Many PT owners find themselves asking the ongoing question of whether or not to lease or own their own clinic space. Taking it upon himself to help you out of this dilemma, host, Nathan Shields, brings over to the show Colin Carr. Colin is a commercial real estate expert who works specifically with healthcare providers to help them answer questions about real estate—ownership, leasing, negotiating, etc. It's an invaluable episode for any clinic owner who is looking to manage his finances optimally. There is tremendous value and savings to be had if you handle things the right way and with help! Don’t try to do it on your own. Build a relationship with a great real estate agent to guide you through the process. From Nathan’s personal experience, they are worth their weight in gold!
I decided to bring on a commercial real estate expert. Many times, the conversation comes up in regards to owning versus leasing your space, the benefits and the pros and cons. How can I renegotiate my lease? When can I do that? We get into all that in my interview with Colin. When I look back at it, you can save tens, if not hundreds, of thousands of dollars over the course of your clinic life-cycle if you negotiate and do what's best for your clinic early on with the help of a professional. If there's one key takeaway that I want you to get that I got out of this interview, it's important to have a commercial real estate agent that knows their stuff on your side so they can help and guide you. Doing it all on your own isn't worth it. You can save a lot of money if you get a professional to help you. I've asked him all those questions and then some on the interview.
I have Colin Carr, Founder and CEO of CARR, a commercial real estate firm that specializes in representing healthcare providers. It's an ongoing conversation amongst physical therapy owners that I've seen amongst my network and also in my social media networks about what are the pros and cons of owning versus leasing your space in which your clinic resides. I thought it'd be great to have a real estate expert on hand. Thank you, Colin, for coming on the show.
I appreciate it. Thank you.
I usually get into the physical therapists that I interview about their professional story and what got them to where they are. I'd love to hear your story a little bit. What got you to where you are in commercial real estate specifically helping healthcare providers and what makes you an expert in the field? Do you mind sharing your professional story?
I've got a pretty streamlined story. I've been in real estate since nineteen years old. I started managing apartment complexes when I was nineteen. I lived in Michigan and worked for a couple of investors that own some larger communities. I moved to Colorado in my early twenties. I kept managing apartment complexes. I switched from property management into brokerage when I was about 23. The initial person I worked with was a senior broker that did a lot of tenant representation for large retailers like Walmart, Wendy's, Blockbuster and people like that. I worked for him for a couple of years and got some good exposure to the large national retail world of real estate. I switched to an international firm after that. I worked there for about five years and got exposed to office, industrial land and lots of other types of commercial real estate.
Over the course of those seven-plus years between those two firms, I had the privilege of working for a handful of healthcare providers, especially towards the latter end of me being with a larger international firm. I realized quickly that there were a lot of brokers that were trying to work in the healthcare space on the landlord and seller side working for the large medical office building owners or large hospital systems that virtually no one was working on the tenant and buyer side. I noticed that the number of healthcare providers that were good at what they did clinically or medically but didn't have a strong foundation on the business side of the business savvy, was high. I quickly find a niche there.There's an opportunity cost of your time to be invested outside of your core focus. Click To Tweet
I had a couple of experiences too that opened my eyes to the need to specialize in healthcare. One of those was when I was first getting started, I did a lot of landlord and seller work. I'd get a phone call and they say, “I'm a dentist or I'm a physical therapist or I'm a physician and I need to move or open a new office.” They'd start asking me questions. 90% of the phone calls that I got from healthcare providers didn't have representation.
It was a combination of seeing the need and also realizing what was happening to the healthcare providers that were not represented. I have one story specifically that triggered this for me. This was one of the catalysts for me in starting our company, CARR and focusing on the healthcare provider side. I had a large medical landlord, publicly-traded landlord. I had a couple of class-A medical office buildings and we did the leasing for that group. We had a lease for NOLs coming up for a plastic surgeon. I got on the phone with the asset manager who was several states away and he said, “Let's talk about the upcoming lease for NOLs.” We start talking about one group. He asked me a couple of questions. He said, “Does Doctor so-and-so have a broker?” I said, “No.” He said, “Does he know the market?” I answered, “No.” He said, “Do you think he’s willing to move?” I said, “Based upon what I can tell, no.” He was paying around $27 a square foot. The landlord said, “Let's go back at $29 or $30 a square foot.”
It’s like, “Let's take advantage of this guy.”
The indicators were, does he know the market? Is he willing to move? Is he educated? The answers were all no. We adjust on a new lease in a building with a doctor that was represented and that lease got done at around $24 a square foot. I asked him, “He's already paying $27. He's already $3 a foot above the last lease we did, $29 or $30, it seems a little egregious.” His response to me was literally, “Get it done,” then he hung up the phone. I got off the phone. I sat there for a second. This isn't anything new. I've been around the real estate at this point for over a decade, but that was a defining moment for me where it clicked. I realized, if a healthcare provider doesn't have representation, they're going to get taken advantage of at the highest level by the landlords because that's what they do.
Before anyone gets too mad at landlords, you got to stop and ask yourself the same question. If you own a house and you're going to sell the house and the house was worth $400,000, but your real estate agents said, “I think we could get $500,000 if we market it a certain way.” Even though it's worth $4,000, your response would be, “Let's get $500,000.” The landlord's mindset is, “If we have unsophisticated tenants that aren't willing to move or can't move or don't want to move, they don't know the market or they miss the proper timeframe to negotiate, it's too late and they're backed into a corner, they're going to capitalize on that.” The combination of me seeing these different things, I saw an opportunity there to specialize in a specific niche of representing tenants and buyers. In 2009, we launched our company. We're now in a place where we represent a couple of thousand healthcare providers per year. I believe we're making a huge impact.
First of all, congratulations. You've got a great story and you're filling a definite need in a particular niche. From my perspective, I can't emphasize enough the value that my commercial real estate agent has had for me over the years. I've had the same guy, Tanner Milne, down with Menlo Group in Phoenix. He has guided me and instructed me on not only real estate purchases, but potential places where I would move to and see if the numbers worked out or not. He talked me through it. He'd spend time on the phone with me. He would bring me different pro formas of real estate places that I could move to, purchase or also consider the lease agreements and go back and forth. He’s instructing me because we don't have that instruction. We're professionals, but we don't have the language down. We don't know the ins and outs of real estate. I can vouch for the need for having a professional commercial real estate agent on your side to guide you and direct you, especially one that's good at communication. It’s exactly what you're talking about and to emphasize the point, it's valuable for owners to have a realtor on their side that knows the ins and outs of commercial real estate.
A lot of times, it's a matter of how much time do you have to devote to a certain area. If you look at the average transaction, it takes 30 to 40 hours and certainly, you can do a deal faster than that. Other deals can take longer. There's an opportunity cost of your time being invested outside of your core focus. The time it takes to learn the market, to understand the process and then to be able to put together the correct posture and to set the table for the negotiation is time-consuming. It takes a specific skillset.
To get to a little bit of what we were talking about initially and the conversation that tends to go on, what are some of the benefits of owning the space versus leasing?
We get asked that a little on a daily basis. Does it make more sense to own or lease? There are a handful of variables that we need to go through before we get to that decision for each person. Let me start by giving a couple of disclaimers. Every market is different. If you're in downtown Manhattan versus rural Nebraska, it's going to be a different market. There are different factors playing there. One of the things that we let every person know when they ask that question is we tell them, “We should look at all your options.” We should look at options to lease. We should look at options to purchase. We should look at options that are high visibility retail if they're available. We should look at options that are in an office building as well because there are pros and cons to every opportunity. There's no one size fits all.
We're a big fan of no matter if you lease for twenty years and you're only going to practice for another five years and you think owning doesn't make sense, I would encourage you, it does make sense to still look at your options. If you found an opportunity to purchase where the effective cost of ownership would be less than it would be to lease after you bought a building and paid for your build-out, even if you're going to practice for five more years, if you’re going to sell that practice, you could then write a lease for ten years. You can have that tenant pay down the principal and have a profitability string pick-up from some nice tax deductions. Step number one or pro-tip number one is you should always look at all your options.
