Helping A Chiro Scale Past 6 Locations | Ep 837

0:01This is Raymond. He owns six chiropractic clinics and he does about$5 million a year and we're going to help him scale. So, hey Alex, my name is Raymond Cooner. I own Cairo First of Washington. So we're chain of chiropractic clinics in the greater Seattle area. So just a little bit about my business. We currently have six brick and mortar locations in the greater Seattle area, trailing 12 months revenue of 5.2 million, EBITDA of around roughly 1.2 million, and our net profit is about 23%. Do you buy those or do you open up organic? So far I've bought all of them. Oh really? Okay. Yeah, but I think moving forward, we're going to change our strategy a little bit.

0:36Yeah, so who do you help specifically? So our key demographic that we help is 35 to 65-year-old men and women that have some kind of condition that we can help with, whether it's pain, discomfort, or loss of movement. So any kind of like income level or anything like that? Yeah, they need to be employed. Insurance or cash? We're about 75 % insurance. Oh, interesting. Okay, got it. So how do you help them? So the way we help them is when someone comes into our office, we'll design a custom treatment plan for them that might be over a period of 60 to 90 days. It might include chiropractic, rehab, and spinal decompression.

1:12So spinal decompression kind of differentiates us from a lot of our competitors because it's a niche service that we offer for people that have disc-related injuries. Is that like stretching people out kind of thing? Yeah. Okay. Exactly. Cool. Well, how do you make money? So basically on the front end, we offer a free consultation. So then when the patient comes in, our packages can range from$2 ,400 to$3 ,600 over a 60-90-day period. We're primarily a reoccurring revenue model. And roughly one out of every seven of our patients, they come in for a larger case value. So like a car accident or a work injury might be worth up to$10 ,000.

1:50Okay. What's advertising? How do you find them? So for paid advertising, the two means of advertising are number one is Facebook ads. So we spend about$1 ,000 per location on that. The second one is Google Ads. So we're spending roughly$500 to$1 ,000 per month on each location. Okay. So what's sales velocity? How many do you sell per month? On average, we're getting about 35 leads per month. And out of the 35, we have 28 that show. Okay, that's pretty good. And so we have a show rate of about 80%. That's great. And our closing rate is about 71%. So total sales probably roughly around 20. Cool.

2:25Solid numbers. Okay. So what's the goal? My three-year goal is to try to get to$5 million EBITDA. I want to try to build a business that can run individually, but then I also want to entertain selling to an institutional buyer. Okay. So this is very much up here, Ali, what we talk about. Okay. So that's the goal. So what's staying in the way? What's the problem? So if I were to prioritize my constraints, what I think they are, number one, I would say is probably lead flow. I think that we could do better in that department. It's not consistent. Okay. When I had one location, it was really easy to predict that and to change the outcome pretty quickly.

3:02But as we've scaled, I'm having a tougher and tougher time, you know, scale the marketing, right? So I would say that's like a big one for us. Second one would be like our sales infrastructure. Because we are 75 % insurance based, there's so many different plans out there, right? So when the patient comes in, we have to determine what kind of insurance they have by verifying it and then make a customized plan based off of that. So if there's a way to streamline that into one day, I think it would be much more effective for us. When I personally practiced, I was able to do it in one day, but I'm having a tough time training my doctors to be able to do that.

3:35Number three, scaling issues. So just centralizing the marketing has been a challenge for us. Limited employee pool, right? So right now we're not expanding, but when we do expand, it's harder to find a doctor, obviously, than a regular person. Because you're buying it from another person who's leaving, correct? Yeah, and then I got to put one of my guys in there. So the hiring pool is a lot smaller for me than it would be for other people. But that's not an issue right now. I don't think it's a pressing issue for us until we start expanding. Yeah, got it. Okay, and then people operations? People operations.

4:07So obviously when I had one location, it was really easy to control the standard, right? But as we expand, it's harder and harder to have that same standard. So let's see the numbers. So going over the numbers again, so top line revenue, 5.2 million last fall months, profit 1.2, net margin is about 23%. Our CAC is about 700. Our lifetime value is 3 ,400. So that's 4.8 to 1 LTV to CAC ratio. Marketing spend, we're spending about 1 ,500 to 2 ,000 per location right now. The short rate's 80%, close rate's 71%, and our annual ad spend on The marketing is about 110 ,000. Huh, okay. Do you have anything broken out between channels?

