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Expanding Into New Markets with Matthew Whitaker

Expanding Into New Markets with Matthew Whitaker

Today I am talking with Matthew Whitaker, the founder and Director of Market Development at gkhouses, a property management company that manages a lot of single family doors in Birmingham, Chattanooga, Nashville, Little Rock and soon to be a city near you.  

After starting in Birmingham during the housing crisis, gk has expanded into multiple markets and seen some pretty significant growth. Most importantly, I like Matthew. I think he’s competent, I think he’s a hustler and he’s doing interesting things.  

Matt knows what it is to be a founder while still being ambitious and taking best in class thinking from outside the industry, recognizing it’s just a business that happens to do property management. I love that mindset.  

Today, we’re going to talk about his secret sauce and how he’s grown the business. If you’re second guessing your own approach to growth, this is the episode for you.

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Topics covered:

  • (01:46) – Background Leading up to Today
      • (01:52) – Matthew shares how he became involved in property management.
        • (02:48) – What caused him to get serious about the business.
        • (05:04) – How and why Matthew separates his roles as founder, owner and employee of gk.
      • (07:44) – What gk looks like today.
        • (09:40) – The details behind Matthew’s buy out of his partners.
      • (11:21) – Matthew’s vision and goal for the future of gk.
        • (12:07) – The goal of 25,000 doors.
          • (13:33) – The motivating effect of such an ambitious goal.
          • (14:28) – Balancing processes of scale with phases of growth.
          • (17:09) – The risks of publicly stating an ambitious business goal.
  • (19:08) – Growth versus Profitability
    • (19:50) – Matthew discusses the different phases gk has gone through.
      • (19:50) – The importance of the 300 door milestone.
        • (20:38) – Leadership development.
      • (21:13) – Expanding into two markets.
      • (22:23) – Current constraints on growth.
        • (22:37) – Cash and people.
    • (24:07) – Organic growth versus acquisitions.
      • (24:28) – Keeping up with churn.
        • (25:39) – Expectations of market conditions influencing churn.
          • (26:08) – The Stockdale principle.
    • (28:47) – Specific metrics gk has used to measure growth.
      • (29:24) – Unit economics.
    • (30:34) – Discussing the benefits of scale versus maintaining a boutique-sized portfolio.
      • (34:15) – Two to three hundred units or ten million dollars.
      • (36:03) – What gk could do currently to increase profitability.
        • (36:50) – The difference between profitability and cash flow.
        • (39:36) – The sacrifices when scaling.
    • (40:52) – How gk positions and differentiates itself within the market.
      • (41:34) – Finding the top quality team members.
      • (42:27) – Customer focused innovation.
      • (42:59) – ‘Unwavering integrity’, formerly ‘uncomfortable transparency’.
        • (44:01) – Handling communication to engender trust with maintenance as a specific example.
          • (47:04) – Discussing maintenance as a profit center.
    • (51:46) – Matthew discusses his role as CEO.

Rapid-fire Questions:

  • (55:31) – What’s the number one thing you learn from having a HomeVestors franchise?
  • (56:09) – College or pro sports?
  • (56:14) – Nick Saban’s worst coaching call of all time?
  • (56:44) – If you didn’t live in Alabama, where would you live?
  • (57:37) – What are the most important sacrifices you’ve made to grow the business?  
  • (58:45) – Who’s your favorite entrepreneur?
  • (59:53) – What is the role of mindset in your success?
  • (1:01:44) – If you could go back four years, what advice would you give yourself?

Resources mentioned:

 

 

Where to learn more:

If you want to get in touch with Matthew or learn more about gkhouses, head over to their company website or find him on LinkedIn.

Transcript:

Jordan: 0:00:00.0 Welcome closers, today we have another episode of The Profitable Property Management Podcast coming at you. This is Season 3 on Profit.

I’m your host, Jordan Muela, and every week I interview world-class property management entrepreneurs and industry experts who share actionable insights to help you grow your property management empire.

0:00:17.6 Whether you manage 100 units or 10,000, this broadcast is designed to help you see the big picture and give you the tools and tactics that you need to get to the next level.

0:00:26.8 Today I am talking with Matthew Whitaker, the founder and Director of Market Development at gkhouses. A property management company that manages a lot of single family doors in Birmingham, Chattanooga, Nashville. 0:00:45.0 What did I miss? Where else?

Matthew: 0:00:46.2 Little Rock.

Jordan: 0:00:47.1 Little Rock, and soon to be a city near you.

0:00:50.2 After starting in Birmingham during the housing crisis, gk has expanded into multiple markets and seen some pretty significant growth.

0:00:59.6 Most importantly, I like Matthew. I think he’s competent, I think he’s a hustler and he’s doing interesting things.

He’s one of the good guys in the industry that’s keeping it as a true, what would you call it, a true founder-based business. 0:01:15.6 The man hasn’t sold out. The private equity company hasn’t taken over yet.

0:01:19.3 So he knows what it is to be a founder while still being ambitious and taking best in class thinking from outside the industry.

0:01:25.9 And at the end of the day, recognizing it’s just a business that happens to do property management. 0:01:31.6 I love that mindset.

0:01:33.7 And today, we’re going to talk about his secret sauce. How he’s grown the business. 0:01:37.7 So, if you’re second guessing your own approach to growth, this is the episode for you.

0:01:42.7 Welcome to the show Matthew.

Matthew: 0:01:44.6 Thank you, I appreciate you having me Jordan.

Jordan: 0:01:46.6 So let’s start from square one. How did you get into property management?

Matthew: 0:01:52.5 I, like many people, was a house flipper and I owned about 30 houses. Back in 2007 into 2007 when the market crashed – when the subprime market kind of was the first domino to fall.

When it crashed and we decided to start a property management company. 0:02:13.6 Because we really started as a kind of a side business because we expected to still buy and sell houses.

0:02:20.2 And we thought, hey, if we’re going to sell houses to investors, which is where that we feel like this business is headed, we’re going to need to have property management as a piece of that.

0:02:30.3 So, we didn’t start it with some grand scheme to grow it to a bunch of houses. We literally started it as kind of a side gig. 0:02:39.4 I always joke, I was always promised I was never going to be two things. One was a property manager and the other one was a real estate agent. And today, I’m both of them.

Jordan: 0:02:48.7 Yeah, nice. Love it. 0:02:50.7 So what was the inflection point for you from when you went to viewing these things as a negative to being a positive? When did you really get the vision?

Matthew: 0:02:59.2 Yeah, it was not a really negative. I mean, it was really kind of something we saw as something important to growing our buying and selling business. But I do remember there was kind of two inflection points.

0:03:10.6 The first one I remember – which a lot of people I bet you can appreciate. Kind of the time we first started making money. And you’re like, “Wow, there’s more money in the chequing account on the first then there was last month.”

0:03:28.3 And so, it kind of woke my eyes up to, “Well, is there any way we can, you know, really grow this thing.”

0:03:35.3 Because I always said, to make $1000 dollars in the business is really, really hard. But to make the next incremental $1000 dollars is a whole lot easier. 0:03:43.3

And so we had done all the really hard things to get it to that first $1000 dollars and then I started focusing on the next incremental dollar.

0:03:54.8 And then there was a group – we were kind of deciding, “Hey, is this something that we want to do? Do we kind of want to put our foot on the gas of single family property management?”

