December 17, 2019

Increasing The Value Of Your Company With Eric Miller (Round 2)

PTO 77 | Increasing Clinic Value


How can you further increase the value of your company so you can sell it at the highest price on your terms? In this episode, Nathan Shields welcomes back Eric Miller, the Co-Owner of Econologics Financial Advisors, to talk about money! In fact, he specifically discusses what it takes to increase the value of your clinic. Whether you're looking to sell or not, a clinic that has great value generates greater profits and is running at optimum efficiency or is easier to own. Eric breaks down seven items that you need to address in order to increase your clinic's profit, efficiency, and overall value, including routine work on your business in the specific areas.


Listen to the podcast here:

Increasing The Value Of Your Company With Eric Miller (Round 2)

I've got a guest returning, one of my favorites and one of my favorite topics, money. I've got Eric Miller of Econologics joining me. If you've read my blog, you know that I'm excited talking about money, but I've done episodes in the past regarding improving the value of your clinic, most notably one with Steve Stalzer of 8150 Advisors. It's a topic worth returning back to because even if you're not looking to sell your clinic anytime in the near future, it's important to run your business as if you are up for sale at any given time. If you are up for sale like selling your house, you're going to make it look as good as possible to get as much out of it as you can. If we run our clinics like that, something that's going to be more valuable on the market is also going to give us something that returns greater profits.

For acting like we are out on the market, it's going to be a business that gives us more money and runs more efficiently because those are the things that buyers want to see. Whether you're in the market to sell your clinic or not, this episode is going to be super valuable for you. Consider some of the fundamental things you need to do in order to increase your value. They are things that we've covered before in the past, but it's worth repeating over and over again because those things that bring us more value also bring us more profits. Let's get to the episode.


I've got Eric Miller of Econologics back on the program. We had so much fun the first time in our discussions a few episodes ago that we decided, “Let's do this again.” I'm always happy to talk about money. Thanks for coming on again, Eric. I appreciate it.

No problem. I love it.

We're not going to talk too much about your backstory. If people want to know where you came from and your history a little bit, they can read the previous episode a few episodes ago. We want to talk about increasing the value of our clinics and what we can do to put ourselves on better footing if we're going to sell. Even if we don't want to sell, how can we improve the bottom line by getting some sound structure and onboard? We're going to go into a number of different things but we want to get things started in that realm. This is something that you guys specifically work with. Why don't you tell us a little bit about what kind of clients you work with at Econologics so that people have an understanding of where you're coming from?

We work primarily with private practice owners. We've set up our business to work with that type of clientele. We focus on two things. The first is to make sure that a practice owner is running his household finances like a business and that they have their attention and emphasis on improving and increasing the value of your business. For most practice owners, that's your biggest investment and that's where all of your cashflow is created. You want to make sure that business is flowing money like a Mississippi and then convert some of those profits to the household to create other income streams along the way. 90% of a practice owner's attention should be on figuring out ways how to scale their business and increase the value of the business.

I love how you stress the importance of 90% of your time focused on this thing because number one, it is the lifeline to the business. It’s not only the lifeline to the business, but the lifeline to their household and the lifeline to their retirement. There was so much riding on it. It's imperative that we spend the time that we need working on the business and not in the business full-time. Let's talk a little bit about what we can do to increase the value of our clinics. Not only will we set us up for a better possible sale price or a better possible exit in the future but also improve our bottom line as we go forward. What are some things we can do?

A good systems indicator is when your staff assures that they can handle tasks even without you in the office. Click To Tweet

A couple of things on that, the moment that you start building this practice value, not necessarily for you but for someone else is where it starts to change a little bit. It's a different mindset because you're not building this thing just for me. You're building this thing for a successor, for the employees, for the patients, for the community at large, and you start taking that perspective and that look. It changes the game. As far as trying to increase the value of the business, it's not just a money market value. Value has many different terms. There's time, money, relationship value, accomplishment values, all kinds of things that would make up the value. When you start looking at your business and saying, "What can I do to make sure that this entity that I put much effort into can provide the kind of value that I need? How can I build this not for just my own benefit, but for someone else?" It starts to change the game a little bit.