4:47Between Facebook and Google? I do. Okay, sweet. So this is our Facebook data. I was able to put together our 12 month numbers for all the clinics for AdSpan. And then for as far as, the challenge that we have is because we're insurance based, we don't get paid for like 30, 60, 90 days after. So I had to go back and I picked Q2 for three clinics. Yeah. So these are the numbers for those three clinics in quarter two. Okay. So why is Kent so much better? Yeah. I don't know. That's what I want to replicate. That's where we don't have consistency. Is that your first location? That's our number one.

5:21Yeah. It's not our first location. It's our third location, but it's probably our number one right now. Is the doc there different than the other docs? Is he good at sales? They're about the... No, he's good, but he's about the same. I would say that culture of that team is really good. I think that's one thing that stands out. Mm-hmm. Yeah, because if you look at, because CAC is, I mean, you know, half of Capitol Hill, right? Yeah. But the amount of money that you're making is, like, you're getting more LTV and lower CAC at Kent. Right. So, are they set, like, is it that the people that are coming, because it's insurance, so is it that they're, like, they're billing better?

6:02Like, how could they get LTV to be so much higher? Yeah, great question. So Kent would have a higher proportion of those$10 ,000 cases I was talking about, because that's blue collar. And then Capitol Hill's white collar. So it's got less of those case averages that are really high. I would say that's one thing. Interesting. Do you have any other markets that are in that kind of blue collar damage? Everett's right there as well. Well, then based on that, would we have more like ROAS? Because the CAC's close, and ROAS is a quarter. So why are there so many more cases in Kent than Everett? I would say Everett has more of those 10 ,000 cases than Kent does.

6:41Does that make sense? Interesting. So I didn't calculate that into the Facebook marketing and the Google audience. Oh, so you didn't include that. Okay. But Everett's a good market? It's a good market for those, but I don't like to be too dependent on one source of patient, if that makes sense. Like I don't want to be too heavy on those auto accident cases in a location. Got it. Okay. Do you have any other data that you've collected together? This is our Google data. Okay. Yeah, so this is from Google AdWords. Well, these obviously do significantly better than your Facebook ads. Yeah, for sure.

7:13Interesting. All right. Are you maxed out on spend here? I don't think I am. I work with a third-party company on this, and I basically go off their recommendations. Okay. I personally would love to spend more, obviously, on this because they're returning so high. Yeah. And these people are in, you know, immediate need of help. Yeah. So, they're much easier. Our case acceptance goes up much higher with these patients. High intent. Yeah. Yeah. Really good. Well, I mean, shoot, this is the most promising part. Okay. Yeah. All right. Let me think about some other kind of... Walk me through the sales process.

7:48The sales process. Yeah. So, we have a two-day process, right? So, day one, patient comes in. We do a consultation. We take x-rays. We'll do an exam. And actually, start me from click to close. So the person clicks on, is Google, is basically the sales process for Google Ads different than the sales process for Meta? Or how does it flow for you? Yeah, so Google, they will call directly into our, we have a centralized call center. So the call in. So it's click to call as the ad. Click to call or click to schedule on our web page. Sure. Do you know what the split is? Is a lot of the call or is like, I'm just curious.

8:21Yeah, I don't know the answer to that. OK, no worries. Yeah, that's a good question. Okay, so click to call or they self-book, got it. So then they talk to a rep that's centralized. That rep does some sort of discovery call, like triages them and either says, I mean, do they look at their insurance at that point on the call? They don't, but that's the thing I'm thinking of adding in so we can get on top of that. Keep going through it. So they do some sort of discovery. They're currently not doing insurance on the call. Yep. All right, so then they do what? So then they schedule them the next available time.

8:50We try to get them in the same day or next day right away. What's the show up rate for the calls? Because the show up rate that you have here, what you showed me earlier, was really good, but that's because they also just got it. They had a conversation prior to doing that too. Right. Okay. So what's the show up rate for that other step? So for the call? Because some is click to call, but the ones that book onto your calendar, you then call them at the designated time? Yeah. No, they just schedule. They can schedule online and then they can make, they can confirm. To show up to the facility? Yeah.

9:17We just take them. Oh, okay. Yeah. I try to reduce as much friction as possible. No, I dig it. Okay, that makes more sense to me. Okay, got it. So some people call and then they book them and the people who self-schedule just book directly. Got it. Exactly, yeah. And then what's the kind of like reminder sequence there to make sure that, because you have really good shop rates. Yeah, so we do three text messages and then we do a phone call. If they don't respond to a text message, we do a phone call the night before. To confirm. And then we'll do another one like two hours before their appointment.