And there was a group that was kind of – they were in kind of a bad situation here in Birmingham. 0:04:09.9 They had been sold a lot of houses that had a lot of problems and they really needed somebody competent to kind of come in and clean up the mess.

0:04:18.5 And so, we were trying to decide, you know, that’s not our business. We don’t want to go in and clean up messes. We want to buy and sell houses, we want to manage houses.

0:04:27.4 But they kind of insisted on us taking over their properties and so we did that. 0:04:31.8 It was about 70 houses. Which, at the time, probably doubled our business.

0:04:36.9 And at the end of that month, or some of the months thereafter, to watch our profit and loss statement grow was just kind of an exciting thing. And so that’s where I kind of caught the — I can grow this annuity business. And so that’s what I did. 0:04:54.3 I mean, we got pretty strategic about growing it probably about four years ago.

Jordan: 0:04:59.4 And who’s the we? Who are the shareholders in this group?

Matthew: 0:05:04.7 Yeah. I’m the only shareholder, although when we – one of our core values is teams, so when I talk about gkhouses, I use the term we a lot, just because I see it as our business. As a team business.

0:05:18.8 I really try to separate myself as the owner from the business. So that’s why I’m the Director of Market Development. I run a position in the business and that’s kind of my day job. And then I’m also the 100% owner of the business.

Jordan: 0:05:34.3 Oh, I like it. I like that distinction. So this is really something that is underrated. Is the distinction between ownership, governance, and operations.

0:05:43.2 Most entrepreneurs tend to – especially for smaller companies, tend to conflate those three roles. So, I’m hearing what you’re laying down and kind of separating out those identities.

Matthew: 0:05:53.4 Well, I want everybody to treat the business like an owner. And I talked to a guy one time that owned a number of restaurants and he asked me, “Do you know the most expensive drink in our restaurant is?”

And I was like, “I don’t know, I have no clue.”

And he said, “The one that I get for free, because if somebody sees me get a free drink then that means that that gives them the liberty to get a free drink.”

0:06:17.9 And so, I want the team to treat the business like it’s their own. 0:06:24.3 And so I don’t – I know a lot of people do that in this world. They live out of their businesses and run a lot of expenses through their business, we don’t do any of that just because I don’t want people to take liberty.

0:06:37.6 I think the business is kind of a living, breathing entity in itself and I want to do everything I can to make it as healthy as possible. 0:06:43.8

And I also want the team to see me doing that and respect that and also treat the business the same way I treat the business.

Jordan: 0:06:53.1 Oh man, guys. That’s profound. That’s something worth dwelling on. 0:06:57.9 Let’s talk about the current state of the business. What have you grown it to, where does the business stand currently? What’s it look like?

Matthew: 0:07:05.5 Jordan, you’re kind of dragging down.

Jordan: Oh no.

Matthew: I’m good now, we’re back. Sound like someone slammed the door, I don’t know if that was in my – ok, I’m good.

Jordan: Let me make sure because it says, “Connecting”. Let me just.

Matthew: I hear you.

Jordan: Let me just make sure that we’re – because I’ve got a back up recording that’s recording on the client side of things. Ok.

Matthew: Yeah, I can see that you’re recording.

Jordan: Ok, alright. What was the last thing I just asked. 0:07:43

0:07:44.0 So Matthew, give us a little bit of picture, where does the business stand currently in terms of units, head count, markets, etc.

Matthew: 0:07:53.3 Yeah so, we look at units in terms of occupied units. So we manage about 1300 occupied homes. 0:08:02.4 What was the other part of that question, Jordan?

Jordan: Head count, markets, etc. 0:08:08.9

0:08:09.4 Yeah, we’re about – if you count our whole team, we’re probably in the 30s. And of course we’re in four markets.

You know, this is something that we’re trying to understand better. Like, driving down the cost of people, which your study obviously did a lot on.

0:08:32.6 And so I want to commend you on that study too. 0:08:34.8 If somebody hasn’t seen that you, I highly suggest them to dig into that because I think there’s some great information there.

0:08:41.8 We’re constantly trying to drive down the cost of management, which is a lot – mostly people.

0:08:48.0 So we’re using a lot of international labour versus just domestic labour. 0:08:54.1 So I count the majority of them in that number. So, we’re in the high 30s, low 40s.

Jordan: 0:09:01.2 Got it. Yeah, I think that makes sense. I mean, having labour in another part of the world doesn’t change the fact that it’s a human being working for you.

0:09:08.7 So that’s kind of the size and parameters of the business. And you said, you referenced four years ago as maybe being the kind of the time frame from when you started to go pro. How many units were you managing four years ago?

Matthew: 0:09:25.8 I remember I was managing about 300 in May of 2013. So that’s a little over four – that’s five years ago.

The reason I remember that is because that’s how many units I was managing when I bought out my partners.

Jordan: 0:09:40.4 Ah, bought out your partners, alright. See. You gotta dig to the good stuff. Walk me through that. How, why, what’s the story there?

Matthew: 0:09:47.9 Yeah so, I had some partners in the buying and selling world. I needed them to buy and sell houses because I was a guy that had a lot of time and no money. They had a lot of money and no time, so we kind of got married, started buying and selling houses.

0:10:07.4 So, between 2014 and – excuse me 2004 and 2008 I bought and sold about 100 houses with them. 0:10:16.7 They were part of the deal when we started the management company.

But, I realized, once we started focusing on management, that I didn’t necessarily need them. 0:10:27.8 The management business is a very cash flow forward business. I mean, you earn that management fee as soon as the rent is paid that month.

0:10:37.8 So, I didn’t necessarily need them to bankroll the management business. 0:10:42.3 And they knew that. They knew that I was kind of headed in that direction.

And we just, kind of, had a very, what I would consider, a very healthy conversation about it. 0:10:54.2 A little bit of a negotiation.

If you ask them, they would say I paid too little for the business. If you ask me, I would say I paid a little more than I wanted to, but very pleased that it happened and it won’t down how it did. 0:11:08.3 And I am still friends with all of them. 0:11:10.9 So it wasn’t a contentious relationship.

Jordan: 0:11:15.3 Got it. Ok. And that was, you said 2013?

Matthew: 0:11:18.2 Yes. May of 2013.

Jordan: 0:11:21.1 So, looking forward, what is the vision and the goal for the business? Where are you trying to take it?

Because I just want to note, what you’re not currently getting is the reward of being king and emperor of managing 300 units. Right?

0:11:36.0 And that’s what a lot of owners get. Is that the downside is that there’s not a ton of vision for growing the business, the upside is you get to be emperor of your own personal fiefdom, have a big title, kind of rape and pillage the business in terms of profits, etc. 0:11:51.4 You’re choosing not to do that. You’re the lowly – what was your title?

Matthew: 0:11:55.9 The Director of Market Development.

Jordan: 0:11:57.3 Ah, Director of Market Development and you’re not making a big thing of it. So, what are you getting? Where are you trying to take this thing man? What’s the vision?

Matthew: 0:12:07.1 Well, yeah. We’ve been pretty transparent about that. One of our, kind of differentiators, is uncomfortable transparency. 0:12:13.2 So we would like to get to 25,000 occupied houses. 0:12:17.6

Jordan: Are you still there?

Matthew: Yeah, I’m still here.

