**Transcript was automatically generated by artificial intelligence.**

Paul Martin

Good afternoon and welcome to another episode of Paul Martin's Crucial Conversations. Today we are excited to have back with us Erich Herkloz. Erich is the CEO of Strive Physical Therapy and Sports Rehabilitation. And back on December 30, first of 2020, Strive entered into a partnership with Confluent Health and at that time had 24 clinics in New Jersey and Pennsylvania. But since their partnership, they have now grown to 30 clinics. Congratulations on your growth, Erich, and welcome.

Erich Herkloz

Thank you for having me. It's always quite an honor. Yes, it's been a wonderful ride and it's great to see that growth particularly with what's going on in the environment right now.

Paul Martin

Absolutely. Yeah. Staying really busy through a very difficult time. And congratulations on that. So, Eric, I can't wait to hear some of the stories you might tell here because some of these things are very personal and things that I may not or Tom may not even even know. But do you remember when it first hit you that it was time to sell and to look for a larger partner for Strive and your partners?

Erich Herkloz

Of course. Of course. I can remember the moment very well, myself and my partners, Mark Muro and Jamie Martin. We had been meeting it was the summer, I think it was summer of 2019. And we had grown, as we all know. If you've read good to great there's inflection points with every business. And we were at an inflection point and we were having a very detailed discussion around this and really trying to say, you know, where do we want to be and who do we want to be in the future? Both personally as well as for the business as well as for our, our teams that we work with. We wanted opportunities abound for everyone and we started to look at every possible strategy versus continuing to grow privately, working with strategic investors, working with private equity, and working with a company like Flow and who has a unique model around that. So we were really weighing all of those factors that really started to walk us down a path to make that decision.

Paul Martin

So as you think back, prior to that meeting of, okay, where are we going from here? Do you remember a kind of moments along that path to that meeting that contributed to this decision?

Erich Herkloz

Of course, without question. You know, it brought it revolved around where our business was at that point in time and where we were relative to those inflection moments. For example, we had a phenomenal controller. She was an exceptional who had been with us for a long time. And I can't say enough wonderful things about her, I'll say that. But we also recognized we were stretching her to her, her pinnacle We were at the top of her bandwidth, so to speak, and we knew we needed more support in that area. But it didn't stop there. It was the financial segment where we were at. You know, at that moment in time, I think we were 20 or 21 locations. So we were looking at each hour, we were looking at finance, we were looking at how we were managing legal, how we were building out our infrastructure internally to manage all of these growing responsibilities. And as a company grows, obviously liability can grow with that. So really ensuring that we had the best systems and structures in place, not only for success, but to minimize liability and really provide our teams around us the service that they would need for months from a company perspective. And it was those moments for the year prior that we just kept picking apart little things, saying, all right, we need to do this and then we need to do this, and then we need to do that. So we had all these moments that we kind of congealed together, for lack of a better word, in the summer, basically saying, hey, we're at a huge inflection point, so we're either going to stay exactly the same or the way we are, we are not going to grow and this will be it. Or if we want to continue to grow, we need to make a decision as to which path we're going to walk down to do that. And that was kind of the the small tidbits that built up to the big moment, so to speak.

Paul Martin

Yeah. And it seems as though, if I'm going to paraphrase again, that in each of those areas you came upon challenges, whether it was a staffing challenge, whether it was a system challenges challenge, but it was challenges that, you know, you guys thought if we're going to be 30 or 40 clinic company, we can't do that with the systems that we have in place now. What's the best path to that? Would that be accurate?

Erich Herkloz

Were you sitting in the room when I had that conversation? Because that was summarizing what I said. That was my partners. I started to lay out, I'm like, All right, we're talking about H.R., we're talking about finance, we're talking about legal we're talking about this and compliance. And we went through every little piece we're talking about. And I said, Okay. I said, We need to create structures for all these. So you guys have to tell me today, do you want to continue to grow and how much do we want to continue to grow? What's our goals and expectations as we go forward? We actually started there with, Yeah, I want to grow. Yeah, I'd like to do this. Yeah, I'd like to see this two, three or four years And it was kind of a mini strategic planning session around us. And that led to so if that's what we really want to do, then we need to create a new plan to address to be able for us to be able to achieve that which led to diving into those areas.

Paul Martin

And I think for a partnership, as we see out there, you know, mature partnerships that make decisions like that's kind of see into the future. There's also partnerships out there that don't have that ability to see in the future you guys seem to have that ability to look into the future and say, what do we need in order to accomplish what we want? And I applaud you guys for that. So you make the decision before you were, you know, in the thick of the process. I mean, you were really in it. Did you ever have moments of doubt surely, or your partner of the day before have moment to doubt?

