Are all clinic owners entrepreneurs? Do all physician-owners really have what it takes to successfully run and grow a private practice?
We’ve talked about joining networks, understanding private equity, and entrepreneurship a lot on this podcast, but usually we are talking about high-level practices to get patients in the door and help them convert to treatment. On this episode of Inside Reproductive Health, we get a new perspective, one that focuses on entrepreneurship, best business practices, and what it really takes to grow in our field.
Dr. Andrew Meikle is the Founder and CEO of The Fertility Partners, a company based in Canada that aims to empower and enable fertility clinics by providing collaboration and strategic expertise. Through his experience in other healthcare fields and his current work in the fertility field, Dr. Meikle shares his thoughts on clinic ownership and entrepreneurship, what fertility networks are looking for, and important things to keep in mind when considering joining private equity.
Learn more about The Fertility Partners and Dr. Andrew Meikle at www.TheFertilityPartners.com.
Mentioned in this episode:
74 - Dr. Paco Arredondo
78 - Dr. Paco Arredondo
59 - Dr. Michael Alper
16 - Dr. David Sable
85 - Dr. David Sable
45 - TJ Farnsworth
Discover our Fertility Marketing System at www.fertilitybridge.com
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Welcome to Inside Reproductive Health, the shoptalk of the fertility field. Here, you'll hear authentic and unscripted conversations about practice management, patient relations, and business development from the most forward-thinking experts in our field.
Wall Street and Silicon Valley both want your patients, but there is a plan if you're willing to take action. Visit fertilitybridge.com to learn about the first piece of building a Fertility Marketing System--The Goal and Competitive Diagnostic. Now, here's the founder of Fertility Bridge and the host of Inside Reproductive Health, Griffin Jones.
JONES 2:26
Dr. Meikle, Andrew, welcome to Inside Reproductive Health.
MEIKLE 2:30
Thanks a lot, Griffin. Great to be here. I'm a fan.
JONES 2:33
I can't wait to talk about the different ways that people can think about how they might sell their practice, how they value their practice. You've got a lot of tangible stuff for us to go over. I might throw a couple philosophical hard balls in between here and there. But you've got a lot of tactical intangible stuff. Before we do that, I'm curious--you were a dentist by trade. How did you end up in the fertility space?
MEIKLE 3:02
I'm fortunate. Jeez, I thought we had like 40 minutes to an hour. I mean--
JONES 3:07
Yeah, this is part one! The other questions are going to be part two [laughs]
MEIKLE 3:11
Very, very, very quickly. Look, I knew that I wanted to be a health care provider from the age that people started asking you what do you want to be in life and it was it was a doctor when I was a little kid and I had an uncle who was a dentist to seem to have more autonomy over physicians back in the day. So I followed his footsteps and never really questioned what I was going to do. I was math and sciences all the way, graduated from dental school. And then it hit me like a ton of bricks that this is a business. I not only have to see patients and deliver excellence in my technical skills, but I've got people to lead, I've got bills to pay. And it sounds surprising but in Medicine and Dentistry, we get zero business and leadership training. Fortunately for me, with my background in sports, leadership came naturally to me. And I quickly realized that I needed to create a team, a team that functioned and functioned synergistically at the highest level so that we could deliver in the best care to our patients. And it quickly dawned on me in the first five years of practice that not everyone had that approach, there was a lot of burnout in the space. A lot of dentists were finding it increasingly challenging to run these little businesses. And so just really, by happenstance, I bought my first practice and the dentist stayed on and he said he'd stayed for six months and once I started running and leading the practice, it grew 30% in the first year with just some simple energy and leadership and systems and processes. He asked to stick around and stayed for five years and told several of his classmates “Hey, you know, this guy Meikle can run your practice, you can just come and go and kibitz with the team,” and it really kind of took off from there. I bootstrapped about 20 clinics while I was practicing dentistry, and at any given time I was operating 10 clinics and realized that there was an opportunity here once I'd spent enough time in it to scale the business and ended up doing so.
JONES 5:13
So your first acquisition was as an individual, you didn't have a firm behind you.
MEIKLE 5:19
Oh, correct. Got my first 20 were bootstrapping.
JONES 5:23
The other 20 that you opened, were they all de novo? Were they all acquisition? Was it a mix of of the two?
MEIKLE 5:29
It was a mix, but mostly acquisition. I learned pretty quickly that cash flow is important. I wouldn't say more important than your grandmother, but it's pretty damn important. So it was fewer de novos and more acquisitions?
JONES 5:44
It's--Yeah. What's the expression? Cash isn't the number one most important thing but it's a close second behind oxygen?
MEIKLE
[laughs] Right.
