Orlando Remak and Jalen Ross – HOA Management Holding Company

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(4:22) – What is the CAM Collective?

(5:09) – What kind of content would you make around CAM?

(6:41) – What are some crazy HOA Management stories?

(11:47) – Why were HOAs interesting to you?

(15:48) – What level of churn do you see in your business?

(17:27) – What are some keys to maintaining HOA relationships?

(20:58) – How does pricing power work in HOA Management?

(22:16) – How have you approached the decentralized nature of the company?

(25:36) – What value propositions did you see were missing in this market?

(31:19) – How do you maintain such a high level of care?

(33:04) – What are some revenue lines and growth opportunities you seen with HOA Management companies?

(37:13) – What are some no-code or automation tools you’ve found to be effective?

(40:55) – What’s the philosophy around having smaller teams?

(50:31) – What are the pros and cons of doing this as a partnership?

(53:55) – Were there any exercises you did on trying to find a career you would enjoy and feel fulfilled in?

(1:02:51) – What are some strongly held beliefs that you’ve changed your mind on?

(1:06:36) – What’s the best business you’ve ever seen?

(1:10:52) – More on CAM Collective

Alex Bridgeman: Let’s kick off a little bit with about CAM Collective and what’s the business and why HOA and why the model, what made it such a good fit for you both.

Jalen Ross: Our business is the CAM Collective. And that is a network of association management companies, which basically means we help folks manage condo buildings, HOAs, cooperatives, not inside their units, but all the condo property that you own together.

Orlando Remak: We got into business in April of 2022 because Jalen and I found that two companies wanted to sell at the same time but they were in two different states, in both Virginia and Illinois. And so we happened to make that work. And today we’re in four states, Illinois, DC, Virginia, and Texas.

Alex Bridgeman: What’s like the semi related podcast, blog, newsletter, YouTube channel you would make for CAM Collective?

Jalen Ross: Well, I can tell you, so you said like a second ago, nothing related to HOAs, like not at all related to HOAs, that actually- we know a woman who owns an HOA business in DC. And that’s her organizing principle for the blog is like don’t talk about HOAs because nobody actually wants to talk about your HOA. So her newsletter is all, she’s like, here’s a racial justice forum you can go to, here’s the best rooftop bars in DC you can go to. She is like those are the ones people click on. Because nobody- we can write the same article about how you should really leave your water dripping when it’s cold outside a thousand times and no one’s going to click on that. They will click on the one about the rooftop bars. And it’s like a geography based business. So it’s basically relevant.

Orlando Remak: Yeah. If we must, if we had to do one, I think I would inevitably get into the HOA business side of it. But let’s say it was just talking about actually managing communities. People listen to that. But the closing question would be like, tell me one crazy story. And every manager has just a deep list of the wildest things they’ve seen, the wildest things they’ve seen. A lot of it’s [inaudible 2:11]. But a lot of dead body stories. But it is just wild the things that you encounter when you’re sort of managing people’s homes.

Alex Bridgeman: So what’s one of those stories? Like anonymize one and share that.

Orlando Remak: Jalen, you got one?

Jalen Ross: Yeah, there’s a number of these. This one was in our DC business. One of the normal duties you have to do when you’re managing an HOA is collect the assessments from each of the homeowners. And so, these were a condo building, kind of looks like a townhouse building with a single floor unit on the bottom and a two story unit on top. And normally this is boring. But you have a monthly or quarterly meeting, and you review the list of people who are delinquent on their assessments, and you have to go and collect from them. And so, there’s this one manager who is now the president of the business, who was managing this building. They were kind of going through a turnaround, they were trying to clean up their collections. And there’s this one unit owner who’s just like on the collections list every month like clockwork, which is not actually that uncommon. But so, the steps are you send them a letter, second letter, you call the attorney, and the attorney sends them a threatening letter about filing a lien on their house. And then usually you don’t get past that. But this guy still didn’t respond. They called him, couldn’t get an answer. So they go to court, they file a lien on the house, the association does repossess the house, and they go inside to take it. They break through the locks. And this guy is just, I mean, the guy died like two years ago and has just been in house since then. And so, this was early in our HOA career. But it was worth talking about. So I don’t know if you know what happens to a body if you leave it for two years. And I was like, that has never been professionally relevant for me before so I don’t know. I don’t actually know. And she’s like, well, just it drips. This house is just a disaster. Because it’s been two years, which is kind of sad because nobody went to look for this guy. And so she’s like, so I had to have a vendor for that, and I have my body guy and I called him and he came and cleaned things up and we sold the house.

Orlando Remak: That is a niche business. That might be it. That’s it. That’s the one. Guys, all you searchers out there, look for that one.

Jalen Ross: That is not a thing I thought I was going to have to think about in my job.

Alex Bridgeman: To have a body guy for a legal purpose.

Jalen Ross: Totally up and up.

Alex Bridgeman: Yeah, that’s pretty legendary.

Orlando Remak: I was thinking more like the owner disputes are always really fun stories. So this was in Chicago. This is a great story. This is one that we didn’t get to experience it ourselves. But so, the dynamic here is condos will often have pipes that go between different units. They all basically share the same water pipe or sewage pipe. And in this case, this sewage pipe was having a lot of issues and was backing up. And the way that it was showing was the person in the unit- so this is second floor unit, first floor unit. First floor unit person was seeing sewage backup into their drain. So it’s showing up in their sink and their toilets. Terrible, terrible situation to be a part of. You really don’t want to have that. And it was happening periodically. And this person, I guess, just had the opinion that it had to be the person right above. And they were the reason why this was happening. And there was no other reason for it, it had to be the owner above them. So, this person basically gets a cup. One day, it backs up into the sink really bad, this sewage, gets a cup, fills it, walks upstairs to the unit above, knocks on the door. And when the owner answers the door, face full of sewage, and just causes a lot of issues. So yeah, turned into a board conversation for sure.

Alex Bridgeman: What was the issue?

Orlando Remak: Well, the pipes needed to be fixed. That had nothing to do- The second floor unit had nothing to do with the problem that the first floor unit-

Jalen Ross: If you really want to get into the technical on that one, it’s a builder defect which is a whole other category of issue that associations have with people who develop the building, and this builder was dumb. They ran the drainpipe down in basement around like three corners at right angles, which is terrible. Obviously, that’s going to clog at some point. And so, they had this, it was like a reliable problem in this building. Because every downgrade you had with around these corners. So it had nothing to do with the poor people upstairs. It was the building’s fault. But somebody’s got to get the pound of flesh.

Alex Bridgeman: You saw all these stories and were like, yeah, this is the place for me, this is where I’m going to build my career?

Jalen Ross: That’s what sold us. I just need to be entertained. Honestly, it is. his is this is not really the answer. But I do think it’s like a fringe benefit of this space. It’s kind of entertaining. We manage like a couple hundred tiny little governments with their tiny little problems that everyone is extremely, very real mad at, and you’ve got to deal with it. And if you don’t have a light hearted point of view on that, you can’t work in this space because it will drive you insane. But everybody is very mad about something at all times. I think it’s kind of fun.

Alex Bridgeman: So yeah, why HOAs? Why are they interesting to you, and why build a CAM Collective around them?