Number two, when you're looking at options to purchase versus lease, there are three places that we like to look at a purchase from an economic standpoint. The first portion or the first perspective is what does the monthly payment look like in leasing versus owning from a cashflow standpoint? If I have a chance to lease and it would cost me $5,000 a month and I have a chance to own and it would cost me $5,000 a month, there's no detriment to the purchase from that standpoint. It's the same monthly payments and the same cashflow. That's a great first place to start. Sometimes you look at a purchase and the lease option might be $5,000 a month and the purchase is $9,000 a month. People say immediately, “That's way too much. That doesn't make sense,” but that's not the full evaluation.
You need to go to the second step, which is what does it look like after-tax deductions? When you get into tax deductions, we'll try to keep this at a high level, but just to give you some talking points. You got some additional tax deductions that don't happen on a lease that does happen when you purchase. For instance, you get to depreciate the asset over 39 years. If it's a commercial property, that's over 39 years. You subtract the value of the land from the purchase price and you get to write off a portion of that through depreciation. You create additional tax deductions that don't happen when you lease that happen when you purchase. You've got to factor in all the tax deductions that you get when you purchase. There are additional write-offs like the mortgage interest and stuff like that.
You could have a situation where maybe it costs $5,000 a month to lease and $9,000 a month to own, but the effect of the cost could be several thousand dollars less now because you're going to pay less in taxes. You might pay more in your mortgage payment, but you're going to pay less in taxes to the government. That $9,000 payment versus a $5,000 lease, there's a $4,000 delta. It’ll shrink down to $2,000 or less once you look at the tax deductions because you're going to need to pay more to the government or you’re going to pay more to a lender or other operating costs of the property. The second area is what does it look like effectively to lease versus own after-tax deductions.
The third area we would like to look at is what is the principal pay down? Every month you cut a check on that mortgage, a portion of that goes to satisfy the principal in that loan. That essentially is the equity you're building. That becomes a forced savings account. If every month you cut a check for $9,000 and depending on the length of the loan, whether it's 20, 25 years, whatever it is, depending on the interest rate, $2,000, $3,000 a month might go to pay down the principal. That $9,000 payment could end up costing you less per month than a $5,000 lease payment, once you filter it through tax deductions, principal pay down and other areas.
Our recommendation is to look at everything available. Look at options to lease. Look at options to purchase. Look at office and retail. Look at properties that are outside of your initial target as far as what you thought made sense. What it comes down to is you've got to run the economics on them. A lot of times you'll find that properties you thought were too expensive are not once you factor in those variables. At the end of the day, it comes down to what's the best property for your practice? What's going to help you to be the most successful and have the highest level of production? You then have to make a personal decision at that point of is it worth paying a little more to purchase. If that's the case or if the purchases last and if they're the top property, it's a no-brainer.
Some people get scared away regarding, “If I own it, then I've got to do the maintenance on it? It becomes a liability and not an asset. What if the parking lot needs to be repaved or I need to put on a new roof?” How do you address some of those concerns?
Depending on the type of property, it is going to determine what type of management you're going to be responsible for? There are a lot of opportunities to own standalone buildings where maybe you're the only owner and you’ve taken all the responsibility. You have to decide, are you going to handle that yourself? Are you going to hire a professional property management firm that handles those responsibilities? You could be in an office condo situation where you own a space in a building as you would in a residential condo, but it's commercial. In those cases, the majority of those have professional property management. They're going to have people that are bidding out the parking lot maintenance, the snow removal, the landscaping and the janitorial companies. They're helping you get the best vendors in place and make sure that the prices are competitive.
How much time you invest in that process is determined by who's managing it. When it comes to concerns about capital expenses are going to be higher like if I had to replace a parking lot or roof, you have to run profitable investment and you've got to have reserve accounts. It’s like your own personal finances. You've got to have a savings account, which is usually a reserve account for your property. You've got to contribute to it monthly. You do have to be prepared because it could cost $30,000 to change out an HVAC system or a new roof could cost whatever it is.There are pros and cons to every opportunity. There's no one size fits all. Click To Tweet
You’ve got to have that rainy-day fund.
Professionally-run office condo projects typically have large reserves and they're constantly contributing to them. They have an operating account and a reserve account. You've got to make sure that you have money set aside for those improvements because you will have to put money into the property like you have to put money into a house. There's no way around it.
You tend to pay HOA or Homeowners Association fees or property management fees in order to have that type of security so that someone else is taking care of those situations. That's only in the office condo situation, I'm assuming.
Our company owns an office condo. We own about a 4,000-foot space for one of our offices. That is a larger property. It's about a 60,000-foot project. We have an operating account that has about $100,000 in it at all times and it has about $200,000 in it from a reserve standpoint. We're constantly building that reserve account up. You have large capital expenditures that pull it down and you keep putting money back into that. If you find yourself in a situation where you're the only owner of a stand-alone building or maybe it's a two or three-tenant building and you occupy one space and lease out a couple of others, you have to take a portion of the cashflow per month and set it into an account that you don't touch that built up over time. Everyone has a different opinion on what that should be. The goal is to get that account up to where minor capital improvements will be covered easily if you needed it. If you had a larger capital improvement, hopefully, you have enough money to recover.
If you have an owner say his lease is coming up in 6 months, a year or 2 years, walk me through the process. How soon do you recommend an owner a reach out to a commercial real estate agent? How much time do you give it? When do you start the negotiations process? Walk us through your typical protocol for someone who's coming up on the end of the lease.
The timing is important. If you start too early, you're going to have no posture. If you start trying to negotiate with a landlord two years in advance, they're not going to hold a space for you in the market that far. If you try to negotiate a legal lease renewal, your current landlord doesn't have a risk of losing you for two years. They're not going to be motivated to put their best foot forward either because it's too far advanced. The flip side of that coin is if you wait until your lease is up in 2 or 3 months, the landlord is going to assume that you have not been paying attention, that you haven't hired representation, you don't know what you're doing. They're going to assume that you're coming with a bluff or barter of, “Can you give me a better deal?” The answer usually is no. The right timeframe typically is 12 to 18 months out.
You could always contact a broker in advance, whether it's 2 years out, 3 years out. They should give you a market analysis and tell you where you're at compared to the market. They should tell you what your options are and start that relationship. It's never too early to start a relationship with a broker. A good broker though won't start the actual process until the target window. If you said, “I want to buy a piece of ground and I want to build my own building,” that is a solid 18-month process in most jurisdictions. You can get it done faster in certain areas. The more densely populated the area and the more growth the area is experiencing, you're looking at about an 18-month process. Some rural areas are maybe closer to twelve. If you're going to buy a piece of ground and build your own building, you've got to start that about eighteen months in advance to be safe.
If you are doing a traditional, “I'm going to go lease a space. I'm going to renew my current lease. I'm going to go buy an existing building,” a lot of times you want to start talking to your broker on eighteen months to get a game plan. If you rule out buying land and building venue, then you will wait until you're around that twelve-month window, and then at that point is the ideal time to start. That gives you that 4 to 5-month window to see the market, negotiate and make a deal and still have that 5 to 7-month timeframe to build out a new space if that's what you decided to do. Physical therapists have the benefit that typically if it's a more streamlined build-out. It takes a similarity to a traditional office space a lot of times. You're not running plumbing lines or oxygen or stuff like that. You don't have quite as much build-out as maybe a dentist does or a veterinarian. You can get away with a few months of the timeframe, but the ideal posture or the ideal process is about twelve months in advance.
If a physical therapy owner is in the middle of a 5 or 7-year lease and there are only 2 to 3 years into it, do they have any leverage at that point to renegotiate different parts of their lease?