JONES 6:01
And so you didn't have a firm behind you? Did you have any other high net worth individuals? Was it just your own bankroll plus some commercial loans?
MEIKLE 6:05
Well, it was just me and a ton of debt. And in 2008, when the credit crisis hit, the banks completely shut down, I realized I needed some more tools. So I went back to school and did an MBA. And in my MBA, I got a ton of support from the profs who said, you know, you're really onto something here. This is an underserved market, there's a need, it's growing in complexity, it's unconsolidated. So my thesis coming out of business school and coming out of the recession was to grow and scale a business that essentially was a B2B business, providing back office services to dental clinics. And we also developed a model whereby we acquired 100% of the clinic, but gave back the dentists typically 20% of the equity in their business, in parent company shares. We launched that business in 2011. And by 2018, we acquired 300 clinics across the country, in every province in Canada, we had about 800 million in revenue, 22% EBITDA margins, and we sold it for 1.7 billion in March of 2018.
JONES 7:12
What you're describing is extraordinarily entrepreneurial. The way you described, at least your first colleague whose practice you took over, was with someone that really wasn't an entrepreneur that preferred this. And I remember being on a ride with you and some others. I've talked about it a couple of times on the podcast, but a long ride with you to Aspen, Colorado, that was way too long. And I remember you said, you were talking about what an entrepreneur is. And you had mentioned that the--and so if I'm paraphrasing, that's why I'm saying it now, so you can correct me. But you were talking about how widely used it is now. And the person that owns a barber shop is not an entrepreneur, the person--
MEIKLE 7:59
I don't think so.
JONES 8:00
The person owns 20 barber shops is an entrepreneur. So can you talk about what your philosophical definition is?
MEIKLE 8:03
Sure, I think, look, unless sell the farm or burn the ship as the Vikings used to, I don't think you're laying it on the line. And you're not leveraging the scale. You're not scaling that individual business. So I think until you can almost take yourself out of the equation and replicate the model over and over and become financially successful with it with capital at risk, I don't think you're an entrepreneur.
JONES 8:30
I think that's a really strong definition. In 2018 I got a lot of traction, still one of our most read articles about I made a philosophical argument that those that started fertility practices in the mid 90s were really inheriting a general practice model established in the mid 20th century, if not earlier, and now they're competing against people who are capital-backed entrepreneurial ventures. And it's like, we're here to play tackle football, but we just showed up to play tag football, you guys can't tackle. No, they are tackling--that's the game that's being played now. You're just still playing tag football, everyone else's playing tackle. And so I've made the argument that I don't think many people are entrepreneurs. I've had Dr. Arredondo on the show to argue the opposite. I still really firmly--I think he makes great points and I encourage people to listen to those episodes. I still strongly feel that many practice owners are not entrepreneurs, they found themselves in this position. And some of the people that are really rising to the top, they are REIs, but they are also entrepreneurs. I deal with them. And I can tell the difference between them and some of our other prospects. And so now we are in this place where there is a big difference. And what do you think the prospect is for those folks that aren't exactly sure where they fall on the spectrum?
MEIKLE 10:04
Yeah, you know, it's a fascinating debate going on in the space right now. And I don't think--you know, you've got sort of David Sable on one end, and I listened to his podcasts and other avenues through which he communicates. And I know Paco, he was at that conference, and we've remained in touch--didn't have a great experience, you know, from a private equity perspective, and he's pretty blunt about it. I think that and then you sort of roll in, you know, some data, and that there's that HBS study on physicians as leaders, do they outperform capitalists, if you will, and they do in a healthcare setting. So, but the article also refers to them as accidental leaders, they don't teach it, they sort of come across it and perhaps hone that side of their skill set over time. And look, I think that the typical practice owner is not an entrepreneur, and they're not typically very business savvy. Some are, and they're doing exceptionally well. This space has grown 10% compounded forever. And, no disrespect, but almost anyone can do well in that sort of a setting, especially when supply is not meeting demand. So everyone's doing well--almost everyone's doing well. I think there's another level, it's not just about revenue and EBITDA. You know, our mission and you know, I'm a health care provider at heart is to drive clinical outcomes, to use science, collaborate with stakeholders, and our group to drive clinical outcomes to be more successful for our patients. And as well to dramatically improve the patient experience, the patient journey. So it's pretty simple. All of our decisions are made based on those two things and I think there's a tremendous opportunity to professionalize some of the areas in the space. When you look at management, for example, I think there are a lot of people doing a lot of great things. But it's sort of doctor first, it's not patient first. So we're flipping this profession on its head. And looking at the management, and the operational efficiency and effectiveness of clinics. We're looking at lean processing from a patient perspective. We're looking at sort of value innovation from a customer perspective, it's got to be driven by the patient. We have to serve the patient. And I think it's largely the other way today. So we have a completely different lens. And I think most groups we’re investing for the long term, we can get into private equity, if you want. We are now backed by private equity. Gotta be careful who you choose who you partner with, you got to be careful who you marry, you got to spend time, you got to do your diligence, you got to go on dates. And you have to be ruthless in your due diligence because it is a life sentence. So I went away from your entrepreneurship question, but--