Jordan: Oh, sorry. Ok. Let’s do it again. 0:12:26.8

0:12:27.8 25,000 wow. Amazing. So, what is behind that? That number seems a little arbitrary at first glance. Where does that come from? Unpack it for me.

Matthew: 0:12:37.5 You know, I would say if it sounds arbitrary, that’s because it is. That it’s kind of funny when we made that goal, I think about three and a half years ago, almost four years ago now, it seemed like an appropriate number and we just kind of held to it over the last three and a half to four years.

0:12:56.2 And it’s kind of just become this big vision that seemed outside of something that we could accomplish. 0:13:02.3 So we knew we wanted something really big. You like to use the term BHAG.

We knew we wanted something big that was kind of outside of something that we could accomplish being who we were at the time.

0:13:15.8 And so, yeah there was no secret sauce behind it. It was very simply a number that we probably pulled out of the air.

It just sounded like way more houses than we would have – could accomplish. So, we’ve kind of stuck with it.

Jordan: 0:13:33.0 And have you found this goal to be motivating to your team? Has it had the effect you would have hoped in terms of having a destination that people feel driven towards heading toward?

Matthew: 0:13:42.0 There’s no doubt. I mean, we are – our leadership development team or we call it the 25K Club. So we try – this 25 number will pop up all over the place.

We have it on Yetis 0:13:52.6 We talk about it all the time. When we’re in a meeting and we’re talking about scaling the business and scaling systems and processes, we’re talking about 25,000 houses.

Like, “Hey, this may work for where we are today, but is this going to work for 25,000 houses?”

0:14:12.1 And so, using that number really kind of opens people’s minds to see the business a lot bigger than it is currently today. 0:14:21.0 And kind of gets – kind of sets vision for them as they’re making decisions within the organization.

Jordan: 0:14:28.0 Now how do you think about the balance between both asking the question will x,y,z process scale, with also realizing that there are different phases and stages of a business.

0:14:39.4 And even if your goal is to get to scale, that doesn’t mean that at times you don’t do non-scalable things as you’re kind of moving up that cycle of growth.

Matthew: 0:14:49.7 Yeah, there’s no doubt. You’ve got to – because sometimes you can’t afford to build the system that you need for 25,000 houses.

0:14:58.7 And so, what I think it does more than anything, is it makes us think bigger. Certainly we can’t solve all the problems that it would take to get to 25,000 houses.

But I also don’t want them thinking at the, you know, our current level house. I don’t want them at that thinking.

0:15:16.9 I want them thinking more along the lines of 5,000 and 10,000 houses. 0:15:22.1 And so, it accomplishes that. And they know we can’t afford to do it.

0:15:26.7 I mean, you talked about us not being private equity backed. And that is true. And, you know, we, you know – that’s often very tempting given we’re bootstrapping the whole business.

0:15:41.2 But we’re very set on culture. We think that we can accomplish a lot of things based on the team that we have. And sometimes it is duct tape and chicken wire. But it’s kind of fun too. Right?

0:15:53.1 It makes you really stretch and it makes you really grow and it’s amazing what the people in this organization, the people that they’re becoming – because we put a lot of pressure on them.

0:16:07.9 We have really high expectations of them and a lot of these team members, most of them are millennials. I mean, they’re in their early to mid-twenties, are performing.

0:16:18.9 The guy that runs our Chattanooga office is 28. The guy that runs our Nashville office is 26. The guy that runs our Little Rock office is 28. 0:16:30.6 So we are doing this with people that are having to grow and be bigger than you would in a normal workplace.

Jordan: 0:16:38.4 I love that. So you’re reminding me of a quote by Jim Rohn, “What you become is far more important than what you get.”

It’s the journey, it’s the process. You can’t take the largest amount of riches or wealth to the grave. If you’re not working with people that are growing, that are committed to your growth and providing them the space and the overhead room at the top in order to get there, then by nature, there’s just some implicit stagnation that kind of goes along with the equation. 0:17:04.2 So, that’s definitely inspiring.

Tell me more about goals. 0:17:09.7 When a lot of people orient towards having a goal, they’re a couple of things that come up. One is, “What if I fail? What if I don’t hit the goal?” Right?

0:17:16.6 That’s an implicit cost for putting it out there. Yours is ambitious. How do you think about the possibility of failure?

0:17:24.6 And did you think about that prior to publicly making such an ambitious prediction. Or aspirations.

Matthew: 0:17:31.5 Yeah. I think you made it public first. I can blame you. 0:17:42.4 No, certainly, certainly the ideal failure is something that, you know, sneaks into the back of entrepreneurs’ minds and there’s no doubt it sinks in the back of my mind almost on a daily or a weekly basis.

But, I really think that making a public declaration like that rallies the troops. Rallies me. Gets me motivated. I love the pressure of trying to perform to get to that BHAG 0:18:13.5.

And I think it has more good than bad. And honestly, it goes back to the old — I think it’s a Theodore Roosevelt quote, “I would much rather be in the arena and be beat up than I would sitting on the sidelines not taking any risk.” 0:18:31.0 And I think putting that out there is an absolute risk, but I also love being in the fight.

Jordan: 0:18:41.2 Yeah, wow. I love it. More good than bad. What more can you ask for?

Matthew: 0:18:45.5 Property management is a fight. It is a grand business.

Jordan: 0:18:52.0 There’s no doubt about that. At the end of the day, what more can you ask for than more good than bad. There is no way to predict the future.

0:18:56.5 Leaning the odds in your favour is about as good as we can do. And there’s obviously going to be a million failures on the way to that goal. Micro failures. It’s pretty much unavoidable. 0:19:08.0 So, why not own it and get some of the upside in the process.

0:19:08.0 So let’s talk about kind of the phases that the business has gone through up to this point. How would you describe the current phase of the business?

What was the one just previous? What is the one right after? You’re focused on growth, so for most management companies, they’re never going to get to 1000 units.

And so, particularly if you’re staying at, let’s say, two or three hundred doors, you start to subdivide and view phases in like 25 door increments.

0:19:39.8 But if we step back, what have been the real inflection points in terms of how governance, structure of the business, etc.? 0:19:47.8 What was just before, what’s right ahead for you?

Matthew: 0:19:50.3 Yeah, I think the first phase of the business is getting kind of above that 300 house number. I know a lot of people use 200. I’ve heard 400.

Getting above that 300 house number is a key because then it becomes more about managing people than it does how well you can manage houses. 0:20:09.7

So, I think a lot of people can’t push that two to four hundred house mark because they either don’t want to manage more people or they see it, you know, each incremental step is going to take money out of their pocket. Or they don’t have the ability to manage people.

0:20:27.3 Maybe they’re a great technician but they’re not a great, you know, I hate to say business owner, but they’re not a great, kind of, leader of people. 0:20:36.6 Or maybe they just don’t want that.

0:20:38.7 So that was kind of the first phase, was pushing through that. Learning to become the leader. And I’m still working on it really hard.

I mean, I tell everybody in our 25K Club that I’m there to learn right along with them and this is kind of a growth journey that we’re all going on.

0:20:58.1 I’ve never led an organization that has, you know, 40 or so people. 0:21:03.3 I’ve certainly never led an organization that has 100, which is where we’d love to get to in the next few years.

0:21:09.4 And so, it becomes about leadership development.