There are definitely some things that are going to drive value in the business. You want to look at it from the perspective of who's going to buy your practice. What are some of the things that they're going to want to see in order to make sure that you get the highest value possible for that business? I can go through a couple of those. The first thing is that if I'm going to buy a business, I want to make sure that the personnel in that business is well-organized. There's an organizational system in place, there are policies and procedures. There are job descriptions. All these things help the organization run. As a buyer, I'm going to want to see that. People are running around like chickens with their heads cut off. They want to make sure that there's order in that business. The first thing is making sure that you have well-organized personnel.

There’s some value to showing a leadership team so that not all the decision-making is on you. They don’t want to be buying you so much as they want to buy the systems that are in place and maybe the leadership team that’s there.

Think of it from that perspective. If I'm going to go in there, I don't want this business to be dependent on Nate Shields. I want it to be where there's a team there that I can depend upon that will continue the production and the profitability of the business even after the owner is gone.

If the owner is the linchpin and you pull that out, there's too much risk involved and don't know which way it's going to go. Is the team going to continue to progress and grow or are they going to say, “I don't like this buyer, so I'm out?” It's imperative to have that leadership team in place and you mentioned the importance of having the business systems. When I sold my business in 2018, they wanted to see all of my policies and procedures. They wanted to see if we have marketing strategies. They wanted all the HR contracts. They wanted to see everything that we had and the more we could provide, the better. It's almost like the more policy, the more procedure you can provide, the greater security they have in giving up their money.

It's not very exciting to build systems in business either. It's hard. It's a grind. It's like pulling teeth. Sometimes you don't necessarily see the fruits of your labor when you're doing that. It's interesting because it's repetitive, boring actions that you're doing to build these systems and you don't see, "All of a sudden I have this windfall of money now." It doesn't work like that. If you keep at it, if you do build those systems in the business, I'm telling you it will pay off as you know in a higher value for you and more time. The big indicator is this. To know that you have good systems in your practice, if you can walk away for about 60 days and come back and still have the production and the profitability of the business still uptrending, then you've built some pretty good systems in your practice. You’ve got a good leadership team. That's a good indicator.

It's exciting to interview some of these guys that I talked to. The one that comes to mind is Travis Robbins. He's with a group called Next Level Physical Therapy. There are some owners in there that are exactly that way. They work from home most of the time and when they go into the clinic then everyone is like, "Get out of here because you mess things up." You start making changes and giving ideas and we're like, “No, we're doing fine, step away.” That's the position you want to be in as an owner. That's where you have some real value than when you're out to sell. You're talking about value. It's not just the monetary value. Can you imagine the freedom that you have, the accomplishment to get to that point? Your employees are excited to work where they're more empowered to do more and make a change and grow and say, “We did this and it wasn't all the owner that did it all. I can have a little glory to myself." It's those kinds of things that provide some value.

PTO 77 | Increasing Clinic Value
Increasing Clinic Value: 90% of a practice owner's attention should be on figuring out ways how to scale their business and increase the value of the business.


That's when you're wearing your owner hat. That's the second indicator that you build good systems is that when you walk in there, the staff looks at you and says, “What are you doing here? Get out. We got this." That would be good.

That's great if you can do that. That's a position that a lot of owners dream of. There's some freedom there so that if they did want to treat, they could go in and treat a little bit. If they have greater aspirations, that's when you start looking for the next location, the next possible acquisition, or increasing your assets to get different revenue streams. Real estate is always an option. People have different ideas if they're going to want to trademark or patent something. That's when you have that freedom to do that and pursue those other avenues.

It certainly allows you to expand in any other area of your life. That's the moment where you start to realize that you're not there to serve the practice. The practice is there to serve you when you're in that position. That's a pretty good feeling.

We're talking about leadership teams, we're talking about business systems, but it also starts with a sure foundation. When I say that, you need to have some sound structures in place when it comes to your financials, legal structure and records.

