Buying a group practice with owner financing — with Michelle Zadrozny

Dan King: [0:00] Thank you for joining us, everyone. I am today speaking to Michelle Zdrozny, who is the owner and clinical director of Plumeria Counseling in the wonderful Dan King: [0:11] city of Austin, Texas. How are you doing, Michelle? Michelle Zadrozny: [0:14] I'm well. Thank you. How are you doing? Dan King: [0:15] I'm good. I'm good. I just told you I was excited about my post-workout glow. So I'm going to bring that into this interview. Michelle Zadrozny: [0:22] Great. Dan King: [0:23] We invite Plumeria. Give the audience, please, the basics on you and the business. Michelle Zadrozny: [0:28] Yeah. So we took over the business about 10 years ago from another therapist who started Plumeria about nine years before then. So it's been in operation for almost 20 years. And we provide just really holistic mental health services. We recruit mainly social workers because we, you know, I'm a little biased. I'm a clinical social worker. We have a lot of, we've worked in a variety of settings, community mental health, hospitals, schools. So there's really nothing that walks through the door that we can't handle. And we mainly see people over the age of 18. We do see some teens and we have one therapist that works with kids. We have about 25 therapists, a combination of licensed therapists and also associate therapists who are working under supervision who provide therapy at reduced rates. And we provide a combination of telecounseling and also in-person counseling in our South Austin office. So we're able to serve throughout Texas. For the benefit of having a really good reputation in Austin, we've been around for a while. So that's really nice. Dan King: [1:29] You said something very unusual that I don't think any other guest has said so far, which is you took over the practice. Tell me about what's happened there. Michelle Zadrozny: [1:36] Yes. So the short version is, so my husband is not a therapist by trade. Dan King: [1:43] Nobody's perfect. Michelle Zadrozny: [1:44] Yes, he's an engineer, but he has, he did, you know, throughout his career, he did a lot of partnership development and strategic business operations, that kind of thing. And so he was actually looking for like a franchise or a business to buy at the time. And I was just getting thinking about launching a private practice. I had done my own consulting for many years. And had been finally gotten my clinical license and really enjoyed working for myself. And so thinking about that. And then he found this, you know, through his various investigative practices, found this business for sale that was actually perfect for what I wanted to do. And also, he just felt like he could, you know, help with making sure that business was making money and doing that. And I could, you know, run my practice and and grow the practice. And it was it was definitely a learning curve for us in terms of working together. And so that's been that was challenging in the beginning, for sure. Just learning or having to manage our roles effectively and keep our marriage intact. But yeah, so so it's worked out really well. And it was, we did change a lot of things. And I wonder sometimes if it would have been easier just to start from scratch than to take over a practice. But at this stage, we're happy with how it's worked out. Dan King: [3:03] I think this is an interesting option for their current practice owners or people that want to become group practice owners. Rather than starting totally from scratch, you can acquire, right? Michelle Zadrozny: [3:13] Yes. Dan King: [3:13] Can you walk folks through to the extent you can share things? I'm conscious you may be restricted on certain points. what can you share about how you structured that acquisition? Did you find it on like a listing like biz to buy or? Michelle Zadrozny: [3:29] Yeah, I don't remember exactly what it was. But yes, it was something like that. Like Alan was actively looking for businesses for sale and came across a lot of franchises and different things. And this was just a, you know, a local independent practice. And it was listed by a broker. And so we, we worked with that broker, it was pretty straightforward. It didn't, it took maybe less than 60 days to get through everything. We looked at all the tax returns, you know, got an idea of what the practice was making. We felt like we could definitely do better than what it was. So yeah, we made an offer on the practice and it was accepted. We did a combination of cash and owner finance to kind of keep the owner engaged so that, because we didn't know, you know, we wanted him to be around in case we needed him. But we did probably that work that was maybe like six months or so. And then we were like, OK, we're going to we got it. We got it. And we he's continued to work in our practice just as a therapist, renting office space and working with insurance for a couple of years after that. But we didn't have any kind of official relationship in terms of the business after that. Dan King: [4:42] For folks that don't know, could you explain what owner finance is? Michelle Zadrozny: [4:46] Yeah. So basically, we paid the owner a monthly amount. Part of the sale price was cash. So we gave him part of that in cash, the majority. And then part of that, and I'm not going to