Erich Herkloz

Of course. Of course. You know, for lack of a better phrase, you know, we had a good thing going. We have a good system in place, both with the way we manage our staff, our daily lives relative to our work performance had gotten to a comfortable place of and change is very exciting. But with change comes the unknown, which majority of the time that's exciting for myself as well as my partners. Otherwise, you would be entrepreneurs. But then there's always those moments that go. If we have a new partner that we're bringing in, how is this going to change? And we did for a long period of time, consider creating those infrastructure shares without taking a partner on. But we did way, you know, to truly build to to truly build our company the way we envisioned over the next two or three years. Invest it into the infrastructure as well as our timeline. To really put those systems and processes in place inevitably would have not allowed us to achieve our goal the way we wanted to accelerate it, because it would have taken so long to put some of these systems and structures in place. Hence why the opportunity of partnering with Confluent seems so really such a perfect fit and hopefully for both sides. I know for us.

Paul Martin

Absolutely. Absolutely. And so for private practice business owners out there, are small, medium, large. What advice would you have for those owners who are struggling with this transition the way you guys did and are really still on the fence.

Erich Herkloz

I think, you know, really twofold. And it's as you said, sometimes it's hard, but you've got to step out of the weeds a little bit and kind of snapshot what you want your company to look like in a couple of years. You know, not tomorrow, but in two years down the road, three years down the road. What do you want your company to look like? How is it going to be run structured And then the second part of that is how you're going to get there, right? And then you need to have conversations with people who have either done that before, have really walked each path. I've taken on private equity partners or strategic partners, or are partners with that unique model such as Confluent or companies that have done it on their own. And you need to start to have conversations to really understand what commitments, what opportunities and what challenges may be in play.

Paul Martin

Yeah. Really good advice. So look forward. And then where are we going? How are we going to get there? And knowing all the resources that you have around you, how can we use those resources to get where you want to get So.

Erich Herkloz

I think one important resource, yeah, it is inevitable. And this was part of our process as we went through when we started to look for representation for us in the deal, we did not make a final decision at that point in time, and we were open with every broker that we had spoken with saying, Look, this is where we feel that we're at today. This is where we feel that we want to go in the next three to four years, and we'd like to consider private equity strategic hybrid models, and we'd even consider doing it ourselves. But we we talked with every broker with those same things in mind to listen to their feedback and listen to their guidance, which was invaluable for us because in reality they didn't have a stake in the game and we knew obviously it was their best bet of it to represent to you. But most of the really good brokers gave you a lot of great knowledge from the other side of the table and from a different perspective, which helped us narrow down our vision and our thoughts quite a bit.

Paul Martin

Sure. So so you threw your net nice and wide and you had a lot of really in-depth conversations and then continue to hone in on where you needed and what you needed to get to that next step.

Erich Herkloz

Yes, completely.

Paul Martin

Awesome. Awesome. So what were what were your fears? And I remember because I was in your shoes and in the process of culminating a sell off partnership of our company. But what were your kind of premonitions on how you thought your staff would react when you told them about your partnership?

Erich Herkloz

So are you asking my personal fears regarding the partnership or my fears and telling our staff and their reaction.

Paul Martin

What you thought your staff reaction would be?

Erich Herkloz

I had some general caution as I approach the conversations with our staff, but because I felt so confident we had the right partner, I didn't have a ton of fears. My only caution was really packaging the message. So they truly understood what opportunities laid out in front of them. And we actually started we were fortunate enough where we were able to bring on so Mark, Jim and I were partners and we brought on some additional partners as we went through this deal. And again, that's why it was a wonderful fit for us. We had some new partners that we got to invite in that did invest into the new company and then we went to all of our first tier of leadership. So all our clinical directors and regional directors and spoke to all that had a great conversation with them that really started to fine tune our message, but also got a lot of really good feedback and a lot of energy from it. So that when we announced it to staff, we initially sent a video and then a letter out to all the staff because we had, you know, obviously therapists all over. And then we did three or four Q&A during the week at various times during the week to jump out and talk to everyone, to answer all their questions and go through the pitch. I can comfortably say we didn't lose anyone from the results of doing this deal. Now, the great resignation period aside, because things have changed this year, the world has changed. We've gotten so much positive energy from it and a lot of that. The key to that and why I really didn't have fears going to this not only did I believe we made made the right choice as a partner, but it was the cultural alignment of our companies. We're very much in sync. So as we talked about the benefits that they were bringing, as we talked about how this was going to dovetail into that, how we live and operate every day. Most people said, Wow. So this isn't really changing that much. Is just bringing us more benefits or like. Yes. And that was a great message because I know people have been taking exponential advantage of it. So it's really the proof is in the pudding. And it's really yielded great results thus far.

