The Practice of Therapy

Gordon: Well, everyone welcome again to the podcast and I'm really looking forward to you getting to hear from Josh Rosenthal and Josh. Welcome. I'm looking forward to this conversation because it's one that I've been interested in and just around leadership and selling your practice and that sort of thing.
I'm kind of at that age where that's on the radar for me and just thinking about You know, what, what's next as far as, as I moved towards retirement, that sort of thing. But Josh, as I start with everyone, why don't you tell folks a little more about yourself and how you've landed where you've landed?
Joshua Rosenthal: I'm a licensed psychologist in New York, New Jersey and Florida, the telehealth license there. I've been practicing since 2008 started my company, Manhattan psychology group in 2011 and grew it to about 300 staff, maybe 250 clinicians. And then recently sold to private equity an MSO called ArcHealth backed by private equity group in September, 2023.
And life is pretty much the same for me. I'm still CEO. I'm still, I have an employment contract with them still doing the things I love, which are leadership growth and culture. But now we have an organization to support us, take care of a lot of the backend stuff that's really kind of tricky and time consuming and we get to just keep focusing on patient care and, and you know, hiring the best people and culture and all that good stuff.
Gordon: Wow. Wow. Yeah, that's, that's really cool. And I know that that's a conversation I've had with a few people, not necessarily on this. This podcast, but just thinking about, okay, if a person gets ready to sell a practice, what are the different ways that they can go about that? And, and what you mentioned is a model of the owner staying on as kind of the manager of the practice or the CEO of the practice, but actually It being actually owned by someone else.
So take us through your process of that and what you've learned through all of that.
Joshua Rosenthal: Well, we're going to need like two to three hours for the whole story. I'll give you the original version. You know, I think every clinician comes to a turning point where they sort of say, you 10 years? And I had been seeing patients for, you know, 13 years.
And I was just starting to feel like. What's next for me. And then at the same time, the business is getting busier. So you also have to decide, are you going to focus on the business or are you going to focus on patients? And I decided I wanted to focus on the business. It was more rewarding for me. I thought I could help more people by doing that rather than doing one on one therapy.
And it just felt right. So I did that and grew the business to a point where You know, it was sellable, right. It of the right size and scale and infrastructure. And then you start thinking about, well, who am I going to sell it to? And what's going to be my role after I sell and not all, you know, private equity groups are created equal.
There's a lot of bad press out there, bad situations where private equities come in and bought companies and squeeze them and push people out and not really focused on patient care, but focused on money. And so you have to be wary of those buyers. And, you know, I found a broker who I trust found a law firm that I trust.
And we went through a bidding process where you go to market, basically it takes about a year and you, you know, you interview them as much as they're interviewing you and you, you know, you use your, you put on your psychologist cap and you try figure out who's a good person and who's being honest and genuine and really cares about patients.
And then you pick someone and it's basically a marriage. You don't really know how it's going to work out. You don't have a lot of time to live together before you sign the paperwork. But if you have the right people and the right team to help you I think this is more of an option today than ever for psychologists and mental health professionals and behavioral health professionals, because in the end, You know, there's a lot of things about the business that we just don't want to do.
And there's a lot of people that are better at it. You know, backend, treasury, finance, marketing, HR, all those things that are just not why we went to school. And if you can partner with the right person and also create a retirement plan. I mean, the idea is to create a retirement for yourself. So that you have stability and your family's taken care of.
I was getting stressed out about cash flow and payroll and people leaving and, you know HR issues. I mean, all these things are so stressful. And so now to have someone that I can learn from and who can support me and my team. Is the best feeling in the world. Right. So I I wanted to come on the podcast to sort of pay it forward Meaning like let other people know that there are some good private equity groups out there that really do care about patients And and it might be an option for people that didn't even think about it
Gordon: Right.
Right. Yeah. So what you know, one of the things I'm curious about is you know, one of the things about owning a practice is you feel like you can do it kind of your way. And, and that's, I think, what one of the reasons that most of us go it, at least one of the reasons I went into practice. Private practice was just for the autonomy it gives you and being able to be the boss, so to speak, and make all the decisions and that sort of thing.
What's your experience been about around those issues, selling, selling the everyone's,
Joshua Rosenthal: everyone's afraid of that. If I sell, do I lose control? And, and it's, it's, it's actually quite intuitive if you think about it, because they want to buy. Well, first of all, there's two models. There's private equity models that buy broken companies and fix them.
And there's private equity companies that buy good companies and help them continue to be good. So if you have a broken company, you need help, right? But if you have a good company and you're making money and you're hiring people and you're doing quality care, and you have a good reputation, then you don't need someone to change that.
