Episode 112 | Buying a Group Practice
WITH ALYSON SKOK
- Episode 112 | Buying a Group Practice 00:00
Hi Group Practice Listeners! In this interview episode, I’m talking with Alyson Skok all about buying a group practice.
In this episode we cover:
- Navigating shifts in leadership
- Navigating the financial aspect of transferring ownership
- Considerations to make when buying a practice
This episode is sponsored by TherapyNotes. TherapyNotes is an EHR software that helps behavioral health professionals manage their practice with confidence and efficiency. I use TherapyNotes in my own group practice and love its amazing support team, billing features, and scheduling capabilities. It serves us well as a large group practice owner.
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Hey, everyone, welcome to another episode of The Group Practice Exchange Podcast. I’m super excited for this episode because I’ve got someone who I have been trying to get on for a while now. Her name is Alyson Skok, and she owns a group practice. But she’s going to be talking about something kind of unique that I know a lot of people think about but haven’t yet done which is purchasing a group practice. So hey, Alyson, how are you?
Fantastic. Thank you for having me.
Like I’d said before we started recording I’m really excited that I have you on because I’ve been following your journey in buying your practice and you’ve done amazing stuff! At least from my end and how I see it happening. It’s pretty freaking amazing. So I’m excited to have you talk about your journey. What it was like to buy a group practice? Some of the ins and outs, and things that people just don’t know until they do it. So tell us where you’re at now, what is the current practice? Where is it at? How big is it? And then we can work our way backwards into kind of your journey to getting there.
Absolutely, yes. So Mass Bay Counseling is the name of the practice. We’re located on the south shore of Massachusetts, a really vibrant area. And the practice itself has been in place for over 30 years. Which you don’t always find with group practices, which is really nice.
So currently, we have about six full time staff, a part time admin, and we really are maxed out where we are just space wise. We have been for quite a while it’s been so busy. I’m sure I’ve heard this from everyone around our area just all over the place that the last year has been quite busy for mental health. Whether it’s the State of the Union, or people just be more open about looking for support.
And so we’ve just been non stop for the last year and really looking how to expand and continue serving our community.
So we are actually in a really exciting time because we’re looking to expand to new building that I’ve actually purchased for the for the group that will let us hopefully get to about 12, maybe 13 clinicians. Which I’m sure will pop up the need for more admin and support there as well. But it also has space that’s going to allow us to do groups and community events and training. So all of myself and my staff are just so excited about where we are. And I have a really amazing team right now that I’m so blessed to have.
That’s awesome. So you tell everyone–I’m not gonna let the cat our of the bag–tell everyone your unique situation in terms of buying this practice.
Absolutely. You know, it wasn’t something that was on my radar until a few years ago, so I had done community mental health, I had done military work, I had done schools and traveling for many years. Decided to kind of come back home to Massachusetts. I missed the snow. So I know I’m a little odd that way but wanted to come back home and kind of get some roots.
So decided to try my hand to private practice which I had never done before. I met with the owner of Mass Bay Counseling, and learned a little bit about private practice. Learned about, you know, the shift from community mental health, which is obviously a huge one. You know, the world of insurance and credentialing and all that good stuff. But it seemed like a really great group. And so I joined up, as a clinician in about 2016.
You know, I started seeing kids and teens, which is my specialty LGBT kids, trans, non-binary kids and their families have really started loving my work into practice.
And then about a year and a half, two years in, Donna, the owner came and talked to me and said that she was thinking about retiring from really the business part of it. She has been doing clinical work full time, the woman’s phenomenal she’s a beast. I don’t know how she does it. She’s in her 60s. She sees about 10-12 clients a day does trauma work, loves the clinical work, but really wanted to step back from the business side of things. Yeah. So she was looking to sell the practice. Um, so she said that, you know, in my time there that she had, you know, kind of been impressed by, you know, my work and my, you know, just kind of my part in the practice, I guess.
