Opportunities for Action: 2 Underappreciated Drivers of Long-Term Deal Success
Carter Schelling revisits Paul's interview with the leader of Empower Physical Therapy, explaining speed and accuracy of fit and how extreme preparation helps owners find the right acquirer.
Full transcript
Generated from the episode audio and lightly edited for readability.
Welcome to studio 3655. I'm Carter Schelling, director of business development for Martin Healthcare Advisors. I also run a consulting firm called 3655 Incorporated. For the last 42 years, I've been helping my business owner clients create extraordinary companies in ordinary industries. And for the last couple of years, I've helped Paul create his wonderful series of interviews and shows about this industry, many of which were shot right here in this studio. Today, I'm doing the opportunities for action from the Steve Depala interview of I think a couple weeks at this point.
It was a really great interview and added to our information about how you can get the best deal possible for your company. So, let's take a look at the context first. Who is this guy? Well, he runs Empower Physical Therapy, 45 clinics, four or five states, but he's also sort of a wizard. He created it from five separate companies that were combined and integrated successfully and then funded by a private equity firm to go out and add some more. Paul's bullish about their future and was talking about them doubling in size in perhaps less than a year.
Second of all, how should we interpret his tone? I always ask this question because these are powerful people we're talking to. They make powerful decisions, but their tone is like, "Well, I see a sort of they really kind of pull their punches a little bit because they don't want to be too harsh." But if you listen carefully, there are a couple of really important driving principles that he offered that you can use to get an edge on your competition in selling your company. He's adding us he's adding two more elements to what we call the new normal for acquirers.
Now, one of the elements we've already discussed is the power of having speed and accuracy of the deal. You want your deal, your transaction to proceed in a straightforward, rapid, but accurate fashion with no holdups in the transaction. We've discussed that several ways. What's interesting is that Steve is adding something to that. His contribution is what we call speed of the fit. Now, what do I mean by fit? Well, they're good buyers and they're good sellers. But not every good buyer is a good fit for you.
And you as a good seller aren't necessarily a good fit for every good buyer. The fit is a whole third entity that has to be attended to, that has to be investigated, and that has to be decided on. You know, some deals break apart, and you ask the players, "Well, why didn't you sell the company?" Well, they're a good company, but they just weren't a good fit. Steve is very insightful to recognize that the acquirer has to figure out, are you a good fit for them quickly?
And you have to figure out are they a good fit for me quickly so that the whole issue of fit and match doesn't hold up the transaction. He indirectly also pointed out the AC the importance of the accuracy of the fit and I'll talk about how that came out from what he said although he didn't articulate it directly as an important driver of success. So, how can you use this new information to your advantage? Well, you can use it in something we call extreme preparation. You know, Paul's been talking about preparation.
I think we need to kick it up a level. One of my clients is a major contractor and they're obsessed with safety. And they discovered that one of the contributors to a high quality safety record is what they call extreme housekeeping. Okay? When you drive by their jobs, looks like looks like a laboratory, not a construction job. Extreme housekeeping. Well, I think that you can get an edge on your competition by what we call I call extreme preparation. Now, where does that fit? Well, with respect to speed of the fit, that means you have to be absolutely positively clear that you're ready to sell.
And I don't think you can do that by yourself. I think the extreme version of knowing that is you have to make yourself go out and talk to two or three other owners who have sold in the last couple of years and let them tell you what it was like for them to one day be king of the company and the next day be a member of a team. Sounds pretty good, but it's I've been involved in many sales of my clients. There's always a shock.
Not only is there a shock, but there's some trepidation sometimes at the altar on the way in getting ready. You want to be clear that you will not stall the process by reconsidering is this really right for you. In addition, are your people ready? That is your family ready for you to sell? Are your partners ready? Are your key executives ready to go through a sale for real? Are your managers now? You may not inform them about this process until it's already taken place, but you know them.
Are they ready to successfully change the way they operate to fit into a new team? And then finally, is your structure and are your systems ready for real change? Because we know that's where the greatest change occurs when you join another company. If you're not ready yet, you're not a good fit. Fix it. Accuracy of the fit. Now, accuracy of the fit is really important, but subtle. For instance, you have to be able to write down not what's important to you in an acquirer, not what's important to your people, but what does your team need to be successful?
What are the contributors to your success today? What do they have or get that permits them to provide you with the financial return you get from your company? What do they have to have to be successful? And do you know, are you sure you know that you'll get it from this potential acquirer? Let me show you how hard that is. You know, Steve said some great stuff. He said, for instance, that many consultants advise owners to spend more time working on their company than in their company.
And he saw the principle, understood the principle, but really preferred to work with owners who still liked hands-on. They had to know their business principles and how their business functioned, but they really still practiced PT. That was part of their philosophy at his company. Great. Sounds good. I'm sure that works perfectly for many sellers because that's how they are, too. But I'm also sure that there are some sellers who have a different strategy. They've decided that in order to really get the business they need from their community, they need to spend time out in the community with referral sources, hospitals, sports teams, even civic functions to get their brand out in the community.
And they may even tell their clinic directors to do the same and not do as much hands-on therapy as they used to. It's a strategy that can also work. It just isn't a great fit for the strategy Steve described. In addition, when asked about the effect of increased pressure on wages for therapists, he said they were very sensitive to that. They wanted the pay market, but he emphasized even more strongly work life balance and the culture of his company as a reason for his best therapist to continue to choose his company over the competitor even when the competitor might be seemingly offering more money.
It was terrific when you heard the that's wonderful. Makes perfect sense and it does for many sellers. But if you're a little bit of an outlier and you've decided, you know, in our company, we're going to get the very best therapists and we're going to pay more than anybody else. And how are we going to do that? We're going to challenge them to innovate and find new ways to be more efficient while maintaining the high standards of care that we're known for. We're going to figure out how to pay more and make more.
And I have to tell you that they'll probably work harder, too. Their work life balance may not be what it could be or would be perhaps in another company, but that's how we operate. It's how we roll. We've been very successful with that. We're known for that. And we attract those types of therapists. That individual is a great seller but not a great fit for Steve. So both sides have to figure that out quickly and accurately so they know whether they should proceed or not. And here's the bad news.
The best person to investigate whether a potential buyer has what you need to be successful is for you to do it. Now, as I know you've been told, when you go through selling your company, there's a whole hundreds of things you have to do in addition to running your company. And everybody's stressed out because there's never enough time. And I'm telling you, in addition to that, you have to play Columbbo and research the heck out of how the buyer operates in his or her environment and whether it'll match your success formula.
How you going to do that? Well, hold your breath. I advocate that you actually take your number one executive, your most trusted individual, bring him or her in to the deal and so they know what's going on and then put them in charge of responding to the requests for information that come from an acquirer. Not making decisions, but being the person who has to go find the figures or go find something that we didn't easily have filed. Checking with you when necessary, but they are the heat shield on all the extra activity which frees you up to find the best source of acquirer intel you can.
You need the best possible source of acquirer intel so that you know given what's important to your success who the best acquirers to investigate are and what each of them prioritizes as most important. You got to know your options and do your homework. Now, why am I making such a big fuss about this? Why am I asking you to put in all this extra time? One word. The risk of getting a deal that's good financially, but in the end is not really satisfying forever more. Is you'll get a good buyer, but not the best possible buyer for you.
You'll get your money, but you won't get your future. That's why extra investigation at the beginning of the process when you have time to do it saves you from regretting the choice you made for the rest of your life. We can help you do that. Put your name and email in down below and let's start a conversation about how we can do that. Thanks for your time today. I'll see you at the next show.
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