Typically not. Most leases are going to require the tenant to sign a personal guarantee. That's a negotiable deal point. The larger you get, the more number of offices you have, the higher revenues you can try to minimize or eliminate it. If you're doing a lease renewal and you paid faithfully for at least a term or two before, it's possible to get that to go away. As a whole, most leases have a personal guarantee. If you're trying to break a lease, you'd be held liable. If you’re coming from the angle of, “Can we renegotiate?” If the landlord already knows that you're locked into a lease for the next 4 or 5 years, without you trying to break a lease or doing something else that you can't get out of it and you have to pay them that amount of money, they're rarely willing to negotiate and voluntarily reduce your rent or give you concessions. That's literally them giving you a benevolence check or discount.
In order to set ourselves up better, what are some negotiation tactics when you are negotiating a lease? How does an owner know if they have a good commercial real estate agent? Are there some negotiating tactics or things that good commercial real estate agent will focus on in order to get the tenant the best lease possible?
Let me give you a couple of things that you want to be looking for when you're trying to find a good real estate agent, when you're interviewing them, etc. The first thing you want to figure out is, do they have the skillset to represent you? What I mean by that is a lot of real estate brokers focus primarily on the landlord side of the transaction. They'll do tenant-buyer rep, but they don't do much of it. One of the first questions you want to ask them is how many tenants or buyers do you represent on an annual basis? What portion of your business is tenant representation versus landlord representation? What you're going to find is the majority of brokers are going to be 80%, 90% or higher on the landlord side.
The challenge of that is number one, you're not going to be a priority as a tenant to them. Number two, every time they go out and look at or talk to a landlord, they're looking for the next listing because they're looking to feed their primary business, which is landlord rep. You're not going to find those brokers that typically will get as aggressive as you'd want them to be in helping you get the best terms possible. You want to start with finding someone who has a strong focus on the tenant side or the buyer side. That is a rare skillset, but there are good brokers out there that have that.
The next thing you want to ask them is what their experience is working with healthcare. Ideally, you're trying to find somebody who has healthcare experience and not somebody who thinks that you're another office user or a restaurant because you're not. There are different criteria for healthcare. There are different nuances. If you find a broker that specializes in tenant-buyer rep and then find a broker that has healthcare experience, you're going to be in good shape. A lot of times people will say, “How do I find that?” One of the best ways is to call people that are well-ingrained in your industry that know who the main players are and then ask them for referrals. Call the lenders, the merchandise reps, the CPAs, call the people that focus in your world and say, “Do you know of any good real estate brokers that specialize in healthcare and tenant-buyer rep?” Typically, if you call a handful of people, you're going to get the same names or you're going to get a couple of good leads to go after and start the process. That's how you would start to find a good broker. I could get into a couple of other details as far as the tone to have the right negotiation as well.
You find a commercial real estate agent, what would you expect them to be doing for you? Is it much different than residential property? What can you expect from them?
The difference between residential and commercial is that with the invention of some of the online databases in residential, you can do so much window shopping from your living room or from your computer, iPad or the phone. In a commercial, that's a lot harder to do because the databases are not the same. There are not typically the visual pictures in commercial as there is in residential. There are also a lot of properties that aren't put into the databases depending on the market you're in. Some markets have a lot of information database, some markets have virtually none. Some markets there are multiple databases, but you have to subscribe to get access. A good real estate broker that you've pre-qualified has the criteria to represent you, tenant-buyer rep and healthcare experience, preferably. The next couple of things you're looking for is you want to make sure that these people are going to make you a priority and they're going to have a high level of communications.
That's the number one place that commercial real estate brokers look bad or give the industry a bad name is they don't communicate. They get busy with what they're doing. You need to emphasize upfront that you're looking for a high level of communication, a high touch and that you want to know you're a priority. You need to be convinced that person's going to make you a priority. It's easy for somebody to pitch you and tell you they're going to do a great job and then not perform. How many industries fall into these criteria? “Here's why I'll do a great job for you,” then they fall apart the second they get hired. Being convinced that the person's going to do a good job for you through the entire process is important.
I think communication is huge. Whether it's your realtor or your CPA, they've got to be able to respond to my emails in a timely manner or it doesn't work.
You find that across the board. It's easy to tell people why you’re great and how you do a great job. You need to make sure that you're convinced the person's going to follow through the entire process. One way you can do that is you can ask for references. Ask them for testimonials, “Can I have a list of the last 5 or 10 healthcare providers you worked with and can I call them?” Doing something like that, you're going to find out quickly who is living that industry and who knows it in and out or who's trying to do a deal here and there and doesn't have the expertise or the timeframe to help you.
What are some of the mistakes that healthcare professionals make? We've touched on some of them, but to summarize them, what are some of the mistakes you commonly see the healthcare professionals make when it comes to either leasing or purchasing their space?
The first mistake they make is they don't hire representation or they hire bad representation. Trying to do it alone, the do-it-yourself mentality is going to cost you a lot more than you think you're saving, not just time but actual economics results. The next mistake is bad timing. They don't start the process at the right time. It's too late or it's too early. If you start calling your landlord on a renewal three years out trying to renegotiate it, they're going to assume you have no idea what you're doing because that's not going to work nine times out of the time. Another mistake that is probably the largest mistake that gets made is people don't know the market. They don't know what their options are. They haven't taken the time to go to the market and look at their options. They haven't taken the time to negotiate with multiple people.
One of our company's core focuses is you've got to have as many opportunities that are viable as possible. We're not going to negotiate on ten properties, but you've got to negotiate on 2, 3 or 4 properties if possible to get an understanding of what the market's going to bear. You can't look at the face rate where they say, “The lease rate is $20 a square foot” and assume you know where that deal is going to end up. Two landlords could be at $20 a square foot. If one landlord offers no free rent, no tenant improvement allowance or no concessions and the other one offers $40 a square foot in tenant improvement allowance and five months free to build and then four months free once you open, then they have lower annual increases and maybe they will do a limited guarantee. You could end up with $100,000 or $200,000 difference in the economics of that deal.It's never too early to start a relationship with a broker. Click To Tweet
You can’t look at face rate and say, “These guys are all similar.” In my opinion, it should be done by your broker because that's what they specialize in. The best approach is you go to the market. You look at your top options to lease and purchase. You look at the top options that meet your criteria. You pick the top 3 or 4, then you negotiate simultaneously against those 3 or 4 so you get a crystal-clear picture of what the market bears. If you're looking at doing a lease renewal as an example, you can't go to your current landlord and start trying to negotiate a lease renewal if you don't know what the best terms are that you can get somewhere else.
That's one of the biggest mistakes people make on lease renewals. They wait for the landlord to come to them, flat a proposal across the table or shoot them an email and then they're trying to gauge, “Is this a good deal? Is it worth signing? Is it worth moving?” What they usually do is they take back, ask for a little bit better lease rate and ask for a little bit higher concessions. The landlord will usually give them a little bit of movement, so that movement to them indicates they got a good deal, but in actuality, they're usually leaving tens of thousands of dollars on the table because they didn't compare it with the other option.
My number one point here is if the landlord doesn't believe that you're willing to move or that you have other viable options, you're not going to see the best terms. They have to know that you're educated, that you know the market, that you're willing to move and that you have other viable options that are ready to go. If you get to that place with the negotiation, you're going to capitalize. At that point, the landlord is going to realize they can't hit you with a lease rate that's several dollars above the market and expect you to roll over and take it. At that point, the landlord is going to move from being ultra-aggressive in the beginning to a little bit defensive and saying, “I've got to put together a fair deal because I don't want a vacancy,” because the vacancy costs the landlord a lot more than that it usually costs the tenant to move.
That’s great advice. It puts you in a position of power. Many times, we feel subservient to the landlord. They're holding our space, but you don't want to be in a position of weakness. You want to be in a position of power and be able to leverage what the market will bear.
It's not a position of arrogance. There's a big difference between being arrogant and confident. Arrogance is you can say whatever you want and throw your weight around. A lot of landlords do that. Our recommendation is to get in a position of confidence. That confidence comes from having the proper timeframe, hiring actual representation, going to the market in advance, negotiate with multiple owners, and then you can have that negotiation with the landlord with confidence knowing, “I've got three options. You have a good property. I've been here for ten years. I'm happy to look at renewal, but it's got to make sense for my practice. It's got to make sense for me financially. If it does, I love to find a win-win scenario here, but if not, I'm going to go to the property that’s going to be the best for myself, my practice, my patients, my family, etc.”
