In this episode, host Nathan Shield talks about the people within your company with the CEO of Pure Physical Therapy and Founder of Next Level Physical Therapy, Frank Garza, PT. Frank started seeing growth in his PT clinic once he started weeding out the "bad apples" in his organization and focused on hiring and firing those people who weren't in alignment. How did he do it? He, along with his wife, established the purpose and values of the company and hired and fired accordingly. Now, the people on his team are rowing in the same direction and growth has accelerated. Plus, the energy in his clinic is fresh and exciting, and the culture is drastically changed. Want to establish a culture like Frank? Set the standards, establish purpose and values, and get your team on the same page. Your growth and an exciting culture will immediately follow!

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Identifying The Bad Apples In Your Organization With Frank Garza, PT

I have Frank Garza out of Texas, a successful physical therapy owner who recognized that once he had established his purpose and values, he was able to weed out those employees that weren't on the team and we're limiting him. By removing those people, he has been able to achieve significant growth. Based on the book, Tribal Leadership, Frank recognized that there were certain stages of people and certain stages of a team that contribute to your success. As you weed out those people that are in stages one and two, and as you move your team into stages four and five, that's when you make significant growth. That's when you make significant progress and start to achieve the purpose that you set out to achieve. This is great that we can have a personal experience establishing the purpose and vision, hiring accordingly, getting the right people on the team, and then seeing the success that comes from it.

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I've got Frank Garza, a physical therapist out of McAllen, Texas. He is the CEO of Pure Physical Therapy and Pilates and also a Founder of Next Level Physical Therapy mastermind and consulting group. I've interviewed a number of original founders and members of Next Level Physical Therapy. Frank is on to talk about an important topic. Thanks for being with us, Frank. I appreciate it.

Thank you for having me, Nathan. I appreciate it as an NLPT being able to come aboard and talk about all the stuff that us private practice owners wish we knew when we were starting.

Tell us a little bit about you. Where did you start? Tell us about your physical therapy path and especially your ownership and entrepreneurship path and what's led to where you are.

I graduated and I played sports. I think like most physical therapists, they get into it because they got hurt and got exposed to the field and connected with their physical therapy team at the time. That's how I got intrigued about it. I ended up graduating and I coached and taught for a little bit. I liked that, but I knew that I wanted to be my own boss. I knew that I wanted to do something that I could control and that I could lead. In football, that's the position that I held. I liked it and embraced it. Going into physical therapy, I knew that I could have my own business. That's why I got into it too. I went through it and got out. I worked for a private practice clinic for a year. Right after that, I felt I knew enough to go out on my own and do things on my own and get my feet wet. I say sometimes that I rushed it and I say that might have been a mistake, but at the same time it probably could have been the best thing I did because people were there trying to help.

There was a time when there was a lot of work. Private home health companies were picking up PT companies to do their home health visits on the side and paying them a good rate. That's how we got started. We said, “This is an opportunity to go on our own and do something that we can fill our schedules and get other people to work under us.” We did that model for two to three years and then it went south bad. Luckily, we had already planned to do our outpatient clinic and that's how our outpatient clinic got started.

You started doing home health first before you went into it.

We started doing home health first. The reason for that was the people that we were working for said, "There's enough work out there. We'll help you get started.” You build your company name, you get a contract, you start bidding home health agencies for work. There was so much work that you could fill your schedule fairly quickly. It's also something easy to manage. You didn't have all the red tape about credentialing and audits and all that stuff with paperwork because they controlled everything. You were just a contract payer. It was a good way to get that taste of freedom, flexibility and ownership of your own business. At the same time, it was one of those models that you were chasing the profits all the time. You weren't making that much money and you were seeing a lot of patients, you had people that were underneath you seeing a lot of patients and you have to pay them. If they didn't pay you on time, then you couldn't pay them on time. We started learning that it wasn't a great model to grow, to scale and to make the money that we wanted to make. We started saying, "Our ultimate dream was to have an outpatient clinic." We had enough capital to invest in that.

It’s a good thing we did because the home health went south shortly after that. There were a lot of people getting busted for fraud. That model went to hell. We've entered into outpatient and we did what we did and we got started with what we knew. The experience of running the home health, but it was a totally different monster. There were so much things that we had to do before we even saw our first client, our billing and all this other stuff. It was an adventure, to say the least. We knew right away that we needed to hire people to help us. We hired staff. We chugged along for a year, two and three. Have you ever been on a roller coaster ride and sometimes the whole cart shakes on one of the stable tracks? That's how the first three years felt like.

You almost have to fail at everything HR before you understand it. Click To Tweet

Not everybody was a good fit for your team, I'm sure.

That's exactly what I was going to get to. We started realizing quickly that who we hired was like, "It's not going to work out. Who are we going to hire? We don't have anybody to hire." I think our mentality at the time was, “We need people to work for us. Let's pick up whoever is available.”

“If they're breathing and can follow some instructions, then bring them on.”

If it was somebody that somebody referred, that helped. That's even better. There were people that we knew in the home health field and they were like, "I have a cousin, a friend that was looking for a job." We quickly assemble the staff. We also quickly found out that we were in for some trouble if we didn't fix it because it wasn't the ideal staff. We didn't know what the ideal staff was. We learned a lot.

In my situation, I was like, "I don't necessarily have any job descriptions written out, but I'm going to put you in this position. I expect you to do what you're supposed to do." I was so naive to think that I could put him in a position and expect immediate productivity, an immediate buy-in. I found out later on that it was probably good to hire people who have bought into your vision, who share the same values. They're aligned. Maybe it's even better if I actually develop a job description and tell them what productivity looks like and how I'm going to measure them. It all comes over time, but you wish you would learn that sooner rather than later because things change when you start hiring based on that model.

I learned a ton. I learned that if we had concentrated on that department itself early on, on the human resource department for sure, that maybe we have not struggled as much as we did because it was a struggle. I look at my position and I'm learning that it's still a continuous work in progress. There's never HR and building your culture and your team like that. That doesn't stop because it's always evolving, things happen within your team and you’ve got to replace them. There are some things you can't control, but it's a work in progress. I also learned that you almost have to fail at everything HR before you understand it. We're not taught any of this in school. We don't know where to grab all these concepts, stuff and resources early on. It sometimes takes you telling the story of failure to another friend and they're like, "You had to do this and you’ve got to read this. You should go take this class." You learn a lot from failure, but who doesn't? One of the other things that I learned is that you cannot swipe someone else's HR material and expect for you to understand it and then much less for your staff to understand it. It doesn’t happen.

You think that there's a one-size-fits-all HR employee handbook. That's not true. Much of your culture and so much of you is simply how you do things. That's what I consider culture to be. This is the way we do things around blankety-blank physical therapy. That eventually develops your culture and it goes even back to your HR material. This is how we treat patients. This is how we expect you to show up to work. This is how we handle disciplinary actions. All that stuff needs to be broken down and individualized for your own clinic.

The number one thing that I learned early on is that we did not have that company culture that we wanted for the first three years and we have to fix it quick. It started with us, which is exactly what you were saying. We have to make a transformation mentally of what we wanted to instill in our company, what the vision was, what the mission was, how were we going to do it and make sure that everybody understood that, everybody was clear on that message. That was the number one thing that I think if people are out there wondering, "How do I do that? How do I avoid making the same mistakes?" Travis already did a show about this. It starts with us and our vision and our mission. It’s making sure that our staff clearly understands that and making sure that everything they do is working towards that common team goal that you're trying to accomplish. It's something that we realize we didn't have early and we started to change it quick.

It's probably you and your wife that came up with the vision and the mission. Maybe you created values between yourselves and your team. When you finally implemented that after three years, was that rough to implement it and get everybody's buy-in? Did you end up getting rid of a lot of people after establishing and planting the flag like “This is who we are?” Was it an easy transition for you or was that something that got smoothly brought into your company?

PTO 70 | Identifying Bad Apples
Tribal Leadership Revised Edition: Leveraging Natural Groups to Build a Thriving Organization

The transition is never easy when you're trying to get rid of bad culture and create a totally new culture. For us, we identified that we had people already in our organization that we're not going to work out based on the meeting that we had about our mission and vision, all that stuff about what kind of individuals we wanted, what kind of characteristics they needed to have per each individual position? That's key too because you want them in the right position. All of that starts with us. We need to identify the vision and mission and how you are going to do it? It’s on your core values. If you know that you're hiring for the front desk, you're going to go look for certain characteristics for that front desk. That's your expectation. You got to give them an expectation for every position. I looked back and I said, "What did I do in some of my coaching career with my team to get buy-in and culture? What did other coaches do with me when I was playing?” There was one coach that brought out a binder like it’s the beginning of the football season and everything that we were going to live by that season was in that binder.

Our hyped-up a chant before the game is spelled out, everything is written. That was his way of instilling that culture. It was a new coach coming in. He was changing everything. Even before school started, we were reading stuff through that binder and getting to know what his philosophy was, how we were going to do things, and how he expected us to do things. If we didn't abide by-in or if we're doing something different, then there was a consequence to it. The same thing applies to your business. You got to set that standard as a CEO and as a leader. You make sure that they follow it.

That's the important thing to note. A lot of times when you set the mission, vision and values in midstream that you've been practicing for a few years, you decide, "Let's establish a foundation and get down to some fundamentals and talk about vision, mission, and values." Inevitably there are going to be some people who don't like the implementation of that structure and that don't have buy-in. You're more than likely going to lose some people. You have to understand that up front and you've got to be okay with that because the people that you lose are the people that haven't bought into your clinic. Once you shed yourself from those people and you can attest to this, Frank, you will then experience some accelerated growth. Especially as you start replacing those people with people who actually do buy-in to your mission, vision and values. As long as you're establishing that over and over again, you don't stop talking about the mission, vision and values after the initial introduction. Once you plug it in and then start hiring according to those, then you start getting some people who buy-in and the growth then accelerates.

