E522 | Is A Cash-Based Practice Actually A Good OpportunityJul 26, 2022
In today's episode, I dive into the opportunities that we have with owning a hybrid or cash-based practice in today's market. There are benefits and limitations to these opportunities that I wanted to address in this episode. Enjoy!
- The 4 variables of any business venture
- The more scale you have, the less stability there is
- Opportunity matching up with skillset
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So there's all kinds of hidden fees within your business that are just part of doing business. One of those is credit card. Processing and for us, we didn't even realize how much we were paying in credit card processing with the first management software we were using for our practice. And when we switched over to PT everywhere, we just realized we were saving literally hundreds of dollars a month with credit card processing with their partner with Card point versus who we were using with our prior.
Software. This has made a massive difference. It's more than paid for itself. It allows us to decrease our overhead. It allows us to have more cash flow to reinvest in our people, in our technology, in our facility, in marketing and everything that's gonna drive the business. So don't get abused by credit card processing companies.
Make sure you're paying what you should pay. And if you're looking for a management software, highly recommend PT everywhere directly integrates with a. Processor makes it very easy and their rates are super, super competitive. So it's saved us a ton of money and it probably will do the same for you if you don't know what you are getting charged.
So head over to PT everywhere. Take a look at what they've got. I think you really like it. So here's the question. How do physical therapists like us who don't wanna see 30 patients a day, who don't wanna work home health and have real student loans create a career and life for ourselves that we've always dreamed about?
This is the question, and this podcast is the answer. My name's Danny Matte, and welcome to the PT Entrepreneur Podcast.
Hey, what's going on guys? Doc Danny here with the PT Entrepreneur Podcast, and today we're talking about the legitimate opportunity of a hybrid or cash-based practice in comparison to things outside of the industry in particular. And this stems from a couple conversations I had recently with Mastermind members that we have that are they've had their business for a while.
Their business is actually, in really a good spot. It's grown quite a bit and they're comparing it to other businesses outside of outside of the PT industry that, they have friends that run other, types of businesses or have started other types of businesses and are in different career fields.
And so anyway, I thought it was interesting and something I wanna touch on because it's sometimes the grass can always be greener and I think that from what I've seen recently, in particular, I've gotten looped in with a lot more. And high level entrepreneurs in some of the the business development groups that I'm in, and one guy in particular I had a conversation with a couple weeks ago, and I thought his perspective was really interesting because he had done a lot of things like.
Real estate, restaurant software service businesses, like he's this serial entrepreneur. And he had started and sold probably a half dozen companies that he had referenced. And what he talked about was. The sort of four variables that he looks at. And that I think are like really, worth taking a look at with any business venture that you're tr that you're, pursuing, that you're going into.
And this is what I alluded to as well with the people that I was talking to in regards to the PT industry, the opportunities that we have, the benefits and limitations of those. And as well as comparing that to other. Industries outside of it. And the other thing I would say is, comparison is the thief of joy.
So the more that we, we start to compare ourself to other people, a we either are better than them, and then we momentarily feel better about ourself. And B, we're worse and we feel like crap. Normally that's not the most advantageous use of our time, but it's hard not to, in a lot of cases, especially if you're a fairly competitive person.
Let's start with these variables in particular. They all have an s as we call it, like the four S's. And the first one is scale. So it's the scale opportunity of the business vehicle. In this case it would be like let's call it a cash-based practice, right? So that would be. A business opportunity speed.
So how quickly can this business get up running and really grow stability? So how difficult it is it to ruin a business like this? And what other market, activities or economic changes can really negatively affect this business? And the last one would be satisfaction. And I think this is one that people don't necessarily.
They don't view as being as important until they're in a business that they hate. And, I can't speak from experience from having a business that I hate. I've always really enjoyed the businesses that I'm, that I've started and that I'm involved in. But I don't think that's actually normal.
I don't think that the average. Business owner really is like super into their business. Oftentimes, the people that I run into, it's they pick the thing and they thought they could make the most money with. And in many cases, that can make them miserable if they have no satisfaction associated with their work or they feel like what they're doing, has some meaning to it besides just a cash grab and trying to make some money.
So when we look at the cash and I'll lump hybrid practices in here as well because I definitely see. A growing opportunity with certain areas to, do really well with a hybrid model, especially in certain areas where insurance is still decent maybe you're in an area where there's like a lot of government jobs and it makes sense to have TRICARE or something like that.
