0:00:02 - Mark Henderson Leary

Welcome to Practice Freedom. What if you could hang out with owners and founders from all sorts of healthcare private practices, having rich conversations about their successes and their failures, and then take an insight or two to inspire your own growth? Each week on Practice Freedom, we take an in-depth look at how to get the most out of both the clinical side and the business side of the practice, get the most out of your people and, most of all, how to live the healthy life that you deserve. I'm Mark Henderson Leary. I'm a business coach and an entrepreneurial operating system implementer. I have a passion that everyone should feel in control of their life, and so what I do is I help you get control of your business. Part of how I do that is by letting you listen in on these conversations in order to make the biggest impact in your practice and, ultimately, live your best life. Let's get started. Welcome back, practice leaders. Another quick hit on something I think is I hope is useful. 

One of the things that's come up a lot over the episodes and particularly hit me when I first started doing the healthcare specific episodes was how many people attributed success to private equity investment, which was absolutely shocking to me because I hadn't thought about it, because what I had been thinking about is everybody who talks about private equity talks about it in the pejorative. It's absolutely the worst thing ever and it's ending all good things, and so that sort of started my journey to figure out like what does this mean? So we're going to talk about what I call the secret decoder ring to good and bad investment. Before we dive into that, though, don't forget, if you're stuck, if you're envisioning that amazing culture, that practice that adds massive value, with people who love it love it as much as you do, at least love their contribution making a big difference, being profitable and giving you the life you deserve as a leader, as a human, but you're stuck, if you can't quite figure out what the next step is, or if you want to move faster, please don't stay stuck. Reach out to me. I want to help and we can talk about what a first or next step could look like to help you unlock that. That is certainly my passion. So if you want to talk, schedule out at practicefreedomcom slash schedule. But back to the investment secret decoder ring. 

Here's what I came up with. If you've listened to a lot of the episodes, there's not going to be anything particularly new, because I just come together over the course of a couple of discussions that have come out of many months of thinking about this, but I thought having an episode to put this in one place would be helpful for people who want to get to the specific thing. So here's what I discovered that, going into this, that people always describe private equity as bad. It is the way to end all good things in the industry, whatever healthcare facet, and this isn't limited to healthcare, but it's certainly very, very prominent in healthcare. And, as I mentioned some of the early episodes, people I knew I didn't even think people running businesses. I just didn't even snap that there was ownership and, oh, it was private equity. I didn't know and at least in terms of the categorization, maybe if I'd thought about it it would have made sense, but it just wasn't in my mind because I knew the health of the business, I knew the health of the leaders and they were running great businesses and great organizations. They were very value and patient focused. It was great stuff. 

So I thought, well, what's the curiosity? My curiosity was what does this mean? How is this a thing? And the first thing I came up with was well, it appears that if there's great leadership in the organization and a passion for making a big difference, that informs the investment search process to find somebody who fits into that, who shares that or understands their role in supporting that. And so I've followed that thread and that turns out to be the case. But it didn't answer all the questions I had. I was continuing to have conversations and some people were suddenly talking about well, what about exits? What about you know, they've got to unload this business? And I thought, oh, that's the missing piece. So here's what I came up with On a two by two, because all consultants, advisors, thought leaders are nothing without their two by two of squares, the four square model. 

I don't have a visual of this, but I think you'll be able to imagine. So imagine the four square model two squares, you know, on a page, and the two columns, like the left-hand column and the right-hand column, up and down. The left-hand column is growth and the right-hand column is exit. Now you can imagine that those are different parts of the continuum. Well, they are. So imagine kind of a way up. 

We're on the way up in the growth side, we're on the way down of the curve of the life cycle of the organization. So that's another way to say it. You know the front nine of the golf course or the back nine of the golf course, and that's a good way to say it too. So let's go to the horizontal, let's go to those rows. So what on the rows? We'll call this. Well, let's see. What should we call this? Because I talk about it in two different ways. Under the growth side, we've got well. In simple terms, it's healthy and unhealthy. So, to keep the two by two consistent, it's healthy on the top and unhealthy on the bottom. But in the growth column it's a different version of healthy than it is on the right side. 

So what does growth healthy look like? Growth healthy looks like a really clear vision. It is understanding that there's a big impact to be made and we can do it. And I have the fire, capacity and interest to carry that vision forward. And what I need is more horsepower. I need ability to acquire, make investments, to acquire, to team up. We might need to have more capacity to reduce our costs. We might need more services to increase our scope, something that money allows us to do, to grow faster, do things we couldn't otherwise do, and when we lead that with passion, we can do that and deliver on what happens with that. 

So healthy means to some extent that we have to be successful. Success is somewhat tied into that. The unhealthy what is that this is kind of unified with the way I describe it as desperate and desperate shows up on both sides. So I'm desperate, like I really want to grow, but everything I've tried has not worked and so I'm going to get some money and we're really going to do it this time. Let's imagine the success odds on that Not good. So, thinking about that, thinking about the things that you want to do, do you have confidence? Do you have a proven formula that's another great way to say this Proven formula that worked until we ran out of steam horsepower territory something we have. 