The truth of the matter is if the landlord has a space become vacant, it depends on the market and space. They might re-lease it again quickly, but if they sit vacant for six months or for a year, which the average space is going to sit vacant for longer than that in most markets, then you have to look at how much money will it take to re-lease this space, and then how much is going to go in there as far as tenant improvement allowance of that deal, free rent, downtime, commissions and all these things. Most landlords, once they know you're serious and they know that you have options, they're going to put together a deal that makes a lot more sense for them to keep you as a tenant than to have that space go vacant and lose a ton of money. That's going to result in you, the tenant, capturing the best deal and typically swinging that pendulum in your favor to the tune of tens or hundreds or thousands of dollars.
It goes back to the value of having someone who's knowledgeable about the market, a commercial real estate agent, especially a good one that can guide you, lead you and talk with you about what's going on out there and where you can leverage things. There are many times where I'll bring up an idea of, “Can we do this?” My realtor will say, “I don't think you'll budge on that, but we can do this,” then you can start considering how you're going to attack this. That lends to the value of having someone in your corner that knows the ins and outs and also can read the attitudes and the positions of the landlords.
That's a great point too because it is a great sounding board. It's not uncommon to have a tenant say, “Can we push in this area?” There's a realm of you want to push and you want to get the best deal possible. There's also a realm of you can push too far and you can hurt yourself if you ask for too much as opposed to getting a reasonable response. If you ask unreasonably, you're going to get an unreasonable response sometimes too. It's great to have a sounding board that says, “That might be too aggressive. Why don't we come a little bit lighter in that area, but then come harder in this area and get you the same result you're looking for.” It may be packaged or balanced better. The way you say something or how you propose it, oftentimes it’s equally as important as what you're asking for as far as what the answer is going to be.
We've covered a ton of stuff. Is there anything else you want to add that you would recommend the physical therapists do out there in terms of looking for leases or purchasing land or vacated properties?
I'm a huge advocate for people owning real estate. I own real estate personally and professionally. I'm a huge advocate of owning real estate when it makes sense. If you've been in a mindset where you have to lease and leasing is the only option for you, there are times when leasing makes a lot more sense than owning and that's great. If you haven't looked at ownership, I would highly encourage you to do that. In a lot of scenarios, the real estate ends up being worth as much if not more than the practice does over time. We are involved in a couple of hundred transactions per year where there's a transition or sale happening with healthcare providers. When there's real estate involved, 89% of the time, the real estate is worth more than the practice.
If real estate makes sense, if there are good options available in the economics and it makes sense, look at it, look at the market. Don't get focused on, “I have to do this or that,” but keep an open option or keep an open mindset and look at your options. If it makes sense, give it the time or diligence that it would require to make a decision and don't be afraid of it. That being said, the same standpoint is you cannot get obsessed with owning if it doesn't make sense. There are times where the only option on the real estate is a dramatically inferior property in a worse location. If you're comparing that to a landlord giving you a better lease rate, huge tenant improvement allowance, huge free rent package, and then giving you the flexibility to maybe start smaller and expand overtime or maybe move to a better area over time, you would want to look at and weigh both options.
Do you have some owners that might be leasing their current properties, but you've helped them purchase commercial real estate in other states or across the nation?
Let me answer that in two ways. We helped a lot of healthcare providers that decide they want to own real estate. Sometimes they own their main space where they have their practice. A lot of times, they lease and they want to own real estate. We have a lot of clients buy and invest in real estate and that's a different topic. The same fundamentals apply as far as it is a solid investment, principal pay down and tax deductions. For your main question, we have a lot of clients that lease in some locations and own others. That gets down to the due diligence. If you've got a space and it's built out, it works phenomenally, your practice is thriving, you get a renewal opportunity with free rent money to improve the space and freshen it up, the lease rate is super competitive. It’s a no-brainer and no hassle, as simple as possible, it can make a lot more sense than going through an eighteen-month process to build your own building and then having it cost you an extra $8,000 a month. The economics make that decision clear.
I threw that out there because there's a number of PT owners out there that might be in the middle of a 5 or 7-year lease. Maybe they're doing well and they have some disposable income, yet they'd be intrigued with real estate as a future investment and look at properties either within their community. Talking to someone like you could expose them to opportunities elsewhere that might be in good markets.
Anytime you have a chance to own real estate for your own practice, you're typically going to get the best financing with that. If you can get the property classified as an owner-occupied property, you're going to get the best financing. Also, whatever percentage of the building you occupy, the security that's based upon your practice, that's usually high for most owners who believe in their practice. If you have a chance to own commercial real estate and occupy a portion, that's great. We do have owners that own some and lease others. Hiring good agents to help you advise in the market, to help advise you on your options, you will come to a conclusion quickly of what makes the most sense of your practice. That's a great way to do it.
Thank you for sharing your time. Do you want to leave us with some contact information? How do we get in touch with you if we have further real estate questions?
Our website is CARR.us. We have a specific division of our company that's Only Healthcare, Only Tenant and Buyer rep. You can get in there and see more information. At the top of the landing page, we have “Find an agent.” You can click on that and you get in touch with an expert agent in your area that can start the process, that can answer any question you can come up with. There's also a tab up there that says, “Lease or purchase evaluation.” If you wanted to say, “How does my lease compare to the current market? If I wanted to own, what would that look like compared to my current scenario?” We'll put together a free analysis for you. You fill out a little bit of information and then the agent with our company that would be representing you in that area will contact you and then give you a free analysis. It's a helpful way to start the process.The do-it-yourself mentality is going to cost you a lot more than you think you're saving, not just time but actual economics results. Click To Tweet
That's a cool add-on. It’s a great opportunity for people to evaluate what they're doing.
We get that. That's one of the biggest questions too. People might be 3 years into a 10-year lease or 5 years into a 10-year lease, it doesn't matter. They're curious, “Where am I at? Did I do a good job or a bad job? We love to answer those questions because it puts people's minds at ease to where they're not constantly thinking about this unknown variable for the next 5 or 10 years. Even if you're far in advance, we'll get with you, look at your lease, we'll tell you where you currently stack up compared to the market. We’ll tell you what we think your options are currently. Once the target window hits, whether that's in a year and eight years, then we start the process. It's a great way to get questions answered now and not worry about it for the next 3, 5, 10 years. That puts your mind at ease there and then knows that you have a game plan coming up that you're going to execute in the future.
That’s super valuable. I appreciate the time that you've taken with us. You shared a ton of information, especially for those of us who don't have a lot of exposure to real estate but are interested in it. For those who want to know, “Where do I stack up? What do I need to look for?” Getting a commercial real estate agent on your side is the first step. That's huge.
I appreciate being able to share it with you. This is our passion. We started the company with this entire model of helping healthcare providers level the playing field. This is our heartbeat and why we do it. It's fun to have the ability to positively impact lives as you do with your patients. It's the same thing.
Thanks for your time, Colin. I appreciate it.
Colin Carr is the founder and CEO of CARR, the nation’s leading provider of commercial real estate services for healthcare tenants and buyers. Every year, thousands of healthcare practices trust CARR to achieve the most favorable terms on their lease and purchase negotiations.
Colin has been involved in commercial real estate since 2000 and has personally completed over 1,000 transactions. He is a licensed real estate broker in ten states. Colin lectures and trains thousands of healthcare professionals, administrators, business owners, students and more on an annual basis throughout the country at national meetings, conventions, study clubs, associations, universities and more.