9:45Okay, so three reminders and call if they have not confirmed their appointment and follow-up call as well if they didn't pick up the first call or the other ones. And then if someone doesn't hit any of those five, do you pull them off the calendar? We don't pull them off the calendar, but we kind of expect them not to. Just like double book kind of? Yeah. Exactly. Okay. Okay. So then they come in. So they show up to the appointment. Now what? They come in for their appointment. We'll do a consultation. So we have a patient coordinator that gets the preliminary data. Okay. So it's like an assessment?

10:13Yeah. Like movement, like move here. Does that hurt? That kind of thing. like circle where you have pain kind of like after you close your framework okay so like so they'll do the first half of that on there and then uh then we'll take uh x-rays we'll do an exam and then we'll tell the patient that hey we need to process these films or these x-rays and then can we need to get you back in tomorrow so we can go over the results of the x-ray yeah that's realizing people yeah that's yeah okay um and then so then we'll release them for we'll still do treatment that day we'll do a light treatment and then we'll have them come back the next day and by then by By then we'll have everything verified and then we'll have a customized plan for them.

10:47Interesting. I got some stuff there. Okay. So I'm going to say it back to you. Yep. So a disco call that gets them booked, reminder sequence, three texts, two calls, only if they don't confirm via text. They show assessment, clarify whether they're there, label them a problem, overview past experience. Then you take them through some x-rays and whatever tests that you're going to run. then you do some light delivery and say, hey, you know, come back tomorrow and then we will sell you the package. Correct. And then whatever. And the people who you do that service for up front, do they pay anything?

11:23Like the 10 to 15 % that don't actually come to the sales appointment. Yeah, so they'll still pay. Like usually they'll have a copay. So that's why we have to verify all that information, right? So it's kind of, it gets complicated with the insurance. If it was just cash, it'd be so easy. But because the insurance is there, we have to verify if they have coverage and then we'll charge them a copay. And it's different for every single person. But our cash fee for that would be like$99, for example. Okay. Yeah. Okay. Got it. What's the, you said you're running 23 % margins. What's the best facility run?

11:51What's the worst facility run, margins-wise? The best facility run right now, I would say, is Kent. All right. Out of these ones. Or you have the six. Go back one or two. There should be six on there. Yeah. Should we have the list? Okay. So we got all of them there. So our two lowest performing are Auburn and Federal Way. All right. Our two top performers right now are Kent and Everett. And in the middle are Capitol Hill and Bellevue. Okay. So what are the margins for the top two, like net margins for the facility? Net margins for top two are probably over about 40%. Okay. So that's what it should be.

12:20Okay. Got it. And what's revenue with those two? Those are annual. Yeah. About 1.5 million. Got it. So that's what you want. Yeah. So those two you're happy with because if you're running, you're running 600K-ish in profit on those times two. So 1.2, oh shit, well, that's most your profit. Yeah. Yeah, yeah. And then the other four kind of are just like. Yeah. And just a disclaimer, like these other, like Auburn and Federal Way are like my newer locations. So like the ad, so my unit is probably even higher than this, but it's just the first six months we had to eat a lot of profit. How old? Auburn is about a year old and Federal Way is about 14 months.

12:56Okay. Can you walk me through the ad funnel with the Facebook ads? So go back one or just, or do one? No, just right here. Yeah, so just like we walked through the sales process. Yeah. Can you walk me through the funnel from the Facebook ads? Yeah. So like from when they click on an ad. So we have a video ad out there. Do you have ads live right now? Yeah. Can you pull up Facebook ads live? We're going to pull them up and we're going to see it. We're going to see for ourselves. All right. So we have different creative. It looks like it's the same copy. All right. So I think there's probably just some work that could just happen on the actual ads themselves.

