Estimated reading time: 14 minutes
In a recent webinar, Prosperity Behavioral Health co-founder Greg Keilin sat down with Nick Padlo, CEO and co-founder of Sophros Recovery, to discuss the organization’s journey from startup to multi-site success. Here are the key insights from their conversation.
On Getting Started: Breaking Through Zero Momentum
Greg Keilin: When you’re starting from zero, how do you break through that initial challenge where you need clients to prove your quality, but you need to prove your quality to get clients?
Nick Padlo: That’s the inevitable catch-22. One of the lessons I learned is that your founder is one of your salespeople at this level. At one to three locations, your head of sales is your CEO. I had to be out in the street meeting people. It means a lot when someone gets a visit from the CEO, even though they don’t know that you have five people on your team – it doesn’t matter. It feels important to them.
But here’s the reality: no matter how good you are, your marketing materials and website are going to say the same things as the guys with deep pockets and big marketing budgets. You’re like, “Oh, we’re client-centered care.” Yeah, the guy that just came in here said that, and he’s got a prettier pamphlet because he has a million-dollar marketing budget.
So you have to find ways to really differentiate and demonstrate that, and then use the opportunities that you have when you’re able to do that to leverage that into better proof to push forward. Once you get the ball rolling, once you get the momentum, now the quality care starts to take over because you’ve had enough clients and people are talking about it in the community and referral partners see it.
On Business Development: The Three Essential Elements
Greg: What would you say are the most important factors in successful business development?
Nick: I think the biggest three things are authenticity, volume, and direction.
Authenticity: You have to be your authentic self, and that authentic self has to be fired up about what we do. Not everyone has a recovery story, but I always tell people we should be leading with our why. There’s a Simon Sinek video on “start with why” that’s great.
I’m not going to say, “Hey, I’m Nick. I’m here from Sophros. We’re a PHP/IOP and we’re really good.” That’s not a good story. Instead: “I’m Nick and I’m an addict in recovery trying to help other addicts. We do that through our PHP/IOP.” It’s a much more believable story and it’s real.
Volume: The reality is that business development takes a lot of work. It’s not a 30-hour-a-week job. At least at the beginning, if you do 75% of the work, you’re not getting 75% of the referrals. It’s something about building that momentum and building that volume and stacking it and putting in the work up front that really allows you to build those relationships.
Direction: How are we spending our time? Are we really focused on the right things in the right places? For example, I told my BD rep, “I don’t want you visiting primary cares because they never refer.” What we did instead was hire a few alumni for 15 bucks an hour to do 30 stops in a day and cover everything in 20 hours. Then anyone that shows real interest, those are the places where I want you to go and do a lunch and learn.
If there was a fourth one, it would be consistent follow-up – having cadences, having discipline. I wouldn’t say my team’s great at that, so that’s why I say we’ve been successful in spite of that.
On Expanding to New Markets
Greg: How were the challenges different trying to translate your success to Tampa versus building that initial Jacksonville location?
Nick: Location two was more challenging for a couple of reasons. One, because I wasn’t there. I spent time there, but it’s not my home. I’m not able to go and sell every day in the community, and I had more to do. So my time is lessened.
And at the time, unbeknownst to me, I didn’t have the right BD person in there. So I didn’t have a good voice in the community and my voice wasn’t there. It was kind of a double-edged sword.
We ended up having to move on from that person, and we’ve since seen ourselves gain momentum. But don’t underestimate the power of that leadership team being local. It doesn’t mean you can’t do it – we’re doing it and we’re starting to do it well – but it took a little longer than the first location for sure.
Greg: Did you try to seed that Tampa leadership team with folks from Jacksonville, or was it entirely new?
Nick: I would have loved to transfer a couple people, but it just wasn’t on the table. So unfortunately, we did offer to a couple people, but they weren’t able to move. I think that’s best practice if you can do it, to cross-pollinate. That’s what we’ve done with this outpatient practice here – we have taken someone from Jacksonville Sophros and moved them to Jacksonville Outpatient. We’ve got a leader here that’s integrated with the culture, which I think is just a huge win.
When you don’t do that, what’s important is to really lay the groundwork for that culture. Lay the expectations of how we treat one another, how we treat clients, what we do. Make sure you’re visiting regularly. If you’re going to do an event in Jacksonville, you need to do an event in Tampa. Yeah, they’ve only got five people. Okay, fine, they can go to dinner. But don’t forget about them when it comes to these little cultural things.
