The Blueprint for Growing a Multi-Million-Dollar Optometry Practice with Dr. Kurt Steele

Adam Cmejla:
Welcome to another episode of 20/20 Money, The Business of Optometry. Joining me on today’s show, Dr. Kurt Steele. Kurt, it is good to see you, my friend. How are you?

Kurt Steele:
Doing all right.

Adam Cmejla:
I’m better than I deserve. I know listeners can’t see this right now, but we both got the memo that it’s a blue Monday. We’re both rocking blue polos here. Great minds think alike, right?

Kurt Steele:
It does look like the same shirt. I just now noticed that. I guess it is. I just got back from SECO, and the book release was there and it went really well. Now I’m headed to Expo this week. I’m actually going on stage with a good friend, Brett Davis. They even advertised it with boxing gloves. It’s private equity versus independent optometry for 30 minutes, toe to toe.

Adam Cmejla:
Okay, tell me, when is this happening? I’m going to be at Expo, but unfortunately I’m only there Wednesday through Thursday afternoon. I’ll have to have somebody take some notes and maybe some video because boxing gloves on stage sounds like a good show.

Kurt Steele:
Friday at 3:30 on the main stage.

Adam Cmejla:
Oof.

Kurt Steele:
And to show you how smart I am, when they asked me who would be a good equity person, I told them the smartest guy I knew. Then I thought, why did I do that?

Adam Cmejla:
That just demonstrates the value you’re going to be delivering on your side of the coin.

Kurt Steele:
I guess. It’s Brett Davis with AEG Vision. I know him from his Vision Source days. He’s also written a book, Breadisms, which is very good. I’ve learned quite a bit from him. He has a football coaching background in his family, and he gives one of the best talks I’ve ever seen on coaching a team.

Oddly enough, in my livestream I had Phil Fulmer on as one of my guests. I don’t know how much you know about college football, but he did 40 minutes for me on leadership and coaching. I’m thinking about playing a recording of it at some point. Football coaches really understand leading a team. Both Coach Fulmer and Brett do. Like I said, I picked the smartest guy I knew, and that may not have been the smartest move on my part.

Adam Cmejla:
Well, teamwork makes the dream work, as a coach I worked with used to say. A business and the customers, patients, or clients on the other side can only be served well if the team is in place.

What I think is interesting about where we’re going today is that in your book, which we’ll link in the show notes, We’re Not Selling, We’re Winning: The Simple Blueprint That Grew Our Practice from $280,000 to $4 Million in Revenue, you spend basically an entire part of the book talking about the importance of your team.

There are a couple different angles I want to go with that, but let me start with this question: why write a book? Writing a book is no small task. It’s a lot of work, a lot of questioning, and I’m sure there were periods where you thought, why did I sign up for this? So what was it about writing a book that was important to you, and how did that connect with the consulting work and the relationships outside your now multi-location practice?

Kurt Steele:
I think the idea came from a lecture I’ve given for years. It’s been called things like Ditch the Sales Pitch or How to Not Sell in the Exam Room. People would come up to me afterward and say, “You should write a book. You should write a book.” I heard that for years.

But then when I started writing it, I realized how important the team was. That’s why team is part one of the book. If you don’t get part one right, parts two and three are kind of meaningless.

If your business is like a car, then the team is your engine. The metrics are your steering wheel. Talking to patients is maybe the upholstery. But without the engine, the rest of it does not matter.

Sometimes it’s better to be lucky than good. I was always what I considered a nice boss, but I was still the boss. About six or seven years ago, I lost three people very close to me: my dad, my brother, and my senior practice partner.

Around that same time, I overheard two of my techs, Jesse and Callie, talking about who was going to miss their kids’ ballgames because of our evening hours. It punched me right in the gut. I went to Molly and asked, how bad are these evening hours really? She said, “Oh, we hate them. When people quit, that’s the reason. They’re here until seven one or two nights a week, and they miss their kids’ ballgames and family events.”
That changed everything for me. It’s actually in my vision statement now: none of my team will ever miss a kid’s ballgame because of work. If that means someone needs to sneak out the back door at four o’clock for a 4:30 game and I have to take my own patients, then so be it.

