Estimated reading time: 10 minutes
Why the most successful behavioral health expansions only tackle one unknown at a time
In the behavioral health industry, expansion stories often follow a familiar pattern: raise capital, open multiple locations simultaneously, add every level of care, expand to new states. Move fast and break things.
But there’s another way – one that prioritizes sustainable growth over speed, strategic risk-taking over aggressive scaling, and long-term success over short-term gains.
Nick Padlo, CEO and co-founder of Sophros Recovery, calls it the “one-step adjacency” model, based on CHris Zook’s business book “Beyond the Core.”
In a recent webinar, he explained how this framework has guided Sophros from a single PHP/IOP location to a multi-site, multi-service behavioral health organization – all while maintaining quality, profitability, and mission focus.
Here’s how the model works and how you can apply it to your own growth strategy.
The Core Principle: Define Your Adjacencies
“Define the thing that you do better than anyone else and do that thing,” Nick explained, summarizing Zook’s first book, “Profit from the Core.” “When you get the bright idea to do something else, just do more of that thing that you’re really good at.”
But “Beyond the Core,” Zook’s follow-up, addresses the reality that growth requires evolution. The key is growing through one-step adjacencies – expanding in only one dimension at a time.
For Sophros, the core competency was clear: PHP/IOP treatment in Jacksonville, Florida. Everything else represented a potential adjacency – a single step away from what they knew.
Mapping Your Adjacency Grid
Think of your expansion opportunities along multiple dimensions:
Geography
- Same city, different facility
- Different city, same state
- Different state, same region
- Different region
Service Line
- Same level of care, different population
- Adjacent level of care (IOP → OP, or PHP → Residential)
- Completely different level of care (IOP → Detox)
Delivery Method
- In-person to hybrid
- In-person to virtual
- English to additional languages
Population/Specialization
- General SUD to specific population (veterans, first responders, etc.)
- SUD to mental health
- Adults to adolescents
The Golden Rule: Only change ONE of these dimensions in any single expansion.
Sophros’s Growth Path: A Case Study
Let’s map Sophros’s actual expansion decisions against this framework:
Expansion 1: Tampa PHP/IOP
- What Changed: Geography (Jacksonville → Tampa)
- What Stayed the Same: Service model (PHP/IOP), delivery method (in-person), market knowledge (Florida)
- The Unknown: Building a network in a new city
- Result: Took longer than expected to gain traction, but ultimately successful
Nick’s Reflection: “I know how to do this work. I know how to run a PHP/IOP. I just need to learn how to do it here.”
Expansion 2: Virtual IOP
- What Changed: Delivery method (in-person → virtual)
- What Stayed the Same: Service level (IOP), clinical approach, geographic base
- The Unknown: Virtual engagement and state licensing considerations
- Result: Successfully launched with English and Spanish options
Expansion 3: Jacksonville Outpatient
- What Changed: Service line (PHP/IOP → general outpatient)
- What Stayed the Same: Geography (Jacksonville), relationships, brand reputation
- The Unknown: Outpatient service delivery and billing
- Result: Leveraged existing reputation and relationships for strong launch
Nick’s Reflection: “I know how to run mental health treatment in Jacksonville. Let me just step it down. I’ve got relationships and everything in place.”
What They Didn’t Do (And Why)
Nick was explicit about expansion options they considered and rejected:
Detox in Miami:
- Changes: Service line (PHP/IOP → Detox) AND geography (Jacksonville → Miami)
- The Problem: “That’s two steps. I’m going from PHP/IOP to detox. I’m going from Jacksonville to Miami. I don’t know either one of those markets. That’s two unknowns and I can’t have that.”
Cross-State Expansion Before Stabilization:
- The Temptation: With Tampa struggling initially, there might have been pressure to try other markets
- The Discipline: Instead, they focused on solving Tampa rather than abandoning it for the next opportunity
Why This Matters: Risk Management
Greg Keilin, co-founder of Prosperity Behavioral Health, framed this approach in financial terms: “You are only taking exactly as much risk as you absolutely need to take in order to expand.”
In finance, risk and return are correlated – but that doesn’t mean you should take unnecessary risks. The one-step adjacency model optimizes risk-taking by:
- Limiting variables: When something goes wrong (and something always goes wrong), you know what caused it
- Leveraging strengths: You’re always building on proven capabilities
- Enabling learning: You can actually learn from each expansion before tackling the next
- Maintaining quality: You’re not stretching so thin that core operations suffer
Nick saw this play out in real-time: “We did have a little dip in Jacksonville. So some of those bad risks did come to fruition. I had built enough cushion for some of the things to go wrong. I did not have enough cushion for a catastrophic case.”
If he had taken on multiple two-step expansions simultaneously, those dips could have been catastrophic. With the one-step approach, they were manageable.
Identifying Your Leverageable Assets
A key question Nick asks about any expansion: “How can I leverage my relationships in some way in order to grow that second facility?”
