Over the last couple of weeks, we have talked quite a bit about cash forecasting, various ways physicians, life science, and healthcare companies can improve their cash flow, why business owners need CFO leadership, why outsourcing CFOs is a popular choice for private companies, and how to effectively use an outsourced CFO. All these topics are focused on owners of and executives working for private companies survive and thrive right now. Today we’ll discuss how to begin the process of transforming your company – right now, in the middle of all the economic and COVID-19 uncertainties. Time to be Bold, be Courageous, to Standup and Standout, and start Swing for the Fences (hence, the reason we selected the photo Barry Bonds, famous Giants southpaw, with an amazing 762 career home runs). We are going to talk specifically about developing your Partnering Strategy.
Let’s reflect back on when you launched your medical practice / business. What I have found is most of our clients started their businesses (or previous generations of their family) to address a problem. Chances are you did too. One of the characteristics that really sets business owners and entrepreneurs apart is their glass half full attitude. They have the ability to see problems as opportunities and use ingenuity to convert a problem’s solution into a successful revenue stream or business. In order to fully seize these opportunities, founders often need to pivot the business until they get the “formula” or “secret sauce” just right.
This is where a guide with industry and business experience, like The Healthcare CFO, fits in. An experienced partner can come in from the outside and help you identify and seize new opportunities and develop a strategy and action plan to pivot your organization. Likewise, pivoting requires some form of trial and error. Challenges often call for new dynamic ways of doing things and you might need a fresh perspective. It helps having a team with broad diverse experiences to help you assess your progress and challenge the results. Especially this year, 2020, with all the other issues businesses and their owners are tacking.
So let’s consider some realistic hypothetical examples:
Maybe you are a physician / owner(s) of an independent general or specialty practice(s). In years past, you had have to invest cash occasionally to make payroll after high volume service months. You really have not invested heavily in technology over the years. Your business was primarily a brick and mortars. You have a fair amount of credit card, real estate, and equipment debt backed with personal guarantees. Now you are trying to come up for air and catch up after several waves of obstacles stemming from the COVID-19 shutdowns. You need help managing your cash, building your working capital, getting your most valuable assets on your balance sheet (receivables managed by a third party revenue management/ EMR). And focus on operational KPIs to help you restore and make up on lost visits in April and May.
You are founders of an early stage healthcare software-as-a-service (SAAS) company. You have completed prototyping and there is a lot of interest from prospective customers. You have work arounds for COVID-19’s impact on your workforce. Actually, with so many people working from home now is a better time than ever to quickly scale your application. The challenge is finding funding to leap ahead of the curve. Equity is hard to come by as investors are jittery about the pandemic economy and young companies that haven’t reached critical mass. Debt has historically been out of the question, but you did get a PPP loan. But you need additional funds. Time to explore other creative arrangement with a partner who can share in the financial risk and possibly leverage their existing relationships and/or infrastructure.
Or maybe you are a very large family owned construction services company focusing on the medical and healthcare facilities. Your prior year revenues were north of $100 Million. Your primary services are engineering and/or constructing hospitals. In March 2020, you quickly shifted your marketing teams focus on your smaller civil business while also exploring new projects or retrofitting existing facilities for COVID-19. Right now you could use a partner to help you diversify to enter new markets.
All of these companies face tremendous obstacles. The owners and their leadership teams have invested a lot of time and money exploring strategies to overcome these obstacles.
Now step back and think about if there were a white knight that could help overcome these obstacles, what would that partner look like. What does that partner possess that could help you transform your business. Write down your thoughts and commit to developing a partnering strategy for your company today. A strong partnership can be critical to your success in transforming your biomed or health-tech startup, physician or family owned business, or established company. And that’s why we’re discussing it today.
How Do You Plan for Successful Partnerships?
Maybe you can relate to one of the examples above. Collaboration in some shape or form has many benefits, but first, you need a strategy and then you need to do some homework.
So how do you plan for successful partnerships? It is actually easier than you think – start with a simple assessment. When you consider the exponential value of what could be at stake (that includes opportunity costs) – the time invested is well worth the effort.
Your assessment should cover a multitude of questions relating to your business, such as:
Who are you partnering with, and what is their reputation?
What are the motivating factors behind the partnership’s proposal?
What are the risks or negatives?
What resources will you contribute, and how will they be valued?
How do you want decisions made?
This is by no means a comprehensive list. It is designed to get you started. To dive even deeper into this topic, schedule a Zoom call with us today to discuss Assessing Your Partnership Strategy.
Why Partnering Strategies that Fail
All too often, a thoughtful evaluation of the business´ or business owner’s wants and needs are overlooked due to lack of business experience, desire to build reputation and reach instant success, or just in the haste of trying to accomplish something under short deadlines or limited cash. It’s important not to rush and overlook this process as these relationships often do impact your bottom line for years to come. I think it’s fair to say for all companies still operating, 2020 is all about surviving and 2021 is about recovering and thriving. Right now, I know it’s hard to see past the obstacle and for some to think about these questions. That is why NOW is precisely when you want to have these conversations as an organization. Start with the basics above and write down what you can.
Spend Time Thinking About The Future And Preserving Success Once Its Attained
I would also encourage you to think through scenarios of once you attain success. I learned a valuable lesson with my firm a couple of years ago about how important it is to write down your expectations of your partner and their expectations of you and how you agree to operate or play in the sandbox together and how you will come together to discuss conflicts. What I have learned is sometimes when partners are successful, one or both may lose sight of why they were successful and begin behaving in a way the other partner views as not being trustworthy or undermining the value of relationships created and the investments partners have. Where the rubber really meets the road is when you thought both businesses subscribed to the same set of values and you later find out through their actions that is not the case. The more business owners I talk to, the more I realize this happens more than you think. So plan ahead for success and save yourself a lot of time and money and heartache down the road.
What a Successful Partnership Looks Like
The most successful long term partnerships I have seen (some international ones like we see on the B2B industrial side lasting multiple decades) are mostly equitable and provide mechanisms for changes in circumstances. There are several in the mining and petroleum industries.
These success partnerships generally have a joint operating agreement and provide a roadmap for navigating conflict. Partners value the relationships, and they work hard at maintaining their relationships. As their relationships mature, they continue to care about the wellbeing of both firms and the partners they work with. They also recognize these partnerships will not last forever, they will not always agree, and the circumstances will change over time. So they strive to address them amicably.
The Healthcare CFO is a strategic partner to our clients. Our guiding purpose is to help private medical, life science, and healthcare companies survive, grow, and prosper. Right now, we are helping clients manage their cash flow, plan for where they want to be next year, identify new revenue and market opportunities, develop relationships and establish new partnerships, cut costs and look for creative ways to further reduce their cost structures, and successfully negotiate new business. We offer customized solutions and have been delivering services virtually (remote work model) through our parent company since January 2018. We specialize in physician-owned and family businesses and working with founding teams with technical backgrounds. We focus on helping independent physician practices often found in smaller US cities and towns.
We want your private company to not only survive, but thrive as the country recovers from the period. Why not call or email us today for a no obligation Zoom consultation with our Managing CFO. Contact us here.