JONES 13:09
No, it’s on point! The way we're going to get there because I want to talk about the dates and the due diligence now we're at the fork in the road. And I want to talk about the fork in the road, which stems from that entrepreneur definition philosophical question, because I do believe that it is a spectrum. On a zero, you have someone that will never work for anything beyond an hourly wage. And at 100, you have an Elon Musk that is going to get us to Mars when he's not even an astrophysicist and Dr. Andrew Meikle is somewhere on the further end based on the behavior that you've described. I myself, I do not consider myself a true entrepreneur yet. I'm somewhere lower on the spectrum. Maybe I'm a 63, maybe I'm a 65. But I am certainly more entrepreneurial than I was. I'm building this business, I'm slower. I think the tendency of a true blue entrepreneur is to do things much faster to be able to take much greater leaps. I need to learn by doing so I go slower, but I am becoming more entrepreneur leveraging systems, leveraging people, invest in more capital. And so I think there are people that are like, ‘Well, you know what, I'm not Meikle, because I certainly wasn't doing that when I was younger, but I'm starting to get the hang of it and and now I'm at this fork in the road.’ How should someone think about this if they're somewhere on the spectrum, and they're like, ‘Well, you know what, I can go with The Fertility Partners or Inception or one of the new groups or I can keep doubling down on my entrepreneurial talents.’ How does someone think about that when they're at that fork in the road?
MEIKLE 14:46
There's a lot to unpack there. And you and I need to have beers and talk about you as an entrepreneur because I think you've got a ton of potential and some different business lines here that you could enter into with your depth of knowledge or leadership. The culture you've created and the true friendly connections you've made in the space. But anyway, that's for another time. You're very, very close. I see it less as a fork in the road than as a chasm to be crossed, and you cross the chasm in one leap, or you don't make it. That's, to me, an entrepreneur’s mindset. So you got to make a decision to go for it, and then go for it. It's like the Jim Kelly hurry-up offense, right? There's gonna be a lot of moving parts man, but you know, you can do it, you can stay on top of it, you can lead it, you can prioritize, and you can guide the team to success. I don't know how to turn a physician into an entrepreneur per se, I think you have to have the fortitude for it, you have to be able to delegate tremendously, because you need to see everything from 60,000 feet and not be too in the weeds. I think, an absolutely critical element. And something that I see as a weakness generally in the space is a lack of financial awareness, a lack of operating the business with financial metrics, people in the space seem to look at it in the rearview mirror, rather than in real time. Our organization, we provide a full P&L every month by the eighth day of the next month. So our partners can see what they've done in their business and how it relates to the strat plan that we've worked on them going forward. So I think, you know, we don't have enough time, but I mean, a start would be, definitely start reading some books, you know, there's a ton of great information on entrepreneurship out there. Gerber has a whole series. You know, those things are very helpful, but you really have to take yourself out of the day to day equation, be able to see it from 60,000 feet, have the best, most independent, brightest people you can working for you, actually executing on things. And I think that's a big first step.
JONES 17:03
I think the chasm analogy is pretty apt, we do something called the Goal Diagnostic, it's a $600 initial offer. And part of the reason why I do it is to see if people have made that leap. Because if they're just coming to me to see like, ‘Oh, well what else is out there,’ we're probably not the firm for them. But if they're coming to us saying, ‘We want to be in these markets. We want to hire this many doctors. We want to increase our volumes by X percent,’ then it's like, Okay, now I can help you. And so I think the way people make decisions comes down to where you've fallen on that side of the chasm, because--
MEIKLE
I totally agree.
JONES 17:32
I wouldn't have spent my last dollar to come to MRSI in 2015, if it wasn't--to rent a car to get to Chicago, right after moving back to the United States--if I hadn't chosen this field. And so I think when I hear people say, we want to take over the world, it’s like, No, you wish that the world would come to you. Taking over the world is a much different thing. And so now with you, we have the opportunity to talk a little bit about that financial literacy, business literacy, that you've mentioned is missing in medical training in the academic setting. So if we start with timing and picking a partner, some of this dating stuff, what are some of the tenants that really belong in that due diligence?