We got rid of the evening hours immediately. I thought we might lose money. If anything, we grew faster.

What I accidentally discovered was that a really happy team, a team with ownership in the practice, a team that is heard and gets to help make decisions, is a much more productive team than one that just feels managed.

That’s why the team comes first in the book.

Another thing that shaped this was the writing groups. I had 30 optometrists participate in five groups of six while I was writing the book. They got early access and gave feedback. Of those 30 doctors, 27 said staff was their number one issue. Nine out of 10.

I don’t believe 90 percent of teams are bad. That’s too high a number. So there has to be a leadership issue there too.

When I do on site consulting, I’ll turn around and ask the team, “What would make this a career instead of a job?” And what I hear is, “I wish I could do more. I’d love to learn more. I’ve never really been trained. I’ve never been cross trained. I have ideas, but nobody listens to me.”

A lot of doctors think they have a bad team, but many times the culture starts with the boss. If you don’t have a great culture, you have to look at how you’re running the practice and how you’re treating your team.

I replaced someone with more than 20 years of management experience with a part time college student, and it was one of the best decisions I’ve ever made. That was Molly. She’s still our office manager today. She’d be the first to admit she doesn’t have an MBA, but she’s phenomenal with people, and ever since she stepped into that role, we’ve basically had no turnover that we didn’t want.

Amy, who has worked for me for 26 years, came to me that day and said, “That’s going to be the best decision you ever made.” That says a lot about Amy too.

So yes, your office manager matters a great deal, and they need to be your biggest cheerleader.

Adam Cmejla:
One of the first things that stood out to me was the title, We’re Not Selling, We’re Winning. When I look at the table of contents, part one is your team, part two is the metrics, part three is patients. So where did the title come from?

Kurt Steele:
It has multiple meanings.

First, we’re not selling to patients, we’re winning with them. We’re giving them what’s right for them. I’ve actually worked hard to remove the word “best” from how I speak with patients. I don’t say, “I’m going to give you the best technology.” I say, “I’m going to give you the right technology.” “Best” can imply the most expensive. “Right” means what fits their needs.

So there’s that side of the title.

But the deeper meaning is really about independent optometry winning.
When I started practicing 30 years ago, if you walked into an office and there was an optometrist there, there was about a 75 percent chance that optometrist owned the practice. Today, I’d say that number is around 40 percent. I don’t think that’s good for the profession.

I’ve had conversations with people who say ownership is not that big of a deal anymore, and I respectfully disagree. I think it’s a huge deal.

There’s a big difference between having a voice and being in charge.
I don’t want us to pass lasers in Tennessee just so optometrists can go work for someone else who owns the laser. I want optometrists to own the laser and use it in optometric offices.

My junior partner, Dr. Eisenhower, is our legislative chair and has been going to Nashville every Tuesday and Wednesday to fight for that. If she worked for someone else, she probably couldn’t just step away like that. But because we own the practice, I can support her by staying here and seeing patients.

The less we own our practices, the less power we have. That’s true in politics, in the business arena, and in how vendors view our profession.
Vendors have told me trade shows are less valuable because doctors no longer make as many buying decisions themselves.

So the title also reflects my belief that if independent optometry wins, the profession is better off.

I’ve had opportunities to sell to private equity groups, but I’m not doing it. First, I have a team I care deeply about, and I’m convinced that if private equity bought my practice, at least half of them would not have jobs within six months. I pay people well, especially for this area, and I believe they’d cut costs quickly.

Second, I’m a Vision Source administrator. I work with 24 practices in East Tennessee. I’d feel like I was betraying that community if I turned around and sold out.

Third, and maybe most important, I’m in a 75 year old independently owned practice. If I want to write a $500 check today to support the local girls’ basketball team going to state, I can do that. And I did.

If I were owned by a private equity group, I couldn’t just write that check. It would have to go through layers of approval.

My patients are better off if I’m independently owned. My community is better off if I’m independently owned. My profession is better off if I’m independently owned.