0:21:13.3 The next big step was us – two, almost two and a half years ago, going up to Nashville. For us, running in two different markets, we kind of dipped our two in the water.

We tried a lot of things. I mean, we learned a lot of lessons. And that was kind of the next phase, was to realize, “Hey we don’t have to be in a market, or I don’t personally need to be in a market for it to run and do really well.”

0:21:41.6 So, that was the next phase. And we’ve kind of been in incremental phases since that. You know, two was really hard, three was a lot harder and now four we’re realizing some things too. 0:21:55.9 But they’re really more incremental steps.

0:21:59.0 So, and I, you know, looking out from here, I don’t know what the next phase is. I don’t know when we’ll hit the next inflection point from a scale. We feel really good about managing in other markets and our ongoing processes.

0:22:16.9 So, I don’t know what the future holds, but I’m sure it’ll hit us like a ton of bricks when we find it.

Jordan: 0:22:23.6 Well, what is the current constraint, Matthew? I mean, are you on target if you just maintain and do everything you’re doing currently to get to the goal in the stated timeline?

Or are there some clear constraints that you know you’ll need to address in order to have the sufficient thorough put?

Matthew: 0:22:37.3 So, I talk about a number of things. One is obviously cash. Our ability to buy companies is limited on the fact that we’re not private equity backed currently today.

0:22:49.9 So we use other sources to, you know, get – to acquire companies. 0:22:58.1 So a lot of that – that’s a limiting thing on our growth.

0:23:03.5 The other one is people. So we’re growing and developing people right now to go run these markets. I mean, our strategy is we love to find the property manager who’s maybe retiring, ready to get out of the business, manages 400 houses and would love to have some sort of leadership come in and take over their business. 0:23:25.7 I mean, that’s kind of our ideal sweet spot.

0:23:29.0 So, you know, our team members – we have to grow team members here and in our other markets to go take over those markets.

0:23:37.1 So, I always look at this thing as kind of like a bowling alley. And I have gutters on both sides. One gutter is the cash gutter and the other gutter is the team gutter.

0:23:47.1 And as I get close to the case gutter, I, you know, I have to wrench back on hiring and basically we need to run very efficiently.

0:23:57.4 And then I start to team towards the team gutter and then I have to start going out and hiring and growing people. 0:24:03.7 So those are the two big constraints on our growth right now.

Jordan: 0:24:07.5 A lot of spinning plates. There’s no doubt about it. In terms of the organic, non-acquisition based growth versus acquisitions, how are you thinking about the pros and cons of the two?

Because, based on what you just said, it sounds like you’re more focused on acquisitions, but I know you guys actually have a fair bit of traction on the organic side as well. 0:24:26.8 How do you think about the two?

Matthew: 0:24:28.9 Yeah we are. So, I think of our organic growth is more kind of keeping up with the churn.

It’s been my experience that right now, kind of the wind is in our faces as property managers. And I suspect, like us, a lot of the sales market is hurting a lot of our businesses.

0:24:49.8 In that, who we call Suzy Homeowner, who, maybe used us to rent a house when she didn’t have enough equity in her home, is able – when that tenant moves now, she’s able to sell that house.

0:25:00.8 And so, we’ve got a natural churn. I think, I saw your study said it was like 25%. I had heard kind of an industry average of 15%.

So, the fact that yours is 10% higher than what everybody was quoting as industry average, I think was interesting and kind of telling of what the sales market is kind of telling us.

0:25:24.8 So, to me, our organic growth, if you will, is really more about staying consistent with our base – our base revenue so to speak. 0:25:37.9 And then we’re really able to grow through acquisition.

Jordan: 0:25:39.3 What are your expectations about the market conditions? Because, as we looked at churn, and we saw this was kind of the silent killer for a lot of companies, a lot of the companies that were in that higher churn segment that we spoke with, articulated an expectation that things are just about to change. We’re on the cusp of the market potentially turning.

0:25:58.8 What are your expectations of where churn will stay as a byproduct of market conditions over the next two to three years?

Matthew: 0:26:08.2 You know, Good to Great is one of my favourite books and the Stockdale principle was one – it was basically, and I can’t quote it exactly, but the Stockdale principle talks about being willing to deal with reality and, you know, I don’t.

He always said that those who didn’t survive in the – people that weren’t kind of the optimists didn’t survive. He was a veteran, a POW and the people didn’t make it were the people that thought they were going to get out by Christmas or thought they were going to get out by Easter.

0:26:51.0 And so, I don’t know when that’s going to happen, when it’s going to switch back into our favour. Certainly, I hope it’s sooner rather than later.

0:26:59.7 What I get excited about is the opportunities it is creating because for us, if you have other managers that are – that are losing properties in their portfolio – let’s say 25% of the properties, it makes them more likely to be a seller. 0:27:22.7 And not that I’m an opportunist, but …

Jordan: Hey, there’s nothing wrong with being an opportunist man.

Matthew: 0:27:29.0 And they can go grow their business back, but they may realize that they don’t want to do that. They may be just kind of tired of the constant churn and trying to replace what they have.

0:27:42.5 And so, we want to become a solution for those people to say, “Hey, I’m tired of this and I want you to take on this problem.” 0:27:51.7 I always say the greatest thing about property management is it’s hard. 0:27:56.4 And the worst thing about property management is it’s hard. 0:27:59.2 And so that creates those opportunities for us.

Jordan: 0:28:03.2 I couldn’t agree more. I mean, to me the hardness, there’s a lot you could pack into that, but what I think about is the effective recurring revenue.

It’s both the strength and the benefit, and what draws a certain personality profile that is so radically different than the sales side of the business.

0:28:18.8 At the same time, it also enables a very high degree of complacency. And it’s kind of like with the Peter Principle, once you cap out and you’re promoted to your position of your incompetence, you have the luxury in this business of riding that out for a pretty extended period of time. Right?

0:28:33.8 You don’t just necessarily implode the business. 0:28:37.9 And so, there’s some pros and there’s some cons implicit with that. For the most part, it’s good. Recurring revenue. It’s honestly pretty similar to software in terms of the financial cash cycle of things.

0:28:47.4 When we talk about some of the underlying unit economics of the business, I asked you earlier about the stages of how things have changed.

What have been some of the specific metrics that you’ve known that, as you’ve grown you needed to really improve?

0:29:05.3 And what metrics have you successfully influence as you’ve presumably gotten some benefits of scale.

Matthew: 0:29:13.6 Yeah. So, some of the metrics we look at are annual revenue per house. We think that’s a really important metric.

0:29:24.4 The other thing is – well you talked about it, the unit economics of a house. Like what is our profitability today of – on a per house basis. 0:29:35.5 And then, as we incrementally grow the business.

0:29:39.2 As an organization at our current state, we probably have a more expensive overhead — call it corporate overhead, management team – than we need for the size business that we are.

0:29:53.1 But we’re building a business for growth and so, I think of unit economics as, “Hey today this is how profitable a house is, but we’re not going to even grow the management team that much, if at all, to even double the size of our current business.”

0:30:08.2 And so, the value of each incremental house is what we look at and what I think investors would look at as to what does this business look like at scale.