CARR’s mission is to help companies, practices and investors “Maximize Your Profitability Through Real Estate®”
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A lot of physical therapists don’t consider what it takes to be great businessman or businesswoman and invest the time and energy into that like they did to become good physical therapists. Blaine Stimac is one of the more successful PT owners who has 23 practices across four states and is ranked #255 on the Inc. 5000 list. Blaine's success is closely related to the systematic way in which he hires and trains his team. Blaine shares that at a minimum, trainings can take up to six to eight weeks, with follow up trainings after that, to create amazing, productive employees right off the bat or weed people out really quickly who are not the right fit. Blaine says growing a business is about the willingness to learn from each one of those times you didn't do great. You’ve got to be willing to embrace every moment as a learning opportunity.
Thanks for joining me, Blaine. I’m interviewing Blaine Stimac with Health & Rehab Solutions based out of Montana. The reason I wanted to interview Blaine is because he’s super successful and every time I’ve talked to him or heard him speak, he's had a lot of great insight for me. As social proof, Blaine's company is number 255 in 2017’s Inc. 5,000 list. He's currently got 23 clinics that are spread out across four states and is looking to grow even more and even faster in the near future. Thanks again for joining with me, Blaine. I appreciate it.
Thanks for having me.
Blaine, tell me your story. How did you get into PT and specifically what led you into then physical therapy ownership?
Probably like a lot of people. I had an injury in high school athletics playing football. I got a bad ankle sprain my junior year and went down in physical therapy and got some physical therapy, which opened my eyes to that field. From there, I knew this was something I wanted to do. I was always in science. I was interested in medicine. When I got that opportunity to work with athletes, to work with people and their body, that's what I set my sights on from that point.
I’m assuming like most of us, you’ve got excited about what you could do with athletes, what you could do to help people quickly, see the progress, and looked forward to that. Did you also recognize the possible benefits of wanting to become a physical therapy owner right off the bat?
I had that idea at the time since I was in a private practice when I got physical therapy. That idea strengthened more when I was finishing up my physical therapy school. I started reaching out when I was getting done with school and testing some different avenues of people I knew who had practices. An opportunity came up for me to jump into what was at the time a young practice only in existence for probably a couple years but wasn't doing great. It was an opportunity for me to jump in and take it over.
You can go into that a little bit. What was the biggest transition for you going from a normal staff PT to not having some leadership in that regard?
This was me making the move into that practice and taking it over and basically starting it from ground up. Any of the patients that were there had departed at the time that I came into it. Day one, I had zero patients on the books. That was my first PT job. I did that straight out of school.
What did you do to get patients in the door? What was number one?
I was in this relatively unimpressive office space over a card table, looking at a phone book and going through the Yellow Pages. That was my start to it. When I had the opportunity to do it, I was definitely excited to step into practice ownership predominantly because I always had the desire to do more, to test myself in a variety of ways. When that opportunity jumped, it was a no-brainer for me. I was pretty great. I was definitely naive with what was coming with regards to practice ownership. I jumped into it with the idea of being excited. I had a vision; I had an idea what I wanted to do. I wanted to definitely do things bigger, better than what I saw as the average out there. That's what led me down there. What I discovered when I did it was something a little bit different.
What were your biggest hurdles there?
Day one, I had to figure out how to get some patients. I went around and started meeting with doctors in town. I’ve got told multiple times that I wouldn't make it. The market that I went into was fairly competitive. It was viewed that you had to have a niche or you had to be part of the community to make it. For me, the first couple years were about trying to establish myself as a therapist. Being young, straight out of school, I was trying to make sure I was good PT. That's what I focused on in those first couple of years. I established myself in the community as a good therapist. I was getting excellent results. The medical community started to recognize me and I was proud of the practice. For the first couple of years, that's what I did. I grew enough in the first year to have to move offices, which was a pleasant surprise.
From that point, about year two is when I bumped up my size of my office. I started to need to hire staff. I started to realize I had a business to run. Before that it was me and my wife who's an OT. We find ourselves pretty easy to manage. Most people find themselves easy. That wasn't the problem. As I started to have a business and I committed to staff, I committed to a space, I started to experience a whole another element other than the care that I was providing. From about years two through year six, I went through this process of learning the business side of it. Not necessarily learning the business side of it, but learning what private practice was about.
It was a shocker to me that it wasn't about how good of a therapist I was. There were all these other factors that were playing into what was happening in my practice. I was starting to get a reality on that and this was becoming real to me. The things that bothered me had little to do with whether I knew what to do with my patients when I went to the office the next day. There were many other factors and what I experienced from years two through six, I experienced somewhat of a burnout, somewhat of being frustrated because I had worked hard and I had ideas of how it was going to go. It wasn't going that way. I had the idea that we’ve got a little bit bigger then I would have some balance back. I’ve got the idea that some things would happen. The irony of it was the bigger we got, the worst it got. The more business I had to run, the more what I didn't know got exposed. That led me to that route of, “This isn't what I thought it was going to be when I first started out.”
You're not alone. That's the common plight of the independent physical therapy practitioner. We assume that because we gained some level of expertise, we get some good feedback and we get some good results, we move on and we move forward assuming that owning a business isn't such a big deal and that we can learn it as we go. Other people have done it, so why can't we? Your story is the same as a lot of the other owners that I’m interviewing. In your case, what sticks out to you? You said you went through some burnout. Was there one area of your practice that was difficult for you to manage? Was it an accumulation of things that led to a point where, “I’ve got to do something different?”
It was an accumulation of things. At the time, I might have tried to peg it a little bit. It was a matter of me coming to this recognition, and that was about year six for me. I was proud of my practice. We had an excellent reputation providing great physical therapy, getting good results, but it wasn't a matter of what wasn't happening. You talk about a lot of therapists going down that route and that happens. There was a day in private practice when you could be a great clinician and you would make it because you're a great clinician. The margins were different. The ability to run a practice and not know a lot about running the practice works. The referral pattern control wasn't near as aggressive as it is. You could compete without being knowledgeable about marketing. There was a day when you could screw up a lot as an owner and still make it because you were a great PT.
Those days have changed dramatically from ten, fifteen, twenty years ago depending on what part of the country you're in. Certain areas get hit with that change a little faster than others. About six years after trying a few different attempts to solve the things that I was up against and my challenges, I had this moment, a little bit of an epiphany with myself, where it was like, “Blaine, you're a darn good PT but you do not know how to run a business.” I got real with myself for a moment and I took a look at that. At this point in time, I’m only 30 years old. I’ve gotten a lot of career. I’m ready to start a family. I could get a picture of what the next 20, 25, 30 years are going to look if I didn't figure this thing out. If I’m going to keep doing this, I’m going to figure out how to run a business. That was the process of me making this move into realizing that I needed to become more knowledgeable and more skilled in that area as well.
Times are different and we've got to do more. We didn't get any PT training from our physical therapy schools. It sounds you were proud of your practice, you had a good reputation, and you were probably making fairly good money. In my situation, I lacked the stability and the freedom that I wanted. The stability and the money might have been good, but I knew that if anything happened to me, then that clinic was going down pretty quickly.
I lacked any freedom whatsoever because I was tied to that company and it depended on me. It was my baby. I thought about it 24/7. It was hard to get weekends off mentally and trying to pay the bills after work and stuff like that. I can totally relate to where you're coming from. Things are changing. You have to do something different. What were some of the things that you tried? What clicked? I’m assuming that essentially you decided that you had to reach out and do something different than what you were doing.
That's the moment that I decided I was going to do something more about the business side of my practice. That's one of the common errors that practice owners make when they want to make their practice better. It's interesting how they'll go get more trained in physical therapy, thinking, “If I become certified, if get my fellow, if I become OCS or I do something of the sort, it’s going to solve some of these problems,” but it wasn’t. That was my first reality with that. I reached out. At the time, there were a few different consulting firms that were around offering business advice. I researched three of them, picked one of them, and was happy with what I’ve got.
I got educated on the business side of it. I got trained as an executive which started to give me the tools and the knowhow that I needed to begin addressing my practice with the same level of skill and expertise that I address my patients. It's that same element. As I’ve talked to other practice owners in the past, I’ve gotten into that idea where I say, “We're going to have to become as good at running our practices as we are treating our patients.” We have all of this intention to become great clinicians and we short-suit ourselves on the physical therapy side of it. We don't get training in PT school.