And that’s why I wrote the book. To help other doctors build multi million dollar practices and keep them privately owned.

Adam Cmejla:
That was basically an abridged version of the introduction.

Kurt Steele:
Sorry about that.

Adam Cmejla:
No, it was great. It really illustrates the why behind the book.

Let me go to a question I know a lot of listeners will have. They’ll say, okay, Dr. Steele, if I grow this into a $5 million practice, who is going to buy it other than private equity? What other OD is going to be able to buy it?

Kurt Steele:
There are a couple answers to that.

First, if private equity wants to buy your practice, stop and ask why. There’s money to be made there or they wouldn’t want it.

Second, yes, they might offer 20 to 30 percent more than what you’d get in a private sale. But to get that last 20 to 30 percent, you usually have to jump through some flaming hoops. You don’t get the whole check up front, and to earn that extra piece, you may have to hit growth targets, keep working under new conditions, and accept a very different practice environment.

I’m not saying people don’t do it or don’t get that money. Some do. But I haven’t yet talked to someone a year or two into equity who is just thrilled to death. They’re usually thrilled on the front end. On the back end, it’s more like, “I’m making it. I’ll get there.”

The other piece is this: doctors wait too late to think about their exit strategy.

I got advice 15 or 16 years ago from my financial advisor, Mark Murphy. He told me doctors make two big mistakes. First, they wait way too late to think about how they’re going to exit. He told me at 40 that I should already be planning. Bring in doctors now, while it’s affordable, let them grow, and start selling shares.

Second, doctors think that because they no longer want to see patients, they have to sell the whole practice. That’s just not true.

What I tell doctors in their 30s and 40s is don’t have associates, have potential partners.

Let’s say you have a $1 million practice and you bring in another doctor. Historically, your practice might be able to grow to $2 million or more with that person. So you set the buy in price based on what the practice is worth now, not what that doctor is going to help make it worth later.
Then give them two years to prove it and start growing into it. In years three, four, and five, you can self finance part of the buy in at the applicable federal rate, which gives the buyer a fair interest rate and gives the seller a return as well. By the end of year five, you’ve got proof of cash flow, a proven relationship, and now the bank is much more comfortable financing the rest.

That’s worked very well for me multiple times.

Adam Cmejla:
And what I really like about that is you’re not trying to extract the absolute maximum value out of your practice, but you’re also not giving it away. In the grand scheme of ownership, the difference between the absolute max value and a strong, successful private transaction can become just a rounding error when you think long term.

Kurt Steele:
Exactly.

All I know is I’m in a poor rural area where supposedly you can’t find anybody to come. And I’ve brought two on very successfully, and I’ve just made an offer to another one.

The key is transparency. Don’t tell someone vaguely that maybe one day they can become a partner. Show them the path clearly.

If you overpaid for a practice and then try to recoup all of that in one big sale to the next person, you’re going to struggle. But if you sell part of it, let the next doctor help it grow, and then retain ownership in the bigger entity, now everybody wins.

Doctors too often see sales as all or nothing. Sell half of it. Keep the other half. Keep the ownership draw. You do not have to see patients in a practice you own.

I have a second location here. I’ve been there maybe five times. My Newport practice is my job. My Greenville practice is my business. It makes money and I’m almost never there because I have a very talented doctor and a very talented office manager running it well.

That’s the difference between owning a job and owning a business.

Adam Cmejla:
Can you talk a little bit about your progression as an owner? The mindset, the skill set, the infrastructure required to run a single location $1.2 to $1.5 million practice is very different from what it takes to run a multi location, multi doctor enterprise.

And what do you say to the OD who says, “Kurt, I hear you, but I don’t want a multi location business. I just want to keep my single practice and do my thing”?

Kurt Steele:
The progression really follows the book.

First, you have to get the culture right and the team right.

One of the earliest watershed moments for me was when we had three employees for two doctors and the benchmark for pay was basically, “find out what McDonald’s pays and add a dollar.”

We had two people who were really good and one position that was constantly rotating because we either lost people to better jobs or they just weren’t very good.

