[00:00:00 - 00:05:12]

Will Smith: Unlike most guests on Acquiring Minds, today's did not come to his acquisition as a self identified searcher. Instead, Matt Orley was an entrepreneurial guy who'd found an industry he really wanted to get into and buying a business there was his path to do so. The industry is short term rentals, that is the property owners who rent their properties on the likes of Airbnb and the growing ecosystem of vendors that serve those owners. As you know, this is a category that has exploded in recent years thanks first to the advent of Airbnb and later to Covid and you will hear Matt's passion for it. There is strong founder energy to Matt.

Brand is another differentiator of today's story. Matt is solidly a brand guy and you'll hear how he is building Red Cottage as a brand forward business. In the three years since he acquired it, Matt has grown red cottage from 50 homes under management to over 200 and from about a million in top line to mid seven figures in terms of short term rentals and Matt's geographical market, The TAM is 250,000 homes. So with infrastructure, brand and innovative product offerings, growing his own business to 500 or a thousand homes under management is, quote, absolutely achievable, says Matt. Please enjoy this conversation with Matt Orley, owner of Red Cottage.

Your LOI is a key step to being taken seriously as a business buyer. Attorneys Bill Barlow and James David Williams return for an office hours tomorrow, Tuesday, January 13th to walk us through the do's and don'ts of this critical document. The loi, James, David and Bill will focus on how Lois can stand out both for good and bad reasons and what you can do to get a competitive edge and avoid common pitfalls. They'll also be sharing their LOI template that is tomorrow, Tuesday, January 13th noon Eastern Register at the link in today's show notes or on the Acquiring Minds homepage acquiringminds Co. How much will I actually make if I buy this business? That is one of the most common and misunderstood questions that searchers ask this Thursday, January 15th, Chelsea Wood of Acquisition Lab walks us through how to shift from a traditional W2 mindset to an owner's mindset.

A mindset that's focused on flexibility, tax efficiency and long term wealth, not just salary. Chelsea will cover why quote replacing your salary is the wrong question and what to ask instead. What makes up total owner benefit? Spoiler. It's more than just salary and a simple framework to help you estimate your real take home pay.

Post close that is this Thursday, January 15th noon Eastern Link to register for that webinar is right at the top of this episode's show notes or on the Acquiring Minds homepage.

AcquiringMinds co.

Welcome to Acquiring Minds, a podcast about buying businesses.

My name is Will Smith.

Acquiring an existing business is an awesome.

Opportunity for many entrepreneurs and on this podcast I I talk to the people who do it.

If you ask owners in the ETA and search community which insurance broker provides highest quality work, great outcomes and has a practice dedicated to searchers and acquisition entrepreneurs, one name comes up again and again.

Oberle Oberle Risk Strategies has worked with hundreds of searchers over nearly a decade and is in fact led by a two time successful searcher, August Felker, which makes Oberle a specialty insurance brokerage for searchers by a former searcher and if you've got a business under Loi Oberle will provide complimentary due diligence on that business's insurance and benefits program. An easy, no risk way to get.

To know August and the team at.

Oberle to take advantage. Check out oberle-risk.com that's O B E R L E- risk.com link in the.

Notes Matt Orley welcome to Acquiring Minds.

[00:05:13 - 00:05:15]

Matt Orley: Thanks Will. Glad to be here.

[00:05:16 - 00:05:40]

Will Smith: Matt, you bought a small vacation rental business about three years ago.

Today you give keynotes at industry events.

So yours is a story of buying into and then becoming a player in your chosen industry.

And you did choose the industry. Let's get some background first please.

[00:05:40 - 00:07:36]

Matt Orley: Matt well I'm thrilled to be here Will, and to talk to you about the story as it has happened over the last three years. It's been exciting and we have a lot of new stuff to share as well.

So I'll jump into it by saying my background really was in brand development and brand management. I worked with a number of consumer brands over the last 15 years or so and in Covid I had this pivot into this vacation rental short term rental space and it was in the acquisition of Red Cottage which has now grown into the acquisitions of a number of management companies that form the basis of that business. When I came into the space it was because I had owned a small portfolio of homes that I was myself Airbnb and looking for ways to differentiate that that portfolio and was looking at this space feeling like there was just a ton of new software being purpose built for it. There was a lot of, there were a lot of small businesses that I was seeing trading and I was looking for a way to go deeper into into this industry and so I set off on my you know, business buying journey, looking for a business that was going to essentially, you know, widen my moat, you know, specifically for the portfolio of homes that I did own and give me more to work with there.

[00:07:36 - 00:08:31]

Will Smith: So to be clear here, we're talking about so obviously enormous growth of Airbnb.

You had a handful of properties that you and your wife together were renting as a side investment, side gig, if you will. But what we're talking about here is the, the as you grow, there are. Well, not necessarily as you grow with a portfolio. Point is, there are service providers who are management companies, are property management companies, vacation property management companies. So you could hand off the management, the back and forth with the guests, the cleaning, all of the stuff that we know that goes into the maintenance and management and, and marketing of these properties to a third party that does all that for you.

They take their cut and they send the rest to you. And that is itself an industry today with a lot of kind of fragmented mom and pops who do this vacation property management stuff. And Airbnb primarily is the platform where they're operating to fill in the gaps.

[00:08:31 - 00:10:16]

Matt Orley: Absolutely. And the nature of that, as you described it, has changed drama dramatically, even from what that looked like, I would say preco.

And what those businesses served to do for those clients, be, you know, be they homeowners or guests. And just, you know, through the technology that you know, now exists that supports businesses like these, there is so much more that a business can offer to you. And as a, as a homeowner. And the space itself, without getting too far ahead in the conversation, is professionalizing very quickly the odds that you, as a guest go on to a travel booking platform like an Airbnb or a vrbo or a booking.com, the odds that you're renting now from a manager are exponentially greater than they even were pre Covid, where you were more likely renting from a mom and pop. So you really are seeing a professionalization that breeds now these companies, the, you know, management companies across the country.

It's highly fragmented. You know, we see managers with portfolios of 10 units, 20 units, 100 units, 500 units. There, you know, it's, it's, it's really all over, over the map, but it, it is a very new space relative to what it looked like 10 years ago. And I think that those changes are really what's exciting and what's driving a lot of new interest in, you know, in this area.

[00:10:16 - 00:10:47]

Will Smith: Well, that's well put, because I think a lot of us think of Airbnb as very mature.

It is a 15, 17 year old business now. And that if Airbnb is mature, so too is the Airbnb ecosystem. But in fact, that is wrong. The Airbnb ecosystem continues to evolve. And you think that your space is in, is in the early innings.

We'll get there. So, Matt, how many units did you have personally when you took an interest in getting into the space as a provider, service provider, business owner?

[00:10:47 - 00:12:10]

Matt Orley: We had five units and everything we were doing was to think about how to differentiate them in a time and a moment when it felt like and there still is a ton of supply. You know, in Covid, you saw investors rush into this space, you know, looking for, you know, quick opportunities with short term rentals or vacation rentals. And so it was, you know, it's, it's, it was really necessary for us to think about how we were going to differentiate our units.

And what we were doing at the time was we were partnering with different brands who were helping us to either furnish, you know, a property or market it with that brand name. And we had a handful of brand partners who really were, we were leaning on to, to, to maximize just our, our units. And it was great. I mean, the immediate buy in that we were ha. That we had from brands gave me even more reason to, to believe that there was just a whole new wave of activity that was happening in this space that felt very different from what those first 10 years of Airbnb looked like.

