[Greatest Hits] Episode #309: The Fewer Moving Parts the Better with Rented CEO Andrew McConnell

Welcome to this edition of the Million Dollar Mastermind podcast. This is where we pick the brains of high achievers from all walks of life and get their hard earned real world insights on Ready. I'm your host, Larry Wydell.

I'm here talking to somebody in Bermuda or the Bahamas.

Bermuda.

Bermuda.

A lot of people conflate the two.

Okay, Bermuda. Andrew McConnell. And Andrew, not very surprising, is the founder and CEO of Rented, which is a vacation rental company. Started it in 2020. Already revenues over $9 million or at least that's what we have. Andrew, you can correct that if you want. And he's a former founder CEO of Vacation Futures, so he's got some experience connecting online people with vacation properties, giving them a chance to put some fun in their life. So, Andrew, welcome.

Thanks Larry. It's great to be here. Appreciate you having me.

And how did you get going on this business?

This business, Rented, was an outgrowth of a couple of my prior companies, Vacation Futures and Rented Capital.

And a friend said the other day.

It'S just when I see a gap in the market, I seek to go fill it. And so I had a couple other companies. One marketplace matching owners and managers, then.

From there financial product that helped management.

Companies lease and guarantee the income to owners but still be able to manage on variable commission. And then again saw a gap in terms of what they were able to do on pricing and revenue management. And so built out a new company with rented, founded in 2020 that we built all the best in house at scale revenue management capabilities, our team, our data scientists, our data modeling to be able to bring the kind of sophistication you see in airlines and hotels to vacation rentals when it comes to making sure it's the right price on the right channel at the right time.

So I'm going to throw it in reverse and get you, you rattled off those things. I'm not sure. I followed the bouncing ball all the way through range of financing and this and that and the other. What was so critical about your previous services? What was the gaps?

Yeah, the first one grew out.

It was a lunch with a couple of my dad's friends back in January of 2012. We were actually in Turks and Caicos.

And the two were talking about Vrbo.

Vrbo then before the rebrand and they thought it was just the greatest thing. And so I hadn't heard of it. I just started asking questions and they said it was this great site, they could rent out their home and make money. I said, wait, you rent your home to strangers on The Internet. When I was in high school and we wanted to throw parties, we always had to do it at whoever's parents were out of town at their house, and half the time we'd get caught. And now you're saying kids in high school could all throw in 20 bucks and the school could just rent a party house every weekend from strangers on the Internet.

And they looked at me and said.

Well, yeah, I guess that could be a problem. But I do a phone call with everybody who tries to book, and I look them up on LinkedIn. I really try to research this. Okay, but how do you get it clean?

Because you live in Atlanta and your.

Place is in Florida, and you live in Boston, but your place is in Vermont. Well, I have to hire a local company and schedule for them to come in and clean and take care of stuff when things go wrong. And so I just kept asking questions and eventually said, wait, this doesn't sound as easy as you put something on the Internet and start making money. Sounds like you put a lot of time into it. Yeah, I may spend eight or 10 hours a week doing it. So. Eight or 10 hours a week, you're a cardiologist and you're a dentist with your own practice. You're billing insurance companies at $500 an hour. Why in the world are you doing this yourself? You don't change your own oil. You don't even mow your own lawn. You hire people to do those things. Why are you doing this yourself? And they said, because the professionals in.

The space were one only working on.

Commission, so they didn't have any skin in the game. And the homeowner, they were taking all the risk. And the other side was they thought they charged too much. And my background, I have a couple law degrees. And I thought back to my negotiation class and said, well, I don't understand. If these companies don't have jobs without homes like yours, why don't the owners band together to make the managers bid against each other to tell you exactly what they're going to give you?

And they looked at me like it.

Was an idiot and said, well, yeah, obviously if there was a way to do that, everybody would be doing that.

Everybody. How big is this market? And it turned out at that time it was more than $100 billion market. Now it's closer to 180 billion a year. And homeowners just signed up in droves. Before I ever had a business, I was getting people calling. Every time I'd mention it, people would say, oh, I actually have a rental Property, or my parents have a property. Could we sign up? Could we sign up? And so that was the original business.

And when they signed up, what did they get? I mean, what did that give them that they didn't have before? They were part of a group that did what?

Well, we would run auctions. So the homeowner may have a place, let's say in Aspen. And they'd say, I'm only going to use it two weeks over the winter.

And two weeks in the summer.