So I think it can help with the scale standpoint somewhat. It just has to make. Makes sense. So in, in most cases, I'm alluding to cash-based practices, but definitely I think hybrid has a solid place in certain parts of the country in particular. So if we look at this, these five S's or four S's in particular with a cash-based practice or hybrid practice, I would rank the scale opportunity of one of these practices out of five and.
That may not sound great, but that's in comparison to other ones that I'll get into. So I put it middle of the pack, it's about a five. It's probably not something that you're gonna grow, a bunch of cash-based practices and sell it for a billion dollars. That's probably not gonna happen.
But it's not like something that you can't scale to a level in which it's, it, it can definitely be an eight figure business. All right? That's why I gave it a five. It's in the middle speed. I give it a five. I think there's many other things that you can do that, scale up faster especially when it involves digital sort of elements of a business.
And there's nuances to that, so I can go into that a little bit. But I think the speed in which you can grow one of these, normally it's middle of the pack as well, so about a five. And it depends on preexisting relationships, your location, your ability to get out in the community and market.
Everybody can be different and they can grow faster or slower, but again, it's middle of the pack, right? It's not, Terribly fast, but it's not incredibly slow to get started either. And then stability, I give it an eight. So this actually, I think is one of the strong suits.
Of this business model is that it's very stable. And the reason I say that is the client base, the client sort of mix is very diverse versus, for instance, I have a friend that has a consulting company that primarily works with Much bigger companies, like 50 million plus companies, and he really has three main customers for his business.
That is a very challenging place to be because if one of those companies decides they don't need his work anymore, then his company decreases by a almost a third. So that's not all that safe. It's not that stable and. It would be much more stable if it was like a much more diverse group of people.
When we look at our practices, oftentimes, within a year or two you've worked with hundreds, if not over a thousand. People, if you're doing a good job of getting new patient volume in the door and in order to really, ruin that you have to, number one, either to do a terrible job or somehow piss off every single person at the exact same time.
If there's a video of you, like slapping a puppy or something that gets on o on Instagram, like you probably would piss everybody off. But the reality is it's like hard to make galvanize even 50% of people, like you have to do something terrible for that to happen. And it would be very hard to do.
So worst case scenario, you piss off half the people and the other half are, they're like what are the puppy who deserve that? And then they're still coming to see you. So it'll be very hard to it'll be very hard to piss off every single person. So I think if you're looking at this from a stability standpoint, and I always look at downside risk because it is a huge it's just a huge variable for me because, I know how hard it is to start a business.
I know how challenging it is and I sure as hell don't want a business that can just dissolve quickly over overnight. So I, I do really like that about the business model. It's probably one of the best parts about it. And then from a satisfaction standpoint, I can only speak from personal experience with this cuz everybody can be a little bit different, but from a satisfaction standpoint, I give it a 10.
It's just, it's such a great way of utilizing my degree. In a manner where I get to work with the sort of designated group of people that I choose that, that I want to specialize in and to be able to truly help them, progress and improve, go and taking somebody from an injured state to not being hurt, to then helping them improve in the activities.
They get a lot of enjoyment out of, or with the people. They get a lot of enjoyment of being around actively that is like, The most valuable part of one of these businesses. And it's not monetary, it's personal and it's, I equate it to my wife ran nonprofits before she started athletes potential with me and they get paid like shit.
They were crazy hours. They're always understaffed, the mission is so personally rewarding. Like you can get paid like crap, work crazy hours, do way more work than you should, and then all of a sudden, you're giving, toys to military kids and you're like, greatest job ever.
From, so from a satisfaction standpoint, like nonprofit organizations are incredibly personally satisfying and but, Not great from just a, a standpoint of being able to provide for your family and really make a living in most elements of that, that I've been exposed to in the nonprofit world.
So I almost feel like it's like the satisfaction level of a nonprofit, but is a for-profit business where you get to use your skillset in just a, a really unique way to, in a way where you know you're gonna get the best outcomes possible for the people that you're working with. And it's very stable now.
It's not as scalable as other businesses. It's not as fast as other businesses, but it's super stable and it's super personally rewarding. And when I look at scale I really think like scale. I also look at that in regards to, how much money the business can actually make, right?
And I think if anybody had a practice that they grew to 10 million a year, like they wouldn't feel. Bad about that, and that probably isn't even the top end constraint of one of these. But it's just I'll get into what I'm comparing it to in a second and you'll see why it's a five.