[00:12:10 - 00:12:40]

Will Smith: I have to say, Matt, it is funny because the brandification of the, of the, of the units to rent on Airbnb is a departure from what Airbnb itself has historically touted. And maybe they don't do this anymore. Maybe this is like 10 years ago. But remember the original thing was stay with a local person and have a hyperlocal experience because, you know, you interact with the owner, that's going away. That's going away.

[00:12:42 - 00:14:32]

Matt Orley: It is and it isn't. And I think that there are some parallels here, you know, across other service industries in terms of what we see within like this short term rental property management space, which is there is a premium placed on authenticity and local market expertise. And so as we've built, built our business, we have absolutely thought about how our name resonates, you know, how we're perceived in new markets that we want to go into as we, you know, further build this multi market business. And I think, you know, whether you're building in the, in the property management space or you're building an H. Vac or roofing or whatever service business you're in, you know, you're thinking about those same things. How do we retain that authenticity and how do we, you know, not be perceived as this, you know, you know, large national behemoth that comes in and, you know, changes the nature of, you know, a certain area and yeah, what I always felt about the business, the Red Cottage business, when we did buy it, was that it one.

I mean it had that kind of authenticity. It had that goodwill built in. People did recognize it. It was in an area that had very little competition. And when we went to value it, I mean it was.

Those were the metrics that were as important, if not more so than the, than the trailing twelve financials. I mean, we were looking at this business feeling like the portfolio was second to none and the name was geographically agnostic. I mean, you know, it wasn't Red Cottage of the Hudson Valley. It was, it was a name that all allowed us to build this multi market business while still retaining a lot of that authenticity that you are sort of needing to have.

[00:14:33 - 00:14:53]

Will Smith: So Matt, let's return to the plot for a sec.

So, but tell us what it was that made you want to pivot out of being out of your W2, your career path to buying and bec. Buying a business and becoming an entrepreneur. We understand your enthusiasm for this space, but what was the, what was the life decision there?

[00:14:53 - 00:17:15]

Matt Orley: Yeah, Covid helped. And you know, the fact that I had this side business, you know, running where I was already exposed to it, you know, gave me, you know, a lot of that push.

And really when I went to, to, you know, look for a business to acquire, I might, I would consider myself, you know, sort of non traditional in how I came to the space. You know, when I did my mba, you know, years prior, this was not something eta was not something that I had really studied or looked at. And so I came back to it and felt like I was giving myself an education and I went out and I was buying all the books and I was reading, you know, everything that I could about how to come into the space place. And I do remember that, you know, at that time, you know, sites like Microacquire had just come up and I was, you know, just all, you know, on all of these different brokerage sites just looking for different businesses and I, and I, I knew that I, I really liked this space and I wanted to, you know, go deeper into it.

And so I was just, you know, focused on this, looking where I could, speaking to brokers, just pushing myself you know, to figure out what that step was going to be. And actually what happened was there were two businesses that I had engaged with. One didn't go very far, the second one went very far, basically all the way to the finish line and, and fell apart for a number of reasons. And both of them were like str adjacent. They weren't property management companies.

But at the time I, you know, I felt very clearly that, you know, these were going to, you know, just give me further a leg up, give me more data to work with that was going to help me expand. You know, what I already felt were interesting and meaningful activities in this space.

[00:17:16 - 00:19:05]

Will Smith: Running payroll, paying your bills, closing your.

Books and producing financials.

These are critical tasks every business owner must do or oversee.

But spending time on them distracts you from the leadership in growth work you want to do. So let system 6 do it for you. Owned and led by a former Searcher, Chris Williams, System 6 is a leading outsourced finance team for hundreds of SMBs, including over 50 searcher acquired businesses. Chris, Tim and the System 6 team understand firsthand the challenges, the opportunities of jumping into a business as its new owner. So whether you own your business already or have one under LOI, talk to System 6 about how they can give you time back and improve your financial operations.

Mention acquiring minds and they'll provide a free review of your books and financial ops, a $500 value. Check out system6.com, link in the show notes or email helloystems6.

So to be clear, you essentially had an industry thesis or, or at least wanted to be in this industry. It didn't necessarily look like property management. It could, that was one possibility. But these other two deals that you, one that died early, one that died much, much later and you got pretty far along on were not in property management but were in the short term rental ecosystem as service provider. They were tech businesses.

One was a kind of a data data business, right? The one you got pretty far on. Yeah, yeah. So you just really were a guy who was like, I'm gonna, the next chapter of my career is gonna be in short term rental.

[00:19:05 - 00:19:07]

Matt Orley: Well, I like what I was doing.

[00:19:07 - 00:19:08]

Will Smith: And I'm gonna buy a business to get in.

[00:19:08 - 00:20:08]

Matt Orley: Yeah, I, I liked what we were doing. I felt like it, you know, that it was clicking and from what I saw, just as a, you know, from, from my vantage point, it felt like there was a ton that was changing and it felt very opportunistic, specifically this space. So yes, I mean, you know, I had a Very loose thesis, I would say. But I knew I wanted to try and find something that was, you know, focused on this with the thought that, you know, whether it was directly supporting the real estate portfolio we had or not, it was all going to sort of, you know, move things in, in the direction that I wanted them to go.

Uh, and, and so Red Cottage, as I said, was an off market deal that I knew of. I had actually stayed as a guest with them all the way back to like 2012 and they were on my list of, of target businesses.

[00:20:08 - 00:20:18]

Will Smith: And, and so you had done some cold outreach to property managers in this world. Some, probably many you didn't know, but this one you actually happened to know you had been a customer.

[00:20:18 - 00:22:05]

Matt Orley: I did not know the seller, they did not know me.

And you know, they were one of a number that I had reached out to. But when I was a guest of theirs, I was looking at this business thinking, this is a great brand. And again, and I'm coming to it for you now from the perspective of brand, this is a great brand. These homes are phenomenal and every home that I ever stayed at with them was a plus. And you know, my, you know, from my viewpoint, it felt like there wasn't a ton of infrastructure there that became, you know, even more clear as I got into the business and under the hood.

But it felt like there was a lot of opportunity to do something with that kind of, of company and that kind of portfolio. So, you know, I was thrilled when it came to fruition and I had the opportunity to make an offer. I was bidding against, you know, much more institutionalized businesses, but my pitch at the time was I love this brand. There is, you know, huge opportunity with this name to do something fantastic and these other buyers really are just going to take the portfolio that you have and roll it into their platform, which, you know, ironically is now what we do with our acquisitions, but it's under the Red Cottage name and, and I still do feel as strongly that the brand we have really supports the kind of growth we want and is strong enough to allow us to, you know, build in the direction that we're going.

[00:22:05 - 00:22:12]

Will Smith: To tell us more about the business, the bullet points of the business, metrics around it.

[00:22:12 - 00:22:35]

Matt Orley: So at the time that we found it, it was doing, you know, about north, just north of a million bucks in revenue. It had mid six figure ebitda and I would say that it was a cash rich lifestyle business that was under invested.

[00:22:36 - 00:22:45]

Will Smith: And, and when you say so, wow, those are great margins, mid six figures on just Over a million bucks in revenue. Are those margins as good as my math is?

[00:22:45 - 00:23:12]

Matt Orley: Okay, they were great.

They were great margins and you know, and then that was reflected in how we valued it. But at the same time it was very clear that that was not going to get us to where we wanted the business to be. Right. If you had removed the owner three years ago from the business, it would have fallen apart.

[00:23:13 - 00:23:18]

Will Smith: And how many employees it was the owner plus how many employees plus two employees.