0:30:20.2 And so, I think, for a property manager to know what it costs them to manage a house today, and if they’re trying to grow the business, what it’s going to cost them to manage a house at scale, is a really important number to know. 0:30:32.1

Jordan: 0:30:34.3 And have you actually – what kind of movement have you seen in that number? I mean, talk me through some of the benefits of scale? You’re pursuing it.

There is so much skepticism on the small end of the market. You’ve got the smug boutique owner that says, “Hey, you know what? Those growth guys are full of it. They’re not making any money. They’re losing their shirts. I’m going to stay small. It’s my personal – it fits with my lifestyle.”

Which, hey there’s no right or wrong there. If that’s your lifestyle, that’s your lifestyle.

0:30:59.4 But there’s a lot of – I sense a lot of scepticism from smaller players towards people at scale. And then you do see some companies going for scale and busting.

0:31:10.4 What’s been your experience thus far? I mean, when does the magic of scale kick in, and more specifically, how and where?

Matthew: 0:31:18.4 Yeah. So, I actually agree with the small guys. They’re right. I mean, when you’re growing a business and trying to scale a business en route to scale, it is a tough, it is a tough business. It is not a profitable business.

0:31:38.3 My guess is some of those smaller guys are more profitable than us.

0:31:43.5 So, I kind of see this business and I think – I heard a speaker recently – I see this business going two ways.

That there’s going to be these smaller organizations that are the boutique type organizations that are going to be super profitable and make tons of money. 0:32:00.4 And like you said, I mean, if that’s what they want, that’s great.

0:32:03.7 And then there’s going to be these businesses that scale. To argue against their point though, is 0:32:11.5 [Inaudible] unit economics of the incremental house.

0:32:15.6 So, we have this like layer of corporate overhead that currently is a percentage of our revenue. Right?

0:32:22.4 And so, as the business grows, that percentage becomes smaller and smaller and smaller.

0:32:28.4 So we double – let’s say we kept our corporate overhead the same, we double in size, then our corporate overhead would be half the percentage that it is today.

0:32:39.3 And so, for them to say that it’s not profitable. Yes, en route to scale, it is not profitable, but I think it would be misunderstanding the truth that at scale, when you have these houses with a limited corporate overhead and management team, that this business does become very profitable again.

0:33:01.6 Now, I can tell you, at our size today, that we haven’t hit it yet. 0:33:08.4 I don’t see why somebody would stop where we are today or even stop – to me, you either need to stay at that two to four hundred mark, or push through to big scale.

0:33:22.4 And somebody may be throwing tomatoes at me, but the way that I see it is, at the size we are today, I still have the challenge of being in the business and working – you know, I’ve got tenants that still have my telephone number. I still have owners that have my telephone number.

So not only do I have to work in the business, but I also have the challenge of managing a team. 0:33:46.3 It’s a harder business today because I’m managing so many spinning plates.

0:33:50.6 At scale, not to say that it’s less work at scale, but at scale, then I’m delegated to the CEO role.

0:33:57.5 And again, I think that the number that unit economics really start to make a turn based on our current corporate overhead, is somewhere in the – well, I would say the ten to 12 million dollars in revenue range.

Jordan: 0:34:15.2 Wow, Matthew, you’re blowing my mind. You just upped the bar, brother. That didn’t help the case.

So, what I’m hearing you say is that you either need to be at two to three hundred units or ten million dollars?

Matthew: 0:34:30.6 That is the way I am seeing the business right now based on our corporate overhead.

Now, I would tell you that we are probably built a little more corporate heavy than most people. And you know my management team pretty well.

0:34:46.2 But I kind of think you need great people like them, like the Spencer Suttons of the world to go grow this thing. To be that ten to 11 million in revenue.

Jordan: 0:34:57.3 Wow. So, that’s really interesting to me. That your projecting, kind of the down cycle that far out.

It’s interesting also, because of how it aligns with the work we did during the benchmarking study.

0:35:10.5 We struggled to see companies that had come out of the growth cycle where they had basically achieved sufficient scale that the profitability had come back up to the levels that is was at previously to going into that cycle. 0:35:24.5 So, I don’t firsthand know companies that have gotten over that hump.

0:35:30.7 Greg Crabtree, one of the advisors – one of our advisors talks about the same thing for any business.

The black hole between three and five million dollars is kind of what he defines being a very challenging place where you’re making that infrastructure, investments, struggle to be profitable, but you can get through it. After that.

0:35:51.5 If you’re right, I think that pretty well guts whatever scaling ambition a lot of folks would have depending on how quickly they think they’re going to be able to get to becoming a ten million dollar business.

0:36:03.4 If right now, you chose to get back to profitability, aside from having to lower your burn rate in terms of employee head count, what else might you do?

I mean, is there any reason that you couldn’t get back to a highly profitable state with the business at the scale it currently exists?

Obviously it would be painful, completely different vision for the company, but if somebody put a gun to your head, or your life circumstances completely changed, and you just needed to milk this thing, what changes could you make?

0:36:35.7 I guess, what I’m getting at is, have you positioned and designed the business in such a way, that structurally, the only path is forward?

Or could you conceive of a way that you could be profitable at your current size?

Matthew: 0:36:50.0 And keep in mind Jordan, we are profitable. I mean, to me there’s a difference between profitability and cash flow, right?

0:36:59.1 And so, our biggest challenge is not profitability, it’s literally cash flow, because we use debt to finance our acquisitions.

0:37:05.9 So, it’s still a profitable business, but it’s not nearly as lucrative as what the kind of the two to four hundred house crew that says you need to stay that big says it is. 0:37:20.2 And they’re right. I mean, that’s the point.

0:37:23.2 So yeah, I could certainly strip some of the overhead if we weren’t trying to grow the business. There’s no doubt.

0:37:31.0 And then I could basically live off of the cash and basically flip our cash flow in a big way. 0:37:42.3 But, that’s not – I’m not in this business to build a lifestyle business. I’m in it to kind of scale it. That’s what excites me.

0:37:51.4 And so, we’re kind of pushing forward with this whole goal. 0:37:56.3 You said one thing that I thought was interesting, which I kind of agree – was it Greg you said that that three to five million dollar range is where you start to get over the hump of infrastructure?

Jordan: 0:38:07.8 Well he said three to five was the black hole of where it’s really challenging and that a lot of businesses never make it through that desert.

0:38:16.9 0:38:33.3

Matthew: 0:38:34.2 Cost structure. So, I think at five million dollars I agree with him, that feels like the hump. And so he and I may not be too far apart.

Jordan: 0:38:49.9 Fair enough. Wherever it’s at, it’s definitely a slog. And it’s ironic to use this word lifestyle.

In the valley, Silicon Valley culture, lifestyle is a really dirty word. 0:38:58.1 It’s kind of tantamount to basically describing somebody as loser.

0:39:01.6 But scale and going for scale, that’s a lifestyle decision too. Right?

0:39:08.5 To couch what you’re doing purely in terms of dollars and cents, yes there’s an economic goal.

0:39:14.1 But at the same time, if you’re just not personally really into that, if that doesn’t really feed you on a really deep level personally, than clearly that is just not a worthwhile investment of time in light of the uncertainty, the stress associated with it.

0:39:30.2 So, on both sides you have people being motivated by things that are beyond dollars, I would say.

Matthew: 0:39:36.7 100%. I mean, if you are not totally committed to scaling a business, I mean, the amount of sacrifice as an entrepreneur it takes to get there.