I would think another area would be the assets of the company. From a financial point of view, you should be able to have your profit and loss statements at hand. You should be able to print off your balance sheet, your tax returns and all of those things that are an indicator, your production reports, all of those things you should be able to have at hand readily. That's one of the first things that a buyer's going to ask for. They're going to ask for your financials. They want to see exactly what cashflow this thing is producing. Make sure all your records are kept up to date. It wouldn't be a bad idea that you would have an audit done on your company prior to selling to make sure that all the records are in good shape and no back taxes are due. No payroll taxes are due. Make sure all the legal rudiments are in good shape, the same with all your corporate documents and then all your contracts. You should at least have your finger on the pulse of where all those things are and then you can access them quickly if you should need them.

Even if they're collecting dust, know that they're in that file towards the back somewhere. Make sure you have them. 

It's an owner's function. That's an owner function to make sure that the compliance is in good shape and to make sure that all the financial records are up to date and current and it's not hard to do.

Money has a way of filling up the crevices you poured in concrete. Click To Tweet

We might do some self-audits in terms of documentation. From a financial point of view, do you recommend doing occasional financial audits even if you're not up for sale?

I would because you never know what you're going to find. You're never going to go wrong by paying attention to what's happening on your money lines. If it uncovers something that may have been a camouflage goal, who knows? When you pay attention to your money lines and you have an audit done or something like that may uncover something. It could be costing you a lot of money. How often do you do it? I don't know. Maybe once every two years would suffice, but it's something that I think should be done, definitely.

If you're like I was several years ago, I didn't know what a P&L was. I didn't know what my cashflow was. I didn't know how to read any of that stuff. It was a matter of me telling my CPA, "I want you to teach me what all this stuff means and we're going to meet monthly from now on." As I did that, my expenses came in lying a little bit and they were more predictable going forward. I knew exactly what my make break line was. I could do some reverse mathematics to figure out how many visits I needed to make each month and where we were tracking. There's much power behind that. You can't take your finger off the pulse of your money lines. The guys that I'm talking to that are losing money and going into a negative cashflow are those people that have taken their fingers off of the money lines. They turned a blind eye towards it for a little bit.

It doesn't happen overnight. No emergency happens overnight. It is a series of things that have been neglected for a long period of time. That's what causes the emergency to happen. I see that regularly. I go into an office or someone's having trouble with cashflow. This wasn't a month phenomenon. This has been something that's been going on for months, if not years. Don't neglect it. It's too important of an area. Your financial solvency is everything. If an organization doesn't have more money coming in than what's going out, then that organization will eventually die. It won't be worth anything, which leads to the earnings of the business. At the end of the day, I've been watching a lot of Warren Buffett videos here. That guy is brilliant because he looks at things from the perspective of, “What kind of cashflow can I expect from this business that I'm buying?” He doesn't so much care about the price of it. He's not speculating. He wants to know what the return of the money will be from that particular business.

As a practice owner, one thing that we do have control over is what the earnings are. You look at the difference between a well-managed practice. Let's say maybe it's doing $1 million practice that's doing a 20% profit margin. That'd be maybe $200,000 of earnings. That may sell for $600,000 to $800,000 at a 3 to 4 multiple, but then you look at that same $1 million practice that only has a 10% profit margin. That's going to sell for a smaller multiple. That may only get $200,000 to $300,000. You're talking about $600,000 of value, same revenue, different profit margins, different management. One person paid attention to their money and their earnings and they got a much higher multiple and they got more money for it as well.

That's a real-life situation. When you can show it increased the bottom line, that's when you have greater value. That's when someone will pay more for your business. 

Totally, because there's prediction there for them. Anytime you buy a business, you want to have a prediction. That's the one thing that you got to have to think of when you're selling your practice. You’ve got to think of that buyer, whoever it is, whether it's a corporate buyer or a successor, you have to think that they need a prediction of that cashflow. The more prediction that you can give them that all of the company, whether it's the systems, the personnel, the assets, the financial condition, there's a prediction for them when they assume control. You build a practice. There are moments of chaos all the time. It's imperative to make sure a transition goes well that there's going to be points of chaos when someone assumes control of the business. The more prediction you can give them, then that'll allow for the value to be higher.

