How to Accelerate Acquisitions

23 min
Season 1
Listen directly on:

This week, Dr. Ivan Zak and Ryan Leech discuss strategies and methodologies to create a predictable practice acquisition funnel using a CRM system.

Topics discussed:

  • Two parts of the Value Creation Stream;
  • Pipeline management;
  • Utilizing a CRM system to streamline the acquisition process;
  • Book: Predictably Irrational by Dan Ariely (recommendation by Sebastian from Digitail);
  • Post-acquisition survey;
  • Using the PFI Index to prevent employee burnout;

Speakers

Dr. Ivan Zak has earned multiple accreditations in veterinary medicine. After graduating, he worked in 35 veterinary hospitals across Canada, where he was inspired to create Smart Flow, a first-in-the-industry workflow optimization system. Smart Flow was subsequently acquired by Fortune 500 company IDEXX, where he became General Manager of the Software division. After consulting 500+ practices worldwide on workflow optimization, he decided it was time for a new adventure. Dr. Ivan has a holistic view of the whole veterinary business market and he’s making his next step the creation of a more cohesive, unified platform that will ultimately benefit the veterinary professionals.

Transcript

Ivan-Zak
Dr. Ivan Zak

Hey, everybody, welcome to consolidate that. Last time we talked about value creation stream and Ryan, hello, by the way.

Ryan Leech, Director of Sales
Ryan Leech

Hello. 

Ivan-Zak
Dr. Ivan Zak

You mentioned the value stream process, and you said that you have an idea of how to make it predictable.

Ryan Leech, Director of Sales
Ryan Leech

Right. Definitely. We had a good chat the other day talking about sort of the flow of it, the upstream, downstream ideas, but really the idea of looking at your acquisition model as a sales process was definitely something that I thought would be valuable for us to talk about, but then also for people to be able to hear about it as well.

Ivan-Zak
Dr. Ivan Zak

All right. Well, let me then just go back to the value stream concept and just dissect which part we’re talking about. So, and in the episode about the value creation plan, we talked about two parts of value creation by the consolidator. Part one is buying practices and then consolidating them into sort of one group, which is arbitrage.
And then part two is margin expansion. And that has various growth levers that you can apply to expand margin. And the two major sort of division there. One is increasing the top line and two decreasing the cost and optimizing the bottom line. But if we split it just to arbitrage or margin expansion, I think you were talking about how to make predictable arbitrage, the upstream, is that correct?

Ryan Leech, Director of Sales
Ryan Leech

Yeah, definitely. It’s about putting together a pipeline and managing that pipeline just in the same way that, throughout my career, right, I managed selling planes that way. You know, trying to figure out the different ways to make sure that you’ve got a predictable idea of who’s going to be able to come in, who you’re speaking with, figuring out your sales funnel, and know what your outcome is going to be from, like you said predictable outcomes.

Ivan-Zak
Dr. Ivan Zak

All right.
So you’re taking the concept of sales into the concept of buying practices. I don’t know if we actually talked about upstream and downstream. It’s usually it’s a fairly, common concept, but I want to, I want to expand on that as well. Right? Because usually, the upstream process is something that has a lot of variabilities.
And then, you know, practices fall into the funnel, come out of the funnels. Some will buy, you know, these practices, not you. And this is sort of a fluid process and that’s upstream. And what you do in upstream is super important for downstream. And in consolidation, I think downstream is basically your integration, your operational improvements, where you apply growth levers and general function of the hospital. So, if you’re not well-defined and articulated in the upstream, what practices you buy, what practices more important you don’t buy, and things like that, it can greatly affect the downstream effect. But optimization of the upstream, the arbitrage, that part of the value creation is what we’re going to talk about today. So, Ryan, tell me more, why do you think it’s similar to the sales process and why do we want to talk about it?