Orlando Remak: So there’s an academic reason for it. I think we led a little bit with the personal. So on the personal side, I think that we like this concept. And we like people businesses. I think it just really matches with our personalities. And also, at the end of the day, it’s got something that’s really important. These are small problems, but these are small problems in people’s homes. So it’s actually really important. So you’re actually doing a very needed service for them. So, there’s also like a service element to it in my mind. You’re actually making a difference in your local area. You multiply the fact that you could make someone very happy in a small way, multiply that by 3500 people in a subdivision. Like for example, you’ve done a great job of beautifying the front of the building, like you’ve actually just made a tangible impact in people’s lives at a pretty large scale just because you did a good job of managing landscapers. But I think the academic reason is just it is a really great space. It’s a space, if you think about the industry, we did a little bit of work in the beginning of this. There are just so many HOAs in the nation. There are over 360,000 or more. It’s an incredibly recession resilient business and industry. If you think about what managers are doing, we are taking care of all the needs of the community, and in return, we are receiving basically a fixed portion of money from a buyer that is getting paid by assessments. Associations are receiving assessments from their communities, and assessments are about as sticky as taxes. And so, it’s a really great business.

Jalen Ross: I mean, you might want to explain what that is first. We do this every day. And I think that we also get phone calls from homeowners every day, and I was just talking to some of the folks who answer our phones in our Chicago business, and they’re like, yeah, one in five people don’t know what their association is called or why they’re calling us. They think that we are the association, which is not true. So like the- First of all, do you live in an association? And depending on where you live, it is either almost definitely yes if you’re in Houston, or almost definitely no if you’re in Boston. But if you are, in theory, you’re one member of a corporate entity that is managing all the common property that you guys own together because you own 1/100 of the pool and the entryway and the gate house and the roads maybe, and the fences, if you’re in a condo building, the hallways and the roof. And so you have to pay your kind of share to maintain that and manage it because somebody’s got to do it. You own it communally. And you have a tragedy of the commons problem. So, you elect a board, who then has oversight responsibility over that common property. And one of those responsibilities is to essentially tax people to maintain it. So you, in a kind of weird way, create a government again in a very small way. And frankly, people just don’t understand that. But that assessment, because if you buy property in that association, this is like legal, usually LLC, then you’re obligated from the deed that runs with the property to pay those assessments every month. And so, literally, that’s taxes. It’s like the most certain cashflow a business can rely on. Because if you don’t pay this, someone’s going to take your house from you eventually. And so, there’s no real collections problem. There’s like a timing collections problem. But everybody will pay their assessments at some point, whether it’s on time, late because you sent them a letter, or because you made them sell the house to pay the assessments, they will pay those assessments. And that’s like a really- We knew that theoretically going in. But that is a really nice sort of failsafe for our business. We know that our clients will always have the money to pay us sooner or later.

Alex Bridgeman: So is there churn whatsoever? Or is it just a matter of like if someone wants out, they sell the house and someone else buys it, and then they’re paying the assessments now? Like is there any churn in any real sense?

Orlando Remak: Churn for- Well, there’s different levels. Are you talking about churn for the management company?

Alex Bridgeman: Sure, yeah.

Orlando Remak: So there is because, ultimately, your customer is a board of volunteers in the neighborhood, which is great from the service you’re providing them because no one really wants to do all the work necessary to manage their community. And again, there’re very important things you have to do. But at the same time, you can get stuck in optics, basically in community politics. And someone, one person can get on board because they have a gripe, and they’re going to blame the management company for it. So the moment that they get on board, the first thing they do is change their management company.

Alex Bridgeman: Yeah, that makes sense. What about for the HOA, like the HOA itself has zero churn because there wouldn’t be a property that leaves the HOA or anything like that?

Orlando Remak: No, then they can’t. So all the homes are part of that association. And so they all have the responsibility to communally fund the common interest areas.

Jalen Ross: In theory, you could dissolve an association, the whole association can dissolve but the voting thresholds to do that are so high that in practice, that doesn’t happen. Maybe it’s happened. Actually, I’ve never heard of an example of that happening.

Orlando Remak: Unless it’s in the world that someone’s trying to- like a building. Usually not like sort of horizontal communities, but in buildings, that happens when people de-convert and turn it back into a single owner building.

Jalen Ross: That’s a whole other rabbit hole.

Alex Bridgeman: So what are some keys you found to retention in maintaining HOA relationships, so when there’s someone who has a gripe, they can’t send out the management company or change management company, or maybe you just find ways to make them less likely or less angry with the management company? What are some ways you’ve reduced churn?

Jalen Ross: Well, let’s start with this. This is really interesting because for a year and half, we just spent all day every day talking to owners and management companies trying to find one that would sell us the business. And they’re always super- this is what’s on their plate, as the owner of the company, they’re dealing with either the new clients or the problem ones that are about to leave. So it’s all in their mind, and to them it is always a risk of a homeowner staging a coup and getting on the board and firing them, which is true. But as a whole, the industry has 90 or 95% retention from a customer standpoint. And so, yes, there’s a few of them a year that are at risk of leaving and you have to work to make sure they stay. The reality is that if you had 100 clients, maybe five of those are even at risk in a year, maybe ten of them are at risk. And so for a lot of reasons, one, in part because they’re volunteers, they meet quarterly, this is nobody’s full time job in most cases, from the homeowner standpoint, you have extremely sticky by nature customers. But I forget who said this to me, somebody was like, look, today’s homeowner is tomorrow’s mad board member. So you’ve kind of got two clients as a management company. The board are your direct clients, that’s who you’re meeting with quarterly, that’s who you’re directly corresponding with, you’re acting as an agent for them. The homeowners are easy to forget. You have to answer the phone when they call. But I think there are a lot of management companies that kind of think of that as a burden and try and minimize the cost on that service front. And in reality, and this is true in a lot of customer service businesses, you just want someone to answer the phone. If you call your management company, whether it’s for a legitimate purpose or not, and a lot of them are actually not because people don’t understand the association dynamic, but you just want someone to answer the phone and either solve your problem or tell you where to go to solve your problem. And if you can do that, then that homeowner’s not pissed off, and that homeowner is not going to run for the board to eject you. And so if you just pay enough attention to making sure that you answer people’s questions in a timely manner, then you have protected yourself a bit from that board coup. But the reality is that you’re only ever going to get that down to a couple percentage points. People, it’s government. So people are going to be mad about some decision the board made. And you as the agent have no control over what decisions to make. You’re advising them, but they are going to make the choices. And if somebody’s mad about the pickleball courts – real thing – pickleball courts taking up a tennis court because they’re tennis players, there’s nothing you can do about that. And if they throw you out with the bathwater, then it is what it is.

Orlando Remak: And that’s again, even in the five to ten that you’re talking about, that’s one or two. I think we feel- I think it’s natural you’re going to have one or two percent churn. But that’s just by virtue of those situations. And I think the rest of it was just people are okay, they’re happy enough with their manager, I think that’s what you’re- we’re looking to beat that bar. The bar is really low for management companies. And the reality is that the ones that we have in the collective are doing something that’s better than that. So that’s why our industry potential- our retention is higher than industry, we’re at around 95, 96%, as opposed to the 90% we’ve seen with other entities.

Alex Bridgeman: Does that also give you a good amount of pricing power? Or how does pricing power work in an HOA management industry dynamic?