You need someone to help you with the other things. So we keep our identity. We keep clinical control. And they focus on the things that they're good at. So a lot of people think like, Oh, they're going to come in and they're going to tell me what to do, but why would they tell you what to do if what you're doing is working?
Because in the end, if they mess with your patient doctor relationship or patient therapist relationship, the patient's going to leave and then they're going to lose money and they're not in the business of losing money. So if you actually think about it, They don't want to do anything to mess up a good thing.
So it's really a question for yourself is, do I have a good thing?
Gordon: Right, right. So in, in preparing for sell, what, what did you find that you needed to do in order to I guess, make it more sellable or make it so that the transition was good and all of that sort of thing.
Joshua Rosenthal: There's, there's personal things and there's professional things.
Personally, you have to, you have to figure out what your goals are. Why do you want to sell? What, how much do you need to sell for, for it to be worthwhile? I mean, just dollars and cents, right? You need to crunch some numbers,
Gordon: right?
Joshua Rosenthal: What do you want your life to be after you sell, right? Like you need to have those things clearly outlined before you go in because everything is going to change during the process.
It's, it's an, it's a roller coaster, an emotional roller coaster, and you really need to have clarity on what your goals are. Otherwise. you might end up doing a deal that's not really the deal that you wanted in the beginning. Now, things change and you have to be flexible, right? But some things you can't really be flexible on and you need to know what those are.
So that's personally. Professionally, you have to have your house in order. If you do not have your finances and your books and your HR, And your notes and your stats in order, it's going to be a disaster trying to give that over to someone to analyze your company. And it's going to end up hurting you because they're going to say, this is so disorganized.
We don't really know what's what we're going to give you less to cover the risk that it's not what you say it is. So you really have to get your house in order personally and professionally. Otherwise you're going to Get less basically, you're going to get less of the goals you want and less value or money for your practice.
Gordon: Yeah. Yeah. What what sort of folks did you find that helped you with this process? You know, I'm just thinking, you know, off the top of my head, certainly you'd want to, you know, An accountant to evaluate the company. You'd want attorneys that are going to be kind of, I guess, I'm thinking of who, who, what were the team of people you got around you in order to begin to look?
And
Joshua Rosenthal: great, great question.
Gordon: Great question. Yeah,
Joshua Rosenthal: it's all about your team because you cannot sell your own practice. And if you try, it's like representing yourself in court. If you try, it's not going to end well. So, so the first thing you want to do is you want to find a good banker broker. Now You know, they're all, you know, they all mean well, right.
But they're all different. They have different fees. They have different ways of working. And so you need to do your due diligence. I spoke to five or six different brokers. I called references on every single one. I had multiple meetings with them and you end up settling on someone who you really think is who they say they are.
Right. I hired a broker named Mertz Taggart, Kevin Taggart. Amazing guy. I would plug him a thousand times. And so he starts with that and he will look at your business. He'll give you a valuation at no cost, no commitment. And then you go from there, right? And so you have your broker, let's say you hire your broker and then you need a tax person.
Now it could be your CPA, but most CPAs are not familiar with deals, right? So you need a deal tax person. Very, very important because the biggest hit you're going to have is on taxes. On the deal money you're gonna lose a lot of money depending on where you are I'm in New York City the worst when it comes to taxes, California the worst So you need a deal tax person and then you need an attorney.
Now you need an M& A attorney, not a family law, not a corporate, you need an M& A attorney. There are just, there are so many things to know about, so many bells and whistles, so many teeth to these contracts. They're all interconnected and you need someone, and you need someone who's willing to spend the time to explain to you what these things mean.
Because when you do a deal, there's probably Eight to 10 different pieces of paper or contracts that you're signing. And they all are intertwined. And if you don't understand how they're connected, you're going to end up making a mistake. So I ended up spending way more money in legal fees. But it was worth it.
Cause I really understood what was happening. So I would say that's the core team. You need a broker. You need a tax person. It could be your CPA or it could be your CPA plus someone who specializes in deal taxes. And then your your attorney. And then, you know, if you really want to get fancy.
Then, you know, get someone in the private equity world, get someone who's in that world that knows what the private equity guys are thinking and can help you negotiate.
Gordon: Yeah. Yeah. How did you go about finding these people?
Joshua Rosenthal: Google. I mean, I went to Google and I just, I just Googled, you know, a behavioral health broker, you know, mental health broker.
I'd gone to a conference an M and a conference. And I saw some people talk that helped to your, you know, your crop fronts, your crop referencing, your double checking, your, your, you really got to take your time. I mean, there's no rush to it. You don't want to sell when your house is on fire. You want to sell when things are good and just take your time.