To be honest, I felt a little bit like Charlie in Willy Wonka and the Chocolate Factory.
I felt like she was kind of handing me over the, the golden ticket here. Um, you know, and so she just kind of put it in my view, if I would be interested at all in taking over. So wasn’t anything I had thought about until that point. I was still just really enjoying my life in private practice. But when she brought it up, it really sounded like a great opportunity. So it really opened my eyes to possibilities and saying, okay, well, what would this look like and really, what could this be?
So we started, you know, this journey figuring that out together. It really was a great partnership from the beginning. So I started shadowing Donna and the office manager at that time, who was there full time. I wanted to know absolutely everything. I’m definitely a self admitted control freak. So I wanted to know absolutely every in and out of the practice. Obviously, till that point, I had kind of just known the clinician side.
I have a question for you. What was that beginning process like in terms of how other–were there other clinicians at the time, right? Were they okay with that process, or were they part of like, knowing that that it was happening?
So during the first kind of, I kind of did a bit of a Undercover Boss for about six months before really deciding to move forward.
I told her that I really, you know, wanted to get to know all the ins and outs, you know, and shadowing that that I was I was absolutely interested but you know, really didn’t know what I was looking at. So we decided to kind of keep that quiet. Only the office manager and her knew that I was kind of learning some of the pieces behind the scenes at the time to really figure out if it could be a fit.
So we did that for about six months.
And that was me learning everything from the office manager who was a really pivotal role at that point maybe almost had taken on too much. You know, was doing everything as far as billing, credentialing, really every piece that you didn’t see. So it was really my go to for kind of learning the policies and procedures that we had in place these for these things. Because like I said, Donna was still doing full time clinical work.
So at a certain point, once I learned that piece, I worked with Donna really learning the financial part of where everything stood. And once we got to a point of okay, we’re going to do this. That’s when we told the staff that things would be kind of switching over, what would change, what wouldn’t change. Although at that point, we were still figuring that out. I would come to learn that that would that would shift over the months. Mm hmm.
So did people feel okay about it? Was that something that was another obstacle that you guys had to face? That maybe you guys were thinking about or didn’t anticipate? Or was it something that works smoothly? I envisioned everything always think a little harder than it should be. So I’m making an assumption that people were like, “Why wasn’t I picked?” you know, or whatever.
I probably was a little on the opposite, where I was like, “everything’s gonna be great! It’s gonna be smooth! Everyone’s gonna be happy!”
Donna is a fantastic human being but admittedly, she said, she’s just really stepped back from kind of oversight. So some processes had kind of been tweaky for a while. I was kind of thinking, Oh, great, I’ll kind of you know, sharpen things up. People will love this. And generally, you know, at first, I think there was a really good, support and good feel.
But then, you know, we had to really look at what systems are working, what systems aren’t working.
So, you know, there was a clinician who was there who had been there longer than me who I do think–it wasn’t again, anything against myself–but just really it was feeling a little bit, you know, they kind of weren’t chosen. Yeah. And so, you know, I, of course, understood that even myself, I was thinking, Oh, god, this would not feel great for me. You know, we had some clinicians who kind of had just got hired and started so they were kind of like, Whoa, this is a lot of change. Yeah.
And then, like I said, the office manager had really been taking over, you know, a lot of things that almost were were just a lot to ask one person. And so I think the shift from, you know, Donna’s kind of passive peace to really active leadership was the shift for a lot of the staff that it was just so different from what they were used to that they have to really decide if it was a fit for them or not.
Yep. So we think that’s probably pretty common for most purchases of a group practice. I don’t know, necessarily about other types of businesses, because I think a lot of large, large, large corporations, most people don’t even have access to the business owner. So it’s not necessarily, you know, any sort of movement one way or another when someone else buys a business like that.
But I think in our industry and a lot of smaller companies, when ownership is really an active part, even with your person, she was active in seeing clients and was, you know, obviously there a lot. That just making shifts like that can be can really shake things up for smaller organizations.