I mean, it’s not just a sacrifice for me personally. I mean, it’s a sacrifice for my family, for my wife especially. 0:39:53.5 It’s not fun to have a husband that’s gone all the time, or working a ton of hours every week and then not necessarily seeing those tangible rewards up front.

0:40:06.9 Certainly there’s a balance sheet piece of this, but she’s not quite as excited about the balance sheet as she is the real money that’s associated with it.

0:40:17.4 So, it is a family commitment and it’s one that I have to – I always have to share as much vision with her as I do with my team because she is part of the team.

0:40:31.8 And so, if I want that kind of support from her then I need to make sure she has tons of clarity on where this business is headed and what the ultimate goal is and what that looks like for us as a family.

Jordan: 0:40:42.7 Sure. Shareholders are not just financial. Arguably a spouse and children are also kind of shareholders in your life that there’s some level of accountability to. That makes sense to me.

0:40:52.9 Let’s talk about some of the other mechanics of how the business is structured. In terms of what gk does differently. Positioning, differentiation. How does gk position itself relative to all the other choices within any given market?

Matthew: 0:41:11.5 Yeah, it’s kind of funny that you brought this up because we actually had a long conversation about this at our most recent leadership offsite.

0:41:21.6 And so, we’re kind of switching it. We really kind of went back to the drawing board. We said, “Hey, what really are we good at?”

0:41:27.4 And so, we came up with three things that we thought separated us from everybody else. 0:41:34.0 For us, we really work so hard and I think I’ve done a podcast with you on what we call our interview process, The Grinder.

0:41:48.0 We work very hard on finding talented team members. 0:41:51.9 We will literally interview and we’re actually even starting to collect data on what it takes to find a team member. What team members work out best.

0:42:01.4 So we’re pouring into our team members, but we’re also kind of collecting data on them to try to figure out if we can find the perfect profile.

0:42:11.0 So we think that we’ve got a – I will say this and somebody will probably disagree with me since this is a property manager’s podcast, but we think we have the industry’s most talented team.

0:42:23.5 So if you see me at an industry event, please don’t punch me for saying that.

0:42:27.4 The second on is we want to be – have customer focused innovation. In other words, we think that a client’s biggest need is communication and we feel like we build trust through communication.

0:42:41.9 And so we want to innovate as a property management team but we also want to make it customer focused.

0:42:49.2 So, any way that we can provide more clarity, provide a better communication so that it provides more trust for our owners and tenants, then that’s very important to us.

0:42:59.8 And then the last thing is unwavering integrity. We used to call this uncomfortable transparency. We’ve switched it around a little bit.

Our business, it would be very easy for us to tell the owner one thing and blame it on the tenant to the owner or the owner to the tenant.

0:43:20.3 And because we control a lot of the communication. But we really believe that, and I still like to use the word uncomfortable transparency and that kind of falls back on integrity. 0:43:34.6 We really feel like we’re trying to play the long game.

And us being upfront about the reality of certain situations or when we screw up or being clear in our communication with owners and tenants.

0:43:45.9 We just think that in the long run, that’s a better business. And so, those are our kind of what we call three uniques.

Jordan: 0:43:55.0 Got it, so let’s dig into those a little bit more. 0:43:55.7 The second one. What was the second point? Remind me?

Matthew: Customer focused innovation. 44:00

Jordan: 0:44:01.8 Alright, so you mentioned communication as an example, how do you handle communication to engender trust?

Getting specific, let’s talk about maintenance for example. An example to potentially play games or have frustrations around what money got spent on, etc.

What are the models for how you’ve seen that handled that can lead to sub-optimal versus more optimal dynamics?

Matthew: 0:44:27.3 Again, it gets back to communication. I always tell our maintenance team, and we have an internal maintenance department, but we also tell our third party this.

0:44:38.4 These owners are not seeing the problem. Like, if my air conditioner breaks in Alabama in July, whatever it costs just please fix it is kind of the way that most people would be.

0:44:49.2 But if the air conditioning breaks in a tenant’s home in July, then it doesn’t really bother my owner who’s maybe in California or New York or even in another part of the city.

0:45:03.7 And so, what they like to see is, they like to feel like they’re getting a value for what they’re – the money they’re spending.

0:45:13.4 So we’re – we talk a lot about being very detailed in your communication of what exactly – what was wrong with the AC. Describing the steps you took to diagnose the problem. Describing the steps you took to fix the problem.

0:45:29.7 Now if I’m going to spend $2000 dollars or whatever a new condensing unit costs, if I have a paragraph of information that says, “This is all the things that the tech went through to get it there. And this is how he solved the problem.”

I feel a little bit better. I’m still not excited that I spent $2000 bucks, but it’s a whole lot better than one sentence that says, “Replaced the condensing unit.”

0:45:54.3 It just feels better to our owners. 0:45:57.4 So that verbal communication is very important.

Jordan: 0:46:01.6 Where’s that process – who is that process overhead placed upon? Because it’s a great idea but it’s also extra work. So in your organization who is it placed upon?

Matthew: 0:46:10.2 We have a director of maintenance that kind of manages the guys and makes sure that that communication gets transferred into all the bills that we produce.

And also in the – when we send out a price to an owner to get something fixed.

Jordan: 0:46:29.4 And that director is managing across multiple markets? Is that correct?

Matthew: 0:46:34.2 That’s correct, that’s correct.

Jordan: 0:46:36.5 What software are you using to handle the work orders and the communications?

Matthew: 0:46:40.9 We’re using AppFolio’s maintenance software. So, we think that it is – it kind of solves most of our checklists that we need for it.

It’s not a perfect solution and I don’t expect them to come up with a perfect solution that crosses everybody. 0:47:01.8 But AppFolio is what we’re managing out of right now.

Jordan: 0:47:04.0 And how do you think about maintenance in general? In terms of being a contributor or a value add to the industry versus what you hear other folks say about it.

Because, honestly, you hear some pretty strong opinions, both for and against maintenance in terms of it being an actual profit center.

Matthew: 0:47:20.7 Yeah. There’s not doubt it’s a profit center. At least it is for us. You know, I think it’s a tremendous value.

I think the biggest risk an owner has is a tenant moving because you have the loss of rents, you probably have a ton of deferred maintenance that will need to be fixed once they move all the stuff out.

0:47:43.0 I mean, there’s so many different things that happens when a tenant moves.

0:47:47.3 And so, for us to be able to control that maintenance piece and deliver a consistent product to our tenants. Seeing the same maintenance vendors coming out and developing relationships with our maintenance guys.

0:48:00.6 I mean, I tell our maintenance guys, “You guys are the face of our company”.

0:48:06.4 So when we talk about getting reviews, like getting Google five star reviews, our maintenance guys are the number one people to get those.

0:48:12.6 Because they’re in the houses, they’re talking to the tenants. Other than the application process and maybe signing the lease, and heck, we do so much of that online now anyways, the maintenance guys are the ones that know our tenants better than us.

0:48:27.4 So, I love having an employee of GK managing that relationship because it’s – we’re all kind of – all of our incentives are definitely aligned.

Jordan: 0:48:39.6 Got it. So then, what is the chasm between that and the inconsiderable subset of the industry that has a low view of maintenance?

