What Sellers Deserve to Know Before They Sign

Yeah, it's been a it's been a wild ride, but got a lot of good people doing a lot of great things and building a great company. I'm really proud of the people in the company. That's awesome. That's awesome. Well, we're ready to go with some questions. Yeah. Fire away. Let's go. All right. So Aaron, what's the most common reason that former owners will choose DPT even when they may have two or three other credible offers on the table? Yeah. Well, and that's in reality that's usually what happens is that there's two or three other people are options, which is great for our private practice section.

I think the biggest differentiator is this is my baby, right? And I started this thing 20 years ago and it's my baby. And I also feel that we have a really strong track record of partnering with mom and pop shops over a long period of time. And we use them as references. And you know, we're not perfect by any extent of the imagination, but they're still with us to this day. And I think that's the most important thing. We we protect their reputation and their original baby.

And if they ever have an issue, they text me. Which is awesome. So, I really think that that's the biggest thing. There's a people side. I also think that we're really flexible. I've done 35 of these acquisitions and not one of them is exactly identical. Each owner has different wants and needs and u we just want win-win, long-term win-win. So, I think that's kind of a little bit more differentiates us in the market because the numbers are going to be the numbers no matter what. Sure.

Sure. Yeah. So when sellers get to know you guys and what do they appreciate about Doctors of Physical Therapy kind of once they've gotten to know you that you know six months out what are what are owner saying? Yeah. Well again we go into it very honest and transparent. I think that's the most important thing. I think the credibility over a long period of time is a big help. I also part of our strategy and we talk about a little bit later is you know we want to know who's the next up.

Typically the people we are buying are matriarchs of our profession and have given a ton to our profession. They are 40 years you know in and don't necessarily need like the biggest price but they want to make sure they take care of their baby and their people. And that's where we go in and that's actually one of our qualifications. Who's next up? Who's the next generation? Because the only way your reputation gets transferred to us is through those people in the trenches. So I think that's the biggest thing and then we look back and say where did we miss where did we make it and you know I'm very proud of the fact that last year last year we reduced we had a big acquisition that you guys heard about from Empire we reduced our turnover rate from 37% to 9% right now.

We typically run about 2 to 3% year-over-year with our acquisitions. So I think that's the numbers don't lie. How we treat people. And I think that's the biggest feedback that we get. We are what we are, good and bad. Typically it's, you know, the word on the street, right? And and I I'd love to see the real facts behind this, but most typically, potential sellers think it's the opposite that it's going from 9% up to 37% post sale. But you're saying it was just the opposite there, right?

I will tell you that that's probably the reality in the market is that typically a new new acquirer comes in and people look for other options and we're very proud. It's actually a metric that we look at to on turnover rate. We run about 10% 1% turnover rate in a year or two years it's 10%. And that's just simply just not a fit for the long haul, you know, and some of them choose to ride off with the matriarch. You know, they've been friends for 30 years and it's not it's not contentious.

So, we're really proud of that turnover rate and keeping good people because that's the only way this business works, right? Absolutely. Absolutely. So, if a single seller took the same business and ran it through three different acquirers, where would your model produce a meaningfully different outcome five years later? Yeah, you know, I will say that the people, again, I'm going to go right back to the same thing. If those key people that built that reputation, the next generation are still there. I think that's what the matriarchs want.

They want to make sure their original reputation is taken care of and that their people are good. And that's my word to them that we're going to protect your reputation and we're going to take care of your people. And that's the biggest in my opinion differentiator. I think the numbers are the numbers. The great thing is that the PT profession is a fairly simple business model. And so to have a certain return and all that I think everyone's going to be within a small variance unless they screw something up.

And I think the only way you screw something up is mess around with the people. As soon as you have your top therapists that have built a reputation goes across the street to your competitor, that value goes way down. So that's why we work so hard on our people. And again, treat them individually and give them an environment to grow in. That's other thing we say is guys, you're capped out right underneath the matriarch. We want to come in and put three more clinics around you guys so that each one of you guys can be a clinic director.

And though guess what? When the pie grows, we all eat more. And that's the whole philosophy. So, yeah, good stuff. So, kind of at the end of the day, you know, the old saying, what is something that you guys offer your partners that most acquirers just cannot truly offer? I we start on the front end on designing the whole two to three years. We start there. Actually, the first thing that I ask of them before we even get the numbers because again, if the numbers are right, that will take care of itself.

Tell me, Grandma Sue, what your next two years look like or three years look like. And let's start there. Because if Grandma Sue says, "Aaron, I want to work for one year and I only want to work 20 hours and I want to go see my grandbabies on Saturday or Fridays." Perfect. At least I know that and we can build around it. Right? So that's where the honesty and the transparency early on is the first conversation. Grandma Sue, matriarch, whoever it is, tell me what the next two to three years are.