Then we lost someone really good and I told my partner Jeff, we’ve got to set our sights higher. The first person we hired with that new mindset is still with us 26 years later.

Second, once you get the team right, the more you measure, the more you grow.

A few years ago I was at an entrepreneur author summit, and a guy looked at me and said, “You’ve got a great job, but you don’t have much of a business.” I didn’t love hearing that, but he was right.

A real business should be able to function and grow if you step away from it.

That’s when I really started tightening up how I use metrics. I can analyze a quarter in three to five minutes now with my team. My P&L is set up the way I want it, the cost of goods and percentages are there, and I can get what I need quickly.

It still blows my mind when I ask a doctor what their cost of goods was last year and they say, “I’ll get with my accountant and let you know in two weeks.” You don’t have to know it off the top of your head, but you should be able to get to it quickly.

For me, I use QuickBooks for the financials and Revolution for percentages, days worked, exam counts, and doctor productivity. That gives me what I need.

And then the key is, you don’t just know the numbers, you react to them.
Doctors will often tell me what they think needs fixing, and they’re completely wrong. My last consult thought she needed help in the optical, but she was already generating around $500 per exam. Her issue was that she was only seeing 6.8 exams a day. She didn’t need help selling, she needed more patients.

That’s why the numbers matter.

Adam Cmejla:
That illustrates perfectly the difference between reading and comprehending your financials. Looking at the numbers without understanding what is driving them only gives you half the equation.

Kurt Steele:
Exactly.

If you know the numbers but don’t do anything with them, then you’re just reading. The point is to use them to implement change.

I know, for example, that my average doctor revenue per day is about $5,200. So if I want to work 40 days next quarter, I already know what that means in projected revenue. I do that for all the doctors.

On the optical side, I give my optical manager 6 percent of projected revenue and tell her that’s the frame budget for the quarter. I don’t micromanage it. I don’t know the names of our frame vendors. She does. I just give her the number and let her manage to it.

Every practice is different. Someone in a very high end area may have cost of goods at 32 to 34 percent and that may be great for them because revenue per exam is so high. So the point is not to copy someone else’s exact number. It’s to understand your own and identify the two or three levers you can move first.

Adam Cmejla:
And that’s probably a good place to wrap, because I think a lot of listeners could make the mistake of getting a book like this and thinking they need to pull every lever in their practice all at once.
Don’t do that to yourself. You didn’t get here overnight, and you’re not going to fix everything overnight.

Kurt Steele:
Exactly. There’s actually a section in the book on a 30-60-90 plan, though honestly I’d call it a 7-30-90 plan because I think you need a win within a week.

Start with part one and involve your team. Ask: what can we do in seven days, in 30 days, and in 90 days?

There’s a grid in the book based on impact and effort. High impact, low effort is your seven day goal. High impact, medium effort is your 30 day goal. High impact, high effort is your 90 day goal.

Do that for your team first. Then do it for your financial metrics. Then do it for patient communication.

That way you’re moving with focus, not trying to fix everything at once.

Adam Cmejla:
I think that’s the perfect place to put a pin in this conversation.

We’ll put links in the show notes to the book and your website, DrKurtSteele.com, where listeners can find more resources and ways to reach you.

Congratulations. Publishing a book is no small lift.

Kurt Steele:
Thank you. And if anybody wants to email me, my email is easy too: drkurtsteele@drkurtsteele.com.

Adam Cmejla:
Doesn’t leave much to the imagination.

Kurt Steele:
No. And I’m also building out a Circle community page. In a couple of weeks I’m planning to do a live Q&A focused just on culture and team building, because when you look at all these OD Facebook pages, that is consistently the issue everybody is having, and that happens to be one of our strengths.

Adam Cmejla:
Very cool. If that gets recorded, send it my way and we’ll make sure it gets linked in the show notes of this episode.

Kurt, I enjoyed the conversation. Thank you so much again, and congratulations.

Kurt Steele:
Thank you, Adam. I appreciate you. Thank you so much.

Adam Cmejla:
You’re welcome. And we’ll catch everybody on the next episode of 20/20 Money, The Business of Optometry.