In terms of, “It’s a headache. You’re not making any money on it?” Etc. 0:48:51.5 Where do you think it breaks down for a lot of folks that they don’t view it the way you do?

Matthew: 0:48:55.4 Yeah. I mean, one of the hardest things to do is to find good maintenance people that are willing to come work as an employee for the company.

0:49:03.8 What I would say is, you’re doing about 80% of the work already and you are the one that is essentially creating the product for the service. For that service.

0:49:19.3 So I would prefer to make that margin than to give that margin away to somebody. 0:49:24.5 Now certainly, there is some instances where we sub-contract out work. But I really think that it is profitable.

0:49:33.4 What I think is that the ones that aren’t profitable don’t’ really understand what the real cost of a maintenance person is.

0:49:46.6 And part of that is educating your owners on the real cost of a maintenance person. When you talk about truck and gas and insurance and all the things that are associated other than obviously the person’s compensation.

0:49:59.7 But the cost of a maintenance – a real maintenance person being out there – once you educate an owner, I think they’re comfortable paying the prices they need to pay to make the maintenance business profitable.

Jordan: 0:50:11.7 So your suspicion is it’s a revenue issue? Folks that are not – that haven’t found a way to make money on it are not charging commensurate with the real underlying costs?

Matthew: 0:50:22.1 I do. I think that’s the only way it could possibly be. Because my costs aren’t going to be that incrementally different than somebody else in another city.

Jordan: 0:50:33.8 Sure. Yeah, that makes sense. So if you’re able to position by articulating the benefits of doing it in house, the additional controls, QA, etc., then that gap may be achievable.

0:50:43.7 But if you’re not doing that and if you don’t have the vision for it, or the soft skills to be able to position it profitably in sufficient revenue. Makes sense. Interesting.

0:50:53.4 So, maintenance is something that we dug into in the benchmarking study. And we definitely saw folks making money with it. But it does happen to be one of those areas where we persistently hear reasons why you can’t do it profitably.

0:51:09.4 So, it’s an opportunity if you’re doing some more due diligence. 0:51:12.7 I see companies like Property Meld that are getting quite a bit of traction right now helping solve some of those problems.

0:51:18.3 And there’s also companies like Homey that are actually coordinating the labour directly and giving both property managers access.

0:51:28.4 I think maintenance is where some disruption is going to happen in the industry. Somebody is going to figure that out. Long term, the destiny of the maintenance function can’t be a guy with a truck and a box of tools. Right?

0:51:42.8 Somebody is going to figure out increasing levels of organization there.

0:51:46.3 I want to pivot to talk a little bit about the CEO role. How you spend your time. How you think about where you spend your time.

You talked previously about still being in the business. My question to you is, why? 0:51:59.4 What prevents you from sitting on a mountain top and thinking great thoughts, planning, etc. What is the ideal way that you would like to spend your time? And what’s the delta between that and the actual day to day role that you play?

Matthew: 0:52:16.9 Yeah, I always see a CEO as somebody that’s willing to get in the trenches. I think they’re more effective when they’re willing to get in the trenches with their team.

0:52:28.5 I enjoy being in the trenches. I love the team that we have over here. We have some of the most incredible people that work with us.

0:52:36.0 And so, I enjoy being around them and heck, when they’re busy, I want them to see me being willing to jump in and help plow the fields so to speak.

0:52:47.0 So – but I do – I’m a big EMyth fan too, so I do know that there are times where I need to step back and work on the business.

0:52:55.8 And I think – I borrowed this quote, but a CEO really only does three things. And so, when I put my CEO hat on, I’ll think about this.

They set the overall vision and strategy of the company and then communicate it to everyone. 0:53:13.1 I recruit, hire and retain the very best talent.

And then I make sure there’s enough cash in the bank.

0:53:19.9 And so, I literally have that quote sitting above my desk and I think about that. When I mentally put on the CEO hat I’m like, “Is there anything here, like do I need to be communicating vision and strategy today? Do I need to be…” — and we’ve been on a heavy recruiting binge right now. 0:53:40.2 So I spend almost an hour or two a day recruiting and trying to hire the most – you know, keep the most talented team. 0:53:50.2 And so, that’s – those are the three things I think a CEO does.

Jordan: 0:53:55.7 Got it. So the idea of being CEO is a little tricky in the sense that for the most part it’s a meaningless title, right?

If you’re running a business that’s at a million dollars, the business can’t afford a CEO. There is not enough economic productivity for a CEO to exist.

So that’s another thing that argues in favour of the title that you actually have. 0:54:17.6 A business needs a tenth of a CEO, an eighth of a CEO. At some point a half of a CEO.

0:54:22.6 And the same with the CMO, CFO, etc. 0:54:27.4 So, you’re not ignoring the role of a CEO. What I hear you saying is, you’re doing it to the degree and measure that you feel is necessary for the business at the stage that it is at and presumably at the point that you hit 25,000 units, that proportion has changed quite a bit I’m guessing.

Matthew: 0:54:45.2 There’s no doubt. I would think that at 25,000 my permanent job would be CEO. And we call this – and I look forward to my team members too.

To some degree, Matt Cox, who runs our Chattanooga office, he’s the CEO of Chattanooga. 0:55:02.3 And so, I want him to have the ability, the unique ability to zoom and kind of work in the business, but also zoom out to borrow something else from Jim Collins.

0:55:12.6 The ability to zoom out and see the bigger picture of our Chattanooga operation. 0:55:17.9 So, to some degree, he wears the CEO hat as well.

Jordan: 0:55:23.4 Yep, totally makes sense. Ownership is ultimately what you’re looking for. Culture is the code to actually accomplishing that. It’s pretty underrated.

0:55:31.0 I do want to transition now to the rapid fire section of the interview. I want to ask you a series of questions and just get some guttural responses from you.

The first question is this, Matthew what’s the number one thing you learn from having a HomeVestors franchise?

Matthew: 0:55:46.1 I learn that I was not made to wake up every day needing to go out to kill something to eat.

And I learned that this management business, when I finally got into it and realized it was kind of the grind away, plodder, personal discipline type of business, that I was much better suited to run this type of business than a sales role, so to speak.

Jordan: 0:56:09.5 Makes sense. College or pro sports?

Matthew: 0:56:13.1 College.

Jordan: 0:56:14.3 Nick Saban’s worst coaching call of all time?

Matthew: 0:56:21.2 Oh wow, I don’t know that he’s made any bad calls.

Jordan: 0:56:24.1 This is the point of the question Matthew.

Matthew: 0:56:24.7 Good gosh. I don’t know. I mean, if this ever got back to him, I’d hate for him to come and seek me out.

Jordan: 0:56:35.8 You remember that quote you gave me earlier about reality brother. Alright, we’ll let you chew on that one for an extended period of time and come back to it.

Matthew: 0:56:43.8 Yeah, let me think about it.

Jordan: 0:56:44.6 Next question. If you didn’t live in Alabama, where would you live?

Matthew: 0:56:49.3 You know, I would like to live in the mountains. We have a hill that we call a mountain here in Birmingham, but I really am not a beach person.

I would love to live in the mountains. I would love to live in a place like Park City. 0:57:04.3 Maybe somewhere, one of the mountain towns of Colorado.

Jordan: 0:57:08.7 Alright. Do you ski?

