Richard Palarea is the Co-founder and CEO of Kermit, a Baltimore-based healthcare cost reduction and spend management company that brings automation and insight to the high-spend category of implantable medical devices within hospitals and health systems. Since its founding in 2011, the company has saved hospitals more than $200 million. Prior to co-founding Kermit, Richard was the Co-founder and CEO of PA & Associates, the originator of the logistics 4PL category in parcel package cost reduction and spend management (acquired by Prostar Logistics).
In this episode of the Smart Business Revolution Podcast, John Corcoran sits down with Richard Palarea, the Co-founder and CEO of Kermit, to talk about how Richard started a real estate appraisal company after college and how he transitioned to building a cost reduction company. They also discuss how Richard managed his company remotely 20 years ago, how he has been helping companies reduce costs, and what he learned from working with his father. Stay tuned.
Here’s a Glimpse of What You’ll Hear:
- Richard Palarea’s entrepreneurial background and how he started a real estate appraisal company after college
- Richard’s experience working for his father and the heart-wrenching story of his loss
- Richard talks about the 1992 Rodney King riots in Los Angeles, how he started a telecom cost reduction company with his wife, and how he handled sales and running the back office of the business
- How Richard managed PA & Associates remotely 20 years ago and what he has learned from working in Baltimore
- How to set up a good referral partner program
- How the idea for Kermit came about and the challenges Richard faces in his current line of work
- Where to learn more about Kermit and connect with Richard Palarea
Resources Mentioned In This Episode
- Kermit on LinkedIn
- Richard Palarea on LinkedIn
- Jason Smith on LinkedIn
- John Owens on LinkedIn
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Welcome to the revolution, the Smart Business Revolution Podcast, where we ask today’s most successful entrepreneurs to share the tools and strategies they use to build relationships and connections to grow their revenue. Now, your host for the revolution, John Corcoran.
John Corcoran 0:40
All right, welcome, everyone. John Corcoran here. I’m the host of this show. If you’re new to this show, go check out the archives because we’ve got some great interviews with smart CEOs, founders and entrepreneurs of all kinds of companies ranging from Netflix to Kinkos’, YPO, EO, Activision Blizzard, LendingTree, OpenTable, and many more. I’m also the Co-founder of Rise25 where we help connect b2b business owners to their ideal prospects. And my guest here today is Richard Palarea. He is the CEO of Kermit, which is a Baltimore-based healthcare cost reduction and spending management company that brings automation and insight into the high-spend category in implantable medical devices within hospitals and health systems. If that sounds like a big idea, we’re gonna dive into it and understand how the concept came around. He’s a longtime founder and entrepreneurs of other companies. And since its founding in 2011, Kermit has saved hospitals more than $200 million, which is amazing. So we’re gonna get to that in a moment.
Of course, this is brought to you by Rise25, where we help b2b businesses get clients, referrals, and strategic partnerships with done for you podcasts and content marketing. You can go to Rise25media.com to learn more about what we do. All right, Rich, I’m excited to have you here today. And we were joking beforehand about your journey to entrepreneurship. And I said that the obvious name for your biography, whenever you write it autobiography is a lemonade stand kid because you said I was that kid who was out there doing lemonade stands as a kid. So take me back to your childhood. And you know, were you out there out hustling the other kids to sell more chocolate bars so that you could win the big prize? Tell me about that.
Richard Palarea 2:17
I don’t have a lot of stories about when I was really young, although I do remember. I don’t know if you’re familiar with cycle Athan or any of these kinds of things that are that are you do for the Heart Association or Lung Association. So my dad was a doctor, very involved in Long Beach, California in the Heart Association in leadership positions and whatnot. So every year there was a cycle. Athan and I we get the sponsor sheets. And he just set me loose, you know, go go knock on every door and see if you can get 10 cents a mile, whatever it might be. And I was this little scrawny kid, you know, 10 years old, I’d show up at the door, knock on the door. And people would look out and they look down and find me and they’d say, what do you need? And I’d say I’m, I’m brought it riding the cycle of fun with my dad. It’s from the Heart Association. Would you mind sponsoring me? Sure. $1 Give me $1 a mile. Give it $2 A mile, right? And they were thinking in their head? How far can this little kid go? After collecting all the sponsorships? I don’t know how we did this. My dad who was not an athlete, me as a scrawny kid would get rid of 10 Speed bikes, and do the route. And that year when I was 10 years old, we did 100 miles. So I showed up, and they give you a tracker, right? Every time you pass the location, they check it off that it’s legit. And so I show up to collect the checks and these people in my neighborhood like, wait a minute, there’s no possible way you $200 And sure enough, so I kind of got a taste for for that that really kind of excited me like, wow, you can you can go and you can kind of sell and people get excited and they go on a journey with you and then you collect money for it. And that was kind of interesting, kind of my first foray into that. My dad was not a businessman. I mean, he was a doctor in private practice. So I guess in a sense he was but he always had done and edifying himself as a physician. My mom was a was a nurse when they met in the hospital and later was just was, was a stay at home mom. So I didn’t I didn’t really see a lot of the entrepreneurial stuff. My grandparents escaped the Nazis during World War Two from Hungary. And were bakers. So my my grandmother ran the Deli in the bakery and she was always managing the cash register. My grandfather was in the back making bagels and doughnuts and cakes and things. So maybe a little bit of that. But I do remember one kind of very, very pivotal time in my life. I was 16 years old. I just got my driver’s license. I’m in Southern California. And at the time, we lived behind it. We lived in a gated community and inside of the gates in addition to the homes there was a historical site there. It was, was a Rancho do you think about? We were talking before before you started recording about the history Free. And there isn’t much deep history in California, not in Southern California. There’s no date back all that much. But what we do have are these ranches that go back to the time of father Sara, basically. Yeah. So we had one in our community. And every summer it would open up for a full day that have Rancho de. And people will come from all over Southern California to tour the rancho. The problem is they couldn’t drive through the gated community. So they had to park down at the bottom of the hill, Long Beach State University is down there. So there’s plenty of parking, but they would queue up on the sidewalk and wait for a van to come pick them up. at different intervals, the van would go up, come back down and pick them up. So I was out doing something with my parents. We were driving home, I noticed the line. They look odd. They needed a drink. Exactly. They were all still we’re all sweating. They look miserable. And my mom, you know, we get home and I said, can I borrow the car and she had a beast of a Cadillac sedan, Deville for door, just battleship and the air conditioning was cranked up. And I just I’m thinking, Okay, I might, there might be something to this. So I took a little cup, I taped it to the dashboard, I put a little sign on the side of the car, said Rich’s taxi. And I went down and picked up my first group of people. And they were ecstatic.