[00:23:18 - 00:23:20]

Matt Orley: Wow. Yeah, wow.

[00:23:20 - 00:23:25]

Will Smith: So very small. And how many units under management? I don't know if that's the phrasing in this industry.

[00:23:25 - 00:23:28]

Matt Orley: Yeah, yeah, it was about 50ish.

[00:23:28 - 00:23:40]

Will Smith: 50Ish. And so in the world of short term rental property management businesses is 50 units. What is that big? Small?

Obviously there are these national players, so it be small compared to that. But.

[00:23:41 - 00:25:43]

Matt Orley: Well, it's an interesting question because I think that 50 units is now on the small side. I think at the time, and I think this speaks to probably just how quickly this space is evolving. It was a good sized portfolio.

My feeling has been that it, it is very hard now to run this kind of business. 50 or sub 50 units. The, you know, it is so operationally challenging. You really aren't making enough to. And maybe this speaks to, you know, the opportunity for other people as they're looking at this space.

You're not really making enough to hire 24,7 support most the owner operators that we see managing sub 50 unit portfolios, they themselves are the ones answering the phone on the weekends. They don't really have a team built around them.

A lot of the software that is coming to market that they want to have is too expensive. They can't, you know, and it's, it's a very challenging place to be. So I think at the time, you know, not so long ago, but, but you know, really a different time in this space. Just considering how fast things have moved. It was a really well sized portfolio.

The units themselves were a plus. But it was, it was under invested. And you know, looking at it, we knew that in order to get it to where we wanted it to be, we were going to have to, you know, reinvest a lot, which we've done and we've really built. You know, the underlying machine is dramatically different from what it was when we had bought it. Yeah.

[00:25:45 - 00:25:48]

Will Smith: And Matt, you are based in where?

[00:25:49 - 00:25:50]

Matt Orley: New York City.

[00:25:50 - 00:25:57]

Will Smith: You're in New York City and these units, I heard you say. What did I hear you say? Hudson Valley.

So where, where was this business?

[00:25:57 - 00:26:07]

Matt Orley: So the business was it was born in the Catskills and it grew into the Hudson Valley. But it was really sort of defined by that geography at the time.

[00:26:08 - 00:26:11]

Will Smith: And so that's an hour and a half, two hours outside of two hours.

[00:26:11 - 00:27:03]

Matt Orley: Two hours.

And you know, that speaks to who, you know, they were really catering to, which was, you know, people who were in the city looking to get out for the weekend. I think the markets that, those markets specifically, just relative to the vacation rental space, you know, they're weekend markets, they're not necessarily true vacation markets. And that changed who they were selling to and what they were ultimately selling. You know, the business at that point was really defined by short stays, by weekend stays. There's, there was very low seasonality, so they were booking year round, but in very, you know, small increments.

That looks very different from something that you might see if you go to a Florida or, you know, know, Arizona or some areas where, you know, you might be in more true vacation markets.

[00:27:04 - 00:27:09]

Will Smith: Yeah, but it's better, it's less seasonal, it's less lumpy. We would expect.

[00:27:09 - 00:27:38]

Matt Orley: If you're thinking about it from the, from the perspective of brand, it gives your customer even more reason to engage with you because if they are staying with you with greater frequency, maybe they're staying two or three or four times in a year for weekend stays, which is how now we message out our message around our business and how we've built the business, they want to engage with you more and you have more opportunity to upsell them into other ancillary opportunities.

[00:27:38 - 00:28:15]

Will Smith: That's such an interesting point.

So in a short term rental market where it's much more weekend stays versus a ski town where it's mostly winter, maybe some summer, or a beach town where it's mostly just summer, while the revenue might look similar, the touch points are so much fewer. People are only interacting once, maybe twice a year. In your case, as a thinking again, brand forward as you do, you have, you know, three and four and five touch points a year. All opportunities to reinforce Red Cottage as a brand in your, in your, in your guest's mind. Very interesting.

[00:28:15 - 00:29:07]

Matt Orley: If I rent a house for a week during my, you know, during my vacation and that's my one time a year, you know, interaction with the brand or with the company that I'm renting from, I have very little reason to engage with them outside of that stay. What we have been able to do is turn that high, repeat, you know, frequency of guest into a more direct connection with the brand, with the platform we're building. And ultimately, you know, show them that, that the Red Cottage platform that we have is, has the best homes, has the, you know, has the best properties, and they should come to us first rather than go to an Airbnb or a verbo or a booking.com so that they.

[00:29:07 - 00:29:13]

Will Smith: Oh, I see.

So you're actually eventually hoping that people come to redcottage.com as opposed to even going to Airbnb.

[00:29:13 - 00:30:17]

Matt Orley: Yeah, they do. We do almost two thirds of our business direct through red cottage.com. i think the biggest compliment that anyone can give us is when they go to our site and they say, I thought you were a channel. I didn't realize that you were actually a management company. Because what we've built is so consumer facing in how we position ourselves.

We almost do zero, like outbound solicitation for new homeowners. And everything we do is to speak to the guests. And ultimately what we found and what we believe is that that will organically bring homeowners to us because they will say, well, my home should be on this site. My home is as nice as any of these homes in this area. And they are, you know, clearly the largest manager within this space in this area.

And that that's proven true. I mean, we have in a, an incredibly healthy pipeline of homes that have come to us organically, I think, because of the quality of the site, because of the quality of the brand.

[00:30:17 - 00:30:43]

Will Smith: So let's return to the plot here, Matt. So the owner was talking to two other buyers, big institutional buyers or national brands. And your pitch was they just want to buy your portfolio.

They're going to get rid of your brand and bring it under their house brand. I, individual buyer, believe in brand, believe in the brand you've built. So it's not just about the portfolio for me, it's about building your brand. And that was the pitch that convinced.

[00:30:44 - 00:30:44]

Matt Orley: Absolutely.

[00:30:45 - 00:30:51]

Will Smith: And what was, what were.

What can you tell us about the terms of the deal, how you structured your acquisition of the business?

[00:30:52 - 00:31:37]

Matt Orley: So it was a cash deal. And I think I spoke to the valuation. It was about, you know, a little bit north of forex sde.

And, you know, from my own, you know, studying and research, I felt like for a service business and for a property management business, I felt like that was, that was fair again, you know, there was definitely a, a premium placed on the quality of, you know, the intangible qualities of the business that I felt like I saw that I knew were going to work in our favor. But that felt to me like the, you know, the, the right Range.

[00:31:38 - 00:31:47]

Will Smith: So the cash deal, that's not something that we often hear about in our world. How did you choose to do that? Did you consider sba?

Did you not tell us more about that decision?

[00:31:48 - 00:32:44]

Matt Orley: I didn't consider SBA at the time and I think that it was probably because I was, you know, coming to this space maybe from a non traditional entry point and you know, in the, in, in the two deals prior to Red Cottage that I had been working on it, we were looking at those, you know, as cash deals. And then when the Red Cottage opportunity presented itself, we were just, you know, trying to move quick given the, you know, given our desire to, you know, to, to win the deal and come into the business. And. Yeah, but SBA at the time wasn't something that I had really considered.

And then for the, for the bolt on since then, we haven't either. I mean, we've really been able to do them off the balance sheet, more or less.

[00:32:44 - 00:32:59]

Will Smith: That's amazing. Well, you had said to me that, that first deal, when you, as you reflect back on it, I mean, for most first time buyers, they're learning as they go, so they don't really know, as you put it, didn't know what you were doing.