So one thing that was brought up was software. So one of the guys I talked to who's I just, I'm convinced I have to do something in the software world. It seems like the only thing that I can do from anywhere I can I can grow it. It's not constrained by people. And there, there's definitely some truth to some of that.
And, I have friends that own software companies. I have friends that have started and sold software companies. I have friends that have started software companies that have failed. In fact, I actually had a chance to go speak at Georgia Tech for their basically their tech incubator for startups, and.
It was very odd for me in not the people, but just like the way in which they view business. Because for me as a service-based business, like I want to be profitable. Like I want this to pay for my, to my family so we can pay our mortgage and buy groceries and save money and, create wealth and.
I'm sitting in this room and I'm getting questions from people about how I run a service based business and a local brick and mortar business. And afterward I had a handful of conversations with different people that were founders of startups and their view and their approach ver very different.
Their approach is basically go out, try to pitch an idea to venture capitalists to get money, try to build something. That solves a problem technologically. And then try to sell that for a big multiple and then ride off into the, to the next project. And I asked them, I was like what's a success rate on something like that?
And they said, if you're good, maybe one out of eight. Projects that you do is like moderately successful. It's very hard to have this unicorn, where you're, you grow it and sell it for $200 million and you hear stories about that. But the truth is it's very rare. And more often than not, you are going to go out of business and have wasted a significant amount of time.
And hopefully you don't lose all of your own money. Maybe you're losing every, all this these investors money but you're still like wasting time and. You're probably not gonna be successful in that. Plus you're also going up, up against the smartest people, as far as entrepreneurship is concerned, because it is the most scalable or one of the most scalable vehicles that you can get in.
Because if we look at these same, four S's, right? Scale, speed, satisfaction, and stability. I put software as on from a scale standpoint, I give it a 10. From a speed standpoint, I give it a five, which is basically the same as as a cash-based practice or hybrid practice because the. The time it takes to build like legitimate software can be very long.
Now you may have a minimal viable product that you're testing with people fairly quickly, but in order to really monetize that and grow that and then be able to get to a point where you know you're at least like paying for the developer, that's actually. Building that, or the handful of developers maybe that are building that, like they're expensive.
So it can take quite a while as well as figuring out your marketing message and who you're serving and does this actually solve a problem? And, is it actually something that people are going to pay for? So the speed side of it software's like fairly slow just like a cash-based practice is. And from a stability standpoint, I give it a one, it's one of the most unstable.
Business vehicles you could possibly get in because it can change so fast. Not only that, you could have like big competitors that just basically they see what you're doing and they decided to copy it and then take it to all of their preexisting customers or bake it into software they have in some new feature, right?
You can even see this with what social media companies do with each other, where they basically just. Replicate features that other ones have quickly because they can see it, they can iterate on it. People are smart, they can figure out how to do the same thing. So stability is very low, it's super low.
And, it's just part of the industry. So the and what tends to happen is the more scale you have with something, typically the less stability you have of something. It's not like the most scalable company in the world. It's also the most stable company in the world. The, probably the only example of that I would say exists is probably insurance.
Insurance is like incredibly scalable, incredibly stable, has been around for hundreds of years, just e even in, a modern economy. And if you look at something like a a Warren Buffet with Berkshire Hathaway, a huge part of that is insurance, right? So it's, insurance is a big business.
It's super boring. So if you look at like satisfaction, very few people get super excited to talk about insurance. It's fairly slow. It it grows fairly slow, but the scale. It's very big, it's like a nine out of 10 on a scale standpoint and stability is like a nine out 10 as well, maybe a 10.
Super, super stable. So if you look at that cool, if you want to go sell insurance or start an insurance company, go for it. But you might be miserable, cuz for you, maybe satisfaction is a one. Versus, if you're a clinician and. And you have your own practice, maybe satisfaction is like a nine or a 10, and you know that, that's meaningful.
You wanna wake up in the morning, you don't, hate doing the work that you're doing. As we go back to software again, 10 for scale, five for speed, one for stability, and then satisfaction. I think it depends. I know people that have software companies and they just hate them.
I know people that have software companies that love 'em, it's like they're, it's their work that they're meant to do, right? So I think it just depends. With that, it's hard to say. It depends on the type of software you're building, the problems you're solving, and if you find a lot of meaning in that versus if you're just doing something cuz you see a opportunity.
Those are actually just in general, the entrepreneurs that I find are the least. Enjoyable to be around personally. Like they, they just are like yeah, I own 50 laundromats and I don't really give a shit about laundromats. I just want to have like passive income. Cause I like to mountain bike.