Orlando Remak: Yeah, I think it’s interesting. They see the service that the manager is providing to the community, and they understand the world that we’re in today where because the costs of wages are going up, you have to come to the conversation and say that they are costing us, and we have to basically raise revenue in order to meet that cost. People are the single biggest cost in this business for us. And so I think that opens up the opportunity for us to go to a customer and say, hey, look, CBI has grown at X percent in the last year, and we have to make sure that we’re paying our people appropriately. That’s why this person is able to give you the time, to give you the service you need. And so we make that argument to be able to have that level of pricing power, to at least grow as fast as CPI. Now, that would work a lot harder if we have one big customer. I think in this industry, the average association management company in the collective has 100 associations. And so each one of these just mathematically is 1% of revenue. So if that does not work with that one board, then it’s not the end of the day.

Alex Bridgeman: That makes sense. You talked about having- cities like Houston might have a lot of HOAs and Boston might have none. I imagine those home ownership cultures are radically different between the two areas. Has that led to some of your thinking around being very decentralized versus centralizing a lot of functions among your member companies?

Jalen Ross: I think it’s less the geography, although that is a benefit of that. I think it’s less the geography and more philosophy, frankly, which is our industry has a handful of long term objectively successful large consolidators, and one of them isn’t doing it for 30 or 40 years. But most of them, or the two or three that I’m thinking of, will buy the company. They will do take your accounting team and they’ll say these guys are redundant, and they’ll fire them and ship that work down to their shared service center somewhere in a low cost market, and they’ll rebrand the company, and they’ll change all your standard processes. Which is like a- on the flip side of this, I think that the investor types, the Orlandos on the phone, will be like, that’s the playbook. That’s how you create value. And there are industries where that is true and where that impact is dramatic. In ours, though, the primary call center business, we just looked at this, 83% of our costs are payroll. And so, unless you can make some dramatic difference using technology, not outsourcing, in the number of communities that one of your managers can manage, you’re going to have to just hire people as you grow. That’s somewhat linear. And so, you’re not getting enormous kind of standard classical business school economies of scale. And so what then matters, I think what matters is if you’re long term inquisitive business, like we intend to be, you need people to want to sell you the business. And they’ve got other options. And if the other option is doing one thing, you basically just got to be a different option for those people. And the people who have not already sold to the 40 year consolidator have not done it for a reason. Either they’re too young and they don’t want to sell yet, okay. Or they’re worried about those accountants that have worked for them for 25 years, or they hate their like national competitors they’ve been competing with. And how do you meet the needs of that person who’s selling? I think one of the big ones is just let them continue- we wouldn’t be thinking about buying a company if it weren’t working somehow. So the idea of showing up on day one and ripping all sorts of stuff out just like never- it just seems silly to me. Unless there’s some like huge math from the other side that obviously makes it work, which I don’t think is true in this industry, just don’t do that. Let the company stay what it is. People like the brand. It’s grown enough for you to be interested in it. People like working there, that’s why they stayed there for 20 years at a time. How about you just don’t change that? Which is, I guess, a radical idea. But I don’t think it should be. And so that’s how we got to a decentralized model, which is like how do you allow that to happen? You just let people keep somewhat local control and identity and brand and culture, and then figure out how you can then help them on top of that. And the question we asked ourselves was, can you build a bigger business like that? And the answer is yes.

Alex Bridgeman: So if you think of like the value proposition to your customer, if your customer is that owner, what other pieces of value did you find where maybe missing in the market among those other consolidators where they couldn’t offer a certain service? We’ve talked about earlier, there’s a peer group, the CEOs have been running these businesses for a long time kind of on their own on an island, they now have a group of other HOA management CEOs they can go talk to. What are the other kind of pieces of value you’ve assembled through CAM Collective that are differentiated compared to other consolidators?

Orlando Remak: Yeah, I think it’s interesting, you touched on it in a very interesting way. But what we do is we try to make sure that we’re bringing the large company resources that any national player would have, and bring it to their business as their business stands. I think the reason why these conversations from the other buyers of the consolidators might be a little bit tough for sellers is usually what they’re doing is they’re coming in there and saying, without saying, but like we are going to change the way you do business in a very meaningful way. And I think what we want to do is come with added resources, meet them where they are, and find ways to help them grow in their own way. So maybe that makes our job a little bit harder because the way that we look at every individual member company is in the ways that they continue to grow. But I think the benefit is, to the seller, well, okay, it sounds like you want to actually invest in training, in the people who are here, you’re not trying to fly in people who are going to replace the folks who are in the company. Because where I’m at, what matters most to me, I think what I love about this industry in general, is that like people that work there matter the most, more so than your customers because it’s dynamic. You have a hundred customers, but you only have 15 managers. And so, you care about every one of those managers a lot more than you care about one of those hundred customers. And so the idea of coming in and saying that we’re going to be providing the resources and we’re going to elevate everyone there, I think is actually really resonant for them. And I think from a business perspective, like people want to see their business grow. And when you can basically tell them that you’re going to help them because we have a person who’s going to dial and talk to every other prospective board member in your area and try to generate leads for you. That’s going to obviously be a really- it’s going to be an encouraging feeling because it’s going to make people’s jobs easier, and you go in there and we think that we can use some modern tools to make someone who works an APs job so much easier, you can remove hours in a week because you can go in there and make some- basically create some tools that we get to bring into every one of our member companies and make people’s lives so much easier. And I think that that’s the kind of stuff that clicks in their mind because you’re not coming in and using a lot of things that I used to write in decks in private equity, I would walk in, and I would say a lot of really great things about how their industry is resilient and how they’re going to go and disrupt the space, and they’re going to make a big difference and we’re going to- all of those great words that go into an IC deck that don’t necessarily make any- aren’t really tangible to the seller, I think we just meet them where they are. We talk about what we can actually do very tangible.

Jalen Ross: I think we talk all the time about sellers’ like kind of wish list. And everybody’s got a list of things that they wish they had time to do. Like, oh, yeah, I would start doing sales, but I just don’t have time because I’ve got all these clients. I wish we could upgrade technology, I wish we could hire somebody to work on whatever it is. And we almost always can take some of those things off their list, either because we’ve already thought about it because it’s a similar problem that other companies in the collective have already had, we’ve developed a tool that’s very easy to turn on. Or it’s just we’ve got extra manpower and attention and energy to do some of those things. And so I think it’s a mistake to think that people who are selling the business are doing it because they kind of hit a dead end or don’t have any aspirations for it anymore. I think we found over and over again, that it’s more likely that, at least the people we end up working with because it’s a good match, are still excited about growing the business. And the other stuff that kind of gets in the way has taken up too much mindshare and kind of made them tired. And so if you can take some of that away, then they’re really excited to work on the stuff they’ve always wanted to do and help grow the business still, which is how they got to the size they are now right over 20 years, is because they were excited about growing the business. And so it’s actually pretty- it’s rewarding, personally, to be able to make that happen for people is to be able to say like, cool, we’re going to work on taking this stuff off your plate, so you can do what you actually want to do. I think it’s- you have to ask them if we’re delivering on this promise. But I think they’d tell you that they’re kind of enjoying it.

Orlando Remak: And the proof there is interesting where the conversations in the beginning for three of the four member companies, which we should probably talk a bit about like where we are today, but we can get there. But of the three, the first three members in the collective, all three of them originally started the conversation off as I plan on leaving in a short period of time. And at the end of it, we had two who basically committed to staying perpetually. And they’ve actually rolled equity into the collective. So I think one of the other things that resonates with sellers is our flexibility, our ability to go through and make sure that this is the right decision for them. I think we treat this decision not as like a point in a huge M&A list just to kind of get through. But like we’re trying to take care of this as a- this is a very big decision for them. And we similarly believe it’s a big decision for us. And so we make sure that we show that level of care.