Ryan Leech, Director of Sales
Ryan Leech

Yeah. So if you think about it in the sense of a sales process, it sort of falls in place.
It makes a lot of sense. You think about just purely on a sales funnel, you have a certain number of practices that exist out there. Later I know we’ll talk about strategic filters and there are a million things we can hit on. But after you’ve sort of filtered to the point of every practice in the world, then you filter it down to every practice in your region, every practice that hits the EBITDA that you’re looking for, every practice that wants to sell. You start to take hundreds and thousands of practices and funnel them down into a spot where you’re looking at 10, 15, 20, 100, 500 practices that fit that criterion. And to be able to manage your pipeline, much like you would a sales funnel, people are going to be able to come in there.
They’re going to fall off. They’re going to come through and they’re going to be able to move forward. You know, it’s selling a practice and selling your business. And for a lot of people, it’s. You know, your baby, it’s what you’ve built. It’s your team. It’s the people that you love and that you care for.
It’s a big decision, but, and a lot of times decisions are easier to not make decisions than to actually make them. So unless you’re following up with people, you’re keeping on top of the acquisition process and having a strong cadence of the sales cycle and the purchasing cycle, you’re probably going to lose opportunities there of people that, you know, maybe the squeaky wheel will get the grease there. For some of them, it’s the acquisition and the consolidator that’s following up with them.

Ivan-Zak
Dr. Ivan Zak

Okay, so that makes sense. And I want to hear more about how do you envision mapping this process again, sort of a classic sales and how do you make it predictable? But one thing that you mentioned, I think is super important for consolidators and that’s sort of when I said about Do’s and don’ts is you’re developing, what I usually call is, your product-market fit. And in that product-market fit, you understand what EBITDA, what type of practice, how many vets, region, all of those things that really become your strategic filter. And that’s what I think is if you doing that, upfront of the process rather than later, then you will quickly filter out clinics that you don’t want, and they will have less impact on the downstream operations.
Right? We’ve seen a lot of consolidators, they have business development running around and their role is to buy practices and they’re compensated on the amount of EBITDA that they buy. So they’re naturally interested, not in the culture, not in how burned out the clinic is, not anything but EBITDA. So, can we sort of implement that filter somehow in that process and make it scalable across all the business developers and make it predictable?

Ryan Leech, Director of Sales
Ryan Leech

Of course. Yeah, it’s similar again, like the sales process, a really-really good salesperson can cause more headaches for the customer support team, and in this situation, the integrations team. Because they do a great job, you know, they can do a wonderful job of working with the practice or working with your client to get them to understand the value in what you’re offering as a consolidator.
But if they’re not going to be the right fit for your strategy and your strategy of what you want to implement or rebrand or put in place, that’s going to be a problem for the entire lifecycle, post-acquisition. So, looking at those things, and if you have that strategic filter in place, what you’ll be able to know is we don’t buy equine practices because that’s not what our specialty is. Or hey, maybe the feline, the cat’s corner practice is not the right fit for us because we want to be able to do 24-hour service and have a larger addressable market. But if you have a great salesperson, they can probably sell the clinic on being excited to work with you. They could probably sell the COO and the CEO on the value of adding a practice that doesn’t fit into your strategic filter, um, which, like you said, down the line, those are going to be outliers that will cause pain points and pressure points that are going to take more time from the entire team. So, really being dedicated in knowing what your client and when I say client, I think of the practice that you’re purchasing, knowing what the right fit is there – that’s going to be a really good spot to be able to predict the long-term growth and spend your time going after things that are going to fit into what you’re trying to build.

Ivan-Zak
Dr. Ivan Zak

And going back to the concept of lean. This is something that I think if you implement that filter upfront, then it will eliminate waste. If you think about lean, what we didn’t talk about the value stream, what value stream also helps you to eliminate the waste of waiting too much.
It eliminates the waste of producing something that you don’t need. And this is one of those cases. So basically, if you are leading the clinic that is outside of your product-market fit, and you finally bring it to the committee that decides to buy or not to buy a practice, and all of a sudden it’s the wrong practice.
Now, business development wasted all that time chasing that clinic. So I think that that’s actually a very valuable piece there.