Gordon: Yeah. So as you started or started putting all of this together What were kind of the first steps that you saw that you had to do within your practice in order to set it up? I mean, I know you mentioned, you know, getting the you know, your records in order and the finances in order and that sort of thing.
Where did you find that you had to spend the most time particularly with a large practice like you have? Yeah. Yeah.
Joshua Rosenthal: So we're three companies you know, sort of branded together, you know, we have mental health and testing. We have special education services, and then we have ABA we're doing a lot of different things.
We have three different EINs, actually four EINs, cause we actually have a special a early intervention company. You know, I would say, I mean, the clinical stuff, if you're doing good clinical work, that sort of runs itself. You've got an EMR, it's taken notes, you've got your sessions. I mean, it's really the HR stuff, right?
Like, okay. You know, how are all your staff, you know, are they categorized properly? W you know, W2 1099s. Are you, you know, complying with labor laws? Like the really nitty gritty HR stuff, PTO census if you have benefit packages, if you have 401k packages, I mean, all that really sort of nitty gritty backend stuff.
If you're a large organization, really you need someone who has that all organized because they're going to ask for that stuff over and over again, and it's very time consuming.
Gordon: Yeah. Yeah. So the, the other question I guess that maybe comes up is just thinking about the, your people, your employees and that sort of thing, and prepping them for this and it being a being something that doesn't create a lot of fear and create a lot of.
You know, consternation, you know, all of that.
Joshua Rosenthal: Yep. Yeah. It's the unknown, right? It's the unknown. It's it's the unknown for me as I'm going through the process and picking people to be on my team and picking hopefully someone to buy the company. It's the unknown for leadership. What's going to happen to their jobs after it's sold.
For the most part, the patients and the providers would have no idea, meaning their relationship is not affected. And that was intentional, right? Because again, you know, that's where the rubber hits the road. You don't mess with that. You don't mess with the doctor patient relationship. If you do, everything falls apart.
So they really wouldn't be affected at all. It's really senior leadership. People that are responsible for running the day to day operations, the people that report to me, the people that are then integrating with the new company, the buying company, ArcHealth, those are the people that you have to be very thoughtful about and how you tell them when you tell them how much information to give to them at different points.
You may need them to be part of your process. During the sale process, you have what's called management meetings where you meet with potential buyers, maybe you go out for dinner and then you have like an all day meeting with them. And so they may want to see your leadership team. They may want them to be at those meetings, not just the owner.
Especially if they're critical. And so you need to figure out when you're going to tell them along the, during the sale process. So I think if you're thoughtful about it and you have a good working relationship with your existing leadership team Then it's easier. But if you, if you don't have a great culture and you don't have good communication, it's going to be more challenging.
Gordon: Right, right. So it, yeah, I know one of the things we were talking and I think this fits in well with this is just thinking about leadership and particularly with the, the size practice that you have, what would you say are some of the essentials that you've kind of figured out and you know, leading particularly professionals.
I mean, you're, it's a, it's a different. I think it's a different ballgame when you're, when you're leading people that are also very intelligent and very uneducated.
Joshua Rosenthal: Yep. I mean, everyone wants to have psychological safety, right. And everyone wants to know. Everyone wants transparency. So no one wants to be the last to find out and no one wants to feel so uncomfortable or unsafe that they can't share what they're really thinking.
Because when you have those things, when you have lack of transparency and you don't have psychological safety, you're not having honest conversations with people. Right. So then people start talking outside of meetings and outside of one on ones and it just gets away from you. So I've always tried to make sure that we have those two things.
As much as I possibly can now, as if you're an owner of your company, there's always going to be things that you're not sharing with your staff because you're the owner. Right. But aside from those things, you really want to try to be as transparent as possible because the transparency breeds trust.
Right. And if you have people that are key, key employees, they need to trust their leader. So, so I really think that those things, you know, come a long way, sharing as much information as you can along the way supporting your staff, meaning trying to put them first as much as you can. During the negotiation process, I was negotiating on their behalf with the buying company to make sure that they were taken care of very well.
And those things go a long way because you know, the people that have the least amount of control about their future are always feeling the most anxious.
Gordon: Right. Right.
Joshua Rosenthal: And and, and you don't want people to feel that way. You want them to feel like you're protecting them. There's a future for them.
And again, if you have a good company with good people, no, one's going to want to mess that up.
Gordon: Right. Right. Yeah. And so it's really important to have and I'm, I'm repeating kind of what she said, but it's really important to have. the structure of your company, the structure of your practice pretty sound before you even begin the process of trying to sell.