On the “One-Step Adjacency” Growth Model
Greg: As you started to think about expansion opportunities, how did you evaluate that landscape?
Nick: There’s a fundamental question when you look at expansion. There’s a book called “Beyond the Core” by Michael Zook. What that talks about is: define the thing that you do better than anyone else and do that thing. 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” was his sequel, which said when you grow, you go through one-step adjacencies. One step different from what you’re doing now. Don’t go two.
So Tampa was another PHP/IOP in the state of Florida that’s relatively close with the same model – one step. Here in Jacksonville, this outpatient operation we just acquired – we have a PHP/IOP in Jacksonville, we’re taking one step away and launching an OP in Jacksonville. One step, as opposed to: “Hey, I’ve got these things, I’m going to do a detox in Miami.” That’s two steps or more. I’m going from PHP/IOP to detox, I’m going from Jacksonville to Miami. I don’t know either one of those markets.
I have to have one solvable unknown. My goal was to let me have one solvable unknown and let me go and solve that.
On Self-Funding vs. Outside Capital
Greg: How did you think about funding growth? How did you decide when was the right time to take on the additional risk of Tampa?
Nick: For me, it was when the cash flow of the business surpassed what I budgeted as the negative cash flow of the new business. If you figure you’re going to spend a million dollars in a year on a new facility, then you need to have a million coming in from your existing centers to cover that, plus some working capital coverage in the bank.
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.
Is that a high-risk move? Absolutely. I am a classic entrepreneur, so I like risk, and I was willing to assume some. But I also felt like it was relatively prudent.
We didn’t have what we wanted to happen in Tampa – it went slower than we thought. 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. However, I didn’t leave myself just enough cushion for it to go perfect for me to be okay.
Greg: Not having outside capital frees you up from external pressure to grow and deliver returns. But you also mentioned discipline. How do you think about being a governor of your own ambition?
Nick: 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. It kind of acts as a natural governor to overly expanding.
I can’t expand until everything’s running well. And I think that’s a good moral compass anyway: expand, get it running well, expand again, get it running well, expand again. It’s this iterative process of growth, level it out, growth, level it out, growth, level it out. So you don’t ever get out over your skis in a meaningful way.
On Personal Discipline and Measurement
Greg: You’ve mentioned discipline several times. Obviously, military background – discipline is one of the first words people associate with the military. How have you developed that rigor?
Nick: I’m a true alcoholic. I am not naturally disciplined. I’m naturally impulsive, naturally risk-seeking, naturally self-destructive. Those are my default modes.
A lot of people go into the Army and they are disciplined or they become disciplined and take that through the rest of their lives. That wasn’t my story. I didn’t have organization, I didn’t have discipline. I thrived in the Army because it forced that upon me. When I got out, I didn’t have it again.
For me, I have to consciously add discipline. Part of that, for me, is working an AA program. I’ve noticed that helps me. It’s measuring things that most people don’t measure. I can tell you that my average steps per day on my Apple Watch is somewhere between 6,075 and 6,100 right now. I know exactly what that is. I know exactly how much sleep I’m getting, what I’m doing in the gym.
I measure these things now because if I don’t measure them, I can’t manage them. When I exercise that in my life, I try to extend that to the business. I need to focus on this because it’s a shortcoming of mine. It’s not a focus area because it comes naturally to me, but I know how important it is.
On Data and Decision-Making
Greg: How have you applied that data mindset to the business, especially as you’ve grown and are managing multiple locations?
Nick: The good thing about all of us in this industry is that we have 90% of our operations housed within electronic medical records. Invariably, our entire business is measurable. Compared to other small businesses that don’t have that luxury of having to use a central data clearinghouse for everything, it’s not so hard for us.
Having the MBA skill set, and I worked at Bain & Company for two years as a strategy consultant where everything was data, I already have that mindset of measuring things. Then on top of that, we have this kind of easy button of the EMR to be able to extrapolate data from.
Whether you use Kipu or Leva or Lightning Step or whoever you use, almost all of them have management dashboards that you can modify and adjust. Putting that work up front to do that, then you don’t have to touch it and you can just manage through it.
I’d say at least 60% of it was probably off the shelf, 25% was me, and 15% was my other leadership team. But I think had I not had the skill sets to do it, you could still come up with a pretty good answer by leaning on the EMR people that are supposed to be helping you. There’s an 80/20 rule there – you could get 80% real quick.