[00:32:59 - 00:33:00]

Matt Orley: I would say I was green.

[00:33:00 - 00:33:24]

Will Smith: Okay, fair enough, as everybody listening is for their first deal. But you are in a space that lends itself well to acquisition, so you probably have more subsequent acquisition experience than your average searcher who's been in a business for two, three years. Anyway, as you reflect back on that first deal, what would you do differently? What could, should you have done differently? With the benefit of hindsight?

[00:33:24 - 00:35:07]

Matt Orley: Everything.

Everything. But it, but everything. But it's worked. I mean, in terms of valuation, I think that at this point, you know, I'm so much more attuned to the nuances of what makes a good portfolio, what makes a good business in this space than, than I, than I was at that point. And all of those factors, you know, contribute to how I now look at, you know, any one of these deals.

And if we're looking at a business where an, you know, a seller comes to us and they have 20 phenomenal units that have been in contract with them for six months. A lot of these businesses are new, right, because the space continues to professionalize so quickly. So it's not uncommon at all that you would talk to someone who has just gone around and sort of picked up, you know, some critical mass of, of owners and now is looking to trade it. And the recency of those contracts absolutely plays a Factor what was, you know, looking back, I'm not sure I considered truly at the time. There was probably, you know, some consideration around it.

But, you know, and thinking about our conversation, I went back and thought about some of these, these factors. One of which was the homeowner retention for Red Cottage was incredibly high and the contracts that were in place and the relationships were, I mean some of them were 10 years old, which you don't see. You know, it is incredibly rare.

[00:35:09 - 00:35:13]

Will Smith: Which was a happy, a happy accident. You didn't value that in the moment.

[00:35:14 - 00:35:53]

Matt Orley: Wow. Factoring in meaningfully into our number, I mean I was so focused on the brand, but, but now, you know, we, we see deals all the time and a lot of them have very new agreements in place with homeowners which, you know, can change how we value the business depending on where their portfolio overlaps with our existing service areas, might change how we look at a business. You know, I, as a baseline starting point, it's really a multiple of, of commissions that the business is earning.

[00:35:53 - 00:35:54]

Will Smith: Define, define commission, please.

[00:35:55 - 00:37:08]

Matt Orley: Commission, management commission that that owner or that that manager makes from those bookings. The vast majority, I would say 99 of the, of these businesses are driven by management commissions. Ours is not. And we can, and I can talk about, you know, why that's the case, but most people are just driven entirely by the commission they earn for capturing the booking.

They don't really have other revenue streams tied to the owners or the guests. And so as a multiple off those commissions, if you're, you know, if your management commission is 25 or 30 or percent or whatever it is, we're looking at the, you know, really the trailing twelve and you know, using a one and a quarter to one and three quarters multiple for those businesses. And then as you look further, you know, where is the bit, where, where is the portfolio located? How new are these contracts? You know, is there a team in place?

Generally not all of these things, you know, can, you know, move that, move that number up or down.

[00:37:10 - 00:38:54]

Will Smith: You know.

Enzo Technologies as one of the leading IT managed service providers serving the search community, led by Nick Akers, an acquiring minds guest who bought the 35 year old business. The team at Enzo regularly works with searchers and their acquisitions. And one feature of acquired businesses that Enzo is seeing over and over is the need to implement cybersecurity promptly during the transition.

So many acquired small businesses either have glaring vulnerabilities, lack security, best practices or both. That step one to de risk the deal you just closed should be addressing these issues. Inso is your full service IT MSP for post close stability. They assess your target surface, the biggest risks in plain English and give you a day one through 30 plan to cut exposure, prevent downtime and even find cost takeouts like bloated telecom bills. Check out enzotechnologies.com I N Z O or email Nick directly at nick@enzo technologies.com.

So let's think about an Airbnb or short term rental business. Rents a home for 500 bucks for one night. Let's say their, their fee is 25% so they earn $125 for that. That's kind of their, I would consider that their top line revenue from that. Right, from that.

Okay. And so these businesses are sold on a multiple of that number of the top line revenue as opposed to bottom line earnings broadly.

[00:38:54 - 00:39:22]

Matt Orley: I've seen businesses trade, you know, based, you know, for a price per contract. I've seen them trade, you know, on multiples of top line revenue. I've seen them trade on multiples of sde.

There's a lot of different ways I think that you can skin this kind of a business.

But we have a very fixed, at this point now I have a very fixed, you know, way of looking at it, but there, there is, there's variability for sure.

[00:39:22 - 00:39:30]

Will Smith: And how, how does the way you come up with your formula compare to what you paid for Red Cottage for your first deal?

[00:39:31 - 00:40:34]

Matt Orley: You know, I look back and, and think that ultimately I feel very good about, you know, what we paid for it and how I looked at it and valued it. I think a lot of the intangible factors have played a really critical part in enabling our growth and allowing us to grow into, you know, what the business has become. And you know, I think that, you know, I, I'd like to think I was a good buyer for the seller and I, and you know, we, you know, try, I would say I try to, you know, act the same with any deals that we're doing.

And you know, whether, whether we were, you know, higher, it doesn't really, you know, higher than we should have been. Doesn't really matter at this point because, you know, we, we've grown it exactly as we, we had hoped to do.

[00:40:35 - 00:41:57]

Will Smith: Well, you wanted to get into this industry. It accomplished that in a very meaningful way. You're a savvy buyer now, so your effective multiple for the entire, you know, all of your acquisitions probably comes down with every deal.

Your effective aggregate multiple that you've paid for every, all these businesses is coming down deal by deal. We, we we assume so. And, and you had all that brand equity and brand of course is notoriously hard to value. So we don't know what that was worth, but it was worth some premium and you especially in your hands because you are such a brand guy and I do love that Matt. I, I, I don't have a lot of brand expertise, but I also just love a strong brand and it's something that we don't hear about much in our world.

I think many searchers and leverage buyouts in particular in, in general is such a math equation. Often they're, they're that intangible that goodwill that, that the brand represents is often just not something that's focused on. This interview with you will air a couple after another brand focused interview. The Chenmark folks bought a furniture manufacturer that had a very strong brand. So we talk about it there again too.

So yeah, so it's a theme that's coming up here. Let's go back just to before we hear what you've done with the business important.

[00:41:57 - 00:43:58]

Matt Orley: It's a huge differentiator and especially as you look at, you know, such a rush into ETA and a rush into business buying as you know, is reflected just in this podcast. You know, I just don't think it's enough to, you know, find a business that's, you know, you, where you're just purely looking at the financials absent of something as important as that. I mean that has the potential to drive so much of that business growth in a way that, where it absolutely should be considered.

And, and you know, you look at roll ups where you know, there are rebrands and there are, you know, and you're trying to find a way to connect more deeply with that target customer. And that's, you know, exactly how, you know, we're approaching this and how we think about, you know, the space we're in and what we want to do. This was a space that really was devoid of brand for a long time. When I think about who our competitors were, not now because I think people have gotten more savvy and there has been, you know, this, you know, you know, growth in, in meaningful brands in this space. But I used to joke that our competitors were like New Jersey Beach Bay Cottage, New Jersey Beach Cottage for rent dot com.

Right. And because those were like, that's what the property management space looked like for so long. And if you went to industry conferences, I mean that's what you were, you know, up against. And when I looked at this 50 unit portfolio at the time, I remember Thinking, well, it's, it's a, you know me, it's, it's a, a huge portfolio. But I think the quality of the brand elevates our standing, gives us the perception of being larger than we are, and allows us to sort of put ourselves into conversations with much larger brands.

