What Is Your Game Plan?
Be careful not to treat your practice as a commodity.
By James Glinn, PT, DPT, OCS
In the late 1960s and early 1970s kids actually “traded” baseball cards. I can recall all sorts of amazing trades taking place, oftentimes with large lots being swapped in multiple item deals. There were small reptiles, marbles, skateboards, bikes, and, of course, all sorts of sports cards. Oftentimes you would see new unopened packs traded with fervor with the acquirer paying handsomely for the chance at what might be inside. Every once in a while some kid would screw everything up by flooding the market. Maybe a grandmother would buy someone a whole box of sport cards or an older brother would hand down boxes of curated cards. Trades would go sideways and the stakes would change. Sometimes the cards in one’s collection would plummet in “value” when a big brother handed down four or five Steve Garvey cards. The emotions of the trades and the ever-changing market were exciting and one never knew what might come next. Everyone had at least one card that was “special,” had more inherent value for some reason. You could never get that card. It might have been a card seemingly worthy of only sticking through the spokes of a bike, but to that cardholder, for their own reasons, it was special.
The cards started to lose their luster for me when the blowhards entered the scene. Sports card shops and shows gained in popularity, and the blowhards spouted about dollars rather than double plays. It seemed the inherent magic slowly dwindled, and, over time, so did the sports card market magic. All along the path of diminished interest were blowhards barking about how much money a card could be worth, seemingly oblivious to the magic. Baseball cards became another commodity…
Sometimes it feels like many practice owners view their practices as baseball cards, buying and selling in various deals focused on “how many times earnings” and “discounted cash flows,” all the while blind to the transformative value of a practice. You hear the blowhards (who are rarely a physical therapist understanding what a practice can really be to a community) spouting off about “taking chips off of tables” and “second bites at the apple.” The blowhards seem to always be framing our practices as commodities. You never hear the blowhards ask about the lives changed, the communities enhanced, and the lessons learned by building an amazing practice with a team of loyal and dedicated people. No practice owner has ever built an amazing practice without the help of a “team.”
This commodity trading is understandable; leading a practice is hard. Doing transformative things is always hard. Parsing things down into a digestible commodity makes things easier and quantifiable; we can AB test and compare apples to apples so often missing the real value, the transformative value. In a profession where change seems constant, many practice owners are likely to see selling their clinic to an outside buyer as a potential solution when they have not planned a proper succession strategy.
The practice owner that has not planned a succession strategy for their practice has few options. When fatigue sets in, it is easy to see selling a practice as a commodity as a way out. The harsh reality that has been observed over and over is the scenario where a fatigued owner sells their practice over a specified period of time with an earn-out, note, and noncompete clause. Initially it is exciting, but then slowly the practice owner begins to feel the pangs of the commodity market. The practice owner who still has gas in the tank when the noncompete is up often cannot move on to building another practice fast enough!
Why do we not see more practices striving to provide lifetime value to their communities? Why do we not see more forward-thinking ways to create and extract practice value over legacy timeframes? Maybe it is the blowhards spouting about the dollars and cents while gently brushing our egos and telling us we are deserving and should trade our “special” card for the promises of something greater. But so often the greater never comes.
And what about the teams? The teams of amazing physical therapists pushing to change lives by restoring, maintaining, and enhancing human function. How do our teams become distilled down to productivity numbers or, in some cases, listed in spreadsheets outlining terms of how they will be bought and sold?
Do not misunderstand the implied message here. The message is not that our practices do not have value. Physical therapy practices bring immense value to our respective communities. Our practices have value; I feed my family based on the operation and profitability of our practice. We understand that business acumen is critical to our ability to transform. Our practice injects thousands of dollars into our communities and we provide a clean, environmentally sound, and magical product. We change lives.
Birthing, growing, and developing a physical therapy practice is often a personal process and brings varied meaning to the people involved. What a practice means to someone personally, professionally, and financially can vary along the journey, but I would urge private practices to at least explore the options to create a legacy practice based on shared vision and values. How does your team benefit, how does your community benefit? Many physical therapy practices already have a culture of ownership that can often be further formalized to give a practice the best chances of sustainability.
Vehicles such as worker cooperatives, employee stock ownership plans (ESOP), and other equity compensation plans have components that make them possibilities for physical therapy practices. Of course there are also an infinite number of ways to transfer the practice to your team via minority share purchase and departing owner buydowns. The options for not treating your practice like a baseball card are numerous and the best way to quiet a blowhard is to not be in the trading pit in the first place.
We will always have the blowhards bumping around in our ecosystem. We exist in a health care market that is rapidly expanding to $5 trillion here in the United States, and anywhere you find those kinds of resources being consumed you will find the blowhards. If we do not allow our practices to become commoditized, then the large swaths of the value we create cannot be merely bought and sold.
While we would love to be able to sell our transformative value to the highest bidder, we have not been able to find a buyer who understands the value of the “special card.” Our team considers themselves owners as well as stewards of the practice. The practice creates value for our team and the communities we serve. Treating our practice as a commodity does not pay respect to the possibilities it holds. Our practice is special and we are keeping it!
James Glinn, PT, DPT, OCS, is the founder of Team Movement for Life. Movement for Life is the largest employee-owned physical therapy practice in the United States. Jim can be reached at email@example.com. If you have a Honus Wagner baseball card to trade, let him know