MEIKLE 18:28
Well, I think being ready for due diligence is one thing. So that goes back to the numbers, you got to have your numbers in order, you got to have some sense of what your profitability is and where your expenses are--what are your variable expenses, your perfect expenses, you know, the classic accounting. And you don't have to learn it from scratch, you know, just get a great advisor and sit down with them and truly understand your business. I didn't have a lot of business training, as I said, it was figuring it out. And just to your point, now probably took a little longer than it might have been when I went to school the accounting prof said, ‘Listen to me in this semester, and it will change your life.’ And I did and it did. It completely transformed my life. So you've got to be on top of the numbers whether deciding to sell or to partner or to have an associate buy-in. Even a sequential buy-in requires a thorough understanding of the business and where the numbers are.
JONES 19:27
Do you find that most people have that sufficiently ready? Or do people need to hire a forensic accountant at times? What's the gamut?
MEIKLE 19:36
I think most of them do not have it ready. Most of them are not particularly buttoned down from that perspective. Some are, certainly, and they've, you know, the larger clinics are typically I'll have more to spend about source to perhaps some of the larger accounting firms or have a long standing relationship with a boutique accountant and that can be a little quicker, but there's still a tremendous amount of unnecessary complexity in what I'm seeing and how they've structured their businesses and a lack of personal knowledge about their own business. And I'll tell you, one of the most jaw dropping things to us as we entered the space was that the typical marketing budget that we see in this is--it kind of is a plug for you, but it didn't start out that way--.6% of revenue, I don't know what you're seeing--
JONES 20:27
I was just about to say it was half a percent of gross revenue.
MEIKLE 20:30
It is staggering, like it is far too little. Again, I think it's been this mindset of ‘We've got a waiting list, we don't need to do anything.’ But you know what, you say it in your commercials, competition is coming, Wall Street's coming, Europe's coming. Like, you've got to always be winning patients or you're going to go backwards. So that's another thing we're very focused on is supporting our clinics. And, I might as well say it here first, we're coming to the US, Griffin, and we will be using your services later this year. We've had inbound inquiries from the UK, from Europe, from the US, South America, we've been, you know, only seven months old, but we've been inundated, I think because of our value proposition and our model. The next logical geographic bow for us is the US and we'll be there by the end of this calendar year.
JONES 21:21
Well, so now there's another person coming in. But I think even if all of that weren't true, I think all of that still isn't enough to put a fire under many people's bellies now. But I do think that, if you're using marketing correctly, you're just using it to invest back into the business at the very least. And so it's a way of--because otherwise, you're taking it out of your own pocket. And that's often why people don't invest in their business, and then it just becomes irrelevant or less competitive or less profitable over time. But if you generate more profit in the meantime, and you use some of that to invest in the longer term of the business, then you can keep the profit machine running. And so you're looking at these books, many of the prospective clients that you're talking to--just prospective partners that you're talking to--don't have the books sufficiently in order, what's the delta between those that do and those that think they do?
MEIKLE 22:25
I think most of them have a sense that they don't, to be honest. I think that they don't know their numbers. Yes. And their EBITDA, their cash flow, or how much their staff wages are, they don't know. So I would say, it's not a big delta, because they acknowledge as much.
JONES 22:42
So when you're helping--when you're looking for a deal, what looks good to you? Are you looking for particular markets? Are you looking for length of time in a marketplace? Are you looking for a number of physicians? What looks good to a prospective buyer or partner?
MEIKLE 23:01
Glad you asked. So the really the most important thing for us are quality care providers or not. And with that goes reputation. So I've spent, as I said, I left Dental Corp in March of 2018 and we didn't launch this business until summer of 2020. I put together the team in the fall of ‘19. And we started planning but I spent--I went to Ashram Vienna in the summer of 2018. I flew to Australia and met all the corporate groups in December of 18--sorry, 19--went to the Canadian Conference well before I launched the business, and I spent an incredible amount of time meeting and earning the trust developing relationships with the top clinics in the country. I would say I approached the four top clinics in the country. And two of them said no, one was not right now, one was ‘doubt it’ and two others said yes. So it took me a year and a half to close on what I know are two of the best clinics in the country. So its quality first. Not only is that just smart, because you know, we want to provide quality patient care and build a quality organization, but when you get any number of the top clinics in the country to sign on, people say, you know, holy sh—, there must be something to this and they pay attention. And I would say, you know, it was almost like an earthquake. When we announced when we passed our point of confidentiality, we're closing the deals, and we announced that we were partnering with them, it really was like an earthquake in Canada. And we've grown very quickly, we have over 20% of the entire market share in Canada. I'm not sure if there's any one corporate group that has that in the US. You know, per capita based on the size of our country, we're larger than Shady Grove, Boston IVF, and Inception--any of the groups down there. So it really propelled us to to where we are today, seven months later.