PTO 77 | Increasing Clinic Value
Increasing Clinic Value: Building value also means building for the success of your successor, employees, patients, and community at large.


I like what you talk about prediction and they want minimal risk. That leads into another topic that we want to discuss and that is making sure that you've got a well-diversified payer mix or referral mix of physicians so that not everything is coming from A1. If you've got one insurance or one referral source that leads to 60% to 70% of your business, that can be unsettling for a buyer. It should be unsettling for you as an owner to be reliant on A1.

The term I've always heard is that you never want to be relying on one of anything. When you rely on one of anything for too long, then you can lose everything because what happens when that source is no longer there? We all talk about having multiple streams of income for the household. That's been a notion that a lot of people have heard. It's correct. I would like to have multiple income streams, but you need to look inside the business as to where all of your income is coming from and make sure that you're not heavily relying on one of anything. That gets back to building the systems in the business and not relying on one referral source, not relying on one insurance company and not relying on one therapist or whoever it is. Don't rely on one of anything. Make sure that you're building it so that income is coming in from a lot of different sources.

That goes back to the buyers want to see your marketing strategy, your growth strategy, whatever that might be so that you are diversifying yourselves. Part of your strategy if you do have as a single, large payer source or referral source, what are you doing to diversify yourself? It doesn't have to be immediate, but are you reaching out to the community more or are you trying to gather the contracts? Are you talking to other doctors to get more to diversify your mix? 

At the same time too, they want to see that your sales trend production-wise is going up, even if it's incremental. Even if it's at 4%, 5% or 10% rate, they want to see that. No one wants to be buying a company that's declining or sideways. It's important that you put your attention on that every single month. What's the trend of the organization? Is our production higher than it was the year before? What's that growth rate and what should it be?

No buyer wants to buy a sinking ship even if it's not falling off the cliff. If you're going downwards, there’s that lack of predictability. Which way is it going to go next year? We don't know.

You don't want to catch a falling knife. I certainly wouldn't want to. I'd want to buy a business that was showing a lot of strength and then I felt good at the marketing that they were doing was attracting a lot of new patients. That they were producing at the level that they should have. What's the percentage? I don't know, but if you're doing 10% to 15% a year, that's pretty good growth.

When we went through our sale, the accountants came in and they asked us about changes each quarter and, “What do you attribute this growth to? What do you attribute this loss to? Why is this happening?” They had some serious guys come in and look over our financials over the past two years and asked all kinds of questions. “Where did this expense go? Where did that expense go? What happened to that? Why don't you see more of this?” They wanted to see the predictability. They wanted to see a gradual improvement over time.

You're never going to go wrong by paying attention to what's happening on your money lines. Click To Tweet

It's good that you mentioned that. It's a good exercise for every practice owner to go through that process even if you don't decide to sell. They'll do it. If you have a practice that's worth something and you reach out to a corporate buyer or somebody like that and say, “I'm thinking about selling my practice." They'll look at it. It's a good experience for every practice owner to go through because they see what it is that a buyer is interested in. To your point, they're going to ask you questions that you're like, “I didn't think about that before.” It's a good way to get some intellectual capital as far as what the people who have the money, what they're thinking and what they're looking for. I would encourage every practice owner, which I do, in some cases to like, "Go through that process. You don't have to sell if you don't want to." At the end of the day, you can say, “I'm not going to sell.” It's important to go through that process.

Prior to that sale that we did in 2018, we had been through 3 or 4 companies that had at least put out a letter of intent on our clinics. We had an idea of what we needed to do going forward and we turned down the other offers but good experience so that we weren't blindsided by the whole process. We knew that it was a long haul. This wasn't going to happen in a couple of months. We had a good idea of what they wanted to see in terms of financials and legal paperwork and reports. We knew that that was a whole process. It also gave us a good idea and I highly recommend people go through the thought exercise of what they want if they are going to sell. What does that exit strategy look like?