And if you're just trying to get out from under a lot of trouble that's not going to make it easy to sell.
Joshua Rosenthal: You're going to, they're going to know it. First of all, you can't hide anything. When you go through The due diligence process of selling. They joke. It's like a colonoscopy and an endoscopy at the same time.
So you can't hide it. It's just, it's going to come out and it's going to hurt you. And it's going to cost you money. And so, yeah, there's just, there's no point to it. Yeah, it's just bad. If you, if, if you're, if you're selling in a bad moment Now look, everyone's different. Like, I mean, you could be you know, you could be in a really tight spot and you need to get out and you can't continue.
And as long as you're honest and transparent about those things, then you'll have a better experience. It's when people try to hide things or cover up things, they're not transparent. That's when everything breaks down.
Gordon: You're right. It's kind of like selling a house. If you've got a bunch of mold in the crawl space, you can't try to hide that in selling a house.
Yeah.
Joshua Rosenthal: It actually depends where you sell though. Some states before and after. Yeah. Yeah. Yeah.
Gordon: True. True. So, well well, Josh with with all of this, how has it changed your life? And being yeah.
Joshua Rosenthal: Yeah. Owner to now having my own boss. I mean, overall, it's been positive. I feel like I got the deal of a lifetime.
I feel like, again, my broker and my law firm, McDonald Hopkins out of Cleveland, plug them were amazing. You know, literally I am so grateful to them. It's been, it's been an amazing experience. You know, not only did I get great value for my company, but I think that the partner that we now have with ArcHealth will ultimately be way better for my staff and my patients than I could ever do on my own,
Gordon: you know?
So,
Joshua Rosenthal: And now I'm part of something that's bigger than myself, right? Even bigger, right. And, and, and there's so much I get to learn now from ArcHealth and their executive leadership team. So. Look, I know everyone, you know, can have different experiences and there's, you know, a lot of bad press about PE and selling to be, but for me, it's been amazing.
And anyone who's interested, I would definitely look into explore, you know, I'm happy to talk to them about it or talk to someone else. Because there's a lot of good that can come out of partnering with a large organization.
Gordon: Right. Right. Yeah. Well, I think this is going to be a good resource for people.
And yeah, and I want to be respectful of your time, Josh, but what sort of parting thoughts would you have just around this whole topic?
Joshua Rosenthal: I mean, it's sort of similar to what I just said. Like, you know, if you're curious about it. You know, ask about it. You don't have to be this huge company making, you know, 30 million a year to be sellable.
You can actually be much smaller if you're doing quality care and you have good leadership and you've got a vision for the future. You know, private equity groups and venture capital people that are interested in mental health and behavioral health love that. I mean, there's nothing that gets them more excited than a a an energetic.
smart, personable clinician.
Gordon: Right. And if you, if
Joshua Rosenthal: you fit that bill and you've got, you know gas in your tank to do new things and you want to grow, then I would absolutely consider thinking about selling your practice.
Gordon: Well, that's great advice. And I think it's a lot to think about. I know, as I mentioned early on, I'm in that phase of life or thinking about retirement and, you know, just what what's going to, what we're going to, what I would like to see happen with the practice and
Joshua Rosenthal: we could have a sidebar,
Gordon: yeah, yeah, sure.
Sure.
Joshua Rosenthal: And I would say the last thing I would say is you don't have to be the CEO of your company. Meaning if you just want to supervise or you just want to see patients. You can still do that. They'll bring someone in to take over all the stuff that you don't want to do. Right. The idea is the idea is always finding good people and getting them into a situation where they can do what they want to do.
Gordon: Right.
Joshua Rosenthal: If you can, if you can match good people with what they really want to do and just leave them alone, then, then, then that's what works. Right. So it's not one size fits all. Not at all.
Gordon: Yeah. Awesome. Well, Josh, tell folks how they can get in touch with you. And if they want to ask you questions or connect, connect with you.
Joshua Rosenthal: So our website is manhattansychologygroup. com. If you want to send me an email, my email is joshua. rosenthal. com. At Manhattan psychology group.com. You can just go to the website, fill out a form, send me a note if if the email doesn't, if it's too long, we do have long email there, so, Mm-Hmm.
Yeah, but please reach out if anyone who's interested, I'm happy to talk about this. I love talking about it. I'm happy to pay it forward. And you know, there's a lot of people out there that need help. And I think that if you have a mental health practice you know, and, and you're, and you've, and, and, and you wanna grow.
There's people out there that want to help you grow.
Gordon: Right? Right. Yeah. That's great. And again, thanks Josh, for being on the podcast.