And that in doing so, like, you know, positioning us in that way has, I think, has allowed us to grow really meaningfully.

[00:43:58 - 00:44:11]

Will Smith: Great. Well, we're going to keep returning to this theme. The deal, your first deal. Back to buying Red Cottage initially.

Tell us about that curveball at the end with the seller.

[00:44:11 - 00:44:43]

Matt Orley: We had worked through our due diligence. You know, we obviously, we signed an loi. I was thrilled, you know, rolled up our sleeves, started really, you know, getting into the weeds to work on, on the deal. And then at the, at the end, as we were approaching the finish line, there was a request made for, for, for a transition salary of some kind.

And that's what you're referring to? Yep. Yeah. Okay. Yep.

[00:44:44 - 00:44:49]

Will Smith: Yeah. The 100 grand. The 100 grand. Like, just give me another 100 grand, please.

[00:44:49 - 00:45:21]

Matt Orley: Basically, which, you know, we respectfully denied.

And there was, there were some tense moments around, you know, what that transition would ultimately look like. And the fact of the matter was the actual support post transition was diminished significantly because of that.

[00:45:21 - 00:46:17]

Will Smith: You thought you were going to get a six month transition from the owner. This is a tiny business, headcount wise owner and two employees. Yeah.

So you think you're going to get all your education, download his brain, have him show you the ropes for six months as part of the acquisition price, and then very close to closing, not maybe at the closing table, but really far down the path. He says, actually, I'm not going to do that for you for free. I demand another $100,000 for that kind of consulting term.

Wow. So did that, by the way, create any tension and bad blood? Because that feels to me especially now that, you know, that you were offering him a really good price. All cash like that just strikes me as really egregious and greedy and, you know, etc.

[00:46:17 - 00:46:31]

Matt Orley: It was absolutely.

Yeah, it was absolutely egregious that I remember feeling, you know, that it was, you know, I kind of bait and switch a little bit.

[00:46:31 - 00:46:31]

Will Smith: Right.

[00:46:31 - 00:47:54]

Matt Orley: And change the nature of the, of the terms, changed the nature of the deal, changed a lot of the, you know, goodwill that had been built up during the course of some of the early, you know, discovery period where, you know, we were getting to know each other. And what made it more challenging was post Close. The seller was obviously had just sold their business.

They were also a homeowner that was remaining in the portfolio of a number of units. So. And they actually ended up being our landlord also because one of the, the components of the deal was that we needed to sign a lease in a building that they had owned. So there were a number of things there that made the relationship, I would say, thorny and, or challenging. Yeah.

And you know, that, and, and that we didn't have a, you know, true or meaningful transition did not help. But it was one of the things that, I mean, we were so far down the line and. Yeah.

[00:47:54 - 00:48:11]

Will Smith: And you, and you really loved, you really love this business. You love this brand.

You wanted to get the deal done when you said he was going to be a landlord. So this had an office, the business for three people. I would think that a.

The str.

Property management business would be done, would be managed remotely, that there wouldn't be an office.

[00:48:12 - 00:48:55]

Matt Orley: Now, now I think that that's the assumption but you know, four, three, four, five years ago, that wasn't necessarily the case. And it was, I think that actually is reflective of what these businesses used to look like right before.

And you know, our business is, you know, you know, based around Slack and we have, you know, team members basically all across our region now, you know, who are probably of, you know, 30 plus, you know, team members who are all remote and you know, we manage to, you know, have, you know, have this company culture just in the, in the software that we use.

[00:48:55 - 00:49:27]

Will Smith: So your seller wants this additional $100,000 fee for the six months of transition. You stick to your guns, you say no. That introduces a lot more risk to the business, obviously a risk you're willing to take. So when you do close and it's you and these two other people and you're in Manhattan and they're in the Hudson Valley, Catskills.

What does the transition look like? What are the mechanics of your first, whatever six months transition look like as you take over this business?

[00:49:27 - 00:50:26]

Matt Orley: Yeah, I mean, I moved up to this area where the business was based and I was really in the office with these people. I mean, it was clear that we were going to be remote from day one. There was no reason why anyone should be, you know, in office at a desk when, you know, what was important was being in the field, seeing new homes, meeting with owners, you know, and yeah, I mean that, that was obvious, but there was a, you know, a short period where, you know, we were up just getting, you know, getting our arms around the Business.

And you know, it was, it was August 1st that we closed. So getting through the, getting through the summer and then into, you know, the shoulder season, that, that isn't really a shoulder season anymore, but at the time we were just, you know, getting, you know, you know, trying to get some breathing room.

[00:50:27 - 00:50:28]

Will Smith: And so you moved up there.

[00:50:28 - 00:50:28]

Matt Orley: Yeah.

[00:50:29 - 00:50:31]

Will Smith: And so how long did you were you up?

[00:50:31 - 00:50:54]

Matt Orley: I mean it's two hours from, from where I live. It wasn't a huge, you know, move, but, but I was up there on the weeks and I was, you know, I would drive back for the weekends and I, you know, had had an apartment that I was renting that was up there and we were just making, making it happen and give us a.

[00:50:54 - 00:51:04]

Will Smith: Picture of, of working up there in the business. What did you find in, you know, was it the business that you thought give us a picture of the, the early months other than, you know, the fact that you moved up there, There.

[00:51:04 - 00:54:05]

Matt Orley: Was no infrastructure and I think that that's fair to say the communication systems, the, were lacking.

What's interesting about this kind of business, you have so many different stakeholders or cohorts that you're catering to at any given moment. Whether it's your active homeowners, your incoming, your new homeowners that you have in pipeline, your guests who are on site, your guests who are act, you know, making bookings or inquiring, your cleaning staff, your maintenance staff, anyone who's in the field, who's just, you know, you know, third party caretakers or who, what, whoever it might be, all of those different groups need to be attended to and need to be, you know, communicated effectively with. And I think that was the part that was really clearly lacking that we were that, that you know, when we came in, we felt we needed to build structure enough to at least attend regularly to all of these different groups. And once we have that under our belt, then we can sort of explore, you know, what does growth look like and you know, how are we going to, you know, migrate our tech stack or how are we going to rebuild our, you know, our booking platform, etc. It was more about, you know, getting control over the comms.

And, and I, I sort of say often I think it's more of a communications business than it even is a property management business because the, the communication is so critical to each one of those groups. Everything we do is about the effectiveness and the quality of our communication. I mean, you have a guest on site who is having an issue, they want to be heard and they want to know that someone is there and you're already sort of up, you know, you're already in a challenging, challenging position because you're not on site. You don't necessarily have someone who is, you know, five minutes away.

The expectations are that you will be able to service someone quickly and for anything that they might need or want. I think Airbnb, just as a platform, has conditioned people to have very high expectations in this short term rental, in this vacation rental space. They come in expecting hotel level service as a baseline and you need to be able to provide it to them. Everything that we're doing right now is and is to build a platform that can service those expectations on the guest side or the homeowner side. And a lot of that just starts with really quick, effective, clear communication to any one of those groups.

And that's what we train our team to do and to think about.

[00:54:06 - 00:54:36]

Will Smith: And so when you talk about communication, when you talk about putting in structure to a business that was, there was no structure, most of that means tech slack, I guess, some platform that's some SaaS, vertical SaaS that is for your industry where, you know, it's some sort of help desk where a message comes in from a guest on Airbnb and that's funneled into a single place and everyone can see that sort of thing. That's. That there's the real key bit of structure that you went after first.