Alex Bridgeman: Yeah, how do you keep focused on that level of care knowing that you might be in the middle, you might do 50 of these transactions over the course of a career, maybe even more, 50, 100, whatever the number is, but this is probably the only transaction for them. That’s the only time they’re going to go through this. How do you kind of right size that focus to make sure that you convey that importance to them while knowing that this is not going to be the last time you do this?

Orlando Remak: Yeah, there’s two points in there. One is I don’t think we’ll ever be in a spot that’s trying to do an acquisition a month. That’s just not what we believe we need to do. And it’s not necessarily what we hope to do. And I think that’ll certainly help make it easier to have sort of meaningful conversations with people. I think that a lot of private equity’s like pitch is we will pay more, and we’ll close the deal in 30 days. I think that’s really compelling for a lot of people looking to sell. I think what we do is, sure, we could probably close fast if we have to, and we will certainly do that once we get to the point this deal is exactly what you want. But because of this decision, I think we’re going to meet them where they are. We’re going to talk to them for as long as they want to talk and make sure we get to the decision that makes most sense, even if it takes six months to a year to get the right deal with them. So I think just by virtue of not coming in and proposing a false urgency or a fake timeline, I think we are already making sure that they see that we’re committed to doing right by them.

Alex Bridgeman: Yeah, I also like the focus on growing their business versus talking about all the different cost savings, or I don’t know if you would talk about that in all the previous decks you used to make, but that focus on here’s the ambition we have, here’s some ways that we’ve seen companies grow like yours, new revenue lines. How does that- it sounds like that resonates with the right owner that you’ve talked with. What are some revenue lines and growth opportunities you most often see with HOA management businesses?

Orlando Remak: I think it’s pretty simple to describe, the way you would write it in an IC deck is there are a number of different ancillary services you can provide to maximize your revenue growth. And I think what you’re basically saying is, let’s find someone who’s going to focus explicitly on capital projects. We’re going to hire this person who maybe was a structural engineer before, or they did masonry projects before. They’re going to come in. And what they’re going to do is they’re going to take a necessary task that managers deal with every day. And they’re going to handle it and focus on that. And in return, what we’re going to do is, for those capital projects, we’re going to charge a percentage of the project, which is a market ask, but it’s no longer a burden on your manager’s time. It’s now someone who’s dedicated and focused on doing that. So they almost have like a mini business unit. And so that’s an example of something you can describe to a seller that gets them really excited because they have that, they may even have it in their wish list. But the reality is that we have an idea of how we can help them do that. And we have some examples because different members of the collective have done that. And so that’s one way. I think this business, a people business is a service business. So really, it’s saying let’s find the dedicated talent to help you do this next step and maybe provide that additional service to benefit your community. And that’s ultimately- that’s basically what it is, whatever the service may be.

Jalen Ross: I think about this as what percentage of an association’s spend do they spend with us? And the answer for most management companies is 5 or 10%. Because they’re paying that management fee and some of the homeowners are maybe paying fees when they sell a house or ask for documents or something. But you’re really only taking 5, you’re only getting 5 or 10% of the spend of your clients. So what are they spending the other 90% of that money on? They’re spending it on insurance, spending it on regular janitorial or landscaping or maintenance work, they’re doing special projects. There’s all the business of the association. And so, if you think about what are the- that’s your scope. And there’s maybe even a little, there’s an extra next level scope, which is then what all the homeowners spend on. That’s kind of like a level 201 thing. But just in 101, what are the association’s R&D spending? And you know that answer precisely because you manage all of their budgets. So I can tell you right now exactly what they spend on every one of those services because we wrote the budget. And so then you start saying, okay, well, the association spending $20,000 a year on a handyman to change out the light bulbs or to paint the walls or power wash the garage. Could we just do that for them? Can we both do that for them at cost or maybe even below cost then what they’re paying some other vendor to do it, do it faster because we control the- we have the guy on staff who knows their association already and is in the same building, same output system with their manager? Could you then just have that person overnight change the light bulbs? They don’t even see an out light bulb. There’s no vendor to call, there’s no waitlist to be on because they’re our clients already. That’s one of them. We’ve seen some companies do that really successfully. And a lot of this is frequently on people’s wish list. I wish I could just do that in house. But it’s a whole project, I don’t have time to think about how to do it. So that’s one of them. There’s a lot of insurance spend. If you’re doing it right, you’re bidding out to different carriers frequently, not every year, but every other or every three years. You’re usually going to broker to do that. That broker is basically just taking a tax on you because they know you have to get this insurance. In a lot of states, it’s required for the association to have it. This broker is getting a 30% commission on every one of those policies they pay. There’s no reason we couldn’t also offer that service as a management company. And there’s five or six examples of those things that are getting you to instead of 5% of spend to 20 without even growing customers. You are just selling additional services to them. And then we can save the homeowner- selling to homeowner is the whole- we could do a separate podcast on that one.

Orlando Remak: There’s a whole two sided marketplace business.

Alex Bridgeman: Wonderful, wonderful. Jalen, you talked about being an automation zealot. Can you walk through a few examples of some no code tools or automated tools that you’ve developed that work really well?

Jalen Ross: Yeah, how long do you have? You have like two or three hours? I’ll tell you about my thoughts here. This is another one of those, this is one of those things that I think is not even on the wish list. People don’t, at least the sellers we’ve worked with so far don’t come to us and say, I wish I had time to work on some low code tools to increase the efficiency of my team. They just don’t think that. And I don’t really know why. I think in a lot of their cases, they don’t even realize that it’s possible. And so, it’s a pretty fun, again, like really gratifying thing for us, as trying to build this business, is it’s sort of magic, you can say to somebody like, hey, you can actually- this thing that used to take your team 100 hours a month, we could probably do in like 30 minutes if we spent a week or two writing the script to do it. Or even not writing the script, doing it in a no code way. So here’s a real example. At almost every one of our member companies, and I would wager essentially every management company in the country, your clients will at some point ask you to buy something for them, and they’ll reimburse you. So if you can do that with an invoice, it’s better, it’s easier. That’s how you pay most things. But say you got to go to Home Depot for something. There’s a million reasons why you might not be able to get invoice. And they’ll say, cool, can you just put it on your credit card, management company, and then you will just bill us back for it? And what that turns into is okay, well, so the first time somebody asked somebody that 20 years ago, they’re like, okay, sure. And it was really easy because you just saw that expense on the credit card, and you say you charge their account, you control the bank account, so it’s easy to reimburse yourself. Fast forward 20 years, and now what you get every- waiting in the mail every month for an Amex statement that has 200 charges on it. You don’t know which clients they’re for. Hopefully, you can figure out the vendor based on that statement. And it takes you 60 days to figure out what all those are. And then by that time, you’re two months late on doing that for the next few months. And so, we’ve seen this problem over and over again. And it’s just painful. It’s one of those things where you show up and you ask somebody like what steals time from you, and every time they say this thing is awful. I just want this to go away. And we basically figured out how, through a combination of different kinds of charge card technology, we use Ramp which I’m like- here’s a free plug for Ramp, Ramp is an awesome product. A combination of Ramp and things like Zapier, they very easily take the data download from Ramp, gives you all of our transactions, set that so that it’s already coded to which association it is, have some combination of Google Sheets or Excel or Zapier turn that into invoices for all those charges by association, upload that to your essentially ERP. And now, what used to take you 60 days, you basically can click a button and it’s done, assuming that you’ve done a little bit of the pre work. And that is just like magic to people. And I was an engineer in college and this stuff gets me excited. So I like actually tinkering with that kind of thing. I get to pretend like I know how to code, which I know enough to be dangerous. And it saves people just hours. We’ve only like really scratched the surface of that. I tell them that I refuse to build custom software. I think that sends you off the like deep end of spending a fortune trying to do something. But there’s all this stuff you can do with like a login and an hour googling that can- the time returns are wild. And people just haven’t even thought about it. It gets me excited.