13:32Like I think you can have a clear call out. And the first line, I would probably separate the call outs. so it's like attention ever in surrounding areas so instead of saying areas i would go to like residents or something like or people like basically combine the two where it says chronic back pain doesn't have to be a life sentence attention ever in surrounding areas uh so be like attention ever like residents with back pain that combines both lines punch here put two asterisks on either side it's like okay that's what it is um and you're putting proof first and i probably wouldn't here i'd probably lead with a question which would be like are you so either i would lead with a question that'd be some sort of like more specific pain or I would lead with the offer and then have the proof of why they should believe that I can help them after they've seen the offer because like it took us all the way down to actually see what the offer was in the headline avoid surgery try uh spinal decompression I would probably just put like the offer there so it's just like a restatement like free spinal treatment decompress you know free spinal uh decompression boom$99 value whatever something like that's probably what I would what I would put there because I think it's just like, there's a lot of words and I think you could probably get, just like I combined the first, the headline and the next sentence into just like, attention, Everett, residents with back pain.

14:41It's like, boom, we got that. And then it's like, you'd be amazed at how much like just changing, tweaking the headline, probably compressing the copy into a handful of bullets. It's like, do you struggle with? Boom, boom, boom, boom. And you've probably tried. Boom, boom, boom, boom. But there's a better way. This is how we do it. We've helped this many people for a limited time. We're doing X, Y, and Z. and I think that would probably work well. I cannot guarantee availability as we accommodate 10 vouchers after a patient schedule. I do like that. It could probably be compressed. We can only see 10 new patients per week.

15:12Right. And scheduling availability is first come first serve for this treatment. Done. Do you think it's good to go, because with Facebook, right? People aren't necessarily going on Facebook and on my back, you know how Google AdWords is like on my back stopped up, I need to call somebody. I think so. There's tons of chiropractors to advertise on Facebook. Yeah. Tons. Yeah. So I don't think there's any issue with advertising on Facebook. Okay. For sure. Got it. What's the landing page look like? So the landing page, so it's just that Instaform, that forum on Facebook, right? Uh-huh. And that goes to a calendar on Go High Level.

15:44Okay. Okay, and then they just schedule on, like we have - So there's really not even a landing page. It's just like they're going to lead forms straight to basically redirect the scheduler. Scheduler, and then we double book for Facebook because the show rates lower for Facebook. So basically we give them like certain times in the day where they can schedule. So they'll schedule their own appointment. And then we put it into our, then we have to manually put that into our schedule, right? Oh, you manually, you have to like basically transfer them over? Into this, into our EHR. Yeah, yeah, yeah.

16:10Yeah. Okay, got it. Because it's not connected to our EHR. Okay, understood. So that's for Facebook. Google's a little different. Google would be kind of like this, like where they can schedule online. On a page, you mean? Yeah. Okay. So when it gets five million EBITDA, you're doing 1.2. Basically, you have to get the other four to be profitable. There's a couple of things that I think we can go over in terms of sales process, lead magnets, things like that. Honestly, I think a big part of it that's not up here is the ops. Because in this type of business, it's so operational heavy in terms of operational excellence.

16:43Because you absolutely can run a 10 to 1, 15 to 1 row. Well, you're already doing it on Google, but you can do that on Facebook as well if the offer is right. And so right now the offer is like, there really isn't one. It's just like, try this thing. It doesn't even say free. And so I think, yeah. So let's do that. Why don't you come over here and then we'll walk through game plan. All right. So got a lot of like, there's inconsistent lead flow. There's the sales process that I would look at. I think the discovery process needs something, need a better front end offer, increase ad spend. So those are the really tactical things that I'll walk through.

17:21but I still want to talk about ops. So if we have these six locations, what would you say, like, are the team structures the same between all six? Is the business model the same between all six? Yeah, identical. Okay, identical model. Got it. So the people coming in are different. That's part of why the LTV is different. And so in terms of the individual location operators, if you had to power rank them like one to six, who's the best okay is is the is the doc kind of like the manager of the location is that kind of how it works that's kind of that's what we're relying on right now okay why don't you just show me once you walk me through with the actual like what the model looks like and we'll do the boxes and they'll talk about the acquisition stuff like the org chart yeah yeah so the doctor should be the um so docs here okay got it and then underneath them is like like a team lead okay like an office manager or anything yep yeah i guess you can call it we don't call them that but yeah sure yep um and then there's just usually a scheduler and we have tech that's it so i'm I try to keep it to four employees per location.

18:20I like that. So you've got a schedule, so basically we nurture. Are they remote or are they in person? So this is a scheduler for when they come into the office. I also have a remote team that does all the inbound calls. And it's centrally? Yeah, centrally. Got it. So that's it. That's the model. I mean, what do you have to pay the docs? They make between the base of$80 ,000 a year, but they probably, like our top ones, make it like over$150 ,000. Okay. And did they get some sort of like profit share or something like that? Yeah, I offered, they range between 10 and 20 % net profit. That's good.