share specific numbers, but part of that was a loan that we carried with him directly. And we just paid him monthly for a period, I think of two to, I don't know if it was two or three years amount just to kind of make sure that, you know, we wouldn't know what we were getting into. And we wanted to make sure that he was still going to be around if we needed him and he wasn't just going to disappear. Dan King: [5:20] Yeah, that makes sense. I mean, we as buyers, we use, we call them seller notes, right? You can call them owner financing. We use them all the time for some similar reasons. So when people are thinking about if they are exploring the idea of if they don't own a practice or even if they do and they want to buy a practice, you don't need to buy it all in cash. There are creative ways right that you can finance some of the purchase price and owner financing is relatively well Michelle Zadrozny: [5:45] Known yeah and i was going to say something else about that because i've talked to a lot of other owners and kind of how they've acquired and done things and and one thing that i've heard that people do a lot is is something similar it's not really an owner finance but it's like they'll give you part of the money up front and then and then part of the money is tied to performance over a couple of years. And I personally don't like that model. Like if I were to sell my business or even buy a business, I don't, I don't like that model because it feels like, you know, that's on them. Like if they're, it's like, you've seen what the practice has done for the last three years or so. And it's like, now it's up to you to make it what you want. If it doesn't work out the way that you anticipated, sorry, it worked out for us. Like, I don't think that I should be held responsible for that. You know, I don't know. That might be a little controversial, but I would not entertain an offer like that because it just, unless it was like some kind of like venture capital situation or something where there was like very large amounts of money tied to it. Dan King: [6:49] It depends a little bit on the model too, because very often in acquisitions, you can keep the seller on board. So if it's a scenario where the seller is staying on board and the seller is contributing to that performance. That may be a stronger argument, right? And especially if the performance bonus is quite generous, that can be one reason for a seller to accept that turn. But you're getting into my world of M&A here, but I just wanted folks who are listening to be exposed to this possibility. Very few people, I think, think about it. They think about organically growing their business. And very often, it is easier to organically grow. When you do an acquisition, and there are risks, right? You have to care for a whole new team of clinicians. You're buying someone else's vision. And you're going to want to be throwing your due diligence to understand really what you're buying. But all that to say, you can absolutely grow through acquisition. And if you do it well, it's a fun journey. Michelle Zadrozny: [7:42] Yeah, for sure. Dan King: [7:43] So you acquire the company, you're running the company. And one of the things we talked about pre-recording was this is a lifestyle business for you. So you don't have the desire to grow it exponentially. Can you say a bit more about that? Because most business owners probably don't have that mindset. Michelle Zadrozny: [8:00] Yeah. So I think this is a really great topic to talk about. So we have had a lot of journeys and evolutions over the last, even the last 10 years in terms of like, when we first took over Plumeria, there were literally like three group practices in the Austin area. So and we knew we knew all of them. And we met together like monthly. I mean, we, we were all just kind of helping each other out in this kind of relatively new territory. Now, I can't even count the number of group practices there are everybody starting a group practice like every other day. And so it's a very different landscape. And then in the middle of that, COVID happened. And so we had to transition our whole entire practice to an online model. And then and we just didn't, you know, no one came to the office for about two years. So we have been through a lot of challenges and pivots, and like any entrepreneur has to do. And we have definitely survived all of that and thrived in a lot of ways. But probably this was maybe like two or three years ago. It was like right at like, probably like after 2021. Michelle Zadrozny: [9:09] To 2023. So it was like after COVID, we got through everybody. And then there was like a collective breakdown, I think, among therapists, where we were just exhausted, tired, we had carried society and the community through a major pandemic, and no one was really and we experienced it also, and no one was really attending to our needs. So we, we felt like we saw it in our therapist, I experienced it in myself of just like this burnout of like, I don't know if I can continue to do this. And, and I love I still have my own there. I have a very important therapy practice that I have personally, with plumeria, like alongside plumeria, I supervise people toward their clinical license, I do a lot of consulting in the community. So when I was like, there is no way I'm going to ever let go of