Alex Bridgeman: Yeah, there’s definitely a lot there. One other- you talked about talent a little bit too and decentralization. I think there’s like an interesting discussion, like overlap between the two where you’ve talked about at the holding company level, you don’t necessarily want a large team or a large staff that you’re managing. You want to keep talent as close to the customer as possible. Can you dive into that philosophy just a little bit more?

Jalen Ross: I just went a rant. I’ll go another rant. I’ll rant all day.

Orlando Remak: Yeah, go for it. I think in the philosophy of keeping the center lean, and I think this is you are far more a zealot on this than I would say I am for sure. I do think that it’s important that the talent that we’re not creating foreign talent to bring in the collective. I think early on, we got some great advice that when you create a new role, especially in the center, that role exists forever. And so if you keep on making new the roles at the center, then you just continue to create bloat. And I think we just want to avoid that. The number- The concept I’m thinking of in my mind is just like you actually want the center to be scalable. And you want to get leverage off of the services that we’re providing off the center from like a numbers perspective. And the way you do that is by keeping the center meaningfully within like a set dollar amount that you can manage year over year. Yeah, there really wasn’t much more thought to it than that. And there’s both like the financial aspect, like the benefits of the collective is that we’re actually getting leverage off the center. And we’re not growing the center as fast as we’re growing the member of companies. But I think just philosophically, I think that the talent is best served at the member companies. And the way that they grow within themselves is by collaborating. If you have- the flip side of having, and maybe this is like the- if you have a network of independently managed management companies, there’s no real reason for them to work with each other, unless you foster collaboration. And we do that. We intentionally make sure that people are meeting with each other at least once a month through conversations, we have an annual planning session where everyone comes together, they open up all of their books, and they have to talk about what they’re actually facing, as opposed to when they go to like industry conferences or they meet as part of like trade co-ops, where they kind of all just represent the best versions of themselves. It’s like the social media effect. So, I think that just fostering that collaboration I think is one of the best parts about that network. And I think you make that a necessity when the center is too thin to be able to do all the services for you.

Jalen Ross: Yeah, I think, hopefully, somewhere there’s a business school professor in strategy who is smiling on us. It’s like all sort of the same choice, which is why does somebody who built a business for 20 years want to sell it to you instead of somebody else, because you’re going to maintain the identity of that place and keep it at the smaller scale and practices and identity that it is. The other side of that is there’s clearly a demand for that from customers. And that’s aligned with the same set of choices, which is every customer also had the choice to either hire a local management company who is down the street or one whose headquarters is across the country and is a big established corporation. And people can make different choices on that. It’s the reason people choose to work in a giant company or a small one. It’s true on the employee side, too. And so, there’s a dollars and cents thing, which is the less you spend in corporate overhead at the center just to make yourself feel like you’re doing stuff is better for the bottom line. Sure, there’s that math. The other one is it’s probably better if your accountant sits next to the person who does the management for your clients, and they can walk around the corner be like, hey, what was the- there’s something wrong with this set of financials. Can you fix that? And it’s done in 30 seconds, and there’s no call to a service center and a two day SLA. And there’s- you just fixed all of that. And so there’s a lot of clients- we sell against the big companies on this stuff. Where instead of you having to call somebody who’s in a random ring group in a city that’s a thousand miles away, you call somebody who you’ve probably talked to before, or who if you haven’t talked to them before, they know your manager. And if they don’t understand your question, they can walk down the hall and ask. And if you can make the dollars and cents thing work and also provide that service, people will choose you for that reason. Because a lot of times, it happens all the time, we get clients that are ex burned like burned by those big ones, and they hate that experience. And so what they look for, without having to sell it, they come to us saying we’re looking for a local management company. And we are like, hello, here we are. And so I think that is all the same set of choices, which is like keep that local identity. And you can still grow, but you keep the local identity and both your customers will come to you, your employees will opt into that. And then the future members of the collective will opt in to be able to keep providing that.

Alex Bridgeman: So that decision to stay local and stay within the region and keep that branding, you mentioned it kind of affects a lot of different areas. What other areas does that decision kind of leak into?

Orlando Remak: Yeah, I think it goes back to manager happiness, just employee happiness. The numbers benefit is manager and employee retention is lower. But I think from just like the day of life perspective is you feel like you’re part of a family or part of a small team. And that small team is about the size of the office that you’re in as opposed to feeling like you’re just a number in a big machine. And so, I think that leads to people feeling more content or happier with their jobs. And so just that satisfaction helps. And people who stay in their jobs longer tend to get better at it. And so then you end up having just really good people who do really good work in your company. And I think that’s ultimately what we want to keep. I think another thing that’s on the flip side for that is by virtue of knowing that business you work for operates independently but is part of a network of other companies is you get the benefit of knowing that if you ever wanted to move or go somewhere else, you can go and work within the same network, and at the very least, you are tangentially connected to the organization that you grew in. Another thing to consider is if somebody decided to hit the sort of- usually in small business, you hit a peak where you can’t grow anymore, you hit a ceiling, and there’s not much you can really do. And so, knowing that you can leave one member company and join another in a leadership position could be really more exciting for you. Or maybe you’re really entrepreneurial, and you want to go out there and start your own management company in different places, maybe somewhere else, like let us actually help you make that happen. And so there’s a lot of different ways where by virtue of our relationship with the network existing, you can create job satisfaction for someone. So they both get the benefit of feeling like they’re still at home, nothing’s changed, but they also get the benefit of the potential upside of knowing that they can grow. And so I think that leads to employee retention, which leads to customer retention, which leads to profits, which I think is the business way of describing what Jim would tell us, the seven word business plan. So its associates first, which Jim loves saying employees first. So I’ll say both, and you guys can edit out which one you want to use. Associates first, customers second, bottom line third. Employees first, customers second, bottom line third.

Alex Bridgeman: I think we’ll just leave both of them in.

Orlando Remak: You can leave the whole thing, I just figured.

Jalen Ross: Yeah, I mean, I don’t think- I think in a lot of ways, we’re not that smart. We made this choice. And so, we’ve duplicated, we’re trying to duplicate this experience for other people. We worked in big companies. We saw the flaws of that, didn’t love it that much. Wanted to work in a business that was human scale, we actually knew people, and there was a small office that was a real actual community. And not- I guess I won’t pick an actual company to complain about. But like if you- nobody cares about your like fortune 100 company values on the wall. There is literally no way to actually define a set of values to describe 100,000 people, and you just can’t do it. Unless it’s a country and even then, it’s fractious. There isn’t a way to do that. You can actually do that when you’re picking 50 people in one office in one place. You can select in and out and people will also do it themselves,  select in and out of whether that culture works for them. Like our NRP, you’ve met Jim in DC. That is a sometimes literally like family first office. You’ve got multiple generations of people in the same family that work there. You’ve got kids in the office and their dogs and they’re eating- they all hang out on the weekends together, and they’re having company potlucks, and they’re going to each other’s houses. And that is what that culture is. If you love it, you will stay there. If you don’t, that’s okay, too. You could do that when there’s 50 people, you can’t do that when there is 100,000. And I think that’s the experience that Orlando and I both had at larger firms, and we opted out of that and opted into a smaller business world. And so the question for us is always, how do we like live in a “yes, and” world where there’s benefits clearly to being bigger, how do we bring those down to a small business? The answer is just, if you bring them together, you can share the costs of stuff. And now all of a sudden, you have both people who you actually know in the office and a place you like to go work, and the financial scale to hire a salesperson or to do better web design or invest in automation, whatever it is, you got to scale to do those things. So that’s the needle we’re trying to thread.

