Why Is a Dynamic Culture So Valuable to Acquirers?
Paul explains how a dynamic culture drives EBITDA up and risk down through productivity, charge capture, patient retention, and word of mouth marketing, making a PT practice more valuable to acquirers.
Full transcript
Generated from the episode audio and lightly edited for readability.
Good afternoon and welcome to another episode of the Martin Rehab M&A Advisory and Paul Martin's guide to finishing wealth. Today, what I want to do is to follow up on a presentation that we did about a week ago and it was titled the war for talent. How to attract and retain staff with a dynamic culture. Today, what I want to do is explore why a rehabilitation business with a dynamic culture is significantly more valuable than one with a stagnant culture. So we're going to delve in today how a dynamic culture will drive EBITDA up and will d drive risks down making your practice more valuable to potential buyers as well as investors.
So let's dive in. You know again a dynamic culture will absolutely drive EPIDA up. You may wonder how can culture drive EBITDA cash flow up. And for those of you who may not know, EBITDA is earnings before interest, taxes, depreciation, and amateurization. Well, we're first going to start with productivity. Look, a dynamic culture promotes productivity and that is essential for driving your EPIDA up. When your team members feel engaged and they're motivated and they're empowered, they become more efficient and they become more effective in their work and that will lead to improved operations and financial performance.
You know, when staff members are encouraged to collaborate and communicate openly, which is the result of a dynamic culture, they're going to feel more motivated to work harder and work smarter. And that will absolutely result in increased productivity and will have a significant impact on a company's EPIDA. You know, a small change in productivity. You know, I'll just make it make this an example. Each therapist seeing one more patient per day just due to better scheduling, them being more effective, being more efficient, that can have a 25 to 50% increase in your EPIDA.
So, dynamic culture driving productivity will improve your EPIDA and your value. Second, let's talk about charge capture. Charge capture again, what your therapists are doing with their patients and what they're actually billing for their patients. I believe a dynamic staff is much better equipped to charge more appropriately for the services they provide. This will absolutely make sure that your business captures all of its revenue potential and that will eventually and ultimately drive your EPIDA up. When staff is trained to understand the value of their services, really truly care about their input into this profession, which talks about the value of the services that we perform and they're willing to then charge accordingly.
We need to get buyin from our staff. We need to then me measure and monitor their performance as it relates to billing more appropriately for the services that they're providing. This will improve their confidence and will ensure that the business is capturing its full revenue potential which will positively impact epito. All right, let's talk about number three. Now number three is retaining patience. Now, retaining patients, many of you may think of that as more visits per new patient. Well, that's exactly what it becomes. And a dynamic culture, you know, will often encourages staff to provide exceptional care, engaging care, ensuring that your patients will remain engaged throughout their full episode of care.
This will increase, as I just said, visits per new patient and will absolutely contribute to a higher EPIDA. We recently looked at a company and they had a little bit of a low visits per new patient. They were absolutely on board that this is due to some patients just slipping away, not enough measures in order to make sure that patients are not again kind of just slipping away. And they increased their visits per new patient by one full visit. That improved their EBIT by over $200,000.
A huge increase. So again, if your staff is dedicated and to their patients and are carrying out a very personal approach to patient care, engaged with their patients, they will have better outcomes and you will have better operations, financial performance. All right. Lastly, in terms of again driving EBITDA up, I want to talk about some soft marketing. I believe that with an engaged staff, again a dynamic culture, that staff is on the floor basically marketing all day long. They become what we would call natural ambassadors for your practice and they're participating again in soft marketing efforts not by any type of design other than just a dynamic culture which causes folks to want to be more positive.
They're more empowered and this in turn boosts revenue and drives EPID dot up. You know, again, an enthusiastic staff, an enthusiastic staff who then go out into the community and share their positive experiences within your practice with others, that will attract new patients simply through wordof mouth marketing. Think about today if your staff, again, we were able to make them more engaging. We were able to make them more dynamic. If each one of your staff members throughout the year brought in 10 new patients, how much that would impact your number of new patients coming into your practice.
Now, let's move on now to how and why a dynamic culture will drive your risk down, which again will ultimately improve your multiple. Again, the higher the multiple, okay, the I'm sorry, the higher the risk, the lower the multiple. The lower the risk, the higher the multiple. So, let's talk now about how a dynamic culture will absolutely reduce that risk, giving you a higher multiple. First is in compliance. Again, with the dynamic culture, compliance issues are much less likely to compliance issues that come up are much less likely to be ignored or simply brushed under the carpet.
Staff members in a dynamic culture are empowered to address concerns and report issues without fear of any retribution, which ensures that your business remains compliant. We have found that yes, compliance programs are huge. We can do ongoing checks and balances, but when you have a staff that is willing to step up and talk about things that may not be going on that are act quite right in your practice, that will take 75% of the compliance issues in your practice and wipe them away. Next, leadership and alignment.
I will tell you a dynamic culture. It absolutely fosters an environment where natural leaders will excel and prosper. And again, this leads to better staff alignment as employees begin to understand and work towards the organization's goals and objectives. Now, if your staff members do not know clearly what the again the company, the clinic, the practice. If they are not clear on what the goals and objectives are, how are we then supposed to expect them to behave in a way that would align with those goals? All right.
Next would be growth potential. Okay. Dynamic culture. How does that drive growth potential? Look, acquirers are always on the lookout for growth opportunities. Companies that are growing. A dynamic and aligned staff presents this opportunity as they are way more likely to the businesses to contribute sorry to contribute to the business's growth and success. Then consequently, acquirers are willing to pay more for a company that has less risk and a higher growth potential. Growth is huge as it relates to value. Companies will pay significantly more for businesses that they see has have high growth potential.
And I truly believe that a dynamic culture creates a sense of positivity and a culture of growth. Let's talk about the next decrease that we can have in our risk. And this is really talking about that second bite of the apple. You know, in the current market, there's a huge opportunity to get that second bite of the apple. As you know, many of these companies are structuring those deal their deals so that you get equity upfront and then you get paid out for that equity at the end of a three, four or five year period.
Look, a dynamic culture and staff will stay with you through this deal and then help you to get to even greater success on the back end. So in conclusion, you know, a dynamic culture in your business is essential for driving EPIDA up and reducing risk. Again, by fostering productivity, ensuring full charge capture performance, creating an environment where compliance and leadership can thrive, you can make your business more valuable and attractive to potential buyers. Don't underestimate the power of a dynamic culture. It can be the key to unlocking your business's true potential and setting the stage for continued success after the initial acquisition.
Invest in your culture, grow your business, reap the rewards. I appreciate you joining me today. Okay. And if you're looking for more insights and strategies on how you can create a dynamic culture, drive that EVIDA, lower your risks, click below. Let's talk. Thank you. Look forward to talking to you in the future.
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