For each potential expansion, map out what you can leverage:
Tampa PHP/IOP
- Leveraged: Clinical model, operational playbook, some referral relationships (RTCs with clients from Tampa area)
- Built New: Local BD network, local team, local provider relationships
Virtual IOP
- Leveraged: Clinical expertise, reputation, some existing client demand for virtual options
- Built New: Virtual delivery infrastructure, multi-state licensing, virtual engagement strategies
Jacksonville Outpatient
- Leveraged: Brand reputation (“everybody knows we’re the best in Jacksonville”), existing referral network, geographic knowledge
- Built New: Outpatient service delivery, broader clinical scope (not just addiction)
The Principle: Every expansion should leverage significant existing assets while building new capabilities in a focused way.
When to Take the Next Step
Nick’s decision framework for expansion timing was elegantly simple: “When the cash flow of the business surpassed what I budgeted as the negative cash flow of the new business.”
But it wasn’t just about having the money. It was about having stability:
“I didn’t wait until it was super comfortable. I waited until I felt like if things go as expected, we’ll be okay. And my thought process was if they don’t go as expected, then I can go out and seek outside capital somewhere.”
The rhythm becomes: Growth → Stabilization → Growth → Stabilization
“Get it running well, expand again, get it running well, expand again,” Nick explained. “You don’t ever get out over your skis in a meaningful way.”
The Counterpoint: What About Speed?
The obvious critique of the one-step adjacency model is that it’s slow. In an industry where private equity platforms are opening dozens of locations annually, can you afford to be this methodical?
Nick’s response is clear: sustainable growth beats rapid expansion every time.
“I’ve watched over the last 10 years a ton of people grow really aggressively, try to bite off a lot,” Greg noted. “Whether that’s expanding the continuum of care, going into a different state, going from SUD to mental health. A lot of people have tried to grow really fast and really wide. And what I’ve seen is a lot of those folks have ended up crashing and burning.”
The one-step model isn’t about being slow – it’s about being sustainable. Sophros has grown from 3 employees to 30+ in Jacksonville, launched Tampa operations, added virtual services, and acquired an outpatient practice. That’s significant growth, just achieved through disciplined, sequential steps rather than simultaneous leaps.
Implementation: Your One-Step Adjacency Plan
Ready to apply this framework to your organization? Here’s how to start:
Step 1: Define Your Core
What do you do better than anyone else? Be specific. “Quality treatment” isn’t specific enough. “Trauma-focused PHP/IOP for first responders in [city]” is specific.
Step 2: Map Your Adjacencies
Using the dimensions above (geography, service line, delivery method, population), list every possible one-step adjacency from your core.
Step 3: Evaluate Each Adjacency
For each option, answer:
- What existing assets can we leverage?
- What new capabilities must we build?
- What’s the size of the market opportunity?
- What’s the competitive landscape?
- Do we have or can we develop the necessary expertise?
Step 4: Identify Your Next Best Step
Which adjacency offers:
- The best leveraging of existing strengths
- A clear market opportunity
- Manageable resource requirements
- Strategic alignment with your mission
Step 5: Stabilize Before Stepping Again
Don’t move to the next adjacency until your current expansion is truly running well. What does “running well” mean?
- Consistent census at target levels
- Quality metrics at or above core location standards
- Financial performance meeting projections
- Team stability and cultural alignment
- Operational systems functioning smoothly
The Mission-Driven Advantage
The one-step adjacency model works particularly well for mission-driven organizations because it preserves what matters most: quality care.
“As soon as we start to not provide quality care, we become a transactional treatment facility, just like everybody else,” Nick said. “I’ve got nothing to sell other than pretty marketing materials.”
By expanding methodically, you ensure that each new location or service maintains the standards that made your original operation successful. You’re not just growing – you’re replicating excellence.
Conclusion: The Long Game
The behavioral health industry needs more treatment capacity. Demand far outstrips supply, and millions of people need help. So yes, we need growth.
But we need sustainable growth. We need treatment centers that will still be operating excellently five and ten years from now, not ones that expand so rapidly they collapse under their own weight.
The one-step adjacency model offers a blueprint for that kind of growth – strategic, sustainable, and success-oriented.
As Nick reflected: “We’re not private equity backed. We don’t have the deep pockets. What that’s forced for me is an extra level of discipline. And that discipline has allowed me to maintain quality care.”
Sometimes constraints breed innovation. Sometimes limits create focus. And sometimes the slow path is actually the fastest way to lasting impact.
Additional Resources
Books Mentioned:
- “Profit from the Core” by Chris Zook
- “Beyond the Core” by Chris Zook
- “Start With Why” by Simon Sinek
Want to hear Nick Padlo’s full growth story? Watch the complete webinar here.
This article is based on insights from a Prosperity Behavioral Health webinar featuring Nick Padlo, CEO and co-founder of Sophros Recovery, in conversation with Greg Keilin, co-founder of Prosperity Behavioral Health.