John Corcoran 6:14
So not even I thought you’re gonna sell them water or something like that. Yeah, give them a ride, pick them
Richard Palarea 6:18
up in the car. And it was air conditioned. And they they and I had a little sticker on the front window that would let me get through the gate. So I didn’t wait. I just write up and, and I was I was lapping the van. I mean, I saw the van and he was looking at me like what are you doing now and, and I think it was probably about three hours later, I had filled the tip jar was cash was just falling out of the top of it by a couple $100. And my dad got home from work and he shut down the operation. I don’t think we have insurance to cover again. But that was my dad, like very practical. But just you know, go out and look at what resources you have around and look at the need and see if you can meet a need. And I did that over and over and over again. So I’m very much kind of matched that journey. Yeah, all the way to entrepreneurship of being kind of in that lane. And you
John Corcoran 7:06
have another great story. So after you graduated, you did sales for a real estate appraisal company. And then the company ends up going out of business, I imagine for mismanagement or something like that, but you you realize, you know, I got good relationships with these mortgage brokers, maybe I could salvage this. And you you kind of said to yourself, like if I don’t try it now I’m going to be kicking myself
Richard Palarea 7:30
for not right. And I go back, go back to Mr. Practical my father who he’s my sounding board. So I’d go to him and say, Dad, what do you think? I mean, I’m at a college, I need to get a job. But I’ve got this situation over here. And I feel like like he just said, John, if I if I don’t try this, I’ll always be wondering in the back of my head, could this have succeeded? Was there something there? And Mr. Practical says to me, go get a job, son, you need to go get a job. And I listened to that. But I thought for a moment and I said just it’s not in my heart. I’ll always be wondering. So see, I basically printed a business card, filed for an S corp, and started a real estate appraisal company really with no experience other than I knew I had the broker the mortgage broker relationships. So I hired back all of the appraisers who the company like go, and they worked on a 1099 basis for me. And yeah, it was a great business. It was all cash, you basically you would go out and do an appraisal, as long as it was daylight, you were doing inspections. And every time you did an inspection, you would you would take money at the door, usually check. So you could do in Southern California and daylight savings time, you could do 10 or 12 of those in a day. So for somebody who was 21 years old to come home with, you know, a couple $1,000 A day in their pocket was phenomenal. And so I kind of I did that for a good long time until, let’s see, it would have been the it would have been the ad so George Bush one was in was in the office when we had that first savings and loan, big bailout situation.
John Corcoran 9:03
And a lot of savings. The original real estate meltdown that was that was your business hard.
Richard Palarea 9:09
Very hard. Yeah, it was. I was in Lincoln Savings and Loan watching Charles Keating being taken out in handcuffs when that all happened. And my appraisals were being called into court. And for a young kid, I really didn’t know anything about witness testimony or any of that. So well, you know, do
John Corcoran 9:25
you have to testify? I did once or twice I had to go in and pretty frightening experience was that. Yeah. And well, there
Richard Palarea 9:31
were no back back then. There was no regulation. You didn’t have to have a license to be a real estate appraiser. Unbelievable. Unbelievable. Yeah, yeah. So so as long as you kind of follow the uniform appraisal form and you follow the guidelines that were standard and accepted, then your appraisals can be accepted anywhere and they were making, you know, large loans off of some of these appraisals. These appraisal reports. The problem was they’re asking certain appraisers to inflate their I animations. Yeah, I was never in that situation, fortunately. So I never had to deal with that pressure. But I always took the ethics part of what I was doing very seriously. So yeah, so I was called into court a couple times I just answered yes or no, sir. And then they and I was done so well, it wasn’t that big of a deal. It was quite intimidating. But there were no appraisals. The whole market just collapsed at that point. So I basically said, What am I going to do at the time, I was really enjoying the lifestyle. In my 20s. I owned an income producing property. I own my own house, I had a boat, I had two cars, and it was all cash. And I didn’t have any concept of what it’s like to pay taxes. So when when the business stopped, and the tax bill came, I said, Wow, and I’m in a bad place. My dad said, don’t worry, you understand computers. I’ll hire you to come run the the back office, the front office of my of my, my practice his doctor’s office, because the folks that were there at the time, were they were using IBM Selectric typewriters to type up his patient statement. And so the era of computers were here and they couldn’t make the leap. So he said, You come do this, I’ll pay you a generous salary. I said, Okay, Dad, I’m in what do you want to pay me he’s like $21,000. And so