[00:54:37 - 00:55:40]

Matt Orley: Yeah, I can talk about the tech stack, I think, I think, I think it's, it's, it's, you know, great.

I almost consider myself, you know, a junkie with this stuff because I, anything that's shiny, that seems interesting and cool and helpful, I want it for the business. You know, I, I've looked at times at our tech stack and it's probably been more bloated than it needs to be. And if you go to any of the industry conferences, and I'm sure this is the same, you know, broadly across real estate conferences as well. There is so much new prop tech that is coming to market, that continues to come to market. And you know, at the vacation rental conferences, you know, there was one in October that there are entirely new vendors that are building these really helpful, you know, tools that, that I want us to be able to leverage.

And so, you know, I've been very quick to integrate those and, you know, trying to just make sure that what we're doing is not, you know, they're not, that our team's not getting bogged down and, and, and you know, learning how to use them. But they're actually helpful.

[00:55:41 - 00:55:53]

Will Smith: Matt, the two employees that you inherited, y. How did they take to the news of the change in ownership and the change. The changes that you started making?

Sounds like you started making changes pretty quickly.

[00:55:54 - 00:56:26]

Matt Orley: Well, they're still here, and it's been great. It's been great. I think we have a phenomenal team. We have, you know, we.

We had from the start. We have now. It has enabled, you know, all of the growth and success that we've had has been, I think, in large part due to the quality of the team and, you know, their passion for what we're doing and their passion for the space. And I. I think we're very fortunate.

[00:56:27 - 00:56:48]

Will Smith: The first two years of your ownership.

So you're now just over three years in the business. A lot of that was J Curve. A lot of that was reinvesting in the business. Give us more a picture of the. Of the numbers during that time.

Did the profitability stay where it was? Did it go down? Talk to us about kind of what it looked like on a, you know, chart.

[00:56:49 - 00:57:18]

Matt Orley: Yeah, well, I think that there was. There was a softening, for sure, in those.

In that year, 18 months post close, some normalizing. You know, we. I bought the business, you know, right after Covid, and so, you know, an argument could be made that I bought it at the top for the business as it was, or, you know.

[00:57:21 - 00:57:21]

Will Smith: At.

[00:57:21 - 00:58:22]

Matt Orley: An inflated multiple based on what a normalized business might have looked like. And we did see a softening. We did reinvest, you know, into the business during that time. So, you know, yeah, there was.

There. There was a bit of a J curve, I guess, as we, you know, sort of, you know, picked steam back up into 24 and 25 when we have, you know, really exploded our. Our portfolio and. And completed the acquisitions that we have.

But those first 18 months, we were, you know, putting things in place and, you know, investing in technology, investing in staff, investing in, you know, the. Our booking platform. All of those things sort of at once. And it was, you know, we met, we got to the other side of it.

[00:58:23 - 00:58:30]

Will Smith: Great.

And what does. So. And bring us up to today, what are. What are the numbers look like today? Maybe start with units under management.

[00:58:32 - 00:58:43]

Matt Orley: So units under management, we have north of 200. You know, I'm. I actually, you know, can share today that we just completed two new acquisitions.

[00:58:44 - 00:58:45]

Will Smith: Congratulations.

[00:58:46 - 00:59:16]

Matt Orley: In.

In the Northeast and primarily in Vermont and New Hampshire, that we've been working on that for the last couple months. And finally, you know, in. In the last few weeks have have, you know, closed on both of those deals which have given us a lot more scale in areas that we had, didn't have yet a meaningful presence in. And we're very excited about that. So that takes us north of 200 and that's great.

Yeah.

[00:59:18 - 00:59:21]

Will Smith: And you're making those acquisitions off the balance sheet.

[00:59:22 - 00:59:35]

Matt Orley: Yeah. So the way, again, I talked about the way that we are looking at those deals or how we're valuing those deals and you know, these are smaller portfolios for sure.

[00:59:36 - 00:59:38]

Will Smith: But what does that mean in 2025?

[00:59:39 - 01:01:24]

Matt Orley: I, I consider anything at this point sub 50 a smaller portfolio.

Both of these deals had about 30, 25, 30 units each. And you know, we put a small portion down, but the bulk of the, of the deal is structured as earn out based on future commissions. So we're saying, you know, we know that we can double the commissions on these units that you have. Let's pay you out over 12 or 24 months and you'll see that upside. So most sellers are what a phenomenal structure for you.

Yeah, yeah. Wow. Again, you know, had I, had I done it on the, on the first deal, it probably, you know, things might have, you know, looked different. But I feel that we're really sharp around how we want to look at these deals now. And what's great is we have sellers coming to us.

We've had two in the last, you know, in the last month who, who have come and said, hey, I see you buying, I'm in your area. Because it, again, it's, it's becoming very challenging to grow and scale these businesses. It takes a long time to build a homeowner relationship. It takes a long time to get someone, you know, a homeowner into contract. I think there is margin compression when you have a business that is on that smaller end of the spectrum.

And so we're being approached by sellers who want, who, who see us as the perfect place for their relationships and their owners and you know, what a.

[01:01:24 - 01:01:25]

Will Smith: Great position to be in.

[01:01:25 - 01:01:26]

Matt Orley: It's a great position to be in.

[01:01:28 - 01:01:43]

Will Smith: Okay, so you're just over 200. Yeah, I love the enthusiasm.

You're over 200 units. You started with 50. Yeah, three years ago. How big can this get? I mean, in like say five years, you know, who knows in 30, but let's say in five.

[01:01:43 - 01:02:57]

Matt Orley: Well, you know, the way I think about the business right now is that just in having rebuilt the underlying structure from what it was to what it looks like today, you know, we have a platform for 500 plus homes where we are Basically running at half capacity. We, we can absolutely, without changing our cost structure in a mean, in any meaningful way, get to that kind of scale in the next, you know, year or two. And we plan on doing that. I mean, we have all the pieces in place and you know, to accommodate a portfolio of that size, we, you look at the market that we're in, there's something like 250,000 rentals in the Northeast. So that's the geo that we have sort of specified as, as where we want to be servicing from, you know, Pennsylvania through Maine.

And you know, whether we're, you know, talking about 500 homes or a thousand homes or, or what have you, I mean, it's absolutely achievable. Wow.

[01:02:58 - 01:03:14]

Will Smith: What does at 200, or call it whatever you're at 225 units. Say, what does revenue look like? Commissionable revenue that, you know, the revenue after, you know, your top line revenue look like for a business of that size.

And then say at a 500 project.

[01:03:14 - 01:03:21]

Matt Orley: Out right now we're at, I would say mid seven figures.

[01:03:23 - 01:03:24]

Will Smith: And.

[01:03:26 - 01:05:06]

Matt Orley: At 500 units, I mean, double that. Ask me, ask me that. I want to point out that what we've introduced into our business is a lot of recurring revenue that didn't exist beforehand. We have a membership program that is geared toward guests that is almost completely unique in this space where guests come and they pay us annual fees to get discounts on their stays or waved cleaning fees or early access to new homes. We've sold hundreds of these memberships and we have a recurring revenue stream now that didn't exist before.

And again, the reason why we've been able to create that and the reason why we've had success with that is because we're catering to a cohort that is staying with us with, you know, a very high frequency. And so we have more opportunity to upsell them. They want to have, you know, access to discounts on their stays and a lot. And those dynamics have allowed us to create this loyalty structure that I think is entirely unique, but has set us up to even further bring on new homeowners who, who want to be a part of that. Because as opposed to basically any other property management company that only has direct relationships with their owners through the agreements that they have signed, we have direct relationships now with guests and we're basically pairing those members, those guests directly with these homes based on what they're looking for and what they need.