JONES 25:01
So you're looking for a couple of names, some quality when you are doing this, what should the sellers or the now partner clinics be thinking about when they are doing this dating?
MEIKLE 25:18
So, you know, my opinion is that--and others have different--we talked about, you know, Paco and Sable and, you know, Michael Alper, and so on. And I know, they did a deal. There's, you know, my opinion, and I can't build a great business in three to five years, I don't want to exit in three to five years. And I don't want the pressure of accepting that. So for me, and if I were a clinician, I look for somebody who has a long term horizon, regardless of my personal horizon, because I'm going to care about my staff, I'm going to care about my patients, I'm going to care about my legacy. So I think a long term time horizon, and then look closely at the track record. So the people, you know, involved, whether it's the CEO and the senior leadership team, like myself, or the equity backers. You look at Eugin, you know, unfortunately for them, their backers, NMC Health, got these delisted. I'm not, you know, telling tales out of school, it's public knowledge. They got the lesson from the London Stock Exchange, that would concern me personally if I was signing on to something like that. There's fraudulent behavior there at the top level, those are the really important tenants to look at. And then obviously, spending time with the individuals, you know, what are their values?
JONES 26:34
Well, so I'm just saying, if I was playing devil's advocate, that kind of argument might be well, these are publicly listed companies. So we know about their finances, we have public records for them, if you're talking about high net worth individuals or private equity firms, but especially individuals, what do we know about them?
MEIKLE 26:55
So again, private equity, you have to talk to other CEOs, successes, failures, current portfolio companies. Unfortunately, many private equity companies, Griffin, still have that old playbook where they want to cut costs, and drive revenues. You know, healthcare companies are different. Doctors are different. Whoever it is that's writing the check has to understand the doctor nuance, they have to respect the doctors. There's an art and science to this profession, this industry, if you will, it's not widgets, it's not manufacturing, it's highly specialized. And they need the tools and equipment that they need to provide the best care, but there has to be an understanding of that. So they look at the track record, I'm also not a fan of the 51/49 private equity playbook, whereby PE buys 51% at whatever, seven, eight, multiple, and then they say, okay, you hold on to 49% at the clinic level, and we'll talk about that later. So they're making the arbitrage on the collective aggregation of the group, and the doctors are not our models completely different. We invite our doctors to have equity at the parent company level, same equity. I have the same equity our private equity partners have. And so they're also participating in the arbitrage, we buy 100%, and they can take back as much equity as they want in the shares. It's up to them, it's up to their risk profile. So we feel like it's a true partnership, our model, we are partnering with the doctors that aligns us on what's best for the clinic, what's best for patients and what's best for the organization.
JONES 28:36
I thought we might talk about it later in the show, because it is a philosophical thing that I've been exploring and reflecting on with regard to private equity, especially in REI medicine. To be fair, you're gonna get a harder question than other people who've been in your position had been on the show is because I've thought about it more recently. And then I think all the next guys gonna get this question. And that guy is you. So not fair that other people didn't get it, but you’re getting it now and--
MEIKLE 29:03
I'm not afraid!
JONES 29:04
Well, the way I'm looking at it, Andrew is I hear people all the time say, we're not going to tell the doctors what to do. You know, the doctors run the clinic, we're not going to tell them how to run their business. And I've just been thinking, Andrew, I think that's bull. And the reason I think it's bull is because if all of my, let's just pretend my clients were those that I was buying. And so we're a business development consultancy and a marketing firm. We don't own equity in any clinic and almost all of our clients though not all, almost all of them are independent. And I just think okay, let's pretend you are all under the Fertility Bridge network. And I know that this doctor spends a half hour with new patients and this one does one hour. And this one is doing half hour, he says that it's better because all he's giving his patients here’s what they're going to do in the next testing and they'll talk about the rest in the follow up. He's not talking to them about everything. While the doctor that does it for an hour is talking about everything, and I know that some of my docs don't do any ultrasounds and some of them do all of their own ultrasounds. And some say a tech is good, I just pop in and say hello. Other people say no, I want to be there with my patients when they're doing their ultrasound. So if I owned all of them, though, and I can see as a marketer, man, I'm getting all these people their goals so fast. The bottleneck is these guys. Guess what the guy that says that everybody should have an ultrasound tech and the guy that says that new patient consults should be 30 minutes, he or she is now the Chief Medical Officer. And you all are doing what he or she says. So I just don't buy that business outcomes don't overlap with clinical ops. And I'm interested in your take on that nuance?