It’s happened to us on two different occasions. One of the things to educate our audience on is how do I identify the bad ones and the good ones? What are some characteristics of some bad culture in your company? I was brought onto this book called Tribal Leadership. It goes through five different cultural stages. After reading that, I started evaluating my staff and listening and observing their body language. You'll find out right away who's on board and who's not. I'll go through those cultural stages to help people identify them for those that are wondering what are they and how do I identify them. Stage one is characteristics and qualities. This is the type of mindset that creates street gangs. We don't want any of this in our company. Their thing is that life sucks. They're despairingly hostile, they band together to get ahead in a violent world. The great example is The Shawshank Redemption. We don't want to hire stage ones, but sometimes you'll get people in your meetings that have that bad body language and in everything you say they’re like, "No, yeah, whatever." There's always something negative to everything you say. There's always a problem to every solution.

Stage two is a little bit different. Instead of, “Life sucks,” they're a little bit more personal, “My life sucks.” They're a little bit more passively antagonistic. They may not say something verbally, but in a meeting, they'll go cross their hands in judgment and not be totally bought in but not be totally against you either. They never get interested enough to spark any passion. These are the ones that sometimes you come in from a mastermind or conference, you've got all these ideas to share with the group and they're like, "I’m not interested." They're not too excited. By the same token, if you say a funny joke to them, the laughter is a sarcastic resigned thing. They’re the whatever type. The talk is that they've seen it all before and watched it all fail.

A person at this stage two will often try to protect his or her people from the intrusion of management. The mood here is that their life sucks. It’s a cluster of apathetic victims is how they characterize that. Stage one and twos are exactly what you don't want to have. If you're looking and coming into meetings and you're seeing these types of behaviors, you want to know that they're not the ones that you want and then they start changing a little bit. They start getting a little bit more positive. Stage three, the theme is, "I am great and you're not.” Knowledge is power so people hoard it. They're the people at this stage they have to win and winning is personal. They're your big competitor people. They will outwork and outthink their competition on an individual basis. The results from this as a collection of lone warriors. These are your hardworking individuals, but not so much team players. They're often seeking help and support, continually disappointed that others don't have their ambition or skills.

If somebody is not trying as hard as they are, they’ll be disappointed. Their complaint is that they do not have enough time or competent support. They’re like, “I’ve got to do this by myself.” It's a bunch of self-described star players. You can't have too many star players. They can't play together as a team. That's basically the theme there. You’ve got your stage four and five. These are the ones that you want all the time. Instead of going from, "I'm great," the stage four theme is "We're great." This is where I think most of your positive company culture is, your great, thriving, growing companies. When they have great culture, they have a great team. They have a lot of stage four characteristics and qualities because it's all about team. Everyone is excited about seeing each other at work. They take the tribe away from the person's sense of self. These are the people that if they take the team away, they feel like, "Where am I?" They feel lost because they feel the team is their second family. At this stage, the culture is effortless. Nobody's trying too hard. Everybody's doing what they’ve got to do and working for each other as opposed to for themselves.

The only one that has influence is the tribal leader. Here in stage four, whoever's at the very top is the only one that actually has influence over this culture because other than that, there are no lone warriors. Everybody's working together as a team. You have your last one, which is, "Life is great." The language revolves around infinite potential and how the group is going to make history. They want to make a global impact. This is where they make an example of Apple where they say that the innovators from Apple and Steve Jobs were at stage five because they did things that made a global impact and they wanted to make life great. The mood is an innocent wonderment. A very small percentage of companies have this type of characteristic. Most have stage four, but you definitely don't want the ones and twos. That's important to understand, to identify what you have.

That's great because you can put this assessment up against each individual within your team very easily. I think it's easy by what you laid out to say, "Who are my stage one players? Who are my stage two players? Who are my stage threes?" What have you learned? Can any of these people change from two to three or three to four? Do you simply hire slowly or fire fast? Do you simply get rid of them?

The transition is never easy when you're trying to get rid of bad culture and create a totally new culture. Click To Tweet

The ones and twos, there's no change there. The threes can get into fours and that's definitely what you want.

Just cut your losses.

Especially if you have a big organization and you have this person in a position where they have a lot of people under them. If they're a stage one and two, imagine what they're telling all those people under them. Imagine the mindset and the stuff that they're feeding them. That's what those people think of everybody else on top. That's not necessarily true.

When you have those people in your company, they can be a real poison. It's almost like if they're allowed to linger long enough, everyone that they touch in their immediate circle becomes poisonous as well. We've had that experience before in one of our clinics where one person in particular was poisoned and unfortunately, they were the leader. After that person left, it took at least a year before we got everybody out who they had an influence on before that clinic started turning around. Looking back on it, my partner and I both believe that we should have closed down the clinic, fired everybody that had a connection to that poisonous leader and started from scratch and got some new people. It can be that devastating and that pervasive when that one person has that much influence.

I'll tell you a personal story of my own too. Sometimes you think it was so bad and then you’ve got a new staff and it got better. You're meeting some goals that you'd never met before and you're like, "This is great." It plateaued for me. I was like, "What's going on?" We've got a new hire. This new hire, it was the first time we have put them through a rigorous hiring process and had this funnel built out and had all these triggers that they had to do before they even came into an interview. I was like, "This guy has got it." We hired him and sure enough, he came in and in six months outworked everybody in the front desk so much that we redid all our internal processes at the front desk. That's when I knew, I was like, "We may have another problem." That wasn't his job. He was going to come in and do reception. He ended up coming in with all these things and changes and made things better. The problem was those other two people that were there before him didn't I go through that interview process that you went through. We didn't weed out as much as we thought early on.

Since then, we've hired another one and we ended up tweaking his process more to make it more specific and refined to make sure that we got another person just like him. The other two people are not there anymore and the other two that we hired are now all cross-trained the way he did everything at the front desk. When we brought them on board, we made the onboarding process and the interview process very detailed to everything that he had created and changed up there with my direction. Even when you think you've got it, you probably have to do another thing. That's what happened to me. We went through and we hit some numbers that we had never hit the first time around. We plateaued and we weren't hitting our goals that had after that. He came on and totally changed it. We brought these two other girls on.

As soon as the new staff came on board without the old staff here, because there was a little bit of overlap, they have put in their two weeks. There were several part-timers in training. The very first week when all the old staff was gone and it was just a new staff with the person that we trained up there, we hit our 200 visits a week goal that we haven't hit in a while. It always happens for the better, but I feel it only happens for the better if you put in that work, your blood, your sweat and your tears into making it better. We refined our process, we identified the leaks, we identify leaks again. We tweaked and refined the process and we got a better product out of it. You got to keep tweaking and refine. That's the main thing.

That's the perfect example of the theorem that the people that got you here are not the same people that will get you there. Some people will be good at getting you to a certain point. What's cool about this also is it exemplifies how you were so intentional about the person that you want to hire. In your own words, it was a rigorous process. For someone at the front desk, if you can breathe and say hello, usually that's good enough for us to sit at the front desk, but you took it a step further. What do we exactly want out of this person? How are they going to be the most productive and how are they going to be the face of my clinic? Immediately, as soon as you did that and got rid of the other people, your numbers grew again. That’s a great example. 

Our main focus was we want to create overwhelm for these candidates. That's what I told the guy, Bruce, he helps some of my marketing and all my funnels and stuff. I said, "I want to create overwhelm." He goes, "What do you mean by that?" I said, "I want you to give them everything and all descriptions and tasks that they will be having to handle." Even if they only have to do it once, even if it's not their main task. I said, "I want them to feel overwhelmed." I was like, "Why?" It's because if somebody can come in knowing that they're a little overwhelmed and stick the interview, then they're going to be good because there's a lot of overwhelm at the front desk. Wouldn't you agree? He’s like, “Yes.” That’s what our mentality was when we did that.

PTO 70 | Identifying Bad Apples
Identifying Bad Apples: When you have employees that have great culture, then you have a great team.

Congratulations that you experienced that because that front desk is such an important part. Correct me if I'm wrong, are you paying these newer guys a little bit more than you were previously? 

They're still in the probationary period. It’s equal to what it was for the others but going forward, they're both doing verifications. I already prepped them and have their one-month meeting and say, "This is where I want to be able to get you at, but I want to make sure that you're completely independent with all of these things." They're not quite there yet, but they're helping so much more than the other two were as far as what they're going above and beyond doing.

That's awesome because you're incentivizing them and you're telling them, "If you're going to make more, this is how you're going to do it." That's always awesome that you can incentivize them. There was also a change in the quality of the candidate once we decided to increase our per hour rate that we were willing to pay that front desk person. If we were stuck in the $8 to $10 an hour range, we’ve got $8 to $10 an hour type of people. Once we bumped that up to closer to $12 or $15, then we got $12 to $15 an hour people. I'm not saying that you need to share your numbers, but I'm leaving that as an example that sometimes you should be paying a little bit more for someone who is super productive at the front desk because that person drives so much of the success of your clinic.

I had a conversation with my wife about this. We were going to try to increase base pay across the board for techs and front office going forward, but with these expectations, our next tech coming in is not going to start there. He's going, "You're going to start here and you could get to here once you get to a year-and-a-half experience and you're doing this." Our techs had been with us for about a year and a half, two years. They’re in a little bit more responsibility. One of them is responsible for the cleanliness of all the gym and the other one is responsible for all the equipment. We have to order stuff. He knows my online account where we go order. He just gets it approved. They're a big part of what we do here and they're making more, but if somebody that comes in and starts to do tech work, they’re not going to start there. They're going to have the expectation of, "If you can do this like Alex is doing at some point, this is where you could be.” I do bonus them. Everybody got a bonus. We do a little a profit share at the end of the quarter. Even though their base rate is a little lower, when they get incentivized and bonus, it turns out to good hourly grade. I do feel you on that trying to get those candidates.

We're talking about front desk and tax, but this is correlated with physical therapists and PTAs as well, even the clinic directors. They can have such an influence on your team if they're in stage one and stage twos. You want to have more of the stage fours, people that are bought into the culture. We're talking about your hiring process. Are there other things that you do to cultivate that culture and move those people into stage four types of employees where they're bought into the team and it's all about effortless culture or the things you do to maintain that?