The other 48 weeks, it's available for the year. Now, we would take that property, we'd have all the photos, the description, and the 48 weeks that they weren't going to be there. And we'd put that up for an auction and we'd have all the management companies looking to add properties in Aspen bid against each other. One would say, oh, I think I could make 48,000 from that homeowner. I guarantee I'll pay you 36,000. Somebody else say, well, I think I could do 50. So I'm going to give the homeowner 38. And so it was this auction and the owner could review the company that made the bid and then what the number was and say, yeah, I want to take that. Instead of doing all this work and having an uncertain income stream, I'm going to do none of the work and get that fixed income stream. Yeah.

And so you were going straight to companies were bidding for these places.

That's exactly right. We had local management companies. Were the people betting on it?

It's always fun to hear how an attorney evaluates a entrepreneurial opportunity.

Yeah, I was never a real lawyer.

And you were double afflicted. What was it, just self flagellation? You wanted to go after two legal degrees.

I really loved school. I thought I learned so much. The intellectual stimulation of it was incredible. But I went to law school thinking I would be a lawyer and then did summer internships and really did not.

Enjoy the practice of law.

I don't want to do that. And I remember in my corporations class thinking, man, all the interesting stuff gets done by these business people we read about.

There you go.

That seems like where I want to be. And so that helped influence. So I went to McKinsey after law school after doing the bar exam instead.

Of going to practice law.

And what's McKinsey?

McKinsey? Management consulting firm.

Okay. And so how did you, you know, you said people signed up for this before you even got it launched. How were you? Just normal word of mouth type thing.

I Guess. Yeah. So friends would tell friends and they'd say, oh, you need to talk to this guy. He will complain about, oh, I had this terrible guest or I'm not making enough money. They say, oh, you should talk to this guy. And so people were reaching out on LinkedIn, on Facebook. People would text me out of the blue and said, okay, there's enough demand. I need to go start a company to do this.

Unbelievable. And so what did you learn from that experience? So now you're entrepreneurial. What's the first biggest disaster you created for yourself that you ran into?

The biggest was thinking we needed way more in place than we did to start. So I went and took a whole bunch of my savings and hired offshore dev shops to go build out this whole platform and do this complicated thing. And we ended up having to throw all the code away. No client ever saw it or touched it. And I instead went back to basics and started with a minimum, minimum product where I used my cell phone, I used Google Sheets and I used Gmail and I would call up owners one by one and get them to sign up. I would get their photos from other websites and paste them into these emails. And then I would go kind of door to door signing up management companies in Hilton Head in the Outer Banks to have them bid on the properties. And then once I started getting enough traction and revenue there, I was able to go hire developers to build out the platform platform in house. And what that enabled me to do was know at any given moment what the next unlock would be. So instead of saying I need everything, I'd say the one thing that's going to make me more efficient today is this. And then once that was ready, say, okay, the next thing that's going to be the biggest unlock is this. And so it allowed us to really just move a lot faster.

The thing is about tech, tech is great, but what is not tech discussed, in my opinion enough is the smart thing to do is to use the lowest level of tech you possibly can get away with.

That's absolutely right.

Because it's easy just to understand. You know what I'm saying?

Yes.

Usability. I mean that's honestly, that's the biggest thing with our current business is when we got into it, we were more tech enabled services and we use third party software. But in using the third party software we just saw, man, these people have built a million things nobody really wants. Like one user asks for each thing and they've just overloaded and complicated this so much. This is totally not usable for the people who need to use it, we need to go build our own software. And so we did that and now have our own software offering that we've taken out to market. And that is the feedback of, oh my God, unusability. This beats 10 out of 10 times every other option there is.

Yeah, that sounds like our financial services company. In the beginning, when we had our fastest growth, we had no brochures, no formal presentation. In fact, I would have pride that I would walk in barehanded into somebody's office or home and say, I got something I want to show you. You have an old envelope or something, or a scratch of piece of paper or a pencil or something. Let me scribble this down. And even when you're training, it was easy for the people you were training to say, well, good Lord, that's not complicated. You know, just stuff on a piece of paper. And then about 15 years later, one of my guys took it another step and he said he would go in and say, do you have a pad or something?

Or a piece of paper?

He said, draw this.

Oh, wow. He'd put it on the shoe. On the other foot, he would have.

Them draw it out. And of course, since they drew it, it had to be true.

Yeah, I was pretty, but that was a big unlock.

And so the less complicated you can keep things, the fewer moving parts, the better. And I guess that's a lesson you found over and over again.

Absolutely. It's definitely one we have to relearn. And as we're continuing to build out the product we're building now, it's one I just keep trying to remind the team of. Yes, there are always things we can add, but what can we take off? What can we simplify? Because we just need to really remember it's about the usability. It's not about just throwing more into the sink.