And, hey, I don't really care what you do with your life. For me I just want to do things that I find meaningful with people that I want to actually be a part of helping and I. Personally enjoy that. That's the satisfaction that I get out of and that's what I want to do. And all the people that I've been around that are like super into whatever they're doing, they seem to be the most engaged and just the happiest, honestly, I.
Because their work and their hobbies, they blend together the things that they find enjoyment in and the thing, the way in which they make a living, they are, they kinda overlap. The last one I was gonna put in here too, by the way is is something that I see with people changing careers.
I've seen people go this route into, in a software as well as Becoming a realtor. So this is something that, I've actually had a couple friends of mine that are clinicians that have just moved away from the clinical space, that have become that have become realtors, and they just, it just fit their lifestyle a little bit more.
And, it sucks to have a seven year, seven year degree and then decide, you know what, I'm just gonna go into real estate. But that does happen. In fact, I've met a couple of people that have done that. And if I look at that as far as the opportunity is concerned, I'm gonna break it down to the same bucket.
From a scale standpoint and give it an eight, you can scale up, selling houses or being an investor side of things depending, especially on the local relationships that you have and your ability to market yourself and and build repeat business like. It's definitely very scalable.
You can have a team underneath you that can grow as well. I give it an eight speed, I give it a six or so. I think it's a little faster. I think it just depends on, again, your local relationships and if you have that established. If you don't, it's probably gonna be far slower than that. But I'm assuming you probably wouldn't do that unless you had some people that you felt like you could work with in the first place.
I'd give it a six. Stability, I'd give it a three. And satisfaction. I give it a question mark cuz I, I don't know. It depends. People might be super into real estate and it's like a eight outta 10 for them or whatever. It's super, super exciting. Maybe they're just doing it because they think it's a better opportunity to make money for their family, so it's probably gonna be more like a one or a two.
But it's always interesting to see the stability in the scale. Side of things, they tend to be inverse, right? So if software's a 10 in scale, it's a one instability. So it's a huge potential opportunity, but it's also risky. Real estate, it could be a huge opportunity for you as well. And it's less risky than software, but it still could be risky because market changes could occur, right?
Like just look at right now. For instance, let's say you're more on the mortgage broker side. I talked to a friend of mine that has a mortgage brokerage and in the last. Three years he's done, about 90% of his business has been doing refinances. So people refinancing their houses into, lower rates typically.
Guess how many refinances he's been doing in the last six months? Like basically zero. It's about 10% of his business is refinances right now because interest rates are going up. So almost all of that he's doing is new home purchases or new, investment purchases. And those have gone down considerably as well.
So out of nothing that he's done wrong his business has gone down significantly in the last six months because he doesn't have the volume of refinances and the number of new homes that are being bought are down as well, because rates are going up. So when you look at stability, that's something that.
He has no control over but it's not the most stable place to be and he has to be very cautious of keeping a lot of cash on hand to get through these leaner times to make sure he still has a business and doesn't have to let all of his employees go. And then when things are crushing it, that he has to just be very mindful of keeping quite a bit of that cash on hand.
Cuz it'll even out over the course of a, 20 year period. But he's gotta make it through that, right? So the stability is not as good there. So I think that as you look at this, you have to ask yourself, this mixture of scale speeds, stability and satisfaction, what's the right business model for you?
What's the right vehicle? And. What I really like about cash-based practices in particular is it's business with training wheels in a way because it is. Very stable. It's satisfying for people that ha that are clinicians typically. They really enjoy the model and it's not that fast.
So you ha you can learn a little bit slower, you can take your time. The, it's not massive scale opportunity like software, but it's definitely very scalable. Like absolutely, a million to 10 million is where these businesses can be maybe even bigger, over the next, five to 10 years.
It's really hard to say. Depends on how many locations and how many people you can bring into that. These businesses are mainly scaled through space and people, right? So if you can scale to a lot of space and people, and you have a lot of demand, you can grow as big as as you want, and you can totally sell it, I sold my practice. We have people in our master money we work with that sell, that have sold their practice, and they're sellable entities. So I think the business model is really solid, but it's also one of those that I think is more forgiving than something like a software that, that can, you make the wrong move or the wrong decision, and all of a sudden you're outta business.
Or a competitor completely just rips your shit off and you have no viable. Software anymore. And that just really can't happen with the types of businesses that we have. I definitely recommend take a look at other businesses, other business models, talk to other entrepreneurs as you're getting into.