I've been working on that a lot. That's something that we've been changing around here because before, we were tied up with life. We're trying to get their business to where it needed to be. Get the kids in the home life to where it needed to be. It wasn't at the top of my focus at the time, nor did I know it needed to be. I started seeing all the positive effects of that. I read a line by Peter Drucker somewhere in his book, he said, "Culture eats strategy for breakfast. It never stops. It's a 24/7 thing." I said that to my wife and I said, "I'm going to take on this hat and know that I'm going to be coming up with some ideas to hang out as a team. We're going to be celebrating any and all little wins, things that nobody else is looking at." We’re trying to create our identity. That's what I told her. As a team, we’ve been hanging out a lot.

Every quarter, we set some goals and when we hit them, we celebrate them. When we celebrate, we go out. I rented a house on the beach and everybody came out and I barbecued all day. They went to the beach and we're in the pool and hung out and had a place to stay and drink. We’re hanging out with each other. We try to create an atmosphere of family and trust just like you do at home. It's hard because it’s like, “They're not your real kids, Frank.” I was like, "I know they're not my real kids, but if we take care of them, it's going to turn around two folds, ten folds for you as a company.” It takes a lot of work.

You're talking about regarding culture, we've talked it about a number of times on the show. When your team members treat their work team as if they were family, that's next-level stuff. You get so excited when they'd not only bought into the company culture, they've bought into each other and they wanted to see each other succeed. They're trying to help and they're trying to promote each other and help each other out. That's the stuff that you hope for as a business owner. In order to cultivate that, it takes celebrating wins, creating goals together. I think quarterly meetings are a huge success. You can push a lot of great cultural values and unity in those cultural events if you're intentional about it and if you plan those out properly. It can gain a lot of traction. It's nice to not only implement the mission, vision and values, but then follow that up with intentional culture-building activities that show the mission, vision and values. We talk about it during those times. That's when you start seeing a culture change.

We try to do that, even when we get together casually, we'll play little games, “Who can recite all our core values the fastest?” We throw stuff out there and always relate stuff to the clinic, even joke about some things that happened in the clinic and create that atmosphere. At the end of the day, we're CEOs and that means we have to lead. We want to lead them to do great things. I used to be a coach too. We can lead them to be good, but when they overachieve and we lead them to overachieve, that makes us feel great. They want to make you feel great. They want you to be proud of them. They don't want you to pat them on the shoulder and say, "Great job." In some cases, you may not know this or they may not tell everybody, but they may have a hard life at home and work is their happy place. It says a lot about how you do that. You can lead by a lot of ways. You can lead by service. You can lead by love. I like to motivate my team. Every Monday, we do a Monday update and we do a little motivational Monday video clip. I'm big into motivating.

Knowledge is power so people hoard it. Click To Tweet

The other thing I've learned that I think helps them respect you and learn a little bit about you as a boss is to not be afraid to feel embarrassed in front of them for something you did. Being in a business where I own it with my wife, I have some experiences sometimes since we work together and we live together. Sometimes you're at work and I may say something that maybe I don't realize that other people are in front and it's rude. When I realize that, I immediately will stop, apologize and make it public like, "I messed up." The faces and the looks that I get from them sometimes it's cool because they're like, "He's normal." They're not afraid of me because they know I'm just human as they are and we all make mistakes. The example is man up about your mistake and make it right or make sure that you expect them to do the same when they messed up. You're going to move on. It's okay.

Show a little bit of humility. Show them that it's okay, that we can make mistakes and we can overcome them and next time I'm going to do better. 

At the end of the day, I tell my kids, “As long as you give it 110%, that's all that matters. Give it your all.”

Is there anything else you want to share, Frank?

This is one thing that I read and I thought I want to share with my staff. I read this and I'm going to share it with them at the next meeting. It says, "If your presence doesn't make an impact, your absence won't make a difference." That goes for all of us. As a CEO, you want to make an impact on your business. You have to come in here full of positive energy, leading your team, motivating your team, loving your team, setting the mission, the vision. Make sure everybody's clear on it so that everybody can focus and go forward. As an employee, you need to do your job and make an impact in your post. When you're not there, it's not going to make a difference.

How do you want to make an impact?

When you're not there, they're going to be like, "Where's Frank?” because you made an impact.

As a leader, you want to be able to say, “I made this impact.” As a leader, especially in a physical therapy clinic, personally I didn't want my impact to be that I saw 60 patients that week. That's not the impact you want as a leader. The impact that you want as leaders is, “I've affected these people's lives whether it's patients and or employees. This is how I lead and this is how I've created a culture that inspires people.” That provides much more power than it does simply treating patients all day.

It's who you are, what are you there to do and how you're going to do it?

PTO 70 | Identifying Bad Apples
Identifying Bad Apples: If your presence doesn't make an impact, your absence won't make a difference.

Frank, thanks for taking the time. I appreciate you sharing your wisdom. If people wanted to reach out to you and ask you questions, what's your contact information? 

I'm going to give you two ways that you can opt in for any information. It's a text message. You can text MM to 844-444-1481. If people want to get onto our app and get some of the free stuff that we have on there for mastermind stuff, they can text app APP to the same number.

That's for the Next Level PT mastermind and coaching that you are doing?

Yes, correct.

It's always awesome talking about culture. I get excited about what we can do to filter out people who aren't bought in and find those people who are bought in because the sailing is so much smoother when you got those people in the right seats in the bus. 

We're still tweaking and refining because that's the process we have for the front desk, but we still got to create one for the clinic and for PT and everything else. It's a work in progress.

Thanks for your time, Frank. I appreciate it. 

No problem, Nathan. Thank you.

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About Dr. Frank Garza

PTO 70 | Identifying Bad ApplesDr. Frank Garza has been a physical therapist since 2006. After working as an employee for one year in private practice, he decided to venture into an independent private practice setting, with his wife, where he is now the CEO.

In doing so they began to see patients in their own home for about 2 to 3 years before expanding into their current outpatient physical therapy facility, Pure PT & Pilates (PPTP), which he owns and operates along with his wife, Dr. Amy Garza.

Together, they have been managing and running the practice for seven years, soon to be eight. Frank is also a founder of Next Level Physical Therapy (NLPT), a consulting group that helps other physical therapy CEOs create the time, choice and financial freedom they deserve.

In the last 2-3 years, he has been really focused on developing and refining his practice’s Human Resources Department. Frank is currently a resident of Mcallen, Texas, a small city located in South Texas, with his twins, Frankie and Tessa, as well as his beautiful wife Amy!

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PTO 62 | Selling Your PT Business

 

Paul Martin has been dealing with mergers and acquisitions in physical therapy since the turn of the century, so he knows the market. However, things are different now than they were even five to eight years ago. Today, Paul shares what you need to know if you're looking to sell in this environment, and what you should know about the current industry even if you're not thinking of selling. As an independent owner, you should recognize what's going on in your local PT space - who is getting acquired, what acquiring companies are looking for, and where they might be going next. These are things that will keep you abreast of the industry and where you fit so you can make sound decisions. Even if you’re not looking to sell, consider some of the things discussed here so you are maximizing the value of your practice and be ready to sell at any given time. You're going to exit someday, so be prepared.

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Looking To Sell? Five Things To Know About The Current M&A Market with Paul Martin, PT

On this episode, I get to talk to industry veteran, Paul Martin of Martin Healthcare Advisors. He has been around since the early ‘90s. He has been advising physical therapy companies since 2000 with Martin Healthcare Advisors. He's helped over thousands of clinics both grow and merge and be acquired or acquire in the physical therapy space. He's been around the block a number of times and now, he has five things he wants us to know about the current M&A market. Those five things are important to know because things are different now than they were several years ago. There are significantly more players, more acquirers in the market space and some of them coming in within 2018number of private equity groups on top of the ones that are privately held and large, but also those are their publicly held. 

Things are different. It's not all about EBITDA anymore. There's a lot to do with what's your growth strategy? What are your cultures like? How do you fit in their footprints because some of these are regional players and not national players? Do you add something to the space that they're trying to get into or increase a footprint or provide a niche service? Are you on a growth trajectory? All of these things are what they're looking for and provide greater value to them. There are things that you need to know in order to provide more value for them as well as provide more value for yourself. I'll continually beat the drum ever since I did the interview with John Dearing last year as part of the podcast about how to set yourself up to sell. Doing some of those things to improve the value of your clinic to sell are the same things that improve the value, the profitability and the power to improve your clinic currently. Doing some of those things improves the stability and freedom that you get to enjoy. 

These are things that are somewhat simple, fundamental, but also take some effort and if focused on increases the value of your clinic. Things such as making sure your legal paperwork is in order to make sure your financials are in order and easily accessible and easily readable. Know your statistics, especially your cardinal’s statistics. Make sure you're on a growth trajectory year over year. Do you have a leadership team in place so that you're not the sole decision-maker and not the sole influencer in the company so that if and when you do leave, things will continue to run well and continue to grow? 

What is your culture like? Do you have mission statement and values? Those things are important because if you're looking to sell, you want to make sure you sell to someone who has that same value system in place. It makes things so much easier when you do and it allows for greater growth even after the acquisition. There are a number of things to consider. Paul goes over the five most important things to understand in the current market. I’ll continually beat the drum on making sure that you have your company set up for sale at any time. It increases the value of your company and increases the power that you have independently. Let’s get to the interview and see what Paul has to share. 

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I’ve got Paul Martin of Martin Healthcare Advisors on with me for the interview. Paul has been around the block a number of times and is doing some great work now for the profession. First of all, Paul thanks for coming on. 

Thanks for having me, Nathan. 

If you don't mind, you've got a wealth of experience based on your time in the profession. Would you mind going back and sharing your story first of all and tell us about your professional path and what got you to where you are now? 

I am a physical therapist by background and I started a company a few months out of school back in 1989 that was called Physical Therapy and Sports Services. I and two partners grew that company. It started driving growth in 1993 when we had three clinics and from 93 to 96. We really accelerated that growth and we grew to 21 clinic locations. Subsequently, we sold that company to NovaCare in 1996. I spent three years with NovaCare and it was a great experience. I felt I got somewhat of a degree in corporate rehab. I learned a lot from the folks at NovaCare. I left NovaCare in 1999 and started this company, which is a company that provides growth and development consulting in the industry as well as merger and acquisition representation of companies that want to go into the market. 