And I, I, I think, you know, no one else can, can say that in the same way.

[01:05:07 - 01:05:11]

Will Smith: Did you in invent this membership program, this loyalty program.

[01:05:11 - 01:05:12]

Matt Orley: Yeah.

[01:05:13 - 01:05:16]

Will Smith: And.

And so give us the bullet points on it.

Again, this is fascinating.

[01:05:16 - 01:06:12]

Matt Orley: Bullet points are that we're selling a membership for $500 a year. You get 10% off all your stays, you get waved fees. If you stay a certain number of days, we'll waive the cleaning fee entirely. You get introductory pricing on every new home that we launch.

We launch a new home every single week. You get 20% off those homes. We do a monthly flash sale. So, you know, which is actually a great opportunity to sort of promote an underperforming home. And we'll say this house is 30% off for the month of November.

It's our monthly flash sale, exclusive to members.

We offer you perks. So we've partnered with local businesses where you can go and say, I'm a member of Red Cottage and they'll give you discounts on drinks or food or spa services or whatever it is. So we've really built out this robust membership program and it has transformed our business entirely.

[01:06:13 - 01:06:17]

Will Smith: That's phenomenal. Madden, is that what you were on stage talking about at the conference?

[01:06:17 - 01:06:19]

Matt Orley: It's what I've spoken a lot about.

[01:06:20 - 01:06:25]

Will Smith: And have you seen other players in this world try to launch something similar?

[01:06:25 - 01:06:42]

Matt Orley: I have. Really. I've seen one or two people do sim.

Do something similar, people that I've become friendly with, but it has not. I. I haven't seen it in a meaningful way. No.

[01:06:42 - 01:06:50]

Will Smith: And. And when you say it's transformed your business, it.

Just because it's added this revenue line that's substantial. I mean, how many of these have you sold?

[01:06:51 - 01:06:54]

Matt Orley: Hundreds. Wow. Yeah.

[01:06:55 - 01:07:03]

Will Smith: And so that all basically follow. Falls to the bottom line. Of course, you're offering them discounts and stuff. So does it?

[01:07:03 - 01:07:03]

Matt Orley: It.

[01:07:03 - 01:07:06]

Will Smith: It's probably not pure profit, but it's close to it.

[01:07:06 - 01:07:58]

Matt Orley: Close to it. I think that in 2024, we launched it summer and August of 24, and I think that the statistic was over half the members stayed at least twice in the year. 20% of the members stayed three times or more during that year. We had one member last year who stayed 11 times at different houses every single weekend.

I think in 2025, I. I haven't done a full look back analysis of. Of the membership, you know, yet as we end the year. But when we had done a review, we had a handful of members who had stayed with us five times this year. I mean, you just don't get that in other businesses. Yeah.

In other similar businesses.

[01:08:00 - 01:09:00]

Will Smith: Matt, part of the Appeal of Red Cottage, you said was that it was a weekend market. Now so, so, so much of the short term rental business is, is very geography dependent, as we've already talked about. So the way short term rentals work in a ski town versus a beach town versus the Catskills versus, you know, a weekend getaway destination is idiosyncratic. Now I hear that you see your target market as all of New England and, and more than New England, from Pennsylvania to Maine. And so you have all these different little micro markets in there and idiosyncrasies.

So it's, it's, it's no longer about just that kind of the, the weekend, the weekender. Is your core customer. Are you thinking about your business in, in, you know, your main customers as different than your outside of New York customers? Is different than your outside of Philly customers? Different value propositions?

Or is it monolithic how you approach this?

[01:09:00 - 01:11:18]

Matt Orley: And I think, you know, for as much as anyone wants to build a platform in this space or really like any service business, you know, at the end of the day, the, the core of the business that we have is, is property management, which is high touch and relationship driven and relatively antiquated in many ways. And so, you know, that has influenced how I've thought about our growth and where we want to grow. You know, I look at some of these national managers, you know, operating in 60 plus 70 markets around the country. And you know, I said already that I think we're in this era, this segment of hospitality where there is such a premium placed on authenticity and being, and being local and you know, it's nearly impossible to do that when you're that broad.

I think that, you know, we absolutely can grow and also be defined by this very specific region where you don't see a ton of those national managers operating because the dynamics for so long have been quite different from what you would have found in other more true vacation markets. Right. So I feel like it's our opportunity. At the same time, all of those like little pockets definitely have their own nuances to them. Where, you know, we're in Stowe, Vermont now, where, you know, that's, that's a more true ski town destination that operates less like what you would find in the Catskills.

The homes that we have in Maine are completely seasonal, right? They close in October. So there are nuances that we have to work with. At the same time, I think that defining ourselves in, you know, by this region allows us to grow authentically and you know, really show that that you know, we can speak to these areas and we know them and we have team members on the ground and allows us to not lose that, you know, that, that aspect of our brand that, that really is, you know, critical to what we're doing.

[01:11:19 - 01:11:39]

Will Smith: And when you have a listing on Airbnb or booking or whatever channel, where does the Red Cottage brand exist, if at all on that listing?

Because I imagine that's something that Airbnb, for example, is really tight about, that they don't want your brand front and center because they want their brand to remain front and center. How, how do you play that?

[01:11:39 - 01:13:54]

Matt Orley: I think it's something that they are, all those sites are navigating as the space evolves, as brands become more prevalent, as the, as, as the space professionalizes. Right. The odds that you are rent from a manager as opposed to a mom and pop, as I said, you know, are much higher than they were.

And so what does that mean when the name and the profile and the icon are all, you know, I'm convinced this, I, I don't have any evidence to, to show this, but, but I'm convinced that when you have a, when your icon is not a face and it's a company logo, that it's, you know, it doesn't help your listing placement. But that, that, that's my, you know, I, I, I have nothing to, to go off of, but I have said it directly to, you know, our partners at Airbnb. But we put our brand everywhere we can. We make sure that there are touch points in the home, in the communication. At every point that you book, you're engaging with us.

And it's so top of mind. You know, we have, you know, our management team is doing test bookings basically every quarter where they're, you know, going and they're seeing how it feels, what it's like, you know, how can we improve this? How can we increase our brand presence? What can we do to, you know, one think about, does this feel like the same kind of booking experience that you would get from a Marriott, from a hotel, you know, from, from an airline? I mean, we really want to have the best experience.

Soup to nuts. From the, throughout the booking process as we can. And that requires that we constantly test and refine it and that we think about how we're messaging and, and positioning ourselves and thinking about who our partners are that we want to align with and how we want to, you know, how we want the customer to feel.

[01:13:55 - 01:13:56]

Will Smith: We're wrapping up here, Matt, but we've.

[01:13:56 - 01:14:02]

Matt Orley: Talked about a lot in Me, Well, I, I could do this, you know, all day.

[01:14:03 - 01:14:17]

Will Smith: So what I want to ask is how you see this market for the searchers listening. Is it a good one to get into? Is it too late? Is it, does it depend on the geography? What do you think for the listener?