MEIKLE 30:52
Totally, totally get it. And I've been asked this question a lot. We bought a lot of dental practices. And the reason our model is so successful, and it was in dentistry, is that it is philosophical, contractual, and it's even legal, we cannot get involved in clinical practice. We're not qualified to, we have no business in there, we do not get involved in clinical practice 100%. I can give you 100 names right now, go back 10 years, and they'll tell you that I won't do it because they will never do another deal. So that was my promise to you. We're not going to do it. We talked to these potential partners before they sign on the line about areas of their clinic, they think they can improve. So call it efficiency, effectiveness. You know, most clinics know they're not efficient. They know they're wasting time. They know they're wasting effort. So we say okay, well, let's work together and talk about how we can improve that. But we will not impose anything on you. We will not drop a manager in there. You have complete autonomy over hiring, firing clinical processes, and operating autonomy, but they want help. That's part of the reason they're joining us. So we map out—like I said, we're using lean. Did I mention this earlier in the podcast?
JONES 32:14
Please go into more detail.
MEIKLE 32:16
The manufacturing process that came out of Toyota in Japan in the 70s. You know, lean processing is an engineering exercise that effectively looks at things from the customer perspective, but it's a process of improvement by removing waste. And, you know, reducing variation, for example. So we're using some of these lean tools to drive efficiency in clinics. So we're doing a couple of de novos right now. And we're engaging with staff members, patients, engineers, construction designers who are versed in lean, and we're taking the patient perspective, how does the patient want to move through the clinic? It's always been doctor first. You know, men don't want to walk down the hall with a sample, for example. I mean, that's obvious. But you know, why are patients lined up out the door at seven in the morning? It's not best for patients. So, you know, we're looking at process optimization, which they are very excited! I can tell you the energy with our partners is unbelievable. I get calls and texts all throughout the week. They're energized to change this, as you said, this inherited family practice model that's 40 years old. So that's an example. You notice I haven't said anything about clinical, we don't get involved at all in clinical medicine. But operations--I'm bringing technology, something like Engaged MD a lot of clinics aren't using that genetic testing. Here's the data. Would you like to do genetic testing? We bought a 20% interest in Sequence 46 in California. We've got incredible pricing. You know that if you use PGTA, you're going to improve your outcomes, like it's up to you. But here it is, and guess what, your patients are going to pay less than if you're buying it from Cooper or Igenomix. So it's about showing them opportunities to serve their patients better and they get to choose we will not impose anything on the clinics.
JONES 34:14
Then what is somebody like? What is the Chief Medical Officer for a group do then in your case? What's that guy Dan Nayot doing for Fertility Partners, if there's no clinical obligations--or best practices might be a loose term of putting it--what's that role then?
MEIKLE 34:39
Okay, fantastic. Look, I'm glad you asked because I am incredibly proud of our senior leadership team. You mentioned Dr. Yuzpe, who is basically the Steptoe and Edwards of Canada. If you know that reference, right? They were the first doctors in the UK to create Louise Brown. So that's out. He is incredibly well regarded and respected, you know, closing in on 100 publications over his career started several programs in Canada, who believes in our value proposition, believes that clinics should come together and collaborate on sharing SOPs--not forcing him on people. But think, look, here's what works for us. You know, the old CCRM advantage is gone now. It's commoditized, everyone has the same opportunity in the lab, same opportunity to buy technology. So it's then about how you go about it. And so we brought on Al very early, who is a huge supporter. We've got Dan Nayot, as you said. We've got a couple different generations, frankly, you know, Dan is founder of Future Fertility, and we're interested in doing some R&D with him on egg identification. And he's also one of the most futuristic or forward looking REI guys I've ever met. And we are looking at the future, we've got a 10 year plan, blue sky committee, so we want to help to chart the course in this space. And we've also got an incredible Scientific Director, who's accredited in the US, you know, pathology and bioanalysis labs, who will do due diligence for us on labs. We've got number of folks from different industries, telecom, also health care, hospital care, engineering, and--we've got the medical expertise, we're putting together advisory boards, led by those individuals, we've just formed our r&d advisory with the who's who of researchers in Canada. They're getting ready to launch a commercial product that will give the ERA test a run for its money with significantly more genetic markers. We will advise and collaborate, but we will not tell people what to do. I think there's not enough collaboration going on in the space and TJ Farnsworth said it on your podcast. It's not a platitude for us, like we're doing it.
**COMMERCIAL BREAK**
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JONES
So you've talked a lot about what networks can do to support clinics in reaching their goals, how clinics can maintain their culture and the importance of autonomy. I want to talk a little bit more about what clinics can do to get ready for due diligence because one of the things that you had mentioned was about books being an order. But I think previously you'd also mentioned contracts and at least an email you had talked about that. Is there some specifics we can give to people that they might not know? And one I'm thinking of is it's often helpful to have assignment clauses, isn't it? Let's say if someone has a revenue generating stream with another entity that they have an assignment clause in that contract, so that if they sell that contract goes to the buyer. What are some of those examples that people should think about and getting ready for due diligence?