PTO 62 | Selling Your PT Business
Selling Your PT Business: Remaining independent means you have to be consistently looking at good, solid growth opportunities within the market.

 

Who's your ideal client at this time? Who are you targeting? You might be helping those guys toward the end of their ownership phase. When you talked about growth and consulting, who are you targeting there? 

We work with companies of all sizesanywhere from a single location company. As we look at our client base, there seems to be a look in the eye of our customers of wanting to learn more about the business of physical therapy, wanting to grow their practices and seeing that in their markets that in order to remain independent, it's necessary for them to continue their growth. 

What are you seeing there when you say in order for it to be necessary to be independent? You’re recognizing that in order to stay independent, you need to have a larger footprint or you need to be at a certain size compared to the hospital networks or the physician-known physical therapy clinics and whatnot. 

Most markets, the large national companies in just about every market in the United States are coming into those markets, acquiring the larger practices are putting a lot of capital into growth with new clinics, new startup clinics. We really advocate if you want to remain independent, you need to be consistently looking at good solid growth opportunities within those markets. 

You’re not only helping people who are growing in that respect and trying to either open de novo or acquire other clinics, but you're also focused on helping those who are trying to exit their practices as well. That’s a little bit about what we're going to get into now, right? 

Absolutely. We have a whole division of our company that takes some advantage of this current market or have looked at it as a strategy to transition their company to a larger business in many different shapes and sizes. 

What are you seeing as far as the market? It seems like there was a pretty hot run there for the last five years. Do you see us on the downhill side of that or do you see it continuing in the expansion of mergers and acquisitions? 

Based on the capital markets, based on the continued ability for private equity to be able to borrow at very low interest rates, but as you look at our economy, etc., we do believe that this market may have hit its peak and every time we get there, we're seeing new private equity groups coming into the market. This is a very long haul for a market to stay as aggressive as fertile as this market has been in the rehab industry. How long will it continue? It’s very difficult to say, but for right now, there are great opportunities. 

Definitely and I think I learned that from one of my episodes last year from John DearingMaybe I'm going out on a limb, but some of it might depend on simply those interest rates as long as money is easy to borrow. Mergers and acquisitions might be prettyI wouldn't say hot thing, but it's been active. 

While the interest rates are definitely a driver, the other driver is private equity seeing this business as the rehab business as a good business that they see it as a fairly simple business. They look at it. They don't see that our reimbursement over the last ten years or so has seen that much change. I'm not saying it hasn't seen any change, but that much change. There haven't been any major changes to our market with any type of regulatory issues that have come up. The public companies, US PT, as well as Select Medical have fared very well in the public eyesIt brings attention to our industry and the private equity sector seems to be very much of a copycat industry. When one private equity group has success, it's not long after that another private equity group is going to follow that group trying to do the same strategy. We've seen that happen over and over again to the point where there are literally eighteen bonafide private equity groups backing fairly large rehabilitation companies in our current market. It's up from six or eight along with the public companies. It’s really moving fast. 

The private equity sector is a copycat industry. Click To Tweet

With so much private equity coming into the marketplace, how are things different? Maybe that leads into a little bit more of our topic. How is the market different for the physical therapists who are looking to sell now compared to several years ago? 

It leads exactly into what we wanted to talk about which you’re exactly right. It’s what we've come up with which are the five things you’ve got to know about the new rehab M&A market. It seems like we have a new market really on an annual basis. There are so many changes that the market continues to go through this evolution. The first thing you’ve got to know is that we're no longer in a market where you can simply sell when you and your business are ready. Historicallyit was back in the days of three or four acquires in the country, business owners would get their business in good shape. They would be ready personally and they would go out to one, maybe two or three of those companies and you could get a decent deal. You could sell your company on your terms at your timeframe. It’s no longer like that. With 25 plus companies, you’ve got eighteen private equity-backed companies. You have two publicly traded companies and at least five other fairly large scale private companies that are all vying for market share within these markets. They're all at such different stages that the market will dictate when you're able to get a good deal for your company, not simply your evolution. That's one of the things that has changed about this current market. 

Are you saying that if you're an independent clinic owner at this day and age, should you be ready to sell at any time? What would you recommend my readers do if their practice owners, especially if they're later on in their ownership and they're looking to phase out maybe in the next five to ten years? What would your recommendations be? 

It’s really important to, on a very routine basis, every few months or so to pop your head up and survey the market around you to seewho are the companies that have made acquisitions in your market? The companies that already made those acquisitions, what is their activity? Who is around your market that may be looking and would be the next likely kind of suspect to be coming into your market? To understand based on those companies and their evolution within the private equity investment of those companies the best time when you have what they need? You're going to get the best deal when you match what they need with something that you can bring. 

How does an independent practitioner, working in quite a bit treating patients or working on their business, where would they go to find those kinds of resources that would tell them who are the active players in my market and who's coming into the market? Because they'll acquire businesses but not necessarily change the names at times so it might hard for them to find that out? 

It’s important that you find someone that lives in this industry and understands, especially the larger companies they believe and somebody has told them that you need to use and find a large investment banking firm, may be out of New York City in order to properly sell your company. The problem is that those companies don't know who the buyers are in this market. These are all privately held companies. Even those backed by private equity are still privately held companies. They're not making public announcements, they're not being vocal as to where they're going next and what they're going to be doing next. You’ve got to find somebody who lives and breathes in this market and understands who they are. 

PTO 62 | Selling Your PT Business
Selling Your PT Business: It’s vital that you find someone to guide you who deeply understands the industry.

 

It's someone like you or maybe a local broker that's in this industry or people like that. It'd be hard I'd imagine as an independent guy to find out all that information. I can see where it's important. In my experience, my partner and I, had three or four offers over the course of a number of years that came to us from different directions. There are plenty of friends that I have that have clinics that have never been approached whatsoever. It seems like it's hit and miss as to who you know or not, what you know and that kind of stuff. It's important to be connected with guys like you that can guide you a little bit. 

We believe it's a big value. 

How should an owner establish or set up their practice to get maximum value? Maybe that leads into the next part a lot of times they'll talk about EBITDA and whatnot and how that drives the value of a clinic, profits, gross revenues or growth in general. What are some of the things that we should be looking out for to maximize our value? 

As we've outlined, I think the second thing that you need to know about this market is that the deal value drivers have changed. What I mean by that is in the past it was, everybody used and get five multiple. That's what everybody should be able to get and everything was about EBITDA. I'm not downplaying that EBITDA is not important. It still is important, but the biggest driver that we're seeing in this market is the competition for your business. Wcoined your EBITDA plus who wants to be in your market now? Who needs to grow in your market, who needs a platform in your market now, who's out there that would be the best fit? That's where you get what we would describe as the best deal. 

You're talking about maybe being aware of where the companies have a footprint in your geographical area and see if maybe you fit well into that footprint or you provide a niche service that could benefit a player in the area. 

Awell as being able to provide that potentially in some very unique ways to a number of those companies where you have a number of companies looking to get into your market for different reasons. You have attributes that may look solid and may look attractive to a number of companies then it's the competition for your company all in what we would call a synchronized competition all done confidentially. That's the process that gets and drives what we see as the best deals in the market.  

If you don’t mind, I'm going to use a personal example. When we sold our clinics and formed Empower PT, it provided a nice footprint for the private equity firm in the Phoenix Metropolitan Area. If you were a business looking to possibly sell in maybe Tucson or Northern Arizona or maybe even Southern California, that's where you might be a value add to a company that's looking to acquire businesses. 

Maybe an in-state business that's looking to go to a market that you serve in-state or potentially if you're large enoughother companies looking to come into a state and compete, you may be able to provide something unique to each of those companies based on their needs. 

A lot of people talk about establishing yourself and with your experience working with growth and consulting in M&A, how long does it take for them to get their business into a good position to get the maximum value out of their clinics? I'm of the opinion that it takes almost a year, maybe two years to ship things up to put yourself out in the market. What's your experience in that? 

The biggest driver that we're seeing in today's market is the competition for your business. Click To Tweet

Our experiences that depending upon where the business is in terms of its metricsin terms of whether it has a compliance program, in terms of where the EBITDA is and in terms of its ability to grow. As long as all of the things within the company are ready in this current market to do it right and to go out to multiple companies, the process that seems to be most effective is put everyone on the same starting line at the same time and drive a process that requires them to stay within a timeframe. You're going to quickly eliminate those who aren't interested or may have their focus on something else at that point in time and then driving that. We've seen it in a range of four to six months, which is much better for the business for much better, for the business owner than going through a process of working with this company for a couple of months, seeing what you can get then walking away from them possibly and go into another one. We see a lot of this franticness of, I’ve got to talk to everybody,” and by the time you go through all that, it's a year later and what have you accomplished? When the business is ready, what seems to be most effective is to put everybody in the same starting line at the same time. 

If I have a friend who has two and going on to three clinics and he's looking to sell in about five to seven years but he doesn't have policies and procedures in place. He doesn't have an employee handbook. He's been working full-time most of the time and now starting to pull out of treating full-time. How long would it take a guy like that to get ready to even go on the market? 

We see a lot of companies like that, as being a practice owner. When you get to that, it's no man's land. That two to three clinics to maybe five to seven clinics and have you set up the management structure, have you set up the systems and the processes for the company to continue on profitably? To do all of that and to set all of that up again, depending upon the stage of the business owner. A lot of motivation to want to focus on and work on their businessthat could be a one to two-year process to get all the things in order to be a business that has the strong ability to grow. 

What are acquiring companies looking for? You talked about something that maybe adds to the value of the company, whether it's in the geographical space or whatnot trying to enter a certain market. What are some other things they're looking for when they're looking to acquire companies? 

Different from our previous timeframes and previous markets, the third thing you must know about the new M&A rehab market is that right now it's very attractive to a buyer if you are what we term as growing through the deal. What we mean by that is historically it was all right, I'm going to pull back and try to do everything I can to maximize my EBITDA. Maybe pare down a little bit and certainly not do any new startup clinics and not start anything that would require any investment. Don't make any changes and just pull back. 