Will and I both knew ahead of time before even going out onto the market that we weren't going to sell unless we got to this point whether that was a number or a multiple or a dollar amount, you name it. We weren't going to sell unless we got that. If they didn't hit that, then we weren't going to sell. It was easy for us then to filter things out. Either it was a yes or a no. It wasn't, "Let's think about it for a few weeks." We knew in our minds what we wanted. Every owner should have a good idea of what that exit strategy looks like.

All the things that we've mentioned so far, all the value drivers that we've talked about from systems to financials to the diversification of income sources, those are all good. You need to start with a transition plan. What are you doing? Who are you building this for? What is your ideal scene for transitioning out of practice? Until you have that plan to something that you can strategize on and build upon like you and Will did. That's incredible that you knew exactly what you were doing and you built everything to that end and then it happened and you're like, “Great.” It was a pleasurable transition. It wasn't like you're selling this business on a fire sale.

At that point, you're selling it on your terms. You don't want to be in a position where you have to sell. That takes you out of a position of power. We had an ideal scene. We had an idea of where we wanted to go and how we wanted to grow. This exit strategy was a sideline thing that if it came up or if it got to that point, then we could visit that strategy. Our ideal scene when that offer came up is we saw the offer becoming an opportunity to accelerate our ideal scene to begin with. We went from 4 clinics up to 25 clinics. In a situation where we work together with other clinics that had shared values, shared vision and because of that, we felt it was an acceleration of what we were already producing in our four clinics. There are opportunities there for owners to figure out what their ideal scene is, both in terms of what they want currently, but what they want in their exit strategy. By going through the processes that you'd mentioned, it only gets us closer to that immediate ideal scene and benefits our household in the meantime and funds our retirement and all those good things. 

To that end as well, you want to make sure that you've built a lot of good people around you as the practice owner. It's imperative to not only have what your transition plan would be, but the next step is making sure that you have good experts around you that can help you along the way. It's advisable that you have a good CPA or accountant that can help navigate. When you go through a transition, there are a lot of tax issues that come up that you may not be familiar with. Certainly, have a good mergers and acquisitions attorney, depending on what sale you're doing to review all the documents. Make sure that you have a good financial advisor that understands what you're trying to accomplish from a household perspective. Make sure you have a good business consultant that can help build the systems along the way. It's definitely not a one-man show as you know. Building that team around you is key to getting a lot of value for the business down the line.

I find that with anything financial when you have a team of resources that helps you so much, because you can't expect to know everything and the ins and outs of everything. To have that team around you and spreads the energy, but also increases your power on a multiple to access other avenues of wealth. I see on social media that sometimes people are saying, "What are you looking for in a CPA?" Does anyone that get well communicate with you quickly? If a CPA is willing to answer an email within 24 hours or sit down with me once a month for an hour and show me what my P&L is. I want a guy that's going to communicate well, answer my questions even if they're one-off things. Not someone who comes around every one year to do my taxes. Those are the type of mentors, resources and experts that you want to have around you.

PTO 77 | Increasing Clinic Value
Increasing Clinic Value: Don't let complacency set in. Wherever you are in your business and phase of ownership, there's always something that you can do to get more direction and control.


They're out there. I love to make fun of CPAs more than anybody else on the planet because I have to deal with them and their viewpoints every once in a while. When you freely find a good one, don't let go because they can help you tremendously in this area. When you sell a business, this is likely to be the biggest financial transaction that you ever have in your life. You have to pay attention to what's happening, the tax situation, the proceeds that you would get managing that correctly. It can end well. They can send you to another level. I've seen some practice owners that after they've sold their business, it turned into a disaster because they misapplied the funds. They misallocated the money. They didn't know exactly what to do with it and then all of a sudden, you've got all this money and you're like, “I don't know what to do with this. I've never seen this amount of money before." There was no plan. Money has a way of filling up the crevices you poured in concrete. It will go everywhere if you don't control it.

It's one thing to plan an exit strategy or an ideal scene after you sell. Is it knowing what are you going to do now with some extra funds or with the extra time? I don't know what I'm going to do and I'm going to move forward doing this and I don't know how I'm going to make money after that. That can be a tough situation to be in and things can flitter away.