Absolutely. Absolutely. Donna had been such an integral part of Mass Bay. And what I had mentioned was the agreement was actually that she would continue to be a clinician with Mass Bay. I absolutely didn’t want to lose her. She does phenomenal work, and does really long term great work with clients. So I know that in and of itself, a lot of, you know, family and friends, other professionals were like, ooh, how is that gonna work? I was like, I’m not sure. But we’re gonna try it because she’s amazing. And, you know, it helped me really kind of on ramp into it, as opposed to just, you know, one day Oh, it’s all on you. Right. So I really lucked out with that.
That was probably one of my biggest anxieties was like, “ooh, this this can’t work.” Right? Like, something’s gonna happen. She’s gonna, not like what I’m doing and people are gonna go to her, you know?
And there was a little of that, but she was honestly just phenomenal from the beginning, as far as you know, supporting the vision of where it wanted to go. Her biggest thing was, you know, she wanted to see that Mass Bay would have a plan to keep going for another 30 years, right? So in the last few years, she’s been nothing but supportive. Every time I’ve led to changes or, you know, updates, really being proactive and being positive with that.
So I think that was a major part of it. If that’s something people are considering, and, staff who are going to stay, especially if it’s like a previous owner that, you know, it like everything, it has to be the right people, and they have to have the right intentions. And her intention was always to have a thriving practice where people love to work. So we always aligned that way.
That’s awesome. I mean, that’s such a, I think, a rare thing to happen. So that’s amazing that you got to have that. Tell us about the buying evaluation process, because I think this is where everyone gets like, you know, you hear numbers thrown out there in terms of what the evaluations are and in our industry because it’s different than others. So, I mean, obviously you’re now an expert at buying practices so–
Well, here’s the tough thing because again, Donna is almost like a little bit of a, again, Fairy Godmother here.
She was, she was the one who proposed actually even like seller financing. So pretty much coming up with a price. And me just making monthly installments to her for the next few years at zero percent.
Because again, her thing was just I want Mass Bay to be taken care of and to do this. So really our thing was just figuring out like, what’s, what’s the number, which I know is where a lot of people fall in? Yep. You know, I’m a researcher, I like to look at everything. So I probably had stacks and stacks of PDFs and printouts on how do you value a company?
You know, I think there’s a lot of good information out there. But I do think that our business is a little different, you know, especially when you have, you know, Mass Bay.
Biggest thing was it’s, you know, foundation in the community to be in the same town for 30 years.
I’ve literally probably even in the two years that say over done very little to no marketing, it’s always been word of mouth people. Mass Bay, it’s goodwill. It’s kind of one of the the names in the area that people know the most, like, how do you put a price on that? Right? Um, you know, keeping up with referrals? Exactly.
So, you know, big part was financially, being able to just know and understand how to read financial documents.
You know, transparency as far as monthly expenses down to being able to walk through, you know, some explanation of tax returns, because, you know, tax returns can say what you want them to say. Yeah, so I know a lot of people are like, “oh, well, it’s just two times this” and I’m like, okay, but no, because, you know, depending on your account and and how you make things look, we all know that, like, there’s different ways of how that can look on a tax return.
So, right, being able to really, again, trust that Donna is being able to give a really transparent picture as far as expenses that are covered or, you know, being able to, you know, kind of the owners part of things and distributions. You know, so a lot of it was looking at, yes, tax returns.
But also, I think what helped most was really that six months of shadowing and knowing, being able to recognize where the business wasn’t taking advantage of growth opportunities. So financially, you know, maybe it looks one way.
But, you know, for example, you know, my mother always told me, one of the most dangerous phrases is “oh, that’s just how it’s always been done.”