In this current market that will not make you attractive to the acquirers in this market because they want companies that can grow. They want companies that have shown the ability to grow. There are a number of different ways in order to look at some of those attributes and look at some of the expense you may have incurred to start a new clinic or an investment that you've made. Ways to structure that within deal companies that have shown the ability to grow and appear to an acquirer as we are growing our company and we are managing our company as though we're never going to sell it. That's attractive in this market. 

That can be tough because when you're growing like that, it can take a significant amount of cash to open up a new clinic or to acquire a clinic and then that's going to negatively impact your financials, which the acquiring companies are going to be looking at. At least through my experience, they can understand that cash is currently going towards opening a new clinic, but it should look at as a positive when it comes to the acquisition. 

It needs to be a balance and that balance needs to make good business and strategy sense. If you're throwing every bit of capital you have and at a new startup clinic and the startup clinic takes twelve months to go positive cashflow, those are not good business decisions. You need to continue to have balance between growth and margins and you're correct, the acquirers understand that growth takes the capitalThere's going to be added expense on your P&L because of that. There are usually many ways to adjust that as well as look at the structure to reward someone for the fact that they're growing. We say this all the time, we need to be the train that's leaving the station and who's going to jump on. 

PTO 62 | Selling Your PT Business
Selling Your PT Business: It's important to identify your culture for your company to continue to thrive.

 

They’re going to look at your EBITDA still, but they're also looking for growth. They're looking for what kind of value you can add to their marketplace. Are there are some other things that they're looking for when they're assessing your companies? 

Companies that are able to drive for their markets at or above the benchmark level of cash per visit are very attractive to a buyer because it means that you're managing efficiently and your staff is productive. That's real attractive versus them looking at this and saying, “We're going to have to teach that staff how to bill correctly and how to charge for everything they're doing.” These companies are moving at such a rapid pace that they're not looking for turnarounds. Many times a business owner will say, “Won’t the acquirer see that has great upside opportunity for them?” They will, but you may never get to the finish line of the deal. They’re in a neighborhood and you’re a broken-down house that needs all the fixes and there are three shiny new houses in your same neighborhood and you don't want to be left behind. 

They’re not necessarily at this stage looking for something that they can fix up and they're going to have to take some time and invest money and effort into. They want to acquire something that adds to the bottom line and move on to get the next acquisition. 

We’ve coined it as speed dating. They are moving quickly and they aren't going to spend a lot of time on a deal that looks like a turnaround they’re going to focus their efforts on, because there are a lot of companies that have put their hands up that are in the pipelines of these acquires. 

Where do other things come into play, especially as a clinic owner? How important is it for the independent clinic owner to have a mission, purpose and values all established and maybe having a particular culture of some kind? Do acquiring companies look at that? 

It’s important and we see it as even more important for the seller. In the current market, many of the companies are offering a structure of a partnership. If I'm going to go out and find the right partner as you just described, culture is important. It's important to identify with what is your culture and what's the culture then that you're looking for your company to continue to thrive and not every acquirer brings that. They don't all have the same cultures. They all have different and unique cultures. When we look at and talk to companies that are looking to potentially sell their business, we say, “You may not want to hear this, but it's not all about the price. Culture is first and foremost as what we see in this market that becomes most important to a seller. They're going to be in there for a long time and they're going to be working along with the acquiring company for a number of years. It’s important, especially if they're going to be in a partnership and they have equity and they can benefit from growing that business. 

From personal experience, there was an opportunity for us to interview seven to eight different acquiring companies as we were on the market. I'm talking about this second hand because my partner was on a lot of these interviews while I was up here in Alaska. He said it was obvious as they sat at the table that things just didn't align. It didn't feel right. It seemed their focus was someplace else, whereas our focus was over here. I think the initial take is that they're all the same. These are all the same companies that are trying to get into the physical therapy market. They probably have the same values, where that's not the case at all. They have completely different values, different objectives and different mission statements so as the seller, it's highly important that you have all that established and that you know what your ideal acquirer looks like. You should probably have a good idea of who you're going to marry before you marry them that leads to a happier relationship down the road. 

There is no question, your perception of that as you were going through this is dead on. We do this a lot so we see it over and over again. When you can sit for three days, the owners of the business and we together met with seven different companies all within a matter of three days and asking a lot of the very same questions to each of them. You're exactly right. They came out with at least four of those companies. There's no way they said that those companies would meet what they were looking for in terms of culture. The other three have different attributes and that's where we start looking at what we see ithe next element that drives the best deal, which is structure. This is number four things that you got to know about this market, which is there are so many different structures in the market now. There have been five private equity groups that have gotten into this market within the last nine months. They all can come in and keep doing the same thing as their competitors. They have to bring something different and unique. 

What we're seeing is they're bringing some unique structures on how the equity in the future will be paid to the seller and where that equity is placed. Structure is right behind culture we say this, “You name the price, I'll name the structure and I'm going to win every time.” In this market, that's true. We line it up in a matrix and look at simply price. Many times when you look at the real value of everything that's going into the deal, it flip-flops in terms of where you're getting the greatest value based on the structure. 

The people who are selling need to know that there are different ways that they can get paid out. Is that what you're saying? That the structure of the deal could be no cash? It could be a percentage now and a percentage later? What are the expectations of your job after the fact? Is that what you're talking about when you talk about structure? 

Yes. There was partnership structureUS PT was on the forefront of the partnership structure and they've utilized a partnership structure certainly with their acquisitions as well. That partnership structure has been sliced and diced in multiple different ways from newer companies, the new private equity that has come in, in order for those companies to try and stand out. A big piece of it is not that you're not getting a good portion of what you're receiving for your business upfront, but how can we structure that back end to make it attractive and to make it secure? That’s where it can be fortunately and unfortunately. Fortunately for folks like us and unfortunately for sellers in the industry, it has become very complicated. What’s always a good structure for the acquirer may not be the best structure for the seller and it's that work on the backside of thatTypically, it's with the equity and where the equity is and how you get it out. That is important in this market. 

What’s the fifth thing we must know? 

We call the fifth thing of market separation. What we mean by that is in this current marketyou have multiple acquires and they're all at different stages of their growth. They're all seeking markets regionally based on the evolution of their growth. For example, a company that has been backed by either new private equity or our first round of private equity. Once they get their structure in place, they're going to be looking to grow. At year three, four, they may be looking to wind down somewhat in order to prepare for the next private equity investment. Companies that become what we call recapped, a new private equity group comes in and takes out a smaller private equity group. All of a sudden, you have a geographical need in which as opposed to staying somewhat regionally, we see those companies and we call it leapfrogging. 

A company that's primarily New Jersey, New York, all of a sudden they're doing an acquisition in Illinois, Michigan and Louisiana. This is what we call market separation which we no longer have one big market with just a couple acquirers. There are segments of markets across the United States and they're all different based on who the acquirers that are looking to get in and what stage in their evolution are they in and it changes. With these new private equity groups, a lot of them are West Coast-based. I think you're going to see a lot of platform acquisitions on the West Coast. We were a part of one of those. We’re seeing some East Coast acquirers and it's slowed down now gearing back up with some higher-level management, etc. They're going to look to jump back into the acquisition game. It causes what we call this market separation which is, it's so interesting and cool when you can look at it from the United States view. If you're in a market, you're in Pennsylvania, to see all of that, it is difficult. It has made it somewhat complicated. 

There must be balance between growth and margins to make good business. Click To Tweet

As a seller, the important takeaway is to recognize where these acquirers are coming from. Do they have a national footprint or are they a more regional player? At what stage are they in? Are they three years into this acquiring phase or are they brand new? Is that what you're saying? 

Exactly, and are they looking for platforms? Are they looking for add-on acquisitions? Are they looking for niche practices within certain markets? You coined it pretty much dead on. 

There are lot of takeaways. Those are valuable information especially if they're considering to sell anytime soon. If they want to get an idea of what the market looks like, it's important to have all these factors in mind. Are there any recommendations that you make to a guy whos like, “I'm not in the market to sell. I'm relatively new in my practice and I could be here for another twenty years and maybe grow with a couple of clinics? 

You want to make sure that as you grow your business and if you're on the very frontend of your career, the reason private equity is investing in this business is that it's a good business to be in. We work with companies across the country that are looking to remain independent in their markets. The keys to that are knowing and understanding what's going on around you, but looking to find and to capitalize on market niches that are focused on things that you serve those people better. You double down on those specific market niches that you can serve because you will typically be able to serve them better than the large companies. Being and living in your own market and in many cases, having grown up in that market. Going out and finding those market segments that you can serve better is I think one of the first things that we talk to companies about as they're looking to evolve within a market looking to grow. 

It comes down to solid blocking and tackling. You are making sure that you're establishing operations and financial budgets. You are making sure that you're looking to grow your staff in a way. You're looking to evolve leaders in your company and continuing to provide the best service of any company in your market or state and active in your community. Don’t let anybody out there tell you that just because such and such company did an acquisition in your market that you're not going to be able to survive anymore and you have to sell to one of these companies. No, that is not the case at all. 

I had guy John Dearing on and wtalked about what to do to prepare to sell. The big takeaway for me was that even if you're not looking to sell, being ready at any time, having your house in order per se, to be ready to sell at any time typically means you're profiting the most. You're running at peak performance anyways. Acting as if you were on the market can definitely lead to benefits as you said, having a leadership team where you're not the sole focus of management and leadership for your company. Having set policies and procedures, having clean books have an operating budget. Have your compliance manuals together and your policy and procedure manuals together because they're going to look at all those things. Even if you weren't selling, having all of those things in place makes you a more profitable company and it improves performance. 

We've seen companies have great success who early in the game have said, “I wonder what the value of my company is now in this market.” What that does is it makes it very clear internally what some of those value drivers are and can help guide decision making in the future. If you're looking to provide value so that you can pass this along to your children that may go into physical therapy or you're looking at some point in time to transition out of your company. We’re all going to leave our companies at some point in time. Understanding what that value is and what the internal value drivers are I think is also a good step to take early on because it will also uncover some of the things that you just said. 