Put it in an email for me and so I can design the model around it. Because no matter what they want to do or what they don't want to do, like Eron, I don't ever want to see a payroll ever again. Perfect. I've got people that do that, right? We we can fill gaps. We've got infrastructure to fill gaps to allow them to do what they want to do and ride off into the sunset with their head held high knowing that their baby's protected, their original baby.

So I think that's the biggest in my opinion. Again, I haven't talked to a lot of people what their models are, but our model is let's start up front. Let's get honest about what the next two to three years is. And that doesn't mean they're held to it. Like, if everything's going great in one year and you want to work, you told you you're going to give us two years and you want to ride off in a year, great. But let's just be honest about what the next couple years and then I'll protect you in that.

You're not going to have to do a payroll ever again. And if you don't want to work Friday's, perfect. At least we know it upfront. And and again, the numbers are going to be the numbers within a small variance. The numbers are the numbers. And so it's the intangibles, their people. Are there people taken care of? Can they go to the local ice cream store and say, "Hey, I sold the DPT and guess what? It's greater. It's better. We're getting bigger. We opened three more locations.

El Paso, we've opened bought them in December. We've got three more locations in one year." So again, that's where it all starts is upfront. And the transparency and honesty up front allows us to do that. So if we go to the flip side, these are these are business owners that work well with you. Are there situations or is there a type of owner that just will not be served by your model and something that you would want to avoid even if it cost you a deal?

Yeah. Well, I'll tell you I've made a mist I've made one mistake for sure in these acquisitions and it has to do with ethics. We bought a company in Michigan. I failed miserably on it. I didn't I didn't read the tea te tea leaves fast enough and we acquired them and there was an ethics issue with an employee and I gave him a warning shot and you don't treat people like that. And then the next time I flew over there and I fired them and guess what?

The investment I just made went to zero and we still never got that money back. But what it did prove to everyone in our company that we're not going to stand for that behavior and I don't care who you are. So there's a mistakes. Ethics is the number one red that's the line in the sand for me. It always has. We'll never move from that. I also think that the a seller that wants to really like sell and be done like wash their hands of it.

There's other partners that have that model and that's probably a better fit for them. We want a you know year and a half, two year migration to move migrate safely the reputation that they've built to their people and with our support. So if they're looking for a you know what, you know, throw their hands up and be done within six months, which is fine. I'm it just won't work in our model. Sure. Sure. Yeah. All right. Can't wait to hear your answer here because I just for some reason think it's going to be unique.

But is there one promise that sellers commonly hear in this market that is in fact fundamentally and absolutely unrealistic once the deal closes? Nothing's going to change. Real simple. And and I again I have to be very honest with you. In the beginning, I said that and then my operators and our HR people and everyone on our team that has to deal with the downstream consequences of that comment grabbed me by the neck. It was awesome. It was great. So, that's the that's the biggest thing.

Things are going to change, guys. Things are going to change. We have a history of changing them for the better. Now, we aren't perfect and we're going to need some grace for a year, but just trust us that we've got 30 of you beforehand that are better off. And so, I think that's the biggest thing we're giving them and then giving them some direction on where they're going to change. Hey guys, we got to flip the EMR. Here's why. The back end gets way more efficient.

We can tighten up a lot of the front end. We can save some money on the back end so that your p your therapists don't have to treat so much to keep the margins. And again, it goes right back to transparency and honesty. I don't want to in the beginning I really thought nothing was going to change and I was way wrong. So, we're very honest about what it's looks like and in the phases. We have a you know, you know, three set a three-step phase.

And so, again, being honest, okay, during the first 90 days, EMR is going to change. That's it. Nothing else is going to change. Second 90 days, this is going to change. Third 90 days, this is going to change. And then by the end of the year, you're we're all back on the same cadence. And here's the why. Here's the why. The why is that we can all talk the same language and we can hold each other accountable using the same numbers. Yeah. Yeah. So that's a learning lesson for me and everyone else.

Things are going to change. I promise you. It takes a bold person to admit mistakes and you are one of those bold people, Aaron. For sure. Not a mistake. So if you take away valuation and structure, what are some of the operational or leadership capabilities that an owner would say, you know what, DPT actually makes my business better? Yeah. And this is where we started out with saying 1 plus 1 equals three. And we absolutely believe that the front end is the people. That's the point that really matters.

The back end is our infrastructure, our contracts. And so when I say 1 plus 1 equals three, the local reputation and then like our contracts, we've got national contracts that I'm pretty sure are probably a little bit better than the local single clinic mom and pop shop. So, if we can work and stop working harder for less and use our contracts or our direct to employer contracts nationally, then again, our clinicians don't have to work as hard on the front end. If we're getting, you know, $150 in net revenue versus a hundred or whatever you want to say, that's a pretty significant impact to your business.