It's unfortunate that we have to see some of these things happen, but to your point, when you don't have certainty about what you're going to do next. When you don't have a plan or a game of what you're going to do after the sale that motivates you, that gets you up in the morning like, “This is what we're doing next,” then boredom sets in. Unfortunately, I've seen a lot of people that they start getting into things that aren't beneficial to them. I'll leave it at that. You can imagine what happens to people when they get all this free time. They start to do some not so constructive things for themselves.

I love the insight that you gave that if people want to see where they're sitting in terms of the value of their clinics or what that process looks like. I do have to put in a plug that the group that we merged with Empower PT, is always looking for clinics out there to grow with, acquire and merge with and share what we're doing. There is an opportunity if people want to reach out to the people in Empower PT, I'll put a little bit of plugin there but that's the group that we joined with. It was a great experience. I've heard about this a number of times, people who have sold and joined maybe a corporate owner and have been dissatisfied 1 or 2 years later. I can say that's the opposite for us. We've been more than happy with the structure that's been created after the fact because we did a lot of this work that you're talking about ahead of time. Imagining what that ideal buyer looked like, what our ideal situation looked like and planning that out ahead of time.

I'm glad to hear that because we tend to hear a lot of the negative stories and it's nice to see someone that's been through it. I'm sure that when you decided to work with that group, there were a lot of philosophical synergies that you had with that group. That's important when you're going to do something like that. It's not about the money, which I know is important. There's got to be some synergy there that I believe what they're doing and that I understand how they view physical therapy and running an organization and you're in agreement with that. When you have that, then it allows things to have the result that you did, which is awesome.

Thanks again, Eric, for taking the time on our second episode here, the last little bit. Are there any parting thoughts before we leave?

We're getting towards the end of the year. There's a tendency that the complacency sets in. Don't let complacency set in. Wherever you are in your business, your phase of ownership, there's always something that you can do to get more direction, more certainty, more control over the direction of your business and your personal finances. That's one thing that we always try to preach to practice owners is that something can definitely be done no matter what financial condition that your business is in or your personal finances are in.

When you rely on one of anything for too long, then you can lose everything. Click To Tweet

Be intentional about it. Make that final push to meet your goals by the end of the year or start planning for 2020. How it might be different or take advantage of tax savings towards the end of the year and you get your stuff right. Start reaching out to resources like you guys or other people to take advantage of those tax savings opportunities.

Our phones are operational and working.

How can they get in touch with you if that's the case?

They can go to our website, They can also email me directly at Those would be two ways that you can get ahold of us.

Are you guys doing any workshops, webinars in the near future?

I'm doing a webinar. The topic is The Next Level Game Plan For Practice Owners: Your Action Plan For Building A Profitable Practice And Personal Financial Success. We're going to talk about all kinds of things about getting to the next level and the areas that you're bleeding cash that you may not realize it and how to remedy that. We're an advocate for physical therapists. We believe in physical therapy. That's why we picked this niche because we believe in the care that they give and the help that they deliver. Physical therapists, especially owners, deserve to have financial success. Sometimes, I don't necessarily think that they, themselves, think that they deserve that, but they do. More than we can get them in the financial condition that their practice is strong or their personal finances are strong, then they can help more people. That's the point.

A webinar like that, are there some recordings on your website?

We do or we're going to. We're doing a transition to a new website, but we'll certainly have resources on our website for webinars like this. They'll be able to access that.

Thanks for your time, Eric. I appreciate it.

No problem. Thanks, Nate. I appreciate it.

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About Eric Miller

PTO 77 | Increasing Clinic ValueEric Miller has been in the financial planning industry for over 20 years. He’s a co-owner of Econologics Financial Advisors – awarded an Inc.

5000 honoree for 2019. As the Chief Financial Advisor for the firm, Eric has had the good fortune to have over 10,000 financial conversations with private practice owners in the various healthcare industry and helped guide them into a more optimum financial condition using a proven system.

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