This is very like normal to, to get involved with that. And have like legitimate conversations with them about the pros and cons of where they're at. I have this friend that owns a juice company here in Atlanta. And I used to look at her business. I was like, shit this is big business man.
She's, it I don't know where they're at now. At the time it was probably like 20 million a year in sales and, but you hear that and you're like, damn that's awesome. But then I would hear her talk about the challenges of having drivers not show up and fruit going bad and having to rebuy juice that they made from Publix because it didn't sell.
Or just like giving product away for free to hold foods to try to break into that. And all the supply chain stuff that they have to deal with in the people and the logistics of moving all this stuff around, both like retail and wholesale and. It. And then the net margins are just like far lower than you would probably think too, because they have so much overhead and equipment and just like the cost of making juice requires fruit, and fruit is expensive.
And so all of that, I started looking at it and I was like, no way in hell I'd ever want to. Own this. This sounds like a super challenging business to run, even though it's incredibly scalable. Like she could grow that nationally and then, sell it to any number of big companies that would probably buy it for, nine figure exit, like massive exits.
But talk then, because the grass is not always greener and if the only thing you're looking at is like, how much can I maybe make in this? That's only one of these four variables. I think you need to take a look at all of them and decide, what the right fit is for you.
And if you're listening to this, most of you, it does make sense to look at at a cash-based practice, at growing a cash-based practice and honestly growing that and potentially. Maybe you don't wanna be involved anymore, but there's options there. You could sell it. You could also, get a key person in place to function basically as your president run it.
And then you have a passive cash flow vehicle for as long as the business is around. It's something that's again, like I said, it's very stable and has options. So as you're looking at these different things, and especially if you're on the fence of deciding what to do, I absolutely would go through this Figure out from a speed, scale, stability, and satisfaction standpoint, what seems to make the most sense for you?
Obviously I'm a big fan of cash and hybrid practices. I think that they're only gonna grow over the next five to 10 years in particular. Just because we're seeing insurance still sucks, it's getting worse. People are more and more aware of their health, post 2020 where a lot of people was like, Yeah, your, in your likelihood of, dying from getting sick goes up dramatically when you're obese, you treat yourself poorly, you get no sleep and you're completely outta shape.
So a lot of these people are prioritizing their health more than they did previously, and that's a great spot for us to be. We can capitalize on that and I think it's a good thing long term, honestly. I think it's a good spot to be. It's just a matter of the opportunity matching up with where you're at with your skillset right now.
And unless you're just some sort of like amazing entrepreneur and you have all this experience, maybe this business model is just not scalable enough for you. But for most of us, we didn't go to school to open a practice. I didn't go to school to open a practice for fuck's sake. I was in the army. I didn't even think I was even going to get out of the army, right?
So I had no business experience. I wasn't reading business books. I didn't know, the first thing about finance and profit and loss sheets and whatever else I didn't, but I didn't have a choice whenever I got out when, cause I didn't wanna work for a big a big hospital company or something like that.
So I think as you look at this, you have to ask yourself for the business experience that you have, which is probably minimal to none. And the opportunity and the stability of it, I think it's one of the best risk adjusted returns that you can. That you can have with your degree, that's also incredibly satisfying to where you can still function as a clinician, but do so in a way where you make your degree work a lot better for you.
So anyway, hope that helps for you guys. If you're looking around trying to decide what to do, or if you're there and what I see is like after a few years, it's it gets boring because you're just working on the same things. You're working on improving and growing and getting to the point where you're hiring and scaling.
If you, there's like shiny object syndrome that does creep in there around that time. Once you're a couple years in and then all of a sudden it's like, Ooh, maybe I could do this. Or, Ooh, this sounds cool. And that happened to me too. I've done this myself and it always slows me down.
It always creates significant amount of drag on whatever I'm doing, instead of just focusing on what, what I've already started. Cause the vehicle's just fine. And then seeing that through. If you're a clinician, And you have a cash-based practice or a hybrid practice, and you're looking at getting some help, with that business, I absolutely recommend going to pt biz physical therapy biz.com, and and checking out what we do.
You can get a better idea of what we, what we offer, who we work with, how we help people and some stats about what actual outcomes we've had with businesses that we work with. And if there's a fit, it's easy place to set up a call, our team reach out and we can chat and see if there's a mutual fit for us to be able to help you get.
We're trying to go a little faster in your business and avoid making some mistakes. Anyway, guys, thank you so much for listening. As always, I appreciate it and I'll catch you next week.
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