And there were a lot of things in places that was, oh, that’s just how it’s always been done. You know, and they really weren’t necessarily financially the smartest choice or, you know, they’re more expensive, but hey, that you just always done it. They raised the price and she just kind of said, Okay, so a lot of it, you know, she’d never asked for increases in rates from insurance companies. So huge one, yeah, they’ve been in practice 30 years. You know, they have some, of course, but you know, there was a lot of, you know, billing 60 minute codes instead of 45.
Everyone there was doing 9083 sevens everyone was there was doing hour sessions. But no, really knowing how to build and knowing how to build appropriately was a huge increase right there. So, you know, I think it’s not just what’s on paper, but it’s really knowing the business, it’s really knowing kind of what’s going in and what’s coming out and where there’s opportunity there. So I think that was what was most helpful for me.
Yeah. How do you how do you take that into account? Like when it coming up with a valuation or what a business is worth? Do you consider missed opportunities that you can see using to grow the business as part of it? No. Right? Because that’s kind of your benefit later, or is it?
Right so it’s a little bit of both. I definitely took into account just, Donna was the first to kind of put out a number, so I was kind of going off that, what would make this reasonable? What would you know? Does this make sense? As far as where do I see the profit margins being? Where do I see, you know, kind of the level of my work being needed?
You know, I was still carrying a full caseload at that point. So, what is this going to look like as far as a full another, you know, 30 hours a week at least. Right? Um, you know, and there are so many factors.
So I think, you know, part of it is, of course, saying, Well, yeah, that’s, that’s for me to grow once I take the business, but also knowing that like, okay, it’s not just as simple two times what was on the tax return, you know, formulation that, right, that is, you know, the piece that’s already there, you know. The foundation, the structure.
I hear a lot of group owners who, you know, just building that structure, you know, insurance contracts and just how things work. You know, take so long and then so much of that was already up and running that you know, to be able to hit the ground, running, take over and be profitable from day one. Yeah. I mean, that was worth a huge amount. Yeah, absolutely.
Yeah. Every few months get a company that wants to buy my group practice out. And it wasn’t until last year that I entertained it with one just to, you know, I think partially I was burnt out a little maybe it was like, what would it look like? And then the other part was like, I should know what what this might potentially look like, you know, even if I don’t plan on selling for another 5,10 or 15 years.
So I had gone through the process and it was really interesting to see what they consider value beyond just the money part.
You know, how much is on your tax return? You know, some of it, they wanted to know how many years each employee had been in the practice and how, you know, that played a big role, you know.
Having a lot of people who had only been there a year or less signified either that there was growth which obviously nothing is so black and white so either they were like okay “Why are there so many people who’ve just a year and less and it was it because there’s turnover or is it because you just expanded” because those are two very different one is a very positive reason.
And once not just seeing different I mean they what they wanted to look at and get information on was far more than just the numbers in terms of like our leadership team and you know what roles that they’re playing because obviously you know, in my business they would be potentially buying.
So it’s interesting to just, you know, on this end of it, learn what people are wanting from me as a group practice owner.
I know you are on the other end of it of saying, you know that, these are the things I want to see. It’s just interesting to be on the other end of saying like, Oh, I didn’t realize it was important for you to know in terms of buying my business, how long people have been here, or you know, how how many people leave per year or you know, how many clients each person is seeing, you know, each office is being used things like that.
Absolutely! Yeah, no, and those I think that’s that’s why it’s so hard to put just, you know, a simple formula on it because there are those pieces. You know, a big thing I learned was just tracking referrals and being able to see through six months or so not only you know, clinician wise I knew I had stayed busy but you know, being able to see like wow, yeah, we do stay busy. The need is there and people come in knowing that like Okay, that was only due to this little bit of marketing and that you know, being able to kind of broaden my obviously idea to the big picture of say okay, well, you know, the team of clinicians we have here now do we cover all ages, all populations?
What you know what’s missing? What would it take to get there?
You know, I definitely I had quite a number of little notebooks, let’s just say, a lot of little like, Okay, did I think about this? Did I think about this?