Ryan Leech, Director of Sales
Ryan Leech

Yeah. It’s, you know, I think about a bit when I, prior to, to get into work into the veterinary space and the way that I got into the veterinary space was with my consulting business working with early-stage startups.
One of my first, early-early clients was a cocktail company, which sounds awesome. Right. You know, shaking up drinks and pouring them all day long. The first day was tasting 65 different drinks. So that was a tough day at the office. The thing though that I learned was their goal for hiring a consultant was that they didn’t want to have a full-time salesperson. Cause we were still building the process. But my goal as a consultant and as a business person was to help them optimize strategies and improve things. And we didn’t have the same idea and I did a fantastic job of selling them on me being great, but I probably didn’t sell myself on my own value of what I really should be bringing to the company. Because salespeople, we’re great at selling, but we’re also really good at selling ourselves.
My wife jokes a lot of times that I’m the easiest person to sell something to because I probably feel bad for the salesperson on the other side. I’ll usually say ‘Yes’ to anything and get marked up and all of that, but it is important to have that idea, and I learned from that. I’ve sat down after I finished that six-month consultation with them and said, what went well, what didn’t go well, and I put together a strategic filter for myself so that I felt confident knowing that in retrospect to say: “Hey, this client is the right one.
This practice is the right one. This clinic is the right one to fit too”. And it allowed me to be a lot more deliberate and a lot more focused in the way that I was building my business, which is the same thing for building a brand, whether it’s Denovo clinics and knowing who’s the right franchisee to get on board or whether it’s the right practice manager and practice owner to bring into your team.

Ivan-Zak
Dr. Ivan Zak

So, I love that you mentioned about the process. So, we talk a little about the processes, the systems. And once you have the process, you want to let it onto the system, and you talked about landing this acquisition process in some of the common sales tools. So can you expand on that?

Ryan Leech, Director of Sales
Ryan Leech

Yeah. It’s, you know if you strip out the luxury and the ideas of buying a practice. Whenever I think of buying practices, sometimes I think of Richard Gere in pretty women. Because he was so glitzy and he was buying businesses and selling them and, you know, wheeling, and dealing.

Ivan-Zak
Dr. Ivan Zak

I didn’t know the area that old.

Ryan Leech, Director of Sales
Ryan Leech

Oh no. Yeah. It was probably on extra reruns, right.

Ivan-Zak
Dr. Ivan Zak

Parents to VHS tape. Careful of those tapes by the way.

Ryan Leech, Director of Sales
Ryan Leech

Oh yeah. People look at it as this black box of equity and we’re moving money here and sending things there. But if you strip out some of those ideas and put together a CRM, a client relationship manager, customer relationship manager, whichever ‘C’ you want to put there, right.
It could be your clinic relationship manager as well. You need to put those things in there and be able to track what emails are going out, understand who’s following up with people, put together the right cadence, understand, you know, even to the point of putting together the offers and the legal ease that needs to be in place there and putting that into a CRM and, you know, there’s expensive acquisition ones. But you know, I know, Ivan, you’re my software genius. And I think from what you guys have looked at is that it’s not always important to have something that’s dedicated purely to the acquisition model. You’re able to take some of these CRMs that are just built for the sales process and understand that they can fit into the acquisition model.

Ivan-Zak
Dr. Ivan Zak

That’s brilliant, Ryan, because, there are software products that actually automate this process of acquisition and they work like a CRM. I looked at one of them called Midaxo, so I think it’s super expensive.
And I think it does the job if you set it up, right. The challenge I think is that you know, first of all, you’re buying it and you think is going to do all things for you. Any piece of software or any equipment or tool you need to learn and you need to adjust it to the way you do things. So I think in the right hand, CRM will really do the job of recording the clinics that you have, building the funnel of how they fall off or how they come in, putting the filter upfront. And then that pipeline is in every CRM tool. And, you know, HubSpot is my favorite and we worked with, Salesforce. I’m sure that you can probably name a couple as well, but automating that process that starts measuring it. And that’s, what’s important. I think that the predictable part that you’re talking about is that now, you know how long each step takes, and then once you know how long it is, you can start optimizing on it.