A multiply by non-zero effect. That's really important, right? The multiply by zero effect is what I call it, when we just keep trying to do more and more because nothing's working at all, but what we have to be honest with about is it's never worked. We keep getting zero results and multiplying by zero continues to get zero. So watching for the multiply by zero effect in that bottom left quadrant of we just need to grow. We don't have the capacity. We need to hire more expensive people, we need more equipment. We'll just, we'll just be there with. With scale, you must have a non-zero answer to multiply against. It's predictable and reproducible. Hopefully that's enlightening on the growth side. 

But a lot of you, a lot of folks, are like yeah, that's not really where we're at. We might be more on the back nine. And from the back nine, what does that look like? Healthy is this is a profitable, healthy business right now. That could be kind of a wake-up call for you If you're thinking well, I'm on the back nine, but my business isn't super healthy. That might mean you're really on the front line and you're going to have to think of it from that perspective. And so if we have that healthy business, it's profitable, it's doing what it said it would and I'm looking for an exit. 

Sometimes those exit opportunities aren't what they want it to be, but that's a different part of the equation. The key part of the equation is do I have something that stands alone, that doesn't have urgency, that is valuable to people, and I'm not in a desperate situation to unload it, so I can take my time and figure out how to pass this over to somebody who is well aligned with our values, and I can assure you I know many private equity people and investors and have seen it go down. Let's just go with the 80-20 rule. People and investors and have seen it go down let's just go with the 80-20 rule Might be generous, but 80% of the people with money are not that great with it, not that smart and not really that well-informed with the consequences of their behavior, and they just have money and want more, and that's unfortunately the case, and so that's part of what happens. They funnel into the unhealthy side of this. 

But there are really healthy ones who understand that there is a long game here and that by adding value maybe creative in their portfolio, maybe by doing things to create bigger and better organizations down the line that if they increase value in terms of better service, more stable organization, more clear vision, better and better execution, that that just makes their investment that much more valuable and that's what they're going to sell as super high value. So that's a thing. It's absolutely a thing. You can hand the organization off without desperation. Now it's a little bit different, because when you're leaving the organization, you lose some of the stewardship, and so the vetting process is higher and it's still riskier. Some of those deals sound great and they don't stay great as much as like that top left quadrant where you're still at the helm. As long as you can produce and do what you're doing and you can manage the investors as a solid leader, you have the highest success potential there. The next highest is that healthy exit, but it's lower. It's notably lower because you really can lose a lot of the control and you're not the. 

The fourth quadrant is that desperate exit, the. You know, I don't know which is worse the desperate growth or the desperate exit. I think with desperate growth at least you got a shot at fighting your way out of this. You can fight for what's right and truth and justice, even if things are working against you and you've got a lot of people telling you and forcing you to do things that you don't want to do. You still are involved and you can help make decisions. But when you exit desperately because you're burned out on the organization, burned out on the industry, where you just ran out of time and you didn't feel like anybody wanted it, that's the worst case scenario and there's an awful lot of that. I would say most of it, most of the investment, most of the exits that are in that space are either the shutdowns or the ones where the time passed and nothing worked and it didn't really get there and you really just want to unload it. You want to garage sale the organization and there are plenty of private equity organizations are just ready to buy at fire sale prices and roll you up, and those do nothing for the brand reputation of private equity and investment. 

So what do we do with this? Really, look at that two by two and think where do you wanna be? Where are you? And it should be obvious, shouldn't be a hidden idea that you wanna be in one of the healthy categories. And if you can't be in one of the healthy categories, figure out how to get into one of the healthy categories. What do you need to do to get the organization healthy? Implementing a business operating system doing something like EOS is a great way to do that Promoting and building your leadership team, which, of course, is not having a good operating system to help you do that. But what can you do? Do you have any time to do something with this? Is there a partnership? Is there a merger? Are there things you can do that can really incorporate what you've got into something that could be higher value down the line. Hopefully that sort of maps it out. 

I think the main take on that is I want you to think about where you are and where you can move to and start thinking of investment and also outside funding as another tool that has multiple tools for multiple situations. Each of those investment situations is different in terms of how they show up, who shows up, how much money is involved, how much. It's multiple tools for multiple situations. Each of those investment situations is different in terms of how they show up, who shows up, how much money is involved, how much involvement are they going to have? Are they bringing an MSO into the organization? What does that do for you? And just in an episode that talks a lot about MSOs. So if you're curious about that, look up the episode about MSOs. That could answer some of those questions. 

But not all funding, not all private equity is created equal. Certainly, be cautious. I'm not saying throw caution to the wind and then private equity is good, because most of it's really not. But if you know where you are and you know what you want, you can do great things with it. Right tool, right job. Anyway, hope that's helpful. If you're stuck, though, don't forget, reach out. We'd love to hear from you and get some feedback on all the stuff we're doing content wise, and if and if we can help in any way, we'd love to do that Practicefreedomcom slash schedule to get some time with me to talk through the first or next step to get you on your way to that practice that you love. We'll see you next time on Practice Freedom with me, mark Henderson Leary.