that. And I saw a lot of practice owners moving away from clinical work and to just in their business. Michelle Zadrozny: [10:06] And to me, the balance is really important for a balanced life. Like I need to have both, I need to have like the business, and also the personal, you know, clinical work. And to give up that clinical practice, because I was feeling kind of burnout was like, not okay for me. So we had to really think about, okay, how do we keep this going and protect me and my mental health. And so we brought in our, you know, someone that had worked with us for the whole time, started out as a receptionist. We made her a practice manager, and we had some experimenting with, you know, different full-time, part-time, how that worked. But eventually, we worked it out with her role of just running all the day-to-day operations of the practice, where she was just coming to me for a consultation. Michelle Zadrozny: [10:52] She kind of, we had, we developed standard operating procedures for everything. We have templates for everything. And so she didn't need me as much. And I had to learn how to delegate and let go so that I could take care of myself. And that has been everything. And that's been going for like the last two years, I would say that I don't, I don't do a lot. And the data, I mean, I, I'm always answering emails and attending to things, but it's more in a consulting role, I would say with her. And when the therapists need clinical consultation, rather than being in the business, you know, like full stop. So that has been huge for my mental health and also allowed me to say, hey, we can continue to do this because this works. Like we, we definitely make less money than if I was doing all that myself. But to me, it's worth it. it's enough money to make it worth it. And, and it makes it more enjoyable. And I can travel, you know, we spend half the year in Washington State, I live in Austin, the other part of the year, and I can do all those things. And, and I see other practice owners that are really, you know, maybe doing well financially, but are just like, I don't, I need a negative strategy. And I feel like really fortunate that we kind of, crack that code in terms of how to make this work for us as a lifestyle business. Dan King: [12:09] Very interesting. Did you set out when first buying the business to grow it in the way that, you know, your average business owner wants to grow the business? Was it the pandemic that shifted your mindset to, you know what, I want to truly just make this a real lifestyle business and don't want to grow it beyond that? Michelle Zadrozny: [12:29] Something about me, I think that would be helpful to know is like I have I have had many many different careers within my career as a social worker I've worked for software companies I've worked for hospitals I've worked for community mental health I've worked in so many different capacities but but since about 2008 I've been been working for myself like doing consulting contract work contracts with insurance companies like doing home visits all kinds of things and realize I can have more freedom and flexibility if I actually get my clinical license, because then I can do whatever I want. So when, when opportunity to purchase Plumeria came along, I was ambivalent, because I didn't know if I wanted to be in an office, you know, seeing clients all day long, like that felt very isolating and lonely to me. And I'm a very, I'm kind of like, extroverted introvert, like, I like to be around people, I like my own my downtime. Michelle Zadrozny: [13:24] But so when we first this is maybe interesting is when we first took over Plumeria, I actually didn't do, we didn't do anything. We just kind of observed for about six months. And I didn't even start a practice with Plumeria for about a year because I wasn't convinced like what this was going to look like. And I didn't want to let go of my own stuff that I worked so hard to do on my own, like my own contracts and stuff. So I was kind of like, well, let's just see how this goes. So I always had like, I always was straddling two worlds like my own independent because i have another llc business that i work under so i had that and then i had plumeria and then i kind of like like probably during like coven a little bit after i was like merging more with plumeria and then recognize that that was problematic because that was causing i wasn't having enough of my own thing too so then i've kind of like with having nicole stepping up as the practice manager it's allowed me to kind of step back more and doing my own thing that feeds me and fulfills me. I love supporting the other therapists. I love providing clinical consultation. That's probably the most thing I love about this work. I don't love all the details, the data. I'm good at it. And I'm very good at execution on things. I'm very highly organized, but I don't love it. So I like having Nicole. I like just being able to say, hey, can you set up this docu-sign, Michelle Zadrozny: [14:49] take care of this for me. Like a virtual assistant. Dan King: [14:51] Essentially. Is it fair to say... Maybe you value freedom more than money? Michelle Zadrozny: [14:57] Absolutely. Absolutely. I value both. But if I'm going to if it's going to come down to one, it's always going to be freedom. You know, making money and making a