Alex Bridgeman: Thinking through the people side more, you both decided to do this as partners. Can you talk about that decision, the kind of pros, cons, and how you thought through doing this as a partnership versus kind of each on your own to some degree?

Jalen Ross: Huge mistake.

Orlando Remak: The biggest mistake of his life. I think the way I thought about this was I had an interest in investing in small business. That was where that kind of the originating thought came from. I was an investor, thought this would be an interesting space to do that. Listened to a bunch of great podcasts for years going into business school that kind of led me to believe that this would be a really great place to spend my investing career. And so, I always thought that if I were to do this, it would have to be predicated on some level of M&A and then I’d be able to do a little bit more work there. But then by virtue of doing that, I just always imagined I’d have a partner. I think that it’s just more conversational. And I think what I wanted out of a partnership was like just to be able to have the Friday afternoon like, wow, that happened, the eyebrow raising moments. And just to be able to like, there’s only one other person in the world that’s gone through exactly what I’m going through right now. And I think that’s a pretty powerful experience. By the way, I have not said Jalen the entire time because he’s replicable.

Jalen Ross: It could be anyone, just someone else in that seat. I just am like a crippling extrovert, where like I could not do this whole thing by myself. You go shut yourself in an office and think big thoughts about the business you’re building. And during the search phase, you just make 100 phone calls a day, whatever it is, and you just do that by yourself. I just couldn’t do it. There’s one of our professors, he’s like, if you want a partner, get a dog. Which, yes, the math is better if you could do all the same things by yourself, then sure. But I would hate it. And that is about as sophisticated as my choice on this was – if I was going to enjoy it. The whole point of doing this is to enjoy it while also having a career. And so, I’m not going to make a paper optimization choice to not have a partner because it improves my share of the equity ownership. Or even like make that counter argument which people make which is like, well, if you have a partner, you can actually increase your average rate of return. I’m a data guy, you can make the data say whatever you want to on those fronts. The question is, are you going to like it better or not in the next 20 years you’re going to do this thing, if you have a partner to go complain to when somebody calls you and pisses you off, or not? And there are people who want to be lone hunters, and that’s great for them. I’m not one of them. So I had to figure out- for a while, I was thinking about doing it alone because I hadn’t found my Orlando yet, and I’m very grateful.

Orlando Remak: I tried not to talk when you said that, that way you can replace that later.

Jalen Ross: Yeah, this is another place where I think people overthink it.

Alex Bridgeman: I like the thinking of how do you design a career that you would also enjoy that would be fun for you and fulfilling and doesn’t just look good on paper. Were there any exercises or things that you did to answer questions to yourself around what would I enjoy based on my previous experiences and what I know about my personality and what others know about me? How do you kind of arrive at whatever it is you feel like you’d be most fulfilled doing?

Jalen Ross: I would like to tell you that we did that thoughtfully. I think there’s two ways to arrive at the same end point, which one of them is like, well, we defined the objectives, and one of them was fit with our personality and joy, therefore, we narrowed it down to these three industries. The other one is you poke around at a bunch of stuff. Exactly. Like look, I love a good PowerPoint. But the other one is, and we did make some intense PowerPoints, like they exist. If you want us to tell you about our model for industry selection, we can show you the slide. But the other version of that is you poke around with a bunch of stuff. And some of them kind of resonate, and you end up spending time there because you like it. I think that, and despite our best efforts at pretty slide making, that’s kind of where we ended up, which is we probably talked to 100 management company owners because we did it for two weeks with our team of interns in what we thought was going to be a rotation. And then six weeks later, we came back to it because we were like, yeah, I didn’t really love the last three. They were fine. But I really am still kind of spending my like nights and showers thinking about the HOA one. So then you go back to it for two more weeks, and you like the answers you get. Then for us, it was like the summer and fall of 2020 I guess. And so, you get to the end of that year, and you’re like, I think we’ve done enough poking around. I think we like this one. The math works. We can make it happen. Like you got to get out of your analysis paralysis and just do it. And that’s kind of where we ended up. I think for me, part of that reason was this business is kind of a funny jumble of different careers where it’s one part property manager, you’re actually managing a physical property which is nice because it actually exists. I like that. I wanted to be an architect for a long time. Part of it is being an architect. Part of it is being an engineer. Part of it is being a lawyer. You’re dealing with these bylaws of the association that are in theory written by lawyers, but are being interpreted by total lay people. So there’s that weird part of it there. There’s a politician part. These are miniature governments. There’s insurance in there. You just end up being this kind of funky jack of all trades. One part real estate, one part law and politics. I liked it. So, I would like to tell you that was analytical. I think it was just we backed into it.

Orlando Remak: Yeah. Are we talking about partner selection? Or are we talking about industry selection?

Alex Bridgeman: Sounds like a little bit of both. I’d say go for whatever feels right.

Orlando Remak: Okay, yeah, I think that I am prone to analysis paralysis. And so, I had to make sort of time guards to make a decision on partnership. And so what prompted this really was that I had this opportunity to take a role that would have not lead me to be in Chicago. But instead, I took the one in Chicago, but it was like I have to make a decision. And so, then I had to quickly decide who I would want to do this with. And so quickly dwindling down to the things that matter the most to me. There’s in terms of like chemistry, easy to get along with, has a degree of interests that are just different than mine, recognizing some of the things about myself that I certainly like about myself but maybe doesn’t lend well to being the CEO of a large company, just trying to find some sort of like opposites in that way. There were some people that fit that bill. Jalen fit most of it. And so I went to Jalen.

Jalen Ross: That’s the four nicest things ever said about me. I’m glad we got that on recording.

Orlando Remak: I went to Jalen. And I say, hey, I’ve got a number of days before I have to make this decision. And so-

Jalen Ross: To be clear, it was like two. The number of days wasn’t like 100, it was two days.

Orlando Remak: I went to him on like a Thursday or Friday. And I was like, I could probably push this out a week, but I’m going to respond on Monday. So make a decision.

Jalen Ross: He gave me the exploding friendship offer.

Orlando Remak: Yeah, I think one of the things that like kind of helped, because I think Jalen had to go through his thought process. I actually don’t know what happened that weekend. And I would love to hear the story of what happened that weekend. But I think part of it was that a good friend in common, his girlfriend, and I think that he basically asked her if I was a good person.

Jalen Ross: I did do that. She was like, I’ve got serious doubts, but I guess it’s your only option. No, it’s funny. We were house hunting that weekend. We were in Chicago looking for an apartment for her. And I did, I had previously asked her, I was like, oh, you know Orlando, Orlando popped the partnership question the other day in class, and I don’t know. What do you think? And she had nothing but good things to say. And then we were house hunting in Chicago that weekend. And I remember like we’re getting into an Uber to go to a different apartment building. And I was just like, I guess I got to decide. I guess we’re doing it. And so I looked at Beth, like I guess I’m going to say yes, here we go. And that’s honestly, we had that same- I think you just reach a point, to Orlando’s point, where you are fully analysis paralyzed. And you’re like, okay, there’s literally no more analysis I can do on this thing. There’s no more thoughts I can have. I’m going to have to make a choice. The partnership movement for that was in that Uber on the way to the apartment building. The industry thing on that was us sitting at my like dining room table in like November 2020 and being like we could go look for other things, or we can do the one in front of us. So we were sitting there having a bourbon and we just go I guess we’re doing it.

