Valuable Lessons from the Success of Larger Companies
This week Paul begins a 3-part series on the strategies and tactics behind the rapid growth of several larger, privately-held companies in our industry. This is the kind of intel you need to grow your business in this increasingly competitive market.
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. Today we are going to start a new series and this new series real exciting. We're going to look really closely at some of the large leading privatelyowned physical therapy companies and their owners. And we're going to study what their blueprint of success has been. And again, this is going to be from some of the leading privately held rehabilitation businesses in the country. Real exciting. Really trying to explore and really get inside their heads on how they think and what their mindset is as they approach the growth and development of their companies.
So again, over these next three episodes, we're going to really try to better understand what are some of the success secrets of these large privately held rehab companies. And we're going to look at some of the very specific traits that these business owners seem to have different and unique from other physical therapy business owners. And so if you are one of these large independently privately held businesses, you can learn from some of the traits that maybe others have that you may not have. And if you're a smaller company, this will be really exciting for you to really try to understand and see how these large business owners think.
So first let's define what's a large privately held rehabilitation company. First of all, privately held means they are not backed by private equity or a publicly traded company. And the criteria that we put for a large privatelyowned reup company is more than 10 clinics. You could have a seven clinic company that is considered large. Revenues typically at about the seven.5 million plus range and an epida of somewhere around a million and a half plus. So again, that's where I say a seven clinic company could certainly be doing seven and a half million in revenues and a million and a half of EBITDA.
So there are some exceptions, but the general rule 10 plus clinics, seven and a half million of revenue, million and a half of EBITDA. And as we all know, there's a few of these in every big market. You know, small states. There's a few in some small states, but in each of the large market, there's usually, you know, one or two or three of these companies that have grown past 10 clinics and are on their way to 20 plus. And some of these companies have really become and again all privately held.
This is private money that has been invested in these businesses, not outside private equity or not outside funding. Some of these companies have become on regional players growing to 50 plus and even 100 plus clinics. That's remarkable being able to do that again as an independently privately held business. Remarkable. But there are a few out there right now. So what are some of the key traits of these business owners? First and foremost, it is an appetite for growth. When when they hear growth and development, their ears perk up, their back gets up.
They stand in attention. They have an appetite for growth and they seem to have a vision for their where they want to go. They they can see what success looks like for them. I've talked to many of these companies and they have said to me, the business owners have said, you know, back when I was five clinics, I thought, you know, h how could I get this to 25? What would I have to do to get to 25? So, they had that vision and then it's just paving the way.
Another trait that we see is strategic networking. Okay, these folks are always seem to be engaging with what we call one level up business owners. So if you're five clinics, you're talking to that seven to 10 clinic company. If you're 10 clinics, you're talking to the 15 to 20 clinic companies. If you're 20, you're talking to the 50 and so on and so on. And you always see them very strategically networking to find information on how they can scale those companies. They also seem to always want to have an opportunity.
So they're always seeking and finding opportunities for knowledge exchange. Remember, if all you're doing is going around asking questions of others and you're never giving of yourself, really difficult to build a relationship where someone's going to give enough so that you will really truly benefit. You have to give on the other side. And that's another one of the traits of these large independently company business owners is that they're giving as well as receiving. You know, let's continue with some of the traits. I think as it relates to risk and in innovation, they really look at risk as it's a calculated risk takingaking for growth as opposed to just I'm able I'm willing to accept any and all risk whatever happens.
Now it's a very calculated risk which means there's a lot of planning and we are seeing now that some of these companies are really embracing innovation utilizing opportunities whether it is involved in expediting their hiring process or it's involved in streamlining their note takingaking process to make it better for their therapist. They always seem to be on the cutting edge of what's new and what's really working in this industry. And this is a key trait as it re as it relates to risk. They always seem to be embracing mistakes as learning opportunities.
I made a mistake three years ago. It'll never happen again. We did a startup and we didn't have all the physicians lined up or the referral sources lined up. It'll never happen again. So, they embrace their mistakes as learning opportunities. Some additional traits, and we're going to keep talking about these as we go through this three-part series, is, you know, they always seem to have adaptability to market changes. So, when changes are coming, they seem to know about it before everybody else does. They're always the first to know about these changes coming in their market.
Culture seems to be paramount. And that is why As we talked to many of them, these companies always seem to be at least fully staffed, if not overstaffed, when everybody else is struggling to find staff. Now, key trait here is they have limited their clinical time or have hired appropriately around them in order to generate growth. So, they've put people around them that can assist the company to grow while they're treating patients part-time, but many of them have really limited their clinical time so they could run, manage, grow, and develop their business.
That seems to be a key trait. Now, this is the last one, and I'm saving the best for last because when I talk to business owners, I could talk to a business owner and know immediately if this is one of these large privately held companies because they have an insatiable thirst for curiosity. They are so curious or I should say they have insatiable curiosity, insatiable thirst for information, knowledge. What's out there? What's working? What isn't working? And it's that curiosity that we always see in sometimes these companies, they'd started at three, four, five clinics and we are going to give you some case studies.
And it's one of the first things that we recognize in companies that we know will absolutely have the ability to grow when that business owner has that just overwhelming curiosity. So we're also in these next two episodes, the next episode we're going to talk about how do we compete? How do you compete with these cats, right? Well, you know, I go back to Herb Brooks and the United States 1982 hockey team. You know, we're going to beat them at their own game. Well, you're going to beat them at their own game.
You're going to adopt their success strategies. We're going to try to go through how they think and we're going to show you how to implement growth networking and innovation strategies and really learn from the operational and strategic approaches of industry leaders. You know, while we, you know, we use the big companies, the private equity-backed companies, the large acquirers, you know, a lot of us out there, they we use them as the punching bag, but you can really learn from what they've done. They've learned how to scale what they do as at the same time trying to make sure that they are capturing that patient experience and that strong outcome experience for their patients.
You're also going to have some case studies coming in episode three. And this will be companies that we can go back 10, 12, 15 years. Many of these companies, one clinic companies, two owners. One was a three company business with three owners. One was a one company business with three owners. And all of these companies right now are 25 plus clinics. And we're going to show you some of those case studies and take you back to the mindset that they had when they made that decision to grow.
We're also going to help guide you in decisions that you're going to need to make now in order to increase your ability to succeed in the future. And we're also going to kind of merge into this how you can choose at a time in the future whether you're going to achieve this growth independently or with a partner. And that's what many of these companies have done. They've chosen the right time to bring that partner in order to achieve the second half or the last third or twothirds of their growth.
And that is another success strategy. So I welcome all of you. Stay with us. We're going to be coming back to you next week with episode number two where we're going to be talking to you about how you compete against these big companies. And then we'll jump right into episode three the week after that with some case studies to see how they did it. So if you have any questions on any of the topics or the things that we've covered today, just click below. Let's talk.
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