MEIKLE 39:39
Yeah, you know that that's more specific to the US. I don't know enough about that. We're just starting to wrap up our knowledge of the US. You know, in Canada, over 90% of fertility services are paid or private pay, and most of that is cash pay. So insurance is really lagging here, there's a little bit of government support. So I can't really comment on that. Your question specifically as what else, what other things should people look for when contemplating a sale?
JONES 40:11
Yeah. And one thing I'd love to know is how do I value my practice? I think that's one thing that people are asking each other at the bar at ASRM, but maybe don't have a lot of guidance on and they might know a consultant, they might have an MBA themselves, but I think that's good wisdom that that people might be able to benefit from. How do I value my practice?
MEIKLE 40:38
Yeah, no, no problem. I think, you know, it's pretty straightforward today. You know, it's pretty much a multiple of EBITDA. So cash flow really determines the value of the business, low cash flowing business will not command a multiple set of high cash flowing business well--and I'll give you those numbers and give or take, you know, the state of your equipment, obviously, 15 year old equipment, you're going to be on the lower end of the multiple, and state of the art brand new is going to be in the upper end. So there's pluses and minuses, I would say there are other intangibles as well, if it's a solo practitioner, do they have a succession plan? Fertility Bridge? Like, are you winning patients? Is this practice growing or is it in decline? There are a number of factors that go into it, but the largest driver of that--so again, you know, if you're contemplating a sale, don't slow down. In fact, invest in your business, keep it growing. Going back more specifically, to your point, how do you value the business? There are many intangibles that could tip the scales in your favor, the largest driver will be EBITDA. So anything around a million or less, you know, could command sort of a five to six multiple of EBITDA today. Anything in the $3 million range, I would be, again, depending on the intangibles could be six to seven, seven and a half. 5-6 million of EBITDA could be an eight multiple. And anything that's a group or a network, again, with platform, real synergies, a real business, could command a multiple, you know, anything that sort of 8-9-10 million could command a nine or even 10, multiple, depending on how buttoned down it is. That's the range. That's the market.
JONES 42:22
I want to pick apart something you said or, or maybe just explore it, which was, you said, keep investing in your business. And maybe that's just, you know, a plug to make Fertility Bridge clients happy. And if so, I appreciate it. But I often find that it's the people that aren't--that are looking to sell within the next, you know, year, let's say--they're often the ones that aren't super interested in Fertility Bridge. And I think that for them, they would benefit from most of the stuff on the later phases of the patient journey, because maybe they're not doing stuff for five years from now. But there's a lot of stuff they could be doing in the next three to six months to increase their revenue and their profit.
MEIKLE 43:07
Totally. You're absolutely right, I just want to jump in and say that that is--what you've just said, is so valuable. Because if you and I were to buy a business, do you want it to be growing or stagnating? I mean, it's a no brainer, they're gonna get more value at the end of that, and they don't have to do it themselves, they can outsource it. I'm a big fan of outsourcing. So bring in the expertise, show to your potential buyer that you are preparing for sale, and you want to hand it off in good shape. But I think they're very few that want to sell and just stop. So you want the momentum to carry into your new business. And if you have an arrangement, post-sale, that's going to recruit you anyway, if there's some sort of revenue stream or profit share post-sale, so it's just good business.
JONES 43:53
It's funny because I think I had the same conversation with someone that ended up going with you all, and if only I had this sound bite to play for them at the time. We certainly won't talk about that. But I think that's what I've always looked at because I look at what I would be doing if I were selling my own business or if I were buying one same way you'd look at if you're buying commercial real estate, you'd want to see more income coming in--
MEIKLE 44:26
Are contracts in order, right? Do you have your stuff under contract? That adds value to a sale. There are just many things of your finances in order, financials in order, legible. All of these things make the business more valuable. So it's worth the effort.
JONES 44:40
Do partnership dynamics ever come into play with this, Andrew? Either in evaluation or just the vetting of the sale. Like oftentimes people might be coming to you because they’re thinking I can't deal with Dr. Smith anymore and let's just each sell 25% or whatever. And then it's Meikle's problem, Fertility Partners problem. And so does this come into play with either how it's valued or? Or how you're vetting with how the current partnership works with each other?