Ryan Leech, Director of Sales
Ryan Leech

Exactly. Yeah. If you’re not tracking it, if you’re using just email and especially nowadays, you know, I don’t know where everyone else is, but I know that we’re sitting in different rooms right now, socially distanced, but a lot of people are not in the same office. So, you don’t get to have that whiteboard with all of your deals you’re working on, and being able to walk in there and see what’s going on.

Ivan-Zak
Dr. Ivan Zak

I can have Excel though.

Ryan Leech, Director of Sales
Ryan Leech

You can have Excel, but it’s going to be tough if you’re really following a true sales process, you’re not going to be able to give yourself the ideas of those things. And you’re not going to be able to track the multiple contexts that are probably needing to be made and looping in the right people.
I liked you were saying predictable, and it reminds me of a book that I just read from the recommendation of Sebastian over a Digitail, which is Predictably Irrational by Dan Ariely. I thought that book was really interesting because what it’s talking about, it’s important. It understands the idea that especially when you’re purchasing someone’s baby, as I like to call their clinic. If they built it, it’s understanding how just the most expensive bid, the highest bid is not going to be the one that fits into the right negotiation. There are so many other factors. When you look at them on a sheet of paper as a business person, they seem irrational, but they are predictably irrational.
It’s understandable that people will be making decisions in certain ways when you understand sort of what their motivations are. And by looking at those things and using the CRM, you’ll be able to see. We bid 3X, 5X, 10X, whatever of your EBITDA, and we won these five deals. We lost these three.
We can understand why. Hey, you know, Bobby and sales, didn’t follow up with this person for over two months. And now we see that they were converted into an NVA clinic. Okay. Well, what did we miss? What did we not do? And you’re able to go back and really see what you guys can improve upon to make it, like we said, more predictable.

Ivan-Zak
Dr. Ivan Zak

So that’s a super important part. Where the disconnect, that we see a lot in consolidators is, where the business development has their own notes, Excel sheets, or whatever it is. So, once the clinic closes and is transferred after all the processes to the integration team, all the information that they found out in the pre-acquisition stage is somewhat lost.
And I’ve, I haven’t seen really great teams that transfer that information. Things like, you know, there’s conflict on the team. There’s, you know, there are some things that they discovered along the way. So, the transition of that information from that initial process to downstream and informing the right people about the right red flags is super important.
And I think that using a CRM like you were proposing, could be a really cool idea where you can integrate the two products together, or at least there is like a, you know, pack it up files that are going through at least have like one, you know, a section where it’s like red flags for the practice or first things to fix. Because what you also want is to categorize clinics early in the game.
And I call it sort of understanding classes of clinics. And we’ll be talking about this a little further, but what I call classes of clinics are basically what is the growth lever you can apply to this clinic to increase EBITDA post-acquisition, and that’s, I think kind of leads to a discussion we wanted to have a little bit about, like, what are you assessing prior to acquisition?
Because usually, it’s, you know, it’s money in the legal, so those are two due diligences, but also I think there’s a lot more than you can uncover before you buy the practice.

Ryan Leech, Director of Sales
Ryan Leech

Yeah, there definitely is. Just to throw it in there, I mean, if we were to say, take nothing from what we’re saying, except for one thing, and I think, if I could give people the one term of advice, it would be that the information that you’re learning during that BD and acquisition process is invaluable. For the longterm. If you’re not going to put a CRM, if you’re not going to do anything, the one super quick, easy, fast, very nice thing that I saw that I learned from a company I worked with was an after-sale survey. So, after-purchase/after-acquisition survey of the person that did that deal, it was a Google doc, or it was a Google form and it came in and it asked you, who was your primary contact? What was the reason that they decided to go with the product or the service? What were the hurdles that you came across? Who else was important in the decision-making process? And what else does the rest of the team need to know about this purchase?
That form, you’d fill it out after you closed the deal and that distributed to your head of your operations team, head of customer support, the CEO got it. So, that way every single person, even if you take out the actual niceties of having the CRM, which I think is very valuable because it stays a lot longer than a Google form, but that way everyone was downloading and transferring that data.
If you do nothing else from what we talk about today, that would be super-super valuable and important for people to understand.

