain class of homeowner.

Russ: Interesting you say that. I always felt that way -

Thomas: Right. So if I have 100 hours of work time do I wanna spend that time constructing an argument for $100,000.00 house or a $5 million commercial property. So I think that really speaks to the lack of dissemination of information about what the options are and how to do it to certain portions of the population because there's not an economic - it's a less attractive economic alternative for the property tax consultant. So putting those two things together, I was talking with my partner and I told him, "We need to remove the labor component from this model and I think we can do that through some automation technologies. It's out there to be had if we structure it properly from a business perspective." So we're really starting with that in mind.

Russ: Sure.

Thomas: That there's a large number of people out there who have not been converted because they're not attractive customers, but if we structure the business properly we can service those very clients profitably.

Russ: Boy, I see the vision for sure. Well that's real cool. Now I would expect that with your domain name - share that again.

Thomas: I Protest Property Taxes.com.

Russ: Okay. That you're likely to show up on search engines and get a lot of traction. Do you have any other ideas and strategies about marketing the service and getting it known out there?

Thomas: We do. In our surveying when we talked to a lot of people to figure out why they didn't protest, what their issues were as they identified with them and in that we discovered about 20 percent of the people that we interviewed didn't even know they could protest. There is not a home ownership 101 that everyone has access to, but in that also we found that about 40 percent of those people said, "I knew I could, but I just really didn't know what to do and I'm not gonna invest a lot of time if I'm unsure of what the result will be." In that same survey, about 60 percent of the people said when we asked them, "Who would you expect to learn about this from?" They said, "My real estate agent." So we took that and identified it as an alternative channel to market as opposed to a property tax consultant. Here is a real estate industry professional that the consumer already identifies with and although that real estate agent may not have an interest in protesting property taxes, if we could partner with them, co-brand opportunities with them to empower them to be viewed as the real estate expert that they wanna be in that end consumer's life, we thought that that was a mutually beneficial arrangement. So we definitely wanna plan on partnering with real estate agents and growing that business. We're doing it. We have feedback from them. They love the product and really because they're about staying top of mind and this gives them a valid reason and a valid way to contact their customers on an annual basis regarding real valuation as opposed to sending the happy birthday card. They're gonna do those things anyway, send a calendar, but here's a valuation exercise that gives me a reason to continue to engage my past clients in a productive way.

Russ: Right. And it's showing that they're market savvy.

Thomas: Right. And they're saving the money.

Russ: Absolutely. Wow. Really cool. That's good. So what's the long-term vision now? You just gonna open up in Harris County? Course you mentioned Texas already. Tell us what your vision is.

Thomas: Well the vision at this point is to - we have some strategic tenants and we really wanna focus on further customization of the product and really pursuing these non-consumers that exist in the marketplace. We really want to - we think about the fit of the strategy and the different activities that we're involved in to tie those things and twist it tighter and tighter. So we definitely plan to be expanding into the major metropolitan areas of Texas by 2012 and we're also evaluating expansion into some other strategic states.

Russ: Now when you use this term non-consumers, you're talking about they're just non-consumers when it comes to protesting their property taxes -

Thomas: To protest their taxes. They're not protesters. They've never done it.

Russ: Right.

Thomas: There are a lot of homes here that have never had a protest filed against them and at the end of the day the property tax assessment serves to allocate the tax burden amongst the people.

Russ: Sure.

Thomas: And a lot of people misunderstand that concept because they think that reduction automatically means a reduction in property taxes. Not necessarily so because the tax rates get set after the assessment is accepted. So the real issue is who's gonna pay that property tax burden. Is it gonna be you or is it gonna be your neighbor.

Russ: Right. Your competitor.

Thomas: Your competitor in a sense.

Russ: Right; absolutely.

Thomas: So the issue is your lack of activity really serves to allow people to heap additional taxes onto you so it becomes regressive in nature simply because you don't participate. That's really what we're trying to educate people on is that you need to be an active participant in the process to ensure that it is fair and it is equitable and we think that message resonates.

Russ: Really cool. Talking with Thomas Benford, the founder of I Protest and we'll be back with more with Thomas after this. You're listening to the Businessmakers Show heard here and seen online at thebusinessmakers.com. This is the Businessmakers Show heard here and seen online at thebusinessmakers.com and continuing on with Thomas Benford, the founder and president of I Protest. Thomas, it's a real cool model ya' got cookin' here. Tell us about your background.

Thomas: Well I actually grew up in a town south of Houston, a refinery town called Texas City and grew up there with my family and attended Rice University ultimately here in Houston, Texas where I majored in economics and computational and applied mathematics. I went into oil and gas investment banking after I left Rice and worked primarily in leveraged finance. During my time there we had the Enron meltdown in the market -

Russ: Oh yeah.

Thomas: So activity really came to a screeching halt and so I decided to go back to business school and I went to Harvard Business School in 2003 and when I returned to Houston in 2005 I worked on another entrepreneurial venture and then soon joined the Halliburton corporate finance team. After a year in corporate finance I was invited to join the management team of Bayroid, which is the drilling fluids and drilling waste management organization, a product service line of Halliburton. I did that until the end of December 2009 and that's when I started working on the property tax venture that we're discussing now in its predecessor form.

Russ: Really cool. Quite a background there, too. So do you see yourself staying in the entrepreneurial world for a good time? Perhaps the rest of your career?

Thomas: I hope so. I enjoy it and it is fulfilling. Ultimately we're all at the mercy of others regardless of whether we work in corporations or we work in -

Russ: That's true -

Thomas: -- _______ environments. So I think this at least keeps me aware of the fact that you have to be going at it every day. That you stay relevant and you stay on top.

Russ: Absolutely. Okay. So before I let you go let's imagine that there's a young, aspiring entrepreneur that's sorta' tuned in and watching this right now and is really intrigued with what you're doing. What kind of general advice would you give him or her?

Thomas: I think one of the most important things is to recognize what really drives value creation. There are a million things you can do, but probably only three or four of them really matter at the end of the day regarding your development and the development of a business. You need to identify what those factors are and make sure that you are integrated across the faces that control them. They say let me only be worried about the things that I can actually affect. If you setup your business that you can affect the things that matter, that's a recipe for disaster. So figuring out what matters and making sure you can control those things I think is the key to having a successful start-up.

Russ: Great. Well Thomas, I really appreciate you sharing your story with us.

Thomas: Thank you so much for having me.

Russ: You bet. That's Thomas Benford, the founder and president of I Protest. You've been watching the Businessmakers Show heard here and seen online at thebusinessmakers.com.