You know, and I think that’s, there’s so many things that you don’t until you’re in that process, like you said, until you really start exploring it that you go, Oh, I didn’t even think about this, you know, when, you know, when I look at tax returns, and it has, you know, some of these deductions and write offs, but, you know, some of those were really amazing trainings that she had done a week away in Aruba. I’m like, okay, well, that’s that is covered, because that’s an owner expense.
But, you know, that’s being able to see that like, Oh, yeah, that’s where some of the finances was going. Or Yes. You know, again, just simple places to save money. Right, you know, and things like that. So, absolutely.
What has it been like, since having purchased, getting into this in a different role? What has it been like for you to just be on the other end of it and own the group practice and have to make the shifts that you’ve had to make in terms of putting in, you know, assessing and kind of bettering the policies and procedures that were there? Weren’t there? Staff issues, the culture piece, like, what has it been like for you now?
So it’s definitely you know, we all say everything is a journey. It’s a journey. I count myself kind of in that servant leadership. You know, I’ve worked–I think we’ve all probably worked in in places, especially those who’ve done community mental health–where you just, you don’t feel appreciated. The paperwork is more important. You know, you just don’t get the focus on the clients. So one of my biggest things was, wow, I get to really shape you know, a place where people hopefully will love to work, you know, and I think that leads to good client care.
So, you know, that’s been one of my main priorities since taking over, that’s been things like just, you know, creating more of a culture of interconnection.
I think a lot of us were maybe kind of we were employees before we’re kind of working as independent contractors and kind of creating more monthly meetings and quarterly staff events and, you know, message boards for each other, just you know, really getting to know each other more. Where before it felt a little bit like we were floating along there.
So the culture has been a big one.
And that’s been, you know, we ended up pretty much all the clinicians who were there when I took over with the exception of of two who’ve been there a very long time, like Donna have moved on. Some have started their own practices. Like I said, the office manager moved on and, you know, so there definitely was a lot of rebuilding there. And so the first few hires for me, were just so obviously every hire is important, but really those first few where I was going, wow, I’m an employer who hires people, and I choose who I’m hiring. And it was just so important to kind of match that future goal and optimism and kind of positive energy. Because I know how quickly one kind of, you know, piece of poison in that when the well can do.
So I really have tried to focus on that. That’s been one of my number one things, you know, how to make everyone’s jobs simpler and more fulfilled, giving them the resources that they need.
We moved from classic paper files to an EHR, which is super fun. I’m actually right now in the middle of scanning about, you know, 5000 old files, to save them and shred them. So that’s been my life the last few weeks, which is great fun. It’s so much fun. Um, yeah, but really, I really take that seriously as far as creating culture that people really want to come to and work. So that’s been a big thing, you know, really being open to feedback.
I had done supervision before, I’d been a supervisor. But as far as kind of this level, you know, there’s definitely some of that imposter syndrome as far as like, oh, yeah, I haven’t done this before. Right? And then I’m gonna make mistakes than that. I’m very transparent with my staff about that, that you know, I’m doing what I know, but I absolutely don’t know everything. And so I welcome them giving feedback and information and us growing as a team. I’ve really lucked out, to be honest, all the hires that I’ve done since taking over have been phenomenal. They’ve all been just great assets to the to the group, which is made my job so much easier.
I know. Isn’t that interesting? How good hires can do that for us?
Great. You know, and I think, you know, a few weeks ago, I think I actually had my first kind of “well, it was okay, and there’s nothing on paper that says I don’t you know that they’re not a good fit, and we do need clinicians but…” I had to really stop myself and say, okay, you’ve done so much on bringing in the right people that you can’t put that away now just because you know, oh my god, we can’t stop getting referrals. Right. You know, the right people, I think has made it so much easier. And, and those who want that same vision. Yeah, has been great.
So I want to end with a question and I’m kind of putting you on the spot. And so I’m going to ask it really slow, so you could think a lot during it. But now being a group practice owner, I want to flip this. As a group practice owner, any feedback for maybe a group practice owner who might be purchasing another local group practice? Because I know you were coming in from being an employee who then becomes the business owner.