Orlando Remak: And I think that happens a lot in making decisions. Like, we get to the- you have to just get the necessary amount of information you need and then go from there, which is the opposite of my entire career. And so that has actually been an interesting learning experience for myself, which is what are the few things that I can calculate right now to get to making the best decision and just this is good enough, versus trying to get the perfect answer.

Alex Bridgeman: Has it felt like that’s- the threshold of information you need to make a decision is actually a lot less than you thought before? Has that been the realization you’ve had? It sounds like it’s pretty close to that.

Orlando Remak: I don’t know. I think you still desire high quality information. It’s just the analysis you’re running to get to the decision. I think maybe over time, we’ll develop a gut sense. But I think that like you can take the same amount of information and cut it a million different ways, when really you only have to cut it one way or two ways.

Jalen Ross: There’s that. I think there is also a threshold difference, which is less that you have to make- you have to like make a lower quality decision or think less about it and more that the amount of data you have as an input is just limited and it’s going to be limited. You will not fix that. Like I was a consultant. And so, sure, I can- every single data point you want, if you’re working for Miller Coors, purely hypothetical, it exists. You can go in that ERP, you call somebody on some team somewhere, they can produce a spreadsheet for you, it’ll take a couple of weeks. And you can do that analysis, it’s possible. You pretty quickly hit a point where you- we do this in diligence when we’re thinking about a new member company. You ask them, okay, this is Orlando, this is classic Orlando. Well, what happened with your employee churn in 2016? And they’re like, I don’t know, I switched payroll systems in 2018. I don’t have the data. It literally doesn’t exist. There’s no way you’re going to answer that question. So you just got to move on. I think it’s like kind of refreshing. It puts a- for two people that are I think prone to analysis, it puts some guardrails around it because you just end up in farce pretty quickly. And so, you’ve got to make a choice with what limited information you have.

Orlando Remak: Yeah, I can see that. I was thinking of it in terms of like you still strive to want the information you need to make the decision. But if you can’t get it, you can’t get it. We just have to move on.

Jalen Ross: I mean, also, the other dynamic is like maybe especially in our model, where we are partnering with existing small business founders and CEOs and employees, instead of kind of replacing them with ourselves or somebody else, we’re constantly negotiating that. The level of analysis and thought that we want to go into a decision is almost always longer and slower than they want. And so that’s also a good balancing act, where we’re saying, okay, well, can we think about it, can we project the year if we make this choice, and then if not, and then also these scenarios. And they’re like, I would have made this choice three days ago, what are you doing? And so you kind of have that negotiation enough times and you get to a spot in the middle where you’ve done enough analysis that it’s probably a good choice, and they’ve given you the gut, and you can meet in the middle on some of those things.

Alex Bridgeman: Speaking of information and making decisions, what are some strongly held beliefs that you’ve switched your mind on over the years?

Orlando Remak: I’ve been sitting on this one. I think I grew up in a suburban part of Florida in a religious household. And I think that if I look at the step function differences in my life, I’ve had the chance to see, I’ve had the opportunity to have like very different mentalities about very important things in life. I think the one that immediately comes to mind right now is I would have told you a long time ago that the King of Pop came and went. But today, I’m here to tell you that Harry Styles is absolutely one of- you look back and say that this man is doing something different, and we are going to look back and appreciate him as maybe not the king, but one of the potential kings of pop.

Jalen Ross: You’ve got a lot of terrible takes, Orlando. That one is ice cold. Harry Styles? Okay.

Orlando Remak: I hope that we catch this reaction when we look back and we’re like wow, Orlando really called.

Jalen Ross: Yeah, roll the tape. I don’t think that’s how it’s going to go. We will roll this tape in 20 years.

Orlando Remak: I think it’s just the idea that there is a generation of musicians out there that are doing really great things. And I think that there’s potential for someone out there to unseat the previous king of pop that everyone has in their mind when they think of that.

Jalen Ross: Okay, you’ve walked back you’re claim from Harry Styles as the king of pop to there is a future king of pop.

Orlando Remak: I’m going to stand on that one. I’m going to stand on that one, but I think that we can- I will open it up to so that way you can stop yelling at me.

Jalen Ross: This is how we make decisions. Orlando says a thing and then I yell at him.

Orlando Remak: I’ll go out of the bounds of a concept, he’ll argue, we’ll get in the middle of it.

Jalen Ross: Now mine’s going to be boring. I didn’t realize we were going with hot pop culture takes. My answer to that is I worked at McDonald’s for a little bit in between my consulting life and my like business school and search life. And we helped them launch Uber Eats, like delivery with Uber Eats, which is pretty cool. We build a billion dollar business in a year. It was awesome. But it was in this like very big organization. And I remember thinking it was pretty cool because our seats for the strategy team were right outside the CEOs office. So we got to hear a bunch of like pretty cool stuff that was going on for this 100 billion dollar company. And the weird dynamic at McDonald’s, they call it the three legged stool, but you have everything you do, you have to run through the franchisees because they’re their co-owners, there’s like antitrust law you’ve got to deal with. You can’t even really set your prices, you can give them suggested prices, but they own the franchise business. So as corporate, you’re constantly negotiating with them and trying to get them to do stuff. And the engineer brain of younger Jalen was like, that’s so inefficient, just tell them the optimized price, and then that’s what they should sell it for. Why are you asking? And so I remember thinking at the time, I would never run a business like this. It’s so silly. It’s inefficient. Why would you do that? And here we are, fast forward five or six years and the entire ethos of our business is about being decentralized and putting decision making closer to the customer and it being collaborative instead of top down. So, that one is a total reversal. I think current Jalen is right, and previous Jalen is a little too tied to the optimization math.

Alex Bridgeman: So is that your best business then, McDonalds?

Jalen Ross: My best business answer is like objectively not an answer to your question. But McDonald’s is a pretty good business. My best business answer is less about like a fascinating academic business model and more like experience. So, I think probably the reason that I even like care about small businesses now is my uncle ran a window manufacturing company when I was a kid. And it had been in his family for two generations. It like gave him the freedom to like have a boat, go on vacation when he wanted to, he brought his dog to the office, his like family was part of the company. And I think that’s a really beautiful thing. And that is, when you said best business, that’s what I thought of. And I couldn’t think of a fun business model one. So I’m like I think the answer is the business gets kind of a bad like social rap, I think, in the modern Zeitgeist. And it’s pretty powerful to be able to create that opportunity for people. And that’s frankly what I want is enough business to be comfortable and productive part of your life and not like a corporate share buyback optimization scheme.