Do you have that compliance program in place? Are your financials in a structure that's going to be easily assessed by acquirer? Are your leases in a structure? Do you own buildings and how are you dealing with your building ownership? Is that ownership in your company or did you put that separate? Are you running fitness programs and other programs that also under a structure, should be looked at and done differently? I think it's important early on to prepare your company for that value look later on and whether that's passed down to your staff, your children or going out to a third party. It is important. 

PTO 62 | Selling Your PT Business
Selling Your PT Business: Even if you're not looking to sell, being ready at any time means you're profiting the most.

 

I love that you tied it back to value. If we use them what increases our company's value as a decision filter, then that would lead our decisions to improve our value and improve our profitability. 

Profitability is important, but as you look across the company, it comes down to profitability and risks. What you want to do is to look to minimize risk by having a very diverse referral base, by having a payer base that's fairly diverse versus one singular payer base, a payer that may be federally funded, that could be changed overnight. As we look at our staff and the arrangements that we make with our staff, as we look at our management structure, everything we do, you want to look to build solidly which reduces risk. 

Is there anything else you want to share with us, Paul? 

This has been great and I appreciate you having me on. I hope this has been valuable to your audience. As I said before we got started, you're doing a great thing for our industry and I appreciate that. I'm glad I found you and I'm glad I was able to get on and talk to everybody. 

Thanks for your time. If people wanted to reach out to you, how would they do that? 

You can send me an email. That’s a pretty long one, but it goes right to our name. It's PMartin@MartinHealthcareAdvisors.com and certainly jump on our website to see what we do and how we do it, which is www.MartinHealthcareAdvisors.com. 

You're going to be presenting some of this information in the future whether that's at PPS or other conferences. 

We are. We did mergers and acquisitions conference that is called Better Strategies for Higher Valuations. We did that in Chicago back in early June and we're looking to do another one right before the Private Practice Section Conference on October 29th in Orlando. We'll be sending out invites for that and it's a nice way to start the conference. We'll do a five-hour teaching a training session and then that would be followed by dinner and it's a great time to network with other business owners across the country. 

If people were looking to go to that meeting the day before PPS, do they go to your website or do they reach out to you individually? How do they do that? 

We’re going to be sending invites out. Certainly send me an email, tell me you're interested and we will make 100% sure you get an invite and you're able to attend. 

Thanks for offering that and being a resource in that regard againThanks for your time. It's been great getting to know a little bit more about the M&A market. 

Nathan, it’s great talking to you. 

Thank you. 

 

Important Links:

 

About Paul Martin, PT

PTO 62 | Selling Your PT BusinessPaul Martin’s personal experience makes him an expert on growing a PT company and selling it to a larger corporation. Early in his career, he grew his three-clinic rehab company in Moorestown, NJ to 21 clinics in only three years before personally negotiating the sale of the company to NovaCare in 1996.In 2000 he founded Martin Healthcare Advisors, a consulting and M&A Advisory firm dedicated to the outpatient Physical Therapy industry. Over the years, MHA has helped more than 500 business owners grow and prosper with their proprietary approach to strategic growth and succession planning.

As CEO of MHA, Paul has advised many of the most successful owners in our industry and his M&A team has led more outpatient rehab transactions during the last four years than any company in the country. He is a nationally recognized expert on the state of our industry and where it’s headed.

No one is better qualified to speak about what it’s like to sell to and work as a partner with private equity-backed companies than Paul Martin.

Paul holds a master's degree in Physical Therapy from Hahnemann University, as well as the prestigious “Certified Business Intermediary” (CBI) and “M&A Master Intermediary” (M&AMI) designations from the International Business Brokers Association (IBBA).

 

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PTO 13 | Culture Eats Strategy

 

The famous quote often attributed to thought leader Peter Drucker goes, “Culture eats strategy for breakfast.” It is often agreed that how we do things is more important than how well we do them. In other words, it is often agreed that culture is more important than strategy. But do we really put that into practice? How much effort are you placing on your company's culture? Simply put, culture is the way we do things. It is less about what we want to achieve and more about who we are. Putting a focus on it will go a long way. Will Humphreys shares what has been done at Rise Rehab to improve our culture and how it's helped in hiring the right people, letting go of the wrong people, and create a productive and meaningful organization that people love to work for.

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Listen to the podcast here:

“Culture Eats Strategy For Breakfast” (Peter Drucker) And How To Create It with Will Humphreys

I have the opportunity to re-interview my business partner, Will Humphreys. After our first interview, episode number two of my podcast, and some of the audio difficulties, we decided to get together and talk again and have another go at it. Will was really excited to focus on simply one thing and that is culture. Will has done some great things in our company and to create a better culture and I thought it would be extremely valuable to have a discussion about it.

I wanted to share a little bit about culture from Brené Brown's book, Daring Greatly, that I think was vital and it gives me pause to think about the culture not only in my organization but also in my family. I want to share just a little bit about her book, if you don't mind, and ask you a few questions. Out of her book she says, “In the business world there is an ongoing debate about the relationship between strategy and culture and the relative importance of each. To define terms, a strategy is the game plan or the detailed answer to the question, what do we want to achieve and how are we going to get there? Culture on the other hand is less about what we want to achieve and more about who we are.”

Out of the many complex definitions of culture, the one that resonates the most is simply, ‘Culture is the way we do things around here.’ One camp subscribes the famous quote often attributed to thought leader Peter Drucker, “Culture eats strategy for breakfast.” hence our title, but everyone simply agrees in theory that who we are is at least as important as what we want to achieve. In Dr. Brown's experience, she can tell a lot about the culture and values of a group, family, organization by asking these ten questions, and I want you as you listen to them to consider these questions and their answers in relationship to your organization or even your family.

Number one, what behaviors are rewarded and what behaviors are punished? Where and how are people actually spending their resources, time, money, and attention? What rules and expectations are followed and forced and what rules and expectations are ignored? Do people feel safe and supported talking about how they feel and asking for what they need? What are the sacred cows and who is likely to tip them? Who stands the cows back up? What stories are legend and what values do they convey? What happens when someone fails, disappoints or makes a mistake? How is vulnerability perceived? How prevalent are shame and blame, and how are they showing up? What's the collective tolerance for discomfort? Is the discomfort of learning, trying new things, giving, and receiving feedback normalized, or is there a high premium put on comfort and how does that look?

The power of these questions is in the ability to shed light on the darkest areas of our lives. Are we disconnected, disengaged or are we struggling for worthiness? Not only do these questions help us understand our culture, but they serve us in discrepancies between what we say and what we do or between the values we espouse and the values we practice. That little quote from Brené Brown and I think it is a good starting point to consider the value of culture in our companies and how we want our employees to feel as they're working with us and as customers come into our clinic. I just know that as we focus on our purpose, on our values and ultimately our culture or company, we will begin to see more stability and freedom and we'll have employees that are aligned with us to accomplish our goals. Take a listen to Will's interview and see what you can do to improve your culture.

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Thanks, Will, for meeting me again. I appreciate it.

Thanks for having me back a second time.

I think we've got a lot of great stuff to cover because we talked about a number of things related to the podcast that you're really excited about and I want to hit on as well.

I'm so excited that you're entering this space in a way that you're doing it. I don't think anyone's doing it this way. Your guests after we tried that interview, they’ve been amazing.

I really appreciate it and I really loved your feedback because we're going to get into something that I don't feel like I've covered so far yet in the interviews, but could be something that is transformative to owners if they're not focused on it. If they do spend some time on it, I think it can be influential in changing the entire focus of their company and make it easier for them as owners.

For those who didn't listen to the first episode that I had with Will, you'll want to go back and listen to it. Will has an incredible inspirational story about how he got into physical therapy and his experience in the rock-climbing incident and all of that. As well as talked about what really was his flexion point or at least the burnout stage that he had working as an independent physical therapist in a rural setting. All of that stuff I think it was hilarious and it was a great story. Let's start a little bit somewhere in the middle of your story there, Will, because we're going to get into something else and this will help us set the foundation.

Tell me a little bit about your experience then as you took on another physical therapy clinic. For those people who haven't heard that story, just to bring up to speed, Will and I first worked together. He was the clinic director at a second location that I opened up. He eventually bought that from me. He and I then also opened up another clinic in another location, so there was a his, his and ours type of scenario where I had my clinic, he had his clinic and then we shared another clinic that we own together. It's at that point of the story that I want to get into a little bit about Will's transformation and the ideas that came forth that helped him turn things around in his life both professionally and personally.

The only thing I'd add is that you and I started working together and that's fifteen years that we opened up Florence, Arizona. When I started working for you, it was like this cool opportunity to start growing a company and learn the ins and outs of being a leader. I very quickly fell in love with the area and you and I as we talk different ways of how we could help me become an owner, it just worked best for us to do a full purchase and so that there really wasn't a big transition at that point. That was the big surprise for me. The story is that when I went from being a clinician director to owner, there was a little bit more to do, but there were some benefits that offset anything that was difficult.

You and I having had such a successful mutual arrangement decided to open up another location jointly in the city of Maricopa. That was being completely blind to where I was in my career. You and I were directors, treaters and owners of our separate locations, and then we started opening a third location where we couldn't physically be there. In retrospect that's when I started the transition without intending to of being a guy who owns my job versus a guy who was going to own a business. As a result of that, it was a nightmare for sure.

PTO 13 | Culture Eats Strategy
Culture Eats Strategy: When I went from being a clinician director to owner, there was a little bit more to do, but there were some benefits that offset anything that was difficult.

You can't leave us hanging. Tell us about the nightmare.

Just to put it in some perspective, I'll briefly highlight. I got into physical therapy by falling off a mountain and breaking twenty bones, both arms and both legs, open, compound fractures, all that. Then at UTEP, I was investigated by the FBI for terrorist activity. I wasn't a terrorist, by the way, but I got cleared for that. There was a lot of pain around that really and I mean this, there was nothing compared to the pain of that moment for me when I found myself driving an hour and a half between clinics in Arizona where it's 110 degrees. I remember one day when it was really there after months of working weekends and long nights and having to put money into things that should be giving me money and missing birthdays and vacations and stuff.