On Vendor Partnerships
Greg: What has been your experience with vendor partners, and how have those relationships influenced your success?
Nick: What I’ve noticed with vendors in general is that you’re going to get great performance up front, especially when you’re small, because it’s really easy to serve you. As you grow, performance can dip a little bit, especially if someone’s on a retainer or fixed percentage. So you have to be constantly advocating for yourself.
The other thing is, if you’re growing, if you’re doing well, if you’re a good partner for them financially, then it’s okay to ask for additional help. You know more about payers, right? So if I’m dealing with a payer issue, I should loop you guys in even if it’s not directly a billing thing. Or if it’s web people or EMR – you can go build the dashboard for what you need, but you can also tell them, “Hey, I can’t figure it out, I need you guys to do it.”
Being able to say: one, I’m not going to allow dips in service. I’m going to be watching, I’m going to be measuring so I know when that happens. I’m going to make a point when things aren’t going the way they should. And I’m going to ask for additional resources.
Be a partner and give them opportunities to be a partner for you as well. I don’t mean being a jerk to these guys – that’s not the best way to go.
Greg: As partnerships have evolved, has Prosperity’s role changed?
Nick: I think there were times when we said, “Hey look, we need this to happen.” And fortunately, your team mobilized and assigned more resources. The team that you need when you’re five employees with 10-20 clients a week is different than the team you need when you have 150 clients coming in a week.
As you grow bigger, it gives you an opportunity to ask to be more of a partner. We’ve enlisted you guys’ help on several things that were crises in the business, and it’s allowed you to demonstrate value. Frankly, from your end, that puts some credits in the bank. If you forget to do something and we lose two weeks, I’m not as upset because I know you just added value in another place.
I’m more active with your senior leadership now that we’re a bigger team. Similar things have happened with our other vendors. As you become a more important partner financially, you should be involved more with the senior leadership, more with strategic partnership.
On Building Referral Networks
Greg: Talk about building those relationships in the community and how you got that flywheel started.
Nick: Simon Sinek has another talk about growth expansion for new technology. He talks about early adopters – a very small percentage that believe in what you believe in, they believe in your mission, they’re excited about what you’re doing. Those are the people you’re going to get first.
The people in this industry who say “you send me a referral, I’ll send you a referral” – that’s a very substantive portion, but that is not your go-to when you first get started. You will never win there. When you are new or you have low volume, you don’t have as much to give as everybody else.
So initially, so much of it is just finding people that are aligned with your mission. As you go on and things evolve, you start to rely on your reputation. Now you’ve got a solid reputation. Now you have five-star reviews or five-star ratings at both of our locations. That carries the day – the client care and the performance and feedback.
When you do get those early people in, use that as your case study. When someone refers a client: “Hey, we got your guy in, he got admitted. Thank you for the referral. He seems like he’s doing great.” Later: “He’s graduated from the program, he’s eight weeks sober, he’s doing really good.” Now they feel good about what they’ve done. They’ve just helped someone. You’ve helped them do that. You’ve been their partner. You’ve made them look good. Now it’s a relationship.
Get the early adopters, solidify the relationship, move on to the people that might be a little less aligned with your mission at a fundamental core level and a little more self-interested. But now you’re a player in the space and now you have real momentum and a real business.
On The Future and Final Thoughts
Greg: As you look back on the Sophros growth story, what would you say are the most important things you did?
Nick: I think the most important things were:
One: We were authentic about our message and who we are. We were very clear about our mission and values, and we talked about those first in everything that we do.
Two: We provided quality care with the best clinicians. That allowed us to have a real product to sell. We’re really actually doing the right thing.
Three: We measured our results. We kept track of where we were and we made adjustments.
Four: As the CEO and founder, I was involved in sales early on. I’m still involved in high yield events, still involved in sales management.
Five: We focused on maintaining our culture and our outcomes as we grow. Because as soon as that starts to dip, as soon as we start to not provide quality care, we become a transactional treatment facility just like everybody else. And I’ve got nothing to sell other than pretty marketing materials.
There are facilities that have wonderful materials, nice places, terrible programs, but good BD reps, and they bring in clients. They will. But they’re not going to bring in as many as someone who’s leading with their authentic self and providing quality care. And it’s not going to be as sustainable. It’s a short-run game.
Want to watch the full conversation? Access the complete webinar recording here.