Not only do we not get training, but the training we do get doesn't carry over to business. I always make the analogy that because you're good at football doesn't make you good at golf. It doesn't carry over the way that if you had some finance training or you had some other industries that might carry over. Generally speaking, because of that, we don't understand what's happening. With the industry as it is today and what it takes to even exist, thrive and succeed in private practice, you've got to be good in a lot of areas. There are a lot of different aspects that you’ve got to know something about and or be an expert.
It’s not always about a certain consulting firm that can do it for you. My whole purpose here is to help people understand that you need to do something. You researched three different consulting firms and you went with one. I would recommend to any physical therapy owner to do the same thing. See what's out there, see what's available, and see what can educate you on the business aspect.
There are many companies out there that will focus on marketing, but how do you structure your business? What should your meeting rhythms look like? How do you hire and fire people correctly so that you're getting the right people on the bus? There are a lot of different aspects to business ownership other than the marketing simply getting the patients in the door. When you're looking for a consulting group, company or person, you want to find that person that's going to help you in all those different aspects of physical therapy ownership.
That's excellent advice. I would give the same advice. The best move I made was deciding to get that business training and go down that route. It's also why as I progressed into becoming a multi-clinic company and starting to want to work with other private practice owners. It's exactly the purpose of my existing company or my senior company, which is to partner with other practice owners and or aspiring practice owners, fill that gap of what they don't have on the business side of it, a true strategic partnership that allows for two skill sets to come together and do more together than they would do on their own. Even if a strategic partnership isn't the right move for certain people, the necessity to get the education to get the training is critical. There are a few routes available to people like you're mentioning out there.
Tell me a little bit about that. Tell me a little bit more about what your purpose is and how you are a benefit to independent physical therapy clinic owners?
As I made that move, I got trained, I’ve got the tools, I started to have a lot more success in my practice. Not only did I have success and I was capable of doing certain things that I didn't understand before, it also gave me some of the freedoms you're talking about. I made an acquisition of another clinic in my community. I tripled overnight. I still was able to understand how to correctly manage what I had. This was a company that had an excellent clinical reputation in the community as the biggest private practice in the community, but again, struggling when it came to running the business.
It was a perfect for me because I’ve got the opportunity to go in and revamp an existing practice. It was an opportunity for me to utilize some of my new skill set. I had a lot of success in doing that. What also happened was it gave me the freedom and I began getting more involved in the APTA on both the statewide and the national level. This led me into recognition of what was happening across the state, some of the senior policy issues that our profession faced. In addition to at that point in time, I had met and had a network of colleagues across the country and many other private practice owners that I understood what was going on, and I saw that there was a bit of an epidemic.
I saw that private practice owners, generally speaking, were struggling. I saw where things were going, the future. I thought it was only going to get harder. I had to face that myself with my practice being in Montana and went, “There are things here that I see coming that I considered still a threat.” I was at a Federal Affairs Forum in DC and I saw this future and I wanted to do something. There were two things I was trying to solve at that point in time. One, I wanted to do something that I thought would strengthen my chance of success into the future. I thought that growth was going to be necessary to do that. I thought strengthening beyond what I could do as an individual practice owner was going to be necessary to potentially handle what could be coming with healthcare reform and what could happen.
This was during Obama's first year in office, before he passed the Healthcare Law. Here we are nine years later and we still don't know what's going to happen with healthcare reform. I developed this passion to want to help private practice owners during that time of going through a certain process myself. Realizing the importance of the business training and realizing how much of a difference that made to me as a private practice owner, I wanted to work with private practice owners. I love that because most private practice owners that I know, Nathan, are in it for the right reasons. They're passionate, they care more, they don't want to work for the hospital, which I love. They're not willing to do it that way. They're out there because they really care. Typically speaking, these are the practices that offer the best physical therapy inside of their community.
I wanted to help them in an area that would strengthen their ability to serve their community. I wanted to partner with them. The consulting world is awesome too. You get a consultant, they can help you. If they train you in business, that's even better than giving you advice because that training you can use and keep. Short-term advice expires fast. It's not enough to deal with the ongoing challenges. What was nice about the company that I work with is you've got training, you had the education. It wasn't just advice, but at the same time there was an enormous amount of progression beyond that spot to take it to the level that I took it to.
That's where I thought a partnership would allow for a lot more where a lot of people don't have the time, the intention, and enthusiasm to go down the route that I did. I saw it as a good route for a potential partnership. I went down that route. I wanted to partner with private practice owners. I wanted to strengthen their chance to succeed. I’m a champion of private practice. I believe private practice has to make it for our profession to make it. If you look at the role private practice has played for when we were a secondary caregiver, we were clearly down the hierarchy in as far as healthcare providers to becoming an autonomous practitioner, direct access, capable of seeing people off the street, being recognized as the expert in musculoskeletal system.
That progression, in my opinion, has been driven by the private practice sector. I usually ask people, “Take a look at all the people that you'll pay money to go to their courses and either become certified in or look at all the people that we write today would let’s hear the big dogs out there.” The ones that we go to their courses got their name on everything, the leaders, the gurus. I’ll usually say, “Name one of them who didn't grow up in private practice. Name one of them who’s existing and living in a hospital system.” It doesn't work. These are the people that were driving the progression of our profession. I believe I want to help practice stay there. Private practice owners are the people who most motivate and inspire me because of what they're doing and why they're doing it. I wanted to strengthen that.
You've partnered with a number of physical therapists and opened up a number of your clinics. That first one you took over was a larger clinic than your own in Montana. With your experience, what are the two things that you see going wrong in private practice ownership that you're able to “fix” and what are some of your secrets to coming in and fixing those things?
Every practice has their own areas that they're strong in and not strong in. It can be the aspects of marketing. It can be the understanding of finance. Financing includes both, one, how to correctly use your money. As we know, we can't use and spend money if we also don't know how to make it. If we can't make it first, we’re in trouble. Number two, once we make it, we better know how to use it correctly in order to run a business. You see that error a lot in practices. All the practices that I’ve evaluated, most of them have a finance problem.
When you say finance, are you talking billing and collections? Are you talking expenses are out of whack and they're spending more than they should be? Is it a combination of both?
It’s a combination of both. What you bring up in the billing and collection side of it is definitely something that you have to know and understand. My general experience with third party billing companies is they do okay, but I don't think they're great at it. They improve if you're a bad situation, but I don't think that they do it as well as it could be done. That's why I decided to perfect it in my own practice. A lot of practice owners who have confronted that area and got good at it realize that side of it. In and of itself, it's a whole industry, hence the reason you have all these third party companies out there. That side of it has to be understood.
There's the side of knowing how to correctly spend your money, the expenses, and how to correctly manage it also from an understanding of how much volume you need your group to do. How do you manage this? There were many practice owners that I’ve looked at their practice that weren't even paying themselves or that were paying themselves less than their staff. They didn't know quite how to make it go and some of them weren't small. They had a decent size practice there. They didn't know quite what to do. It's not that they were way off in left field in any one area as much as it's a multitude of small little things not quite done right that add up to a chunk in there struggling with either low margins they're battling. They're wondering if they're going to make payroll this week. They're wondering what's going to happen.
Even when they're making decent money, when I asked them how many hours they're working, they're still making less than their staff. They're working 65 hours a week. When you break it out over per hour, it doesn't even sometimes come out to that. They recognize that they're not always getting that, but they keep going and they're driven because they have such a huge intention to help. They want to be great physical therapist, what is inspiring and what is great about it and what is to be admired. At the same time, we've got to have some skill on this to know what to do with that intention.
Number two, if I ask almost any business owner what's the hardest part about running a business, they're almost always telling me personnel, staff, people. Getting people to do what you would do. They'll say, “I’ve got to clone myself,” or they'll say, “If I could only hire more like this,” but the reality of it is those people are not going to do what you do. It requires that you have a skill set. It requires that you have some ability to learn to build a true team of people who can perform at a level that's above average.