[01:14:17 - 01:16:30]

Matt Orley: I, I think it's day one in this space. You know, it's interesting now because I think that a lot of, you know, we, I, I still get emails from searchers who are interested in, in the, the vacation rental space who, you know, don't know, don't realize that I bought the business saying, hey, you know, I, I'm, I'm a searcher and I'd love to talk, talk to you about buying your business. I've gotten, I've gotten that email a handful of times and you know, and it's funny, I think it just speaks to the popularity of eta, of the moment we're in and the moment that, that we're in relative to this space as well, where, you know, you're sort of looking at a lot of different service businesses or sectors and you know, you might feel like this one is still yet, you know, untapped. And you know, we're just seeing really the first examples of institutional capital coming in through some more sizable roll ups. We haven't talked about that, but I'm happy to, you know, give, give you those examples.

We saw Aries come into a roll up just a few months ago.

It's, you know, all of those are positive indicators to me that what we're doing is, you know, that we're still very early in this space and I think that anyone searching would, you know, that there's still a lot of opportunity for them. I would try and look for 50, you know, I, I would hesitate to go below 50 units in any of these portfolios. And I think that when you get into that range, especially now, it's a little bit of like a man with a van type of acquisition. We can integrate those portfolios and those businesses because we already have the structure, we already have a team, you know, and all of that in place. But if you were to, you know, look in that smaller range, I think you're going to have a harder time, you know, scaling it right now.

[01:16:30 - 01:16:44]

Will Smith: And to find a, to find one of these businesses that has 50 or above units, is it super competitive? But because the roll ups or the Matt Orlys are there trying to buy them already or, or not necessarily, there.

[01:16:44 - 01:17:56]

Matt Orley: Is competition in the space and I think you have to be prepared for that. In any, in any area where you are going in as a searcher or a new business buyer and if that's, you know, something you're not prepared to, you know, have to deal with, then it might not, be, then it might not be aligned. But you know, we've lost deals, we've lost good deals that, that we've wanted that we found off market.

There is definitely we're seeing businesses trade all over the place and I think that, that really sort of frothy, you know, M A in this, in this space. I, you know, I, I see it as a good sign and, and I think that there's, there, there are still so many deals to be found and to be done it, you know, I think that a lot of them are found off market. And if you're able to, you know, study and, and learn the space and go to the industry conferences and you know, meet these, meet these groups or these individuals and, and make yourself known, you know, I think you'll be able to, you know, find success in buying a business, you know, in this area.

[01:17:57 - 01:18:12]

Will Smith: And do you have any pointers on type of geo like avoid the beach towns or yes, go to the beach towns or major, major urban markets. Stay away from.

Because there's the pen stroke regulatory risk. Any, any pointers there?

[01:18:12 - 01:21:48]

Matt Orley: I think you would be hard pressed to find any area in the country where there isn't someone, you know, screaming about short term rentals or Airbnb in some capacity. It's, it's, you know, it just exists and we choose not to be in urban markets. I think there are urban markets that are, you know, I have friends who have businesses that are entirely urban.

Every market, you know, has its own risk profile and you know, for, for better or worse. But I think, you know, as long as you're defined in what you are building and where you're building, I actually think that's the most important thing. I've tried to be really disciplined in the deals that I've looked at and the geos that we've gone after. I see a lot of businesses that have built in this very disjointed way based on where they see opportunity and less about where, what their customer ultimately wants. You know, I've seen businesses that service Colorado ski towns and also the Florida Panhandle.

The Florida Panhandle is the most, you know, this is the, where the, where the vacation rental industry was born out of, it seems. But so I've seen businesses that cater to Wisconsin and the Florida Panhandle. To me it's very hard to build that kind of business where you're servicing entirely different clients across entirely different geos that have no connection to one another. Right. It doesn't do anything for your brand.

It doesn't do anything for your awareness. I think it muddies a lot of the messaging that you have and that you're building off of. We've seen deals all over the country. I've seen deals in Oregon. I've seen deals in South Carolina.

I haven't. You know, we've. We have not looked at anything even as those have seemed very healthy and compelling with good portfolios, because they don't actually do anything for the business that we're trying to build, you know, which is very defined and is very specific. And I think that. That the discipline that we've tried to keep has enabled us to have that much stronger of.

Of a brand ultimately, that resonates with people, that they understand what it means, that they understand why they're coming to us. And when we're selling a membership, people know that every home that is in our portfolio is accessible to them in some way, meaning, theoretically, they could go. They could rent it if they wanted to. It's a very different thing. If you're thinking about how I'm selling someone on that kind of value proposition and I'm selling condos in Florida and also, you know, a frames in the Poconos, those are entirely different assets.

Yeah, that. That. That I think makes. Makes it very hard for someone to see I need to align with this business. I need to align with this brand.

This is, you know, there's something here for me broadly, and that's how we think about, you know, our growth and. And the units that we're onboarding and picking up and where we, you know, how we. How we want to continue to expand.

[01:21:49 - 01:21:56]

Will Smith: Great point to close on, Matt. Anything we didn't touch on that you wanted to.

I know we could talk about the industry all day.

[01:21:56 - 01:23:06]

Matt Orley: No, we could talk about the industry all day, I would say, because this is really focused on, you know, buying these businesses and, you know, how you ascribe certain multiples to them.

You know, at the time that. That I bought Red Cottage, you know, it wasn't necessarily about the multiple itself as much as it was about the, you know, the idea that we could transform this into this, you know, hospitality platform and that it had the bones in place to do that. And I think that that's what we've done. And, you know, that's what I get really excited about and What I think is going to enable us to continue to buy in a really disciplined way where, you know, we, we continue to present ourselves as the best partner to any of these small portfolios, small or large, that, that you know, want to find someone who can integrate those relationships and integrate those homes a meaningful way. And, and you know, I think that's the, you know, what's important to, to know.

[01:23:07 - 01:24:20]

Will Smith: Well, Matt, your impression on me is that you're a guy who's got a real affection for this industry or an excitement about this industry. You have a vision, you're visionary about the industry and your own brand within it. You're bringing new products to market in the, in the form of the membership, the loyalty program. We didn't even talk about your unlimited idea teaser there for the audience. Anybody who's interested can reach out to Matt.

So I just find this story very entrepreneurial. At the risk of being redundant, they're all ETA stories. But you're bringing just a lot of product, vision, if you will, to, to the category and it's no surprise that you're on stage. You've moved very quickly in three years. It seems like you're at the forefront of a trend in a hot industry which is this professionalization and overlaying that.

Not just professionalization, but actually bringing brand. So I don't mean to pump your tires, but I, I think it's really neat how you, how you brought so much. Yeah. Vision to, to this industry and how excited you are clearly about it. Thank you for joining us, Matt.

And we'll have a link to Red Cottage of course, as well as your LinkedIn in the show notes and our Instagram.

[01:24:21 - 01:24:24]

Matt Orley: You can do that because you know that's, we love to share.

[01:24:24 - 01:24:25]

Will Smith: That's where you sell.

[01:24:25 - 01:24:28]

Matt Orley: That's where it has happens, of course.

[01:24:28 - 01:24:31]

Will Smith: All right, your Instagram as well.

Matt Orly. Thank you, sir.

[01:24:31 - 01:24:32]

Matt Orley: Thanks, Will.

[01:24:32 - 01:25:19]

Will Smith: Hope you enjoyed that interview.

Don't forget to subscribe to the Acquiring Minds newsletter.

We send an email for every episode.

With an introduction to the interview, a link to the video version on YouTube.

And soon key takeaways number and more.

Essentials from the interview.

For those of you who don't have time to listen or watch it, subscribe.

At Acquiringminds Co. You'll also find all our webinars there on the website, both.

Those we have coming up and recordings of past webinars. At this point There are over 30 webinar recordings, a wealth of information on all the technical nitty gritty of buying a business.

Acquiringminds copy.