MEIKLE 45:16
That's an interesting question and one that I haven't encountered in this business. It is, has been surprising to me. So we've had one of our clinics that we acquired had 11 partners, and they needed consensus. They needed to unanimously decide to go ahead. And that was challenging. I mean, there were a lot of meetings, a lot of questions to be answered. Everyone has their own particular view on things, their own advisors, their own financial advisors, their partners in life. So it, you know, more partners is more complex, but I haven't encountered that where we've had a chasm, schism in the partnership, and how to deal with that. And remember, ours is a partnership. It’s not--our docs aren't selling and going, you know, to Florida, they are staying on a minimum of five years. If there are enough partners in the group and one wants to retire, then fine, we'll figure it out. But ours is an ongoing relationship. I think people are wanting to step out or block a partnership, they will be approaching us.
JONES 46:15
What about the younger docs? This wasn't a question that I had planned on asking you, but hearing you talk and having you here, I want to ask it. The same meeting that you and I were, there was one person that had a counter opinion. And I've invited this person on and doesn't feel that they have enough to talk about it for a show. But one thing that is often said is, well, this mostly benefits the older docs who are within five years of retirement and the younger docs then don't have any equity to build of their own, this person had made a counterpoint of, well, you could have even more because you have the PE firm, you've got some, you're growing it and then you're selling with them when they sell five years down the road. I don't know enough about that. And so I'm really curious about your take is, what do younger REI is have the benefit in all of this?
MEIKLE 47:09
It’s an interesting point, and we come across it quite often. I think we've solved for that, in a couple of ways. I think that younger people--and I hate to generalize--typically don't want to carry as much debt. So I'll call them, you know, maybe millennials, right? New grads in the 30s.
JONES 47:29
Also probably coming out with a lot more debt than that previous generation did. So they're, you know, between undergrad, many of them went to affluent private schools, and then medical school, and then they earned an average of what? 60 grand a year between residency and fellowship? So they've never made any real money. Now they’ve got a mortgage, many of them have children at this point, they probably have between a quarter and a quarter million dollars of debt on average, I would guess. So I'm sorry to cut you off, but I'm thinking that probably is a lot more debt than it was in the early 90s.
MEIKLE 48:07
And you're absolutely right and that plays into it. There's also that millennial mindset where they think they want more balance in their lives, then my generation, you know? It was nothing to work six, seven days a week back when I was at age, but people today want to go rock climbing and whatever they want to do yoga and stuff. And that's fine, and probably wiser. So I don't think that they're prepared very early on in their career to, again, take on more debt and take on the responsibility. There's a tremendous amount of responsibility, running these clinics, as you know. So I think that the mindset of young people today works in our favor in this model. Now, let's step that forward 10 years, whereby you've got docs in their 40s, who are still young, they're the ones who are saying, hmm, I've got 20 years left, like doesn't make sense for me to quote unquote, sell now. Well, I can run models for these people on a tax effective basis with our conservative projections on how our shares will grow in value, that they'll be better off doing a deal with us. And they'll be supported with a sophisticated business organization. So when it comes to, you know, their financial outcome, they will be better without better off with us. And they'll continue to have the autonomy of running their practice. And as the older partners retire, we'll help them backfill with other docs and support them in a day to day. So I think it's a compelling proposition there. It's not for everyone, and we find that we're not for everyone, and everyone's not for us, and that's fine. But I think our value proposition is very compelling.
JONES 49:43
And you've given us a lot to think about in terms of selling practice, in terms of thinking about what to think about with partnerships, and to whom you're selling and getting things in order for due diligence all the way down to how we would value our practices. How would you want to conclude with whether it's private equity or high net worth individuals, or the money coming into the field of the trade offs between selling and keeping, or the philosophy and entrepreneurship, any of these multitude of threads that you and I have touched on today. I'm going to let you conclude, however you want to put the bow on it.
MEIKLE 50:17
Oh, well, thanks. First of all, thank you very much for this opportunity. I think that, you know, this service that you provide in this great dynamic profession is really valuable, Griffin. So thank you and keep it up. I guess in terms of concluding, and I was sort of brought in under that private equity bucket, I guess. I would conclude that there are tremendous opportunities out there to partner with various organizations if it suits you. And I think it's just really important to have your house in order before entering into that, do your due diligence, find the right fit. And look this profession right now is an incredibly it's at an inflection point, it is changing. And if you want to change, you might look to join an organization that aligns with your values, and they can help you, they could support you to implement changes in your clinic, to drive patient flow, to make your life easier, so you could provide the best possible medicine.
JONES 51:18
Dr. Andrew Meikle from The Fertility Partners, thank you so much for coming on Inside Reproductive Health.
MEIKLE 51:23
Thanks again. See you soon.
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You’ve been listening to the Inside Reproductive Health Podcast with Griffin Jones. If you're ready to take action to make sure that your practice drives beyond the revolutionary changes that are happening in our field and in society, visit fertiltybridge.com to begin the first piece of the Fertility Marketing System, the Goal and Competitive Diagnostic. Thank you for listening to Inside Reproductive Health.