I remember there's this one day where I was driving down to Maricopa and I was in a white Tacoma truck. The AC was busted and so I'm driving an hour and a half from Florence in summer and it’s 115 degrees from Florence to Maricopa. I had to pack a change of shirts because I knew this was going to happen. While I'm driving, the charts that I was taking to Maricopa to do my notes to catch up at night were so heavy that the seatbelt alarm was sounding in my truck. There was so much weight. My truck thought there was a physical person sitting next to me.

This was prior to HIPAA, the charts, right?

Yeah. I'm going from clinic to clinic. I'm transporting but this was years ago. I'm driving to Maricopa, I am sure I was done. I went home at night, I saw my wife at 10:30. She was awake and I'm like, “I'm done. I'm walking away.” She was like, “I get it. You’ve got to get out of this.” This isn't like a way of life and I had to swallow some real serious pride and admit that I wasn't like those guys who just start businesses and kill it but I didn't care, I was in so much pain. My wife lovingly suggested something. My wife's very atypical in that she's super calm and cool most of the time. I think a lot of other people wouldn't have handled it as well as she did and she was just like, “Why don't you give it one more try but this time why don't you try finding a coach? Why don't you try joining a business network?” She had heard about this thing called Accelerator for very small businesses. It's an adjunct to Entrepreneurs' Organization, which is the largest business networking group in the world. Vistage is number one in the US but EO is the biggest in the world. They had a guy who I knew who was into it and that's what I did, so I joined that and that was really the turning point for everything as a result.

You joined the network and you ended up getting some consulting as well. You’ve reached out and got a coach and that's a lot of what I'm hoping owners get out of this. If they haven't already and if they're in a place where you are or prior to the point that you got to, is that they take the opportunity to recognize, “We're physical therapists. We're not businessmen most likely and we typically haven't run businesses before.” It's imperative that they take the opportunity to invest in some coaching, consulting, some training. Let's say all of that is education. Invest in the education to learn how to have a business and how to run it appropriately whether it's you or Blaine Stimac or Shaun Kirk, all of these people had a burnout point. They had a situation where they had issues where they couldn't run the business anymore. My slogan for the podcast is to reach out, step out and network. It took you to get to that stage before you finally decided, “I need to reach out, step out and network.”

Culture is the experience of being in the business. Click To Tweet

What's funny is I look at it as a lifeline, like I've got to just do something, this is something to do. What it turned into was a realization that this is what the best of the best do in the world. They constantly look out new information. They're constantly seeking out networks of people. You've heard time and time again, your network is your net worth. That's huge when I've seen now fifteen years later or whatever, ten years later, how that impacted things. It's beyond my wildest dreams, going from that place to where we are today as a company. It's unbelievable.

Looking back then with some perspective where you are now, what kind of things happen both intentionally and unintentionally to really start seeing and stimulating change and progression and growth in the company?

What I didn't know that I was doing at the time was I was investing in myself. It's funny how becoming a physical therapist, we understand initially we have to go to school, but yet starting a business for many people, they're smart enough to know maybe that's why you shouldn't start a business, but for both of us we’re just like, “Let's do it.” You take that risk and then you realize later you have to invest in yourself. Investing in my self was really unintentional but what ended up resulting is, I learned about business on all aspects of it. We started working and that was where you and I came together and started putting in these pieces of your systems, your strategy, “Here's execution and here's marketing.” Over time what came for me probably the most powerful lesson and benefit, and this is the highlight of what I'm sure we're going to talk about, is creating a culture in our company, is the accumulation of all that investment and is the primary driver that results in how well the business can function as a business not as a guy who owns a job.

It's independent of you but of course you are a huge part of it because you and I came together and determined our values, our mission statements and how we do things. That's what our culture is, it’s essentially how we do things. We want to be a system-driven company that's not dependent upon the owners. We want people who love working for us and we love being a part of their team and we want to create something bigger. All those things I think come together as what we would call culture.

I like that you're looking to define the word because I think that it gets a reputation for being a flowery, emotionally-driven aspect of business and over the years, it's gotten a lot more buy in, but it's not clearly defined. I think you defined it perfectly in a sense from how I define it, is that culture is the experience of being in the business. Whether you're an employee, whether you're an owner, it's that experience. That's driven by systems, it's driven by clarity of values, it’s all of those components. I think the biggest thing I've learned over my unintentional and intentional efforts, is that there's some really basic things that anyone can do to dramatically impact their culture. In healthcare in particular, we suffer from a culture epidemic.

Like a deficit.

In healthcare we do have an organic culture of helping others. There's an already built-in component since we're service-based, but how to differentiate? That's how we drive recruiting. That's how you and I have had so much success in recruiting, marketing, growth and retention. All those components of how those processes are lived have come from the ideas of culture.

PTO 13 | Culture Eats Strategy
Scaling Up: How a Few Companies Make It… and Why the Rest Don’t

In healthcare and to use a healthcare term, things can become very sterile very quickly and thus the culture throughout different clinics can become homogenized or simply completely dependent upon the owner, if they're a smaller clinic. It's all about the owner and everything he does, but we didn't want that. You said there are some very simple things that we can do to create culture. What are some of the things that you did that you believe really started creating a culture within our company?

I say what I did, but this is a we as well because I want to recognize that you were fundamental in all of this. We got together and the first thing we did was put some clear language around our values and our purpose. We talk about, again, the flowery concept of owning a business. It's the mission, vision, values. Verne Harnish from Scaling Up indicates that you can go with mission or purpose but nowadays purpose has a little bit more of an emotional connection as to why you exist. That’s the whole Simon Sinek thing of starting with the why you exist then you can focus on how you do things. Then lastly, like a concentric circle, how you do things.

Why you exist is an emotionally driving force that comes from looking backwards in your rear-view mirror, you'll find it. How you got to where you are today is the story of the purpose as to where you want to go. Mission statements can be very long and very verbose and forgettable. The key thing with clarity on this, because clarity equals power, is knowing clearly why you exist in your business, your personal and then as a company why that company exists, and then putting values around that. The values are the key drivers for the decision making. Here’s a way to really test and see if your values are in fact legitimate for you is, would you fire someone for not living that value?

Those are the easiest firings to have.

It is when you hire them with the values, when you fire them. We've had experiences where we fired someone and then afterwards was asked to officiate the marriage of that person. That's the power of culture in a moment like that. Where there's no stress over firing someone and it's done in a way where the person feels honored and they still promote you positively despite being let go, which isn't always, but it's possible when you have a culture like that.

I think what was really powerful for us back when we merged, for me in particular, was the process we went through in determining our values. We came down to four values: professionalism, accountability, growth and empathy. It was really heartening in that at that time to come together and determine what values define how we do things. Just to give people an example of the exercise that we took as we listed every characteristic, every value, every word that we thought might be appropriate for how we wanted to be seen and how we wanted to work. We started knocking off those that were maybe similar in definition and nature and went with the one that we thought was more appropriate. We'd come down to maybe eight or ten words that described us. We started prioritizing and really talking about each word and what it meant to us.

As we did that, some of them didn't feel as aligned. There's just a feeling more so than anything or even as we talked about it, we agreed, “That really doesn't explain what I want to do or how I want to be seen.” We knocked those off and eventually came down to the four that we have. It's cool that they form an acronym so it's easy to remember them if we put them into PAGE: professionalism, accountability, growth and empathy. It was a foundational point in our relationship or as a company to really define our values.

From that time forward, it's been very easy for us to share that in interviews, in team meetings and in hirings and firings. Part of our employee assessments, all are centered around our values and it helps us drive those home. Even if we were not fully living up to them, it's easy to then have the conversation, “What can we do better to be more professional,” or even look back on different scenarios and what could we have done to be more accountable or does this help with growth. I don't know about you, but I felt like that experience was one that was helpful in establishing the culture from the very get go is determining our values.

I think that of all those things, mission, vision, values, purpose, the two key ones to start with, if you don't have anything, and this was told to us through consultants, is purpose and values. The purpose again is the seed of the culture, the values help regulate the decisions around that. We did it a little bit reversed. We ended coming up with the purpose slightly after our values, but either way, I think one message I want to get out there is regardless of size, whether you have 100 clinics or you're a sole operator of one clinic, the path to freedom and the path of happiness starts with clarity around why you exist and how you regulate it.

Values are the key drivers for the decision-making. Click To Tweet

I talked to you a little bit about it with Shaun Kirk in his interview, if you don't have a purpose and you're not clear on that purpose, then it's going to be really hard to get through the tough times. I could be able to see past those. You going to sit there and say, why am I doing this? Why am I putting myself through this? If your purpose is clear, then you're able to fight through it and figure out a different or a better way. If you're not clear on your purpose, then it's really easy to give up and maybe throw in the towel or blame others or just fall apart.

What's cool too about what you said is that, once an owner is clear on that, the key thing is to simplify it down so that it can be easily remembered by anyone who hears it. Like our company purpose is to be the light in the lives of others. Our values, we use an acronym PAGE and we use it like, “Are we on the same page?” meaning are our values aligned? There are little things you can do as an owner and that we did that have dramatically impacted how people might not only resonate with it but how they can remember it. Once we got clear independently on it and we started living those, which is the next thing, because it's one thing to have them, if we didn't live those values, there is no point in creating and having them.

If anything, it hurts culture because we create distrust from people seeing us say one thing and live another. There's a whole podcast on how maybe we have evolved into really honoring our word around our values. Once that was created, then presenting it to a team and learning how to drive it is a totally different and very simple process that can be done. It starts to take the weight of the business off of the owner's shoulders and puts it on other people because they give a crap, they care enough. They're mostly bought in to a point where they're entrepreneurs, owning from within without actual ownership of the company because they believe it. We see it all the time in larger companies like Zappos, Amazon or Apple. These people they bleed their culture to the point where it's almost a cult and small medical PT companies can create the same thing.

What are some of those things that you're doing now that you think are vital to creating, maintaining, and improving the culture in Rise Rehab?

You hit the main one right off when you were describing how we started recruiting. Anything from our ads to reviews to how we fire is based off of those values and then driving the purpose. Apart from reinforcing the values and purpose throughout those phases, there's an incredible opportunity to drive culture through our meetings and our meeting with them. Meetings are very important but they can also be an incredible burden. Having them be efficient into the point but also be focused on the values is a big deal. In our case, what we'll do is in every weekly meeting and then in every monthly director training meeting, there's a discussion, a brief one albeit, over a value. A question can be asked simply what does empathy look like in the situation we saw. Just small, little discussions can impact things.