I had this realization after battling for a while when I first took that clinic, the first practice over that I was telling you about. I had the realization that I wasn't going to win with what was average. I needed to be able to do is to create a group that was above average. I realized I had to have a skillset and invest in the development of my group and their abilities. Probably one of the tougher parts of running a practice is learning how to work with your staff, learning how to take this group of people and expand their skill set upward and do it as a team.
Any secrets to what you do then to build that team or to filter the incoming people or filter out the wrong people? What secrets do you hold on there?
First off, you do have to be capable of hiring good people. There is a skill to that. There is a correct way to do that or a better way to do that. You definitely have to have a high standard for what you allow to stay on your team. If a person is distinctly not getting their job done, you have to be able to deal with that. It’s no different than if you're on an athletic team and one personnel on the field was distinctly not getting their job done, that person would be replaced. That has to happen. Once you get an improvement in the hiring side of things and the ability to know when a person should stay on your team and when they should not, the second piece is you’ve got to be good in your training. If you don't train people well, onboard them correctly, and give them the right training and expectations of coming onto your team, you're going to struggle. That's a key factor too.
You've shared your training with me in the past and there's quite a bit to it. You focused on defining the product that that position is supposed to obtain and how they go about getting that product have a clear definition as to the post. Am I saying it correctly?
Absolutely. We are definitely going to make it clear what the expectations of being part of our team. We let people know right away that we're trying to build a great team here. We're not trying to build an average team that will appeal to certain people, and certain people it won't appeal to. People who want to come in and punch the clock and do the bare minimum, it's going to be less appealing to them as the person who wants opportunity and wants to advance their career.
We make it known right away that expectation. We make the exact outcome or result of their job. Every position has a specific thing that it's there to do, which we might also call their product. It's the thing that, at the end of the day, we have to make sure is happening. It's the thing that we have to make sure we're capable of doing. If I’m a receiver, I have to catch the ball. I can't almost catch the ball. At some point in time, I have to actually catch the ball. When I’m learning, that's okay. When I’m growing and developing, that’s okay. I’ve got to eventually develop that ability to catch the ball and then I’ve got to have it right. We work on making sure people understand what that is, make sure that they want, that they're on board, that this matches their own personal goals and what they're trying to accomplish in their career. We start teaching them the knowhow, the technique, and what it takes to correctly do that.
My teaching isn't a matter of some two our little quickie training that I give them onsite or, “Here, read a couple things,” and then throw them insight. This is something that would involve reading, training, and mentorship. It involves some time. We deal with mistakes, we deal with misses, and we come back in and try to strengthen. No one learns their job in the first week that they're there. We want to think they do. Sometimes that's all the time we give it, some little quickie. Who is going to come in and in matter of a couple of days learning their whole job?
How long do you consider your onboarding, your training?
Every position is a little bit different, from a therapist to a physical therapy tech to a reception to a billing person or whatever. Every person grows and develops at a little bit different speed. One person might be twice as fast as the next one. We're less interested in time but more interested in the fact that person is making progress towards and their effort is there, they're willing, they're trying, and then we work with them. It can be anywhere from oftentimes six to eight weeks, and sometimes it's three to four, five, six months.
We even have some of our training. They'll go through a second round, a certain period of time down the road, which then adds in a higher gradient of training that would be too much right out of the chute. It also reiterates certain pieces so they can get it again. Sometimes studying something more than one time allows for it to sink in a little bit more. We have a couple of things there and we're always willing to help that person. What we more look for is desire and willingness, a person who wants to progress and grow in their career. We spend the amount of time in that at that point.
How do you weed somebody out if you've figured out that this person isn't going to work on your team? Take me through that process. I’m assuming that you figure it out pretty quickly with the amount of training you do because you do a lot more training than most. How do you weed someone out if you recognize that they're not producing what they are supposed be?
A well put together training lineup sequence program will definitely help. In that process, if you're working with someone frequently and consistently, you'll start to recognize the people who weren't there for the same reasons that you want the rest of your team there for. If you're working with them closely during those early days, it starts to show up a little bit. Oftentimes, their willingness starts to change, their frustration. There's frequently, instead of trying to figure out what needs to improve, oftentimes there's a “why things can't be done” approach.
A person will always complain about stuff and they'll tell you why it can't be done. They don't go, “Yes, let's try that again. Let me see what can I learn about this? What part of this can I get better at?” There's always more of a resistance about why it can't be done as opposed to an attempt to try to find the solution we need to it. You start getting a feel for that. Once we get that feel, the progression of their training starts to change a little bit. We're going to have a little bit more of a direct conversation about whether they want to be there. What it is that they want? Sometimes they're not always bad folks, but this isn't what they want to do shows up.
You'd rather find that out quickly and honestly if they're aligned with you or not.
The sooner, the better. That's a good piece of advice there, the sooner, the better you can find that. Here's another thing that I’ll throw out as a piece of advice or as to comment out there for the practice owners. Sometimes when we hire, we hire a little bit out of desperation. We get busy and we weren't prepared for it. We weren't ahead of the curve. What ends up happening is we wait until we're super busy. We're not confident in our numbers so we don't make the move early when we should be. we know our numbers are going to stay, everybody's freaking out, and we go hire the first person or first therapist or first receptionist that comes along.
We’re put in a difficult situation because of someone parting and we hire more out of desperation than trying to find the right fit. When we do that, oftentimes, one, we don't get as good of a quality of candidate that we hired as a new team member. Number two, when that person's not working out, we hang onto them too long because we don't want to do it again. It was such a hassle to go hire that we don't want to let this one go because we can't face having to do it again. Both of those are strong reasons of why we go around with a less than high performing team or what I like to sometimes say sandbags. We're trying to run a race with sandbags on our back.
I’m trying to think of what you hear quite frequently in business terms where you take your time in hiring, but you fire quickly. It sounds not only do you take your time in hiring, you take your time in training those people up. When you figure out they're not the right fit, you're pretty quick about it and you pull the trigger.
Absolutely. Each one of our partners that we work with is learning that themselves because they're the one running their practice and we’re consulting them. If I am directly onsite running that practice, I’m probably fast. I’ve done this for a long time. I’ve been around the block a lot of times and you’ve come to recognize. What I love though is there's always an intention to want to help that person. Most private practice owners are strong in their desire to help people. That also make us a little bit of a sucker at times because we hang on.
We want to help our employees as much as we want to help our patients. What you understand is that person has to meet your desire to help them and they have to meet you halfway. You can't walk them to do better than they want themselves. They have to want, at least as much, to do well as you want them to do well. We like to help them and spend that time with them, but as soon as they're not working out or we recognized certain things, we move pretty fast.
I read a lot of books on business. You go to conferences, you have a lot of mentors out there and that's probably one of the consistent things you hear from successful business owners. Hire slow, fire fast. It's true, but it's much harder to do in person than it is until you’ve got a good feel for it, and then you could do that. You also got to be willing to learn from each one of those times you didn't do it great. You’ve got to be willing to go through it a few times. You’ve got to be willing to experience every aspect of that. Sometimes the hard parts of running a practice, Nathan, we don't always welcome them as well as we welcome the good parts. We have to welcome every part of it because if you don't, you're not learning as much from it as you do the good parts.
A lot of times when we were running into tough parts, we have a tendency to wish it wasn't there. We don't embrace that moment as a learning opportunity. We don't do everything we can to learn from it and see the places that we made mistakes in on the front end. Consider it an opportunity as opposed to, “This is something uncomfortable, it's painful. I’m going through it and I wish I wasn't.” It doesn’t work that way. You’ve got to be willing to take one on the nose sometimes and enjoy it. You’ve got to want to learn from it and embrace that moment.
Consider it a learning experience. You mentioned that you read a lot of books. Are there some books in particular that are favorites that stick out business-wise that you would recommend other PT owners read?