Yeah, we had our founder CEO for forever. He used to say, every two, three months, it's a matter of having a budget meeting. Say, what can we get rid of? Who can we get rid of? What can we get rid of? And the deal was, it's like getting rid of the weeds. If you can get rid of it, you didn't eat it. Another friend of mine who grew up in dc, he said he always loves it when there's a crisis. And they say only essential workers need to report. All the non essential guys stay home.

That's what you want to be is non essential.

Yeah. So when you're able to get the day off, that should be sending you a Signal that's a problem anytime you grow, anytime you make an adjustment is do you really need all of what you're getting, all of those things? And does that eliminate the need for some of the stuff that you did before that maybe you wouldn't get rid of right away unless you thought about it? So, you know, part of setting up a checklist for yourself is to say, let me think about these things. Do I still need this or do I need all of these new things?

That does bring up a really big.

Point because you sometimes it did make sense at a certain point, right. That put certain systems in place, you used certain technologies, you had certain roles.

And that the reason doesn't exist anymore. But it happened so long ago. And you have these baked in assumptions that you don't question it. And so really taking that time every now and then for a certain task, maybe once a year, for other tasks, maybe once a quarter, but really thinking through what are the assumptions that underlie why this needs to get done. Are those assumptions still true? Were they ever true? Should we try something different or stop entirely and test it? A friend of mine in finance said there were these reports that people did every single week and they'd show up at these meetings and he just said, has anyone ever used these? And the answer was no. So they just stopped doing them. All of a sudden a bunch of time saved every single week and not generating those reports.

Yeah. And it's a matter of starting with the minimum you need, not everything you need. And this whole take speed has a lot to do with again, fewer moving parts, less baggage to carry forward, less things to do in the course of days. Like how can we get this done the cleanest, most efficient way now. But as volume ramps up, you just need more complexity and you need more things. Because if you're doing like 10 sales or 10 transactions a week or a month, the odd thing doesn't come up that often. But if you're doing 10,000 in a week or a month, the odd thing starts every day. That thing shows up and we got to get something written into the system or in place in the system or somebody in the system who. They will take that away as a problem. Talk about when you started, you started with yourself. Right?

Right.

And how did you ramp up on. And you got this in. This is 2012, when you started that vacation futures.

Correct.

And when you left in 2020, how.

Many people were there?

We had gotten about to just 25, 25.

Yeah.

Because you're primarily a transaction company, people are calling in and arranging that.

Well, primarily technology people were predominantly just doing it online by that stage. Early on I had to go knock on doors. I didn't have money to spend on marketing. I had time, I had spent all my money to build out technology that we had to throw away. So then I had to go generate sales, just kind of hand to hand. And then from there could kind of think through each task of okay, this is a task that I'm doing manually today. When do I have in a stage that I can move it to a lower cost resource? And then when to your point, 10 versus 10,000, when does it get to a stage that it makes more sense to just automate it and build out.

Technology to solve the problem?

And so that was the constant thing of start with a task, offload it to a cheaper resource once you can systematize it, and then once it was high enough volume, move it on to technology.

Could you give me an example of one big nightmare you got yourself into or that occurred? And I mean, they were really frightening. But then you not only found a way to solve that problem, you put things in place where that wouldn't come up again, at least to that extent. Can you think of a situation like that?

Yeah, I mean, one was honestly how we built out the current company we have is we ended up in a situation. So I had this financial product called Rented capital and we had investors and we would go partner with the local managers and sign on those fixed rent obligations. So we'd say to the owner, hey, we are going in and we're going to pay you 3,000amonth for this property and we are working with this manager and the manager is going to rent out your home as a vacation rental. And some months I may pay you 3,000, but I'm only making 500. In other months I may pay you 3,000 and I'm making 10,000. Because we're dealing with seasonality and how well it's rented. And ended up with several thousand properties all over the world. And started seeing that these managers just weren't doing a good enough job. A lot of the underlying assumptions on how they were going to perform were not being met by some of our local partners. You end up in this really horrible financial situation because we're on the hook for these financial commitments and the kind of getting out of it. And then what this led to was we just built out the capabilities ourselves. We said, okay, we can't count on these local third party partners to do this, we got to go do this ourselves. And built out. The team built out the technology and started lifting revenue 30 to more than 130%. Same property, same managers, and that worked so well. We ended up spinning it out as its own company. Where that's all that company does, that's rented.

And how big of a hole did you get yourself into before you decided I got to make a big change here and come up with a significant solution.

It was millions a month. There was a lot of numbers churning through. A lot of money turning through at that point.

Yeah. When you guarantee they're always going to have 3,000 or whatever and there's no revenue coming in, you've got thousands of properties around the world that can turn into some real money. And how long did it take you to turn it around?

We saw the revenue lift within two to three months.

Yeah. That's fantastic.

It was just in scaling that across.

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