18:52I mean, that's usually what I like to have, especially for like a high-skill thing. Profit, that makes sense. Question on that, though. Would you recommend getting, like I try to get them equity, because I want them to come along for the ride, or does that cause, I mean, that would increase our EBITDA, obviously, because it wouldn't be payroll that 20 % would go under. It would improve our EBITDA, but then it also gives them ownership. Or would you not recommend doing that? Well, if you think about equity, right, you've got cash flow, so like distributions. You've got sale. Like if you sell it, there's value from that.

19:25There's risk. And then there's control. So like that's what equity gets you. Now, they're not going to get control because you're the one who owns it and you're going to be making decisions. It doesn't really matter. They probably don't want the risk. No. Okay. So then it just comes down to them getting paid on a sale and them getting distributions in the meantime. You already have this one. If you want, you could include something called a profits interest. Because you probably have LLCs for each of them. And so this would be something that basically functions equity-like. So that if they sold, they would get whatever percentage of the profits interest.

19:57So it'd be like, okay, we're going to say that the business today is worth$500K. And you're going to get, call it 15%. Above that goes to you. And then it's also key for them too, because you're like, hey, for us to get above a$500 ,000 EV for this thing, then we need to have profit for the location at$200 ,000 or whatever. And it's like, hey, but if you get profit per year to$500 ,000, then we're probably looking at something like$4 million. So you're going to get 15 % of$4 million. So you have another$600 ,000 check on the data bag. So that way, and I would just draw the same quadrant, which is like there's four elements.

20:34And so I want to make you an owner. And this is how we're going to do it. The benefit to them is that when you do this, there's no tax implication. Got it. So they, cause it's like if you were to issue them shares, yeah, they gotta pay taxes on it. The other benefit is, and this is just being real, is that let's say in five years, you don't wanna sell, you change your mind or they decide they wanna move with their family. Your equity doesn't walk with them. It comes back to the pool and you can give it to the next person. Got it. So it's basically, this is fundamentally like phantom equity. Right.

21:02And I think that's totally fine if you wanna do that. The question is whether or not that actually changes their behavior. Yeah, yeah. And so that's kinda like - I thought that it doesn't really. I tend to agree for this particular role. But I do think the profit share is a much faster feedback loop, and I think that works. Because there's months where they hit, like, if they're 20%, and they could be taking only$12 ,000,$15 ,000 profit next month. But then that kills our EBITDA for the next month, if that makes sense. Because it's coming out of payroll versus distribution. Yeah. I don't know if that makes sense.

21:26No, I understand. It's basically bonus. Maybe it's too small thinking. No, I mean, the thing is that when you sell, there's ad backs. Right, okay. And so, like, the person who's buying it is going to do their own math on what they think. Got it. Yeah, so like you're even, they're literally going to throw out your financials, and they're going to do their own financials and then decide. That makes sense. Then that means that the other four locations probably have really low revenue. So Auburn and Federal Way for sure. Okay, what's the revenue of those two? Revenue is roughly$40 ,000 a month. Okay, so like$500 ,000-ish.

21:57Yeah,$500 ,000-ish. Okay, that's the issue. Yeah, which is like our breaking number, right? Capital Hill and Bellevue are higher than that, so they're middle. Are they, how geographically concentrated are these? They are all within 30 miles. Oh, so all of them are in one city? Yeah, so in the same area. But Auburn, Federal Way, and Kent are awesome because they're like within five miles. And it's so easy to rotate staff to, et cetera. So do you say Kent, Federal Way, and what's the other one? Auburn, or like five, ten miles. Auburn, interesting. Yeah, but those are two new ones, right? So like Auburn and Federal Way, kind of hard to judge.

22:31Interesting. And if you looked at our EBITDA now, like if you did six months trailing versus 12, would probably be a lot higher ratio than that because they were kind of eating themselves in the beginning when I first opened it. You had to put some cash into it. Exactly, yeah. Got it, got it, got it. Okay, so starting with the lead magnet, I think that offering$19,$29, somewhere in there, first consult or free x-ray or something to that extent would probably go way better. And I do like, especially for your type of business, to do a low ticket instead of something like this. So it'd be like$29 x-ray, you know, plus, you know, assessments, blah, blah, blah.