Orlando Remak: Yeah. I actually kind of started- I started the thought process of best business that way as well. I was thinking about businesses that I think make a meaningful difference that people actually remember and think about for a long time and they’ve set up sustainably for that reason. I’m from Florida. You know where I’m going with this, Jalen. Publix is absolutely one of the best businesses for many reasons. I think what they do every day, it’s supermarket. It’s every one of those Publixs is located in like their local area. Like it’s a fixture. People go there. People talk about going to it. It’s a big deal. And service makes a big difference because people can go to any grocery store around the area, but they actually care about the experience they’re having there. And I’ve had a consistently great one every time my entire life. I think growing up with that being there and then Publix always growing in that area, it’s been a big deal. I think now they’re in other states, but they were firmly in like Georgia and Florida growing up. And then I think if you look at it from the business side, it’s a pretty profitable supermarket, which is hard to say because grocery stores run on pretty small margins. And it’s the nation’s largest employee owned business. And I think that’s really fascinating. And so I think about potential futures for the collective. And I would love for this to eventually be an employee owned business.

Alex Bridgeman: Big statement at the end with the employee owned. It’s a big switch. Do you have any sort of employee ownership process now or any plans for it?

Orlando Remak: That’s a good question. So and this might- we don’t. We don’t have it today. I think this is one of those things where there are a bunch of different ways you could approach an exit. And I think that a world where we were able to create ownership for employees would be really great. It’s something that sort of lives beyond us. Going back to Publix, it’s not- the person who founded it, his name is George Jenkins. It is not called Jenkins Mart. And so, it’s called Publix. It is not tied to him in any way, and it lives far beyond him I think just by virtue of it being employee owned. I think people- I think it’s just shows in the service you’re getting when you go there. So yeah, I’m not sponsored yet, but my hope is one day.

Jalen Ross: Ramp and Publix, just free promos in this interview.

Orlando Remak: Publix is actually up there in terms of NPS in Florida. They’re like the leading brands. It is very clear that they’ve done something great and they’ve done something consistently great for everyone. Just saying, I’m not the only one. All you Publix heads out there, hit us in the comments. Tell everyone how great it is.

Alex Bridgeman: What do they do? I’ve never been to one or spent a lot of time in Florida. Are they just something like Whole Foods or something?

Orlando Remak: It’s not just a supermarket. Okay? It’s a place where shopping is a pleasure.

Alex Bridgeman: That’s cool. I found something for die ins at Publix. There’s some sort of protest for people who pretended to be dead throughout a Publix. I’ll send this to you. We’ll cut this from the recording.

Orlando Remak: We might want to go back. There’s one question that I think I’d like to revisit. Which was just why HOA because I think that there’s an opportunity to explain our story. I don’t know if anyone actually heard about us. Like, where we are, where we are today.

Jalen Ross: I was going to say that we might have missed the like, what’s the company?

Alex Bridgeman: All right, let’s do that. So tell us a little bit about CAM Collective. I was about to say, tell us about Publix. Tell us a little bit about CAM Collective.

Orlando Remak: Yeah, so I think, this starts off because Jalen and I think a little bit differently. I think I’m a little bit more of like a top down thinker. You read a bunch of really great like Sims in books. And then you come up with a thesis and you figure that out. I think Jalen has an engineering mind, he’s the kind of person that just kind of starts with bottom up. And so the way we decided to do this was HOA wasn’t necessarily the first place to start. We actually decided that we were going to look at a number of different industries. So we went in with a small framework, followed that, had conversations. And after I was able to accomplish getting to the end of internet, doing as much top down research as I could, I got there really quickly and realized it wasn’t much you could really do. But from the bottom up, what you can do is go out there and talk to owners. And so, what we did was we would have conversations with owners in a bunch of different industries and just learn and get a better perspective. So we did that basically during the fall of 2020. And we had conversations with owners in this span, the HOA industry, which I think was really fascinating for us because it was a time when in the market, this is the middle of the pandemic, most business owners are talking about the problems that they’re facing. But instead, these owners were talking about how they couldn’t staff for the growth they were experiencing. Because as people were staying home, communities become a bigger part of their lives, they started paying attention to those things. And so then they started doing more work within their community, that turned into more work. And so that was actually really fascinating for us. And what you learned about the HOA industry when you look online is that it’s extremely big, extremely fragmented, it’s benefiting from the fact that they’re- So 25% of homes are in associations, yet 60% of every new home, I guess, six out of every ten homes are being built in an association. And we know that there are 360,000 associations in the United States. And so, it’s large. It’s very fragmented. There are four to seven thousand management companies out there as well. So you feel really good knowing that if we’re trying to find one, we’re going to find one in a pool of 4000 to 7000. And so I think what we’ve also learned in that process, having conversations with those owners, is none of them go to sleep worried about losing their customers. And that’s for two reasons. One is because they have multiple, most management companies have over a hundred. I would say they can have a small portfolio, but they will- But the customer is a smaller percentage of overall revenue relative to another business where you might have one large customer. And the other is, at the end of the day, we just looked at some of the public companies out there, and we saw that their revenue has basically been flat or up for the past 20 plus years, just showing you that the category is just extremely stable and constantly growing. And I think the reason why that’s the case is because you’re providing a very necessary service. And you’re also taking care of HOAs. And as you know, HOAs are really good paying customers because they’re getting money from assessments and assessments are pretty much as good as taxes. And then as we dug in, had the chance to see a couple of financials for companies as we were having chats with owners, I think we just realized that it was a really attractive business model. So you’ve got that stable market, you’ve got a business where 90 to 95% of your customers stay. And you’ve got a business where, because it’s a people business, laptops are really your only expenditure, ongoing expenditure, and all the other services you’re paying for, paper and so on. So your margins are people, certain expenses, and then from EBITDA, our earnings, like from that level of profit, going down to free cash flow is pretty great because at the end of the day, you are one of the many vendors that you’re- I’ll take a step back. You’re providing a necessary service for your communities. And what you’re doing in that process is managing their bank accounts in order to help them with cutting the vendors necessary to help serve their community, and you are one of those vendors. So you basically make sure that you are paying everyone on time, including yourself. And that creates a really good working capital dynamic for your business. So, for us, that means limited net working capital needs, and your profit will go down to bottom line, basically, your earnings is your free cash flow. And so I think all those things just made it seem like it was a good enough business to run.

Alex Bridgeman: So what about using a holding company approach versus any of the other models that are common in ETA?

Orlando Remak: Yeah, that came from talking to a pretty large group of owners where we just kind of learned that they had a choice. So when owners were looking to sell, they thought to themselves, well, I can sell to my family, I can sell to my employees, or I can sell to one of the large consolidators out there. And I think that a lot of the sellers first were concerned about having to sell, one, their family doesn’t want it, two, their employees don’t really have the capital to be able to buy their business from them, and then, three, they don’t necessarily want to sell to one of the big guys out there because the big guys’ promise is typically something along the lines of coming in with a process that’s going to change the name on the door, it’s going to change their system and process, going to change the software, going to change- they’re going to lose half their staff in some instances. And so that just doesn’t seem like an appealing choice to them as well. And so we thought, well, we don’t necessarily need to- we could just promise not to do those things. And that’s going to basically allow us to have multiple members within a collective of independently managed management companies. And so that sort of reversed us into a scenario where we had a large decentralized network of management companies to work with. I think that sort of was the beginnings of the CAM Collective. I think then as we got really excited about the idea of managing this decentralized network, we thought about all the different ways we can help grow them. And so we are establishing a center that sits on top the member companies and provides all the resources that any large buyer or any large management company would be able to provide any of their individual branches, we would be able to get those resources and provide them to the member company.

Alex Bridgeman: Thank you both for coming on the podcast. It’s been so good to see you guys in chat more. I love getting to hang out. We could probably chat for hours about everything under the sun and all the different rabbit holes. But thanks for sharing little bit of time.

Orlando Remak: Thanks for having us.