Ivan-Zak
Dr. Ivan Zak

Well, I mean, all of these assessments could be included and automated through CRM because again, people are looking at money and legal structure, but there is how’s the team doing?
Are they all fighting inside before the acquisition? Is the owner of the hospital, who’s married to another doctor, dating the receptionist?

Ryan Leech, Director of Sales
Ryan Leech

That’s a pretty, pretty deep dive in the discovery process, but yeah, I think you’ll find out right.

Ivan-Zak
Dr. Ivan Zak

Yeah, there are more things on the surface, like assessing them for marketing ability.
If marketing is one of those growth levers, you want to apply post-acquisition for the EBITDA growth or the top line, then you can assess their website, their SEO presence, you can do sort of things and find out on social media. What is the feedback about them? You can create a pretty significant assessment and deposited it into your CRM and then transfer it as one of the files across.
So, I think that’s super important is also. Marketing, you can do it without talking to anybody in the clinic. So, do sort of what you can find on the internet. You can assess their culture, right? Post-acquisition and do surveys on that or burnout surveys, you know, since I’m involved in a lot of burnout.
You know we use this easy instrument, which is a PFI Index, in my survey. It was 16 questions. And then after 16 questions, you can understand whether people were burned out within the last two weeks and it’s sort of a spot check that you can do. And there are people in the industry that we know, that they can do these surveys.
So, there are more things that I think people are missing prior to acquisition that would really help the post-acquisition downstream effect.

Ryan Leech, Director of Sales
Ryan Leech

Yeah. I always laugh about the day that my wife and I got engaged. We were staying with her family. And that night we came back from dinner. After I had proposed to her, my father-in-law said: “Congratulations, tomorrow morning I want you guys both take a strengths-finder quiz. So that you can figure out how you work well together and how you communicate with each other, so, that things go well for the rest of your life.” And that’s that survey, right? Doing the survey and figuring out how your team works well and what sort of opportunities there are to improve them would definitely be really valuable.
And, and those are things that don’t rock the boat, right? People fill out surveys all the time and then you can understand what you’re working with and who you’re really diving into it with. I think it’s important to remember, right. When you’re purchasing these clinics there are people and, you know, at VIS we do have that big idea and the structure to try and improve the lives of the veterinarians and be able to allow the consolidators, the levers and the ideas and the structure so that they’re not causing the companies, and the teams, and the people that they’re employing to feel burned out, or underappreciated, or lost in that acquisition process.

Ivan-Zak
Dr. Ivan Zak

Super important. And I think that something like this idea of making it predictable flow of clinics from the upstream through the acquisition funnel. I think that’s probably one of those cool instruments that may help with the burnout. I remembered another book that I want to throw in at the end. Predictable Revenue. This is where the word predictable stuck in my head. By Aaron Ross. So, they’re talking about how to structure a predictable SAAS application sales pipeline, but I think it will really help to understand how you can actually slice the pipeline and the funnel upfront before you’re buying the clinics.
So, that’s probably another book that could contribute to sort of, this idea of the predictable flow of practices into consolidator.

Ryan Leech, Director of Sales
Ryan Leech

So for Christmas, I’m sending you Predictably Irrational.

Ivan-Zak
Dr. Ivan Zak

All right.
And I’m sending you Predictable Revenue. And since we’re in the digital age and we can’t really see each other, I’m going to send you to your, I assume you have an AOL account because we have VHS.

Ryan Leech, Director of Sales
Ryan Leech

Oh yeah, AOL, VHS. Just send it to the production team, and they’ll chain mail it to me. And I’ll reply to 15 people also have bad luck for 2021. Okay.

Ivan-Zak
Dr. Ivan Zak

There you go. All right, Ryan, it was a blast. I think it’s a great idea. Applying CRM to the acquisition process. Thank you for listening. And we’re going to bring some more nuggets of wisdom about consolidation next episode.