good living has always been really important to me. I never felt like because I was a social worker, I should have to take a vow of poverty. I always subscribe to the belief that when I do better, I have more to give, whether that's emotionally, financially, whatever. So I, and I coach a lot of other therapists on like how to like get away from that scarcity mindset and how to really embrace like you're, you, you know, charge what you're worth, make, make what you're worth. Don't be afraid. Like you don't, you can do good and you can do more good, the more financially secure you are. So I would say they're both pretty important to me, but I will always choose freedom. Dan King: [15:43] And there's this old adage that focus is so powerful for growth. So if you were of the view that you're going to spend 100% of your time on Plumeria and you're going to grow it, certainly be much easier to grow it if you were spending 100% of your time on it, but that wouldn't be authentic to you. Michelle Zadrozny: [15:59] Exactly. You're absolutely right. Yeah. And it's always fun to talk about these things because as you talk about it and process things you don't normally talk about in this level of detail, it's like, yeah, that is true. Yeah. I'm developing some insights as we're talking. Dan King: [16:13] Yeah, this podcast is just a subconscious way for me to be the therapist that I should have been. Dan King: [16:20] Interesting. Okay. So let's maybe transition to another of your interests, because there are many. I'm seeing this more and more the longer we talk. Advocacy work. That's something you've done that I don't see a lot of practice owners doing. They're very focused on the day-to-day, right? But advocacy work is something that interests you. Can you share more about what you do and why it interests you? Michelle Zadrozny: [16:42] Yes. So I am, you know, like I have said a couple of times, a clinical social worker, which we have a very specific code of ethics and core competency. And one of them is social justice. Like that is a huge core value that we have as social workers. And for me, it's very, very important. And so I've always been involved with NASW Texas, which is the National Association of Social Workers. And we have an incredible chapter. Will Francis is the executive director of the Texas and Louisiana chapter. He is amazing and just so incredible. And we also have a full-time lobbyist with NISW. So I have just been, I've been a volunteer for that organization. It's a volunteer-led organization. I've served as a branch chair for the capital area branch, you know, membership development and putting on continuing education for our membership, you know, educating our membership. And I've done that. I did that for about four years. And then I served on the board, the state board. Michelle Zadrozny: [17:46] In a member at large capacity. And through that, through the board service, we are asked to kind of do, you know, contribute in some way. And so one of the things that I did is I started a monthly, at the time it was monthly, now it's bimonthly, it was a monthly, basically a peer support group for other NASW Texas members who were also practice owners, group practice owners. And so, And that was about probably three or four years ago that I started that. Michelle Zadrozny: [18:15] And we just really had a place for us to talk to each other. And in a non-competitive way, we weren't sharing trade secrets or anything. We were just helping each other with the landscape because it gets very isolating. And we needed to understand what's happening, especially since COVID. How are people surviving? How are people dealing with things? How are people doing and just supporting each other? And it was extremely helpful. I think we have about 25 members of that group and usually about 10 or 12 show up to our meetings. And through that group, we have done some incredible work that it started out as just kind of a peer support group, but it ended up being, you know, things that we talked about. We brought to leadership at NASW Texas, and they created initiatives and advocacy initiatives based on what we were talking about. So talking about provider reimbursement rates for insurance, talking about the corporatization of our profession and the influx of venture capital into the market, particularly in Texas, and how that was impacting local independent businesses. And, you know, with NASW Texas, you know, they have a direct line to our board and also to all of our elected officials. Michelle Zadrozny: [19:30] And always at the Capitol during our legislative session. So we were able to have a huge presence during our legislative session. You know, a lot of things didn't get passed. There were other priorities in Texas. That kind of work really energizes me because it's really promoting our profession and furthering the things that are impacting our profession. Dan King: [19:51] What have you learned from participating in the lobbying process? I'm really curious. Michelle Zadrozny: [19:54] I don't lobby specifically like we basically, you know, we come up with the issues and then the lobbyist NASW comes up with the like the legislative agenda that they're going to address. And then if we're needed, you know, I've offered to like speak. I have spoken at hearings like around insurance issues and things like