Matthew: 0:57:11.1 I do. Although the older I get I start to worry about my health. And I do it so infrequently that I’m like – it kind of scares me to think of skiing right now.

Jordan: 0:57:22.0 Yeah, you’re thinking about that having an insurance policy in the event of disaster. I hear you.

Matthew: 0:57:30.5 There’s no doubt I’m worth more dead than alive, so I don’t want the broken leg insurance policy, I want the total take out.

Jordan: 0:57:37.3 Nice, nice. Matthew, what are the most important sacrifices you’ve made to grow the business?

We all make lots of sacrifices and some of them are terrible and unnecessary, but what were the critical sacrifices that you’ve made?

Matthew: 0:57:53.4 The – I have never sacrificed family for this business. I think I’ve got a great margin between family and this business, but what I do and what I think my wife and I have sacrificed mostly, is just income.

0:58:12.7 I think what – to grow this business, what we pay me as an employee of the business is probably less than what I could earn on the open market.

0:58:25.3 And so, my lifestyle is a toned down version of probably what it could be. 0:58:34.3 I’m ok with that and my wife’s kind of ok with that. But that’s probably – money is probably the biggest thing we’ve given up.

Jordan: 0:58:40.7 Makes sense. I hear you on that man. More than I’d like to admit. 0:58:45.0 Who’s your favourite entrepreneur?

Matthew: 0:58:49.8 I like to listen to Reid Hoffman. I like to read things by Bezos. I’ve got a ton of really favourite entrepreneurs.

58:59 One of the people I’ve been listening to a lot who I think is really smart is Mark Andreesson. He’s been an entrepreneur in the past but now he runs that venture capital fund out of Silicon Valley.

0:59:19.8 And I’ve really kind of – I’ve heard him speak a few times on a few podcasts and just loved what he said. And then I was like, I need to go find everywhere he is and see if I can’t learn more from him.

0:59:31.9 And I’ve been listening to there – I think there podcast is A16Z or something like that, which is a really great podcast.

Jordan: 0:59:41.5 Yeah. It actually is an excellent podcast. I find Reid Hoffman’s to be a little more predictably of interest to me. And the production value’s are a lot higher.

That would be Masters of Scale. But both of those are solid, both of them have an amazing track record. 0:59:53.5 Next question, what is the role of mindset in your success?

Matthew: 1:00:03.1 I think it’s a lot. I mean, I go through an emotional rollercoaster almost on a daily basis.

And so, the ability to kind of work through that emotionally. And I think becoming as objective as possible is probably where I’ve arrived. And I do that through a lot of reading.

I’m enjoying reading Ray Dalio’s book, Principles right now. I’m actually reading it for a second time. About finished with it.

1:00:38.1 And so, by reading it kind of gets to the part of the brain that becomes more objective for me and allows me to kind of see problems as they are and not emotional.

1:00:51.5 But at night, me being transparent – night’s when I struggle the most because you’ve given it all day and then you come home and you’re wiped out and you’ve got kids and so, getting to the – getting – trying to remain objective that whole time from a mindset standpoint is a challenge.

Jordan: 1:01:12.5 Mental game baby. There’s no doubt about it. Yeah, sometimes you get that anxiety. Particularly if you’re on vacation.

1:01:19.5 It’s the struggle between realizing that you are not in ultimate control of the outcomes. You put your best foot forward, you try your hardest, but at the end of the day, life and a business, it’s bigger than what any one person can influence or get done.

While at the same time, having radical accountability, being results oriented, etc. 1:01:42.3 I definitely identify with that struggle.

1:01:44.2 Final question for you is this, if you could go back and talk to yourself four years ago and you can’t tell yourself what sports team to bet on, you can’t tell yourself what stocks to pick, conceptually, what’s the big piece of advice, or the life lesson you would have tried to impress on yourself that you think would have had the biggest impact, the biggest single impact over these four or five years that you’ve been in the management business?

Matthew: 1:02:15.1 You know, I think you and I had a dinner recently and I think my answer to this is probably something that I kind of shared with you.

I think I would want to know that I have a decision to make from a capital standpoint. Like, do you want to grind it out for a certain period of time?

And I’m kind of way too far to stop this road I’m down. Or, do you want to go a different route that may be a little bit easier, maybe not.

How about a different struggle in that having partners and being a little more capital backed from the beginning.

1:02:57.2 I would love to know that that would have been – if that would have been an opportunity or at least sought out what that would look like.

1:03:04.5 I’m not saying that I wouldn’t have still chosen the path that I’m down, because I’m super pleased and having a lot of fun doing it.

1:03:12.8 But, again, when you’re growing a business from a bootstrap standpoint, it is a challenge and there’s certain stressors that require my complete attention at all times.

1:03:28.6 That I wonder if I’d gone down this other route if that had been – if that had been a little more – if that would have matched my personality a little more.

Jordan: 1:03:40.9 So you’re basically saying you would have encouraged yourself to do more due diligence on going the funded route rather than the bootstrap route.

Matthew: 1:03:47.1 Yeah, there’s no doubt.

Jordan: 1:03:48.8 Yeah, interesting. And that probably comes up when you see companies like Castle, now dead. Or OneRent, now at 2000 doors, having been in the business for I think three years or less. That play is definitely happening right? The folks that are unabashedly not into property management, they’re from the valley or from Chicago, New York, etc.

I’m thinking about Greg Jones out of New York with Max, can’t remember his last name, in charge. 1:04:16.9 So that play is happening and the truth is, we don’t know what the answer is.

There’s an uncertain outcome. We’ve got the NRTs entering the market, Home River Groups, RentersWarehouse. So there’s definitely no clear winner one way or the other.

But, you’re just saying that more due diligence of at least exploring the option, that would have been your advice.

Matthew: 1:04:38.7 That’s exactly right. I mean, just knowing what I know now, knowing what that four years look like, it would have been interesting to at least make that decision.

Jordan: 1:04:51.0 Fair enough. Well, if folks want to stay in touch or find out a little bit more about the business, a little bit more about the brand gk, what’s the best place for them to go.

Matthew: 1:04:59.1 You know, our website. Again, we’re uncomfortably transparent. We push out a lot of information on our website.

I like to write articles on LinkedIn so they can certainly connect with me or follow me on LinkedIn. I’m a big kind of passionate believer in millennials, and so I write a lot of articles on hiring millennials, how to train millennials, what to look for in a millennial.

And yesterday, I got the opportunity, which I thought was pretty cool given I was basically a C and B student at the University of Alabama, to speak to about 50 or 60 kids. 1:05:37.4 GK Houses got to teach a class on single-family property management.

1:05:41.6 And the last 30 minutes I basically told them how to get a job. So I’m pretty passionate about millennials.

If you want to know how to hire them, everybody’s always complaining about them. I think that they’re the greatest thing, I think that they are so ambitious and so exciting and give me so much energy. And so if they want to know more about that, I could certainly help them with that.

Jordan: 1:06:07.5 Love it. So check out gkhouses.com, follow Matthew Whitaker on LinkedIn. Matthew, we’re going to keep eyes on your career.

You’ve made a big bet and you’ve done it public. That alone, regardless of whether or not you hit the mark, is commendable. Ton of respect for what you’re doing over there with gk.

Appreciate you beating the drum of culture. So, thanks for coming on the show man, let’s stay in touch.

Matthew: Yeah, thank you for having me.