So, that's what we do. That's how we add value. We don't add value otherwise. We add value through our contracts and our people. We have a leadership program that's national for our young leaders. So, if we're going to grow, we're going to hub and spoke Grandma Sue PT, we can't just put someone that, you know, hasn't never led a clinic there. And a lot of them are that way. So, they got to go through this leadership program. And it's not leadership on like you like a typical this is P&L leadership.

This is how to manage people. All the stuff that they don't teach you in the academic world, we got to teach them in one year. It's been a very successful program. And so that's kind of what we had. The oneplus 1 equaling three their reputation our infrastructure if we can save one or two points on the back end they're usually outsourcing their RC RCM to a third party at six seven points you know we do it in house that all goes to the bottom line so again that's where the true partnership is and why we need a long-term partnership this isn't a turn and burn or flip of clinics these are this is a long-term value creation value creation to to both of our companies and all of our people.

They're our people as some. For sure. For sure. So, when you look back at some of the most successful partnerships, and we're gonna we're going to close with this one. What did those former owners do that made that partnership with DPT so successful? Yeah, they were the true buffer of transitioning their reputation from their reputation to ours to us really. And so, and there's a lot of facets on that. Number one, and we say this out loud. I say it because I go and meet with every single one of the of the companies before we go live, guys.

Trust is earned, right? You should not trust me. Trust is earned and we're going to earn it. In the meantime, these next 120 days, I need to I need to use Grandma Sue's your trust in Grandma Sue to give me some time to build trust. Really that's so the owners that have been the most successful for us and there's different degrees of them but have been they lean in and know that they're the inner they're the in the inner in between them and us at this point same with their reputation of local doctors right not going and say hey I sold them and this big corporate giants coming in which we're not but again those owners that understand from our first conversation what the plan is and what they need to do have been our most successful So the second component to it is if they've got a strong lineage underneath them, those are home runs for us.

You know, stepping o opening clinics are is easy to do. Filling them up is the hard part. And so opening a clinic is easy, but we need their reputation in the market and to fill those clinics up. And that's really the ones that have been the most successful. We're on the same page on their role. You know really transitioning their reputation to us over a period of time and then riding off into the sunset right a lot of them say they want to and most of them have and we don't care some of them come in on Monday right now I've got one in Michigan she's 83 years old we bought her 10 12 years ago she comes in and has coffee with the doctors every Monday which is awesome it's perfect so you know again having them ride off and let the juniors step up you know if that matriarch is there for too long unless that's the plan.

That's the plan. But if the matrix around too much and the juniors can't step up and be their own people and that's why the strategy in the front end starts with what do they want to do? What do we want to do for the next two years and how do we get there and let's build a model around it that we all are going to be really happy with in two years and then you're going to be a reference for us when we go see another Grandma Sue down the road.

And that's how we've built it. Well, Erin, I will say this. Met you many years ago and I am not surprised with the growth that you've achieved you have achieved with this company two words that you've used a lot today trust collaboration I'll never forget the first transaction that we did with you and what you told me that made you guys different was that you were available and that you would check in on this company because it was a little It was a small company up in Michigan up near up near that Michigan State school though.

Not not Michigan, up near that Michigan State school there. But and you said and I always do what I say I'm going to do and I just talked to them just a couple months ago and I said so he said yep he did exactly what he said he was going to do. So yeah always remember that story and had you just tell that does not surprise me the growth that you've achieved. Well, I appreciate it. The only thing now, first off, we've got a lot of good people doing a lot of really great things.

So, I'm a very small part of it. But at the end of the day, we built this company on trust and honesty. And, we won't do business any other way. And my word is good. And you can have a, you know, $20,000 contract that lawyers have beat up and I don't care. My word is good. And if something doesn't happen as planned, there's a why behind it, and I'll be very honest on why. So, that doesn't happen too often. Absolutely. Well, Aaron, as always, you have been a great resource to us.

You've been a great resource to the listeners today, and I hope they heard you loud and clear. So I really appreciate your time today. Great. Well, thanks, Paul. Again, I'm we've got a lot of really good people doing a lot of really good things. A lot of our former owners are all of them, most of them are still with us at some level. We're really proud of them and they added value to this company as well. So again, humbled that you'd asked me on this show.

It means a lot to me, Paul, and this, as you know, this profession means a ton to me. I've been in it since I was 15 years old. So truly appreciate you and all you guys do and the help that you're bringing the profession. Well, thank you. Thank you. I appreciate that. And so for any of you, today that have a question for myself or Aaron, just click below. Let's talk and have a great rest of your day and have a great weekend.