that. I have experience in, you know, in my career as a social worker, like going to the Capitol, we have like a social work day at the Capitol and talking to legislators and legislative aides. It's not my favorite thing. I like more of the behind the scenes, you know, like, what are the issues and how do we get that up to leadership to actually make change? So the making change is really exciting to me. I don't need to be the one that's actually like at the forefront at the Capitol. Dan King: [20:42] Policy development, really. Yes. Yeah. And I think, I mean, social workers training, some of them will probably be a bit more natural at the lobbying, but social workers training could help them both develop policy and lobby directly. Yeah. Michelle Zadrozny: [20:56] And there have been other times in my career where I really enjoyed doing that and meeting with, you know, legislative aides and, you know, but I'm 100% virtual. Like I said, I'm not even at Austin half the year, so I don't, my time is more valuable in other ways. I've gotten a little lazier as I've gotten older. Dan King: [21:16] Well, it just shows how many different types of personalities can be involved in this group practice journey. And it shows that you have a lot of freedom if you get to a certain stage to Dan King: [21:26] shape what your life is like. And it's so easy for the life to serve the business as opposed to the business to serve the life. So you, Michelle, are definitely a testament, definitely a testament to the business serving the life. Michelle Zadrozny: [21:38] Yes. Well, I and I feel like I've been working my whole career to get to like I'm 52 years old. So I feel like it's that, you know, you're at that place where it's like you're in your zone, right? Your zone of genius where you're like, OK, this is where I operate most effectively. And now I'm just going to figure out how to continue to give back and continue to, you know, find my purpose and everything. But but I remember even in college, like I would just. Michelle Zadrozny: [22:06] Have these amazing conversations with people. And it was before I discovered social work before I ever knew I wanted to be a therapist. And I was like, you know, if I could just get paid to sit around and talk to people all day, like, what's that job? That's the job that I want. And I always remember that in my head that like, and it's like, you know, if you just always keep that intention, and it's always been, you know, front and center to me. And also, you know, I, I don't know, My whole family is very service oriented. Like my sister's a teacher. My brother was a retired Marine. And so our family was very centered on service. And my dad was an entrepreneur. He owned his own business. He was a mechanic and had his own auto shop for years, as well as my grandfather. So I come from a family of entrepreneurs, but also service oriented. Michelle Zadrozny: [22:53] So it's kind of that's very much rooted in my whole being and identity of like, you have to make your life work for you. You can't be a slave to like, you know, what you think success should look like. It's really what you want your life to look like. And I really worked really hard and had some really hard times in my career. Like a lot of jobs were not the best fit for me. I got fired a lot in my early career, to be honest. You know, a lot of times it was like, we're running out of money, nonprofit. It's like, I think I'm just like creating too much of a problem. I'm going to too many networking meetings in the community. I'm not, you know, I'm talking to people. I was doing like good things, but it wasn't really aligned with my job description. So I was like, I always figured out a way how to do the thing, how to make the job, Michelle Zadrozny: [23:38] the job that I wanted until it no longer worked for the organization. Dan King: [23:42] You definitely are someone who values freedom. I can see that. So to bring us to a conclusion here with your, your freedom, what do you do with your time when you're not working? Michelle Zadrozny: [23:51] Oh my gosh. Well, we talked about working out. I love to work out. I work out every morning. I'm a home workout kind of person. I have my little workout gym at home. I love to read. I love to learn. I do a lot of continuing education, training. I consider my whole life, my work life is really all integrated. My work with my clients, my work with my supervisees, that's all rewarding to me. And I just fit that into my life. Yeah, my hobbies are like really like reading and watching movies, like kind of like boring and live music, of course, because we're in Austin. And I have this whole other this is like a total side thing. But I have this whole fashion consulting business that I do, and which is completely unrelated. But just, you know, that that kind of feeds my soul. Dan King: [24:39] So that sounds like business number eight. If I'm counting. I love it. I love it. Michelle, you are very authentic. So appreciated this conversation. I think there's some really good nuggets for folks to think about. You have definitely done things differently, right? And there's a lot to celebrate there. So thanks so much for coming on and sharing this sense of possibility with people. Michelle Zadrozny: [25:01] Thank you so much, Dan. I really appreciate it. It was really nice talking with you.