I probably have not read a single book that encompasses every aspect. I’ve read many books and I like each of the pieces that different parts of them bring. Sometimes I get inspired more by reading about people's story. I read how they overcame their willingness to go through adversity, their toughness when they were getting hit. I love these stories. I love hearing other people have the ups and downs because sometimes when we see a successful person, you don't always realize that they had to work to get that, that they had to go through a lot of different growth phases.
They had to mature. They had to go through ups and downs. I find that inspiring because during the times when it is tough, during the times when you're battling a little bit, it's nice to have that motivator of knowing other people have gone through that and to not in any way slow down, to not hold back at all. I love those aspects of it. I’ve read many books. I’ll do some study on marketing. I have different potentially recommendation of books and different aspects that you can go down that route and things I like to look at there a little bit. I love reading about people's story as much as even a direct technique and whatnot because we have our systems that we use quite a bit and we try more strengthening in certain areas. I’ll do quite a bit of study on marketing or whatnot.
The one thing that is unique about you is that you have a number of clinics across different state lines. Is there any challenge to that that you've come across?
Yes, there is. You're going to have to learn a new practice act. You're going to have to learn a new employment law. The insurance contracting is not always the same across regions. Every time you go into a new region, there's quite a bit of research and due diligence that goes into that process. Anytime you get a distance away from your clinic that you can't easily drive to it, you've got to be stronger in certain areas. You have to be if you're onsite every day. Probably the biggest challenge is learning how to get distance from your clinics and still have the right things being done. That goes back to a strong business model, strong training, strong understanding of what to teach people, and becoming good at business, being a good executive and strengthening your team.
It goes back to the number of the things that we've already talked about. Number one, hiring the right people because you need to have the right people managing that site that is far away from you, and doing a lot of the proper training. A lot of that training can't occur unless you have pretty solid and stable policies and procedures in place to make sure that everything's running the correct way. You're looking at all the same key performance indicators. You're all focused on the same statistics and even focused on a similar meeting rhythm that you can report accordingly.
You hit on some of the key points there. A good book that talks a lot about getting the right people in the right seats on the bus is Jim Collins’ Good To Great. It’s a book I enjoyed as well. Not excellent exact techniques on how to run your business, but a recognition of the fact that those that are more successful are doing things different than those that are not. It's not based on luck. It's not based on a variety of factors. It’s based on learning what to do and doing it. That's a great book. You’ve got to have a good organizational structure. You've got to have good metrics, analytics, statistics.
You've got to have the ability to have meetings and be well-coordinated as a team. You've got to have good written materials, policies, procedures, knowhow, recipes, correct technique that you can teach people. Success is about figuring out what to do and then being able to execute that game plan. Ability comes down to three key factors, being able to see what's happening, the ability to know what to do with what's happening, and then the ability to execute based off of what you wanted to do. There are a lot of people who come up with a plan and failed to correctly execute it. Those factors as a team, any team comes back to also the ability for good leadership. Every practice out there has to embrace that opportunity to be a good leader has to like everything that comes with that, the good and the bad.
Sometimes when you're the leader, you're also the first guy the fingers point at. You’ve got to want that. You’ve got to be willing to embrace that. The more technique and the more skill you have behind you, the more enjoyable. It gets fun. Just like an athlete, you see an athlete who's good, they make it look easy, almost fluid, they're smooth, they’re skilled, it's like an art. A good executive is the same way. They become artful in what they're doing. They're skilled and they make it look easy. Realize that that's a reflection of their confidence, not their skill set, and the time that they put in to grow.
Most practice owners, if they might recognize that they're not all the way there yet, would recognize that as long as you're trying to grow, you're constantly trying to improve, and you have a path towards that growth, that's what you're looking for. That's what we want to do because I know where you're at. You guys have done great things with your practice too. I know a little bit about your story and as you guys know, we're always striving. We're always trying to get better. We're always growing. That drive and feeling confident that you're going down a path that's going to lead you where you want to go makes it more fun. It becomes enjoyable the more skilled you become at it.
Tell us a little bit about how people can get in touch with you? Tell us a little bit about Health & Rehab Solutions and what you are doing at this point, if they are interested, how to contact you.
Health & Rehab Solutions has a couple of different routes in which we look to accomplish our purposes, grow, and accomplish our successes. One is through partnering with either existing practice owners. These are practice owners that either recognize that they want to strengthen the business side of their practice and they see a strategic partnership as the best route to do that. One of the things to understand about our company, if you are an existing practice owner, is we have no private equity backing.
We don't have investors that we're having to serve inside of our model. We've done everything we've done self-funded and we're still run and owned by physical therapist. Health & Rehab Solutions is owned by myself and my partner, Ryan Robinson, who is also a physical therapist. Between the two of us, every time we partner with a new partner and help them run and grow their company, is another physical therapist. That's quite a bit different than this big market out there which is dominated by these big industries who are backed by private equity and venture capitalist group. At the moment you do that is a different game.
One of the things that we are unique in the market right now is we're an opportunity to partner with 100% physical therapy owned group as opposed to a private equity group. We like to call that more a true partnership because we believe some of the other models out there would have the tendency to be sometimes a little bit of a biased model. They're set up a little strong in one direction or the other as opposed to this direction. That's how we look at it a little bit. It's important for people to know that differentiation.
We'll partner with existing practice owners, go in and start teaming up with them on their practice, sometimes to solve what is a challenging market. A lot of times to get back on track with helping them go towards their goals. A lot of times where they originally wanted to go and where they're going or what they've accomplished thus far is not what they have in their original vision, in their original set of goals. It's time to get back on track with that and go.
Some people we've partnered with also see our opportunity to partner with us and then increase their platform for growth. Not only does it solve some problems that they have, but it also strengthens their opportunity to grow. They get the structure that we've created, they see our systems, they see our model and how well it's been put together and how it allows for that. It's one of the pieces and the things that is truly strong. We also will partner with the practice owners that are aspiring practice owners, people that are up and coming, looking to make that move into practice ownership.
Getting a strategic partnership will allow them to accomplish more than going out on their own. Once we have a partner from that point, we have our own strategic plan and growth plan with each one of them. Sometimes we're making with that single person and that partner or growing quite a bit of their brand and their clinic. We have four or five clinics now. We have some companies that four or five clinics and are wanting to continue to build inside of their own geographic region.
If people want to reach out to you and get to know a little bit more about your company, how did they do that?
The best opportunity would be to email me at BlaineS@HealthRehabSolutions.com. You can also contact us through our website, HealthRehabSolutions.com and get in touch with us that way as well. There's contact information on there. There's an email you can email in addition to my email that I gave you.
Thanks for sharing. I appreciate your time, Blaine. The work that you're doing is phenomenal. Your purpose is obvious and you've got a ton of experience to share with not only the people within your group and with Health & Rehab Solutions. Based on your work in the business and with the APTA you've got a wealth of experience. I look forward to hearing more from you in the future.
Blaine Stimac, PT, MSPT, received his Masters of Physical Therapy from the University of Montana in 2000. He has been a private practice owner since 2001 and has received extensive training in business and management technologies becoming an expert in private practice. He serves as the CEO of his practices and has engineered a multi-practice group that has experienced significant growth over the past 5 years. He has been involved in the acquisition of 7 practices, including 14 clinics, during his career in private practice. Blaine co-founded Health & Rehab Solutions, LLC to further expand his successful practice model. Blaine is also dedicated to the physical therapy profession and private practice. He currently serves on the Board of Directors as the Treasurer of the Montana Chapter of the APTA and is active advocating for his profession on a statewide and national level. He is an active member of the Private Practice Section of the APTA and recently authored an article for IMPACT magazine. He has become an opinion leader within his profession by advocating for private practice and consulting multiple practice owners in improving their practices. Blaine is passionate about creating a group of private practices that are known as the benchmark in what a private practice clinic should be. Outside of the office Blaine spends time with his family and watches his three boys learn, grow, and live life to the fullest. He is very active and can be found whitewater kayaking, skiing, biking, hiking and enjoying the adventures of the mountains.