Probably the number one surveyed, most loved thing about working at Rise right now from our team is a quarterly meeting we do called the Quarterly Town Hall. All of these meetings, by the way, are found in their structure in Verne Harnish's book Scaling Up. In this Quarterly Town Hall, we shut down, we bring all 50 people together for an afternoon on a Friday, once a quarter we get together. We, as a leadership team, asked the team to highlight people in the company who have impacted them through their values. It turns into a love fest for each other and it's cool because the more they love each other and the experience of the company, the less it's about the owner. I really think our team likes me. I know for a fact that if I got hit by a bus tomorrow, Rise would exist as a standalone with people who are driven by loving what they do because they love each other. It's all about relationships.

PTO 13 | Culture Eats Strategy
Culture Eats Strategy: With a strong culture, I've created an ability for me to be a real focused provider and step into any aspect of the business that serves me.

That’s because they've aligned with the purpose and the values. They've gone to love the purpose, the values of the company and not just Will Humphreys or Nathan Shields. It's not about us at that point, it's about something bigger than our selves.

Then the next thing after that, for sure this was a surprise for me, is finding a charity to support. It sounds like an easy thing but we picked a charity called Feed My Starving Children. Since our purpose is to be the light in the lives of others, we created what was called the Light and Hope Wall in each of our clinics. What we do is we ask patients and team members alike to look for opportunities to write down acts of light. Whether that's someone just smiling at them as they came in the door or someone covering a shift or a patient who's made their day. We've had patients talk about family members who aren't even in Rise and they plaster the wall with these sticky little notes. They’re nicely shaped little things that stick on the wall. For every message we donate a dollar to Feed My Starving Children. We do quarterly packing events where we go down as a team and pack. You combine those with the town hall and instantly the love started flowing for each other because it wasn't about coming to work anymore. It was related in purpose, but it was different than soft tissue mobs.

Maybe it's intentional, maybe it's unintentional, have you seen a benefit in creating and improving the culture of the clinics and your ability to recruit or even keep people on staff?

All the main headaches are dramatically improved if not handled by culture. I love that phrase that, “Culture eats strategy for breakfast.” I had the hardest time recruiting for people in the middle of nowhere in Florence for a decade plus. I would find myself trying to just convince people to come out into the boondocks. What shifted is once we had a team that really loved and cared about what they did, then it just hit this pivot point where I would go out and message, I'd asked myself, “Am I recruiting with these values?”

We also have three cultural values, which is a different discussion, but briefly we have family fun and freedom is how we want to feel at Rise, whereas the professional values are how we make our decisions. When I recruited, I go to these fairs where you have tables and all these companies out there and it just wasn't fun and that's one of our cultural values. We got a spin wheel and some prizes and the normal swag that you get, you made it more of a game. We'd also put things like some penalty stuff or if you spin the wheel, you could get a slap in the face or we put a long awkward hug with one of them. A quick story on that, was one time someone landed on the long awkward hug and the person was so cool like, “Let's do this.” It wasn't me, gratefully. It was someone else. They hug for a solid two minutes and it was awkward. Just straight up. I erased it after that. I was like, “No, we're not doing that again.”

Keep doing that. At some point you’re going to bring up the #MeToo Movement or something like that.

The point is that it was so fun and our table would just have a crowd of people there. Now, we have a waiting list of people to go to anywhere in our company but what's powerful, and this is something I didn't realize that would happen is when you start recruiting that way, first of all, you started tracking these rock stars who start immediately buying into the culture, a rising tide raises all ships. That culture is the rising tide and everyone starts coming on board at a higher level.

Then the word, this is the surprise and the coolest thing is that I hear when I meet people now after years of doing this, the last two years in particular, I meet people, “Rise, I have heard that you guys are so fun.” They talk like that versus, “I've heard of you,” and they start sharing how they've heard of you in a way that aligns with what you're trying to say. It's so much bigger. It's almost like you have to, as an owner, let go of your pride a little bit. I honestly look back and think part of the reason I had a hard time seeing all these things to do was because I’ve got some satisfaction of being the culture, being the guy that the patients wanted to see or the employees wanted to work for. There's nothing wrong with that if people want to stay there, but if people want to be free and be able to grow and develop in other ways, there's no other way that through culture.

Clarity equals power. Click To Tweet

There are two things there. Number one, we're small fish in a big pond when it comes to Phoenix. For the fact that our name is able to get out there simply by what you're doing in your recruiting efforts. Through the culture that you created, word is spreading by word of mouth and not necessarily by the number of places our name is placed across the valley, that’s all really impressive and it's cool. Number two, and correct me if I'm wrong, but like you said, really attract some people to the company that are not only aligned but are rock stars but it also helps us weed out some of those people who maybe they're rock stars for another team. We’re able to figure out who's aligned with us and we're able to not only weed them out, but they're able to weed themselves out. Have you had some experience with that?

I love how you describe it because I thought that I had while you were saying that was, oftentimes culture, vision and values get this category of being the touchy-feely side of business. In actuality having a clearly defined culture and values ends up taking the misemotion out of it, the emotion that doesn't serve us, the stress, the anger. When you have someone quit because they don't feel like they fit, you just go, “Let's go find somewhere where you can fit.” Having those discussions with people around values, I'll try to be careful with names, so we had a young man join our team. He was honestly a rock star, just a wonderful guy. He could produce and patients love him but there was always these outpoints of things were still being missed, or you just feeling when you'd walk away like, “Something's not right.” There would be little problems and they were just consistent, they would change. Finally, we sat down, we talked about the values and specifically accountability was the one that came up and we looked at like, “Accountability to us means you can count on me. We're one of those companies where we share a lot more. It’s not independent providers who come in and check out.” He said, “I really want to be held accountable in a different way.”

As we looked at that, and as well as some other factors that kicked in, we flat out said, “I don't think it's a fit.” He was like, “Me neither.” I said, “What can we do?” It's a different discussion. It's not even firing at that point because it's like a realization that I instigated in that case, it was to self-eliminate, that's a gift. When I instigated that, it was like I wasn't stressed up the night before and we sat down and talked and as a result of that, he gave us more than four weeks’ notice. He was able to leave in a way to where he didn't let his volume drop and I gave him a positive recommendation. That's not always going to happen. Sometimes despite our best intentions you got to fire quick because they're just bad news but most of the time I would say that if we're focused on culture, we're only going to attract rock stars or rock stars for other companies for the most part.

It takes a lot of the effort and the heavy lifting off of the owners is when those people buy into the culture, you get the right people on the bus and in the right seats on the bus. They're going to drive that bus for you. You can maybe be standing up looking ahead into the future as the visionary, but they're going to do a lot of the heavy lifting. They're going to do a lot of the work and if you have that kind of culture and it's really driven down well, they're going to hold each other to those values and it's not going to have to come from the top down. Ideal scene is you get other team members talking to their team members, their peers regarding the values and holding them accountable.

I think a real turning point for us culturally was when I had an entry-level employee holding me accountable for being late to a meeting. In a loving way, by the way, it wasn't done in a way to where it was like I felt bad afterwards. There's something about when they’re willing to hold you accountable in a way to where you feel like, “This is what I said we're going to do,” you know they're doing it for each other.

To go back to what you said earlier in the interview, that's when you can start really realizing some freedom and there's some foundational fundamental stability in place, but it's really something then that you can be proud of. That's really a launching point for you to continue to grow and really do what you want to do. I know you find a lot of joy in creating the culture and in the recruiting and you can spend more of your time and energy in those things that really gives you something.

If we're focused on culture, we're only going to attract rock stars for the most part. Click To Tweet

To your point, I think a lot of people hear this when they're in between, like when they're in pain, but they haven't had enough pain to change, the go to is I just want to treat. That was me at one point. I just want to treat my patients. I didn't know until there was space provided that there were things additionally that I was passionate about, but what if I had been treating? Great, with a strong culture I've created an ability for me to be a real focused provider and step into any aspect of the business that serves me or for a lot of people they eventually get to a point where they don't want to treat three days a week, they want one or two days off a week where they can be home with their families. That's very realistic and once the culture is there it’s very easy. It starts with us getting out of our way, of seeing how we're driving it and how we are maybe holding on to it.

If you were to look back on your story, your experience now over the past years, what would you tell your younger self?

I’ll just give him a hug. I’ll tell him it's going to be all right. It's going to be worth it and that click all that stuff, the sweaty shirt stuff. One of the things that resonated with me later that I probably would tell myself is that I'm only going to be as great as I tolerate and it starts from within. I was tolerating inconsistencies as an owner and being real with myself as to where that culture started. It was me being clear about what I wanted, who I was, where I'm going. It's not like they became clear after a couple of processes for me. It's still an ongoing journey but I can articulate it exponentially better now. It's about the journey, not the destination. Giving myself that perspective and it's going to be fine, don't give up. Stay focused on doing the best that I can, but I would tell myself, start with culture. I've described what it really is to have a good culture like the way we just did in this podcast and then say start with that. Everything else, processes, all those things, those how-to things aren't as powerful as who we're being in the company by culture.

You start with culture and then other things tend to fall in place it seems. Thanks for coming back and doing another interview with me, Will. I appreciate it.

Anytime. I hope it's not the last.

I'm sure we'll come back around again some time. I was really excited when you mentioned that you wanted to talk a little bit more about your experience and culture because I really wanted to delve into that because I've seen what you've really been focused on recently and it's made tremendous strides within our company. I really wanted to share that with the audience so thank you.

No worries. Thank you.

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About Will Humphreys

PTO 13 | Culture Eats Strategy

Will was born and raised in El Paso, Texas. It was as a high school senior that he first became introduced to the field of Physical Therapy when he became a patient himself after a critical rock climbing accident that left him with broken arms, and legs. During this time, he decided he wanted to become a Physical Therapist and help provide the same light and hope to others he was given by his Physical Therapist. He has a wonderful wife and four boys. He enjoys creating an environment that promotes family, fun, and freedom for his team and customers.

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