But now you own this group practice and I’m sure your experience of being on the other end and just going through the process of buying and selling a group practice gives you way more experience than any of us here.
But I know that a lot of good practices that are like local to us, when they retired, they often don’t ask an employee in their practice, they’ll ask another group practice, hey, do you want to absorb RS or you know, buy us out?
What feedback would you have? Like if you can envision yourself now being this group practice owner and there’s maybe another place nearby that is retiring. They want to sell it to another good practice owner who can absorb it, like, is there any feedback? Now, knowing what you know, that you would give to a group that wants to kind of buy? Or sell I guess! I’ll go either way, buy or sell their group practice feedback that maybe you didn’t anticipate?
You know, I think, as far as the selling side and just in my ongoing conversations with Donna, it’s really about, knowing and being very truthful with yourself about what you want to see happen next. If it’s “I want to retire and have a little nest egg and go live my life, and then they have the practice and don’t think about it anymore,” then that’s your goal. And that’s amazing.
If the goal is “I built this thing from the ground up, and I want it to continue the way it is for a few years” and like, you have to think about is that, are you going to find someone who has the same vision as you?
Right, you know, and how are you going to feel if things change or if you know, the vision or the mission changes?
Um, you know, I think that’s, again, one of the only reasons that this has worked so well with myself and Donna is that, you know, she, from the beginning has said, you know, my goal is this, I want that to continue being amazing. You know, and, and we really, you know, I think had that been a struggle. You know, her continuing to be an employee would have been You know, extremely difficult, I’m sure.
And as far as the buying a practice, I think, you know, there’s because there’s so many pieces and I mean, even just we all see when we’re when we’re on some of our Facebook groups and your amazing page practices are run so differently, right? There are so many different ways to run a practice insurance and private pay and, you know, staffing and everything that you know, I think having the wealth of knowledge from those type of groups is great. But if you’re going to look at buying a practice really knowing that practice,
Yeah, that’s why I’ve been turned off by buying other group practices, because I’m like, oh, I would have to change it all. Yeah, where are you like, that should be like how mine is because I feel really good about how my how this team is and our mission vision. I could never buy one and not unless and I don’t know any that in my area that are anything similar to mine in terms of how we just operate. So it seems like it’d be really hard
Yeah. And so in that instance, I would think I mean, you have to know that that’s going to be, you know, a lot of work and in some ways, maybe certain things more work such as retraining staff, or re changing the culture as opposed to building a culture. So I think that, I mean, that could be a whole podcast in and of itself, right? Pros and cons and challenges of each.
Because you know, some and even that knowing the staff, I don’t know how, I honestly don’t know how I would have gone about buying it not being part of it, because there’s just so many things you learn from being there on the ground.
You know the staff, you know, which ones are you know, I have no idea I had an idea of which ones were gonna maybe not the right word, which ones probably weren’t gonna last.
Generally, I was right that way. Yeah, the only way I do that was for being their coworker and, and being able to see that so, you know, I think if possible, you know, not just knowing the kind of what’s on paper. It’s almost like a week when we do interview and hire someone you know, they can look really great on paper, but You get to really see their work and see them interact and see the really day to day, that’s when you know if it’s a really good fit.
And that’s really what I would stress.
If there’s any way to be able to do that to, you know, shadow, the owner, talk to the current staff. Really get to know, you know, at that time, the office manager was the crux of everything. So I knew that was where most of my information was gonna come from. I think it made me look at it like, hey, it’s not just a business deal. Look at it like this, you know, we’re just not, you know, we’re not just a business. Right?
You know, our work is not just, you know, oh, Google, how do you value a business? It’s just so much different than that. So, you know, I think to be able to know yes, there’s a business side of it, but also know that like, Hey, we have to look at a lot of variables that other people don’t.
Exactly. And you have to know which of those are important to you.
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