Paul Martin

Yeah, I think, you know, what I'm hearing, Eric, is you guys as leaders first brought kind of your first tier leaders, you know, kind of into the fold, walked them through what a great opportunity this was. And then continuing from there to each segment of your company, I don't want to say level, but segment of your company continuing to share. So you continue to build that trust. You continue to build really the the the idea of how great this was going to be in the future for your staff. And yeah, I was really impressed the way you guys went through that and the time you took. And would you say that was all worthwhile at this point?

Erich Herkloz

100%. Yes, completely. And you know, to your point, you go through the segments of your company, but also every segment the same conversation really ended the same, you know, starting from the first meeting to the last where we said, look, if you have issues, you can bring them to us because we want you as advocates out there, because we want you to believe in us as much as we do. And there will be people who call on on the Off-Line after our meeting to call me and talk about something and walk through something. But every time the call would end, I mean, I'm really excited now. So the minute was announced, they were taking their energy and transposing it into the next segment of people that are becoming aware. So it really built a wonderful energy around it that has carried forward to today.

Paul Martin

That's awesome. Awesome. So what made you decide as you were going through the decision process that you wanted a professional advisor to help you with this and I know you had a lot of conversations, but what was the evaluation criteria and what was the, you know, the candidates, the criteria for actually making that decision?

Erich Herkloz

You know, we've known Tom Carden, who obviously you work with and know very well for a long time and had a tremendous amount of respect for him. And we wanted to go out and really survey a really that. And we've got to know brokers over the years to survey the top brokers that we knew or had relationships with or had lived, so to speak, in our world. And for us, it really came down to two parts. One is aptitude to do the job. You know, what is their attention to detail, the products they're producing relative to your SAM or the information they're sharing And the second part of it was relationships, really, what relationships did they have in the industry? And we we got the opportunity to work and get to know some great brokers through that process. And there were some individuals who had good aptitude but had no relationships in the field. But as you talk through that segments of our concerns and questions, it left a real gaping hole for us because we had talked earlier. One of the reasons we loved this opportunity for us is the cultural alignment. Well, if you don't know anyone in the field, you're not going to necessarily have an idea or an understanding of what that company's culture is. So as we continued through our meetings and interviews, we determined very early on we wanted somebody that didn't just do one deal in the space, but in companies that knew the players in the space and knew the companies in the space and had done deals with them so that they know, look, everybody's got works. Where are their words? Where are their sticking points? Because nobody's perfect. And we have to learn. We have to make sure we understand everything before we walk into a marriage like this. And inevitably, working with Tom Carden was the best decision we made. Obviously, as an exceptional skill set. But his knowledge of the individual companies, both on an operational level as well as the personnel that are in the company, as well as really his emotional IQ of just understanding people was such a tremendous asset for us and really helped us create a clear alignment.

Paul Martin

So once you made that decision, what were the steps that you took to make sure that as you now have entered into this, but to make sure that can flow was the best partner for Strive.

Erich Herkloz

So when we started to work with different companies and bring in private equity and all the like, you know, obviously, you know, released the same that initial phone calls we did talk to numerous people in the industry, partners of influence that I knew had partnered with them to get their individual perspective as to how their experience went up, as well as with the other companies that we spoke to at that time and really spelt out as many people as we could in the industry. Our broker had done the same thing. Tom had done the same thing with individuals that he knew in there. We talked to other companies that were in there as well, both conflicted as well as the other companies we were looking at to really get a a sense of what is all right. It's exciting today. You know, it's funny and I'll digress for a second, but since we've done a deal, you know, everybody asks, how's it going? How's it going? How's it going? I'm like, Guys, I'm six months, eight or nine months, and this is still the honeymoon. If it's bad right now, I really made a bad mistake and we wanted to make sure when we were asking these individuals out there, it's not about, you know, how great was the integration. We know the integration is always painful. You're changing so many systems and operations, but what does it look like? Two or three down years down the road? Are you still enjoying your day to day job? Are you still excited for what you're producing or creating? And those were the big takeaways for us.

Paul Martin

So as you describe that, what were the key attributes that you saw in Confluent for yourself, your partners and your company that kind of brought you to this decision?

Erich Herkloz

There's so many companies. One of the biggest trends we've seen over the last two, three, four years is the really good companies are creating pathways and opportunities for professional development and growth for their teams in their companies. And I think we can see that throughout a number of great companies that are out there today. We just felt like as we looked at Confluent and as we talked to the other partners, it was just head and shoulders above the rest. You know, that's something we've always taken a ton of pride in is and really it's what gets us most excited is seeing our teammates grow, develop, prosper, both professionally and financially and creating pathways for that. You know, I just had a conversation earlier today and I say this phrase too often, but rising tides raises all ships. So the more you can develop and grow your staff and your teammates, the better we're all going to do. So why wouldn't we in positions of leadership, coach and mentor and develop and when we looked out there and all the players that we engage with them, again, there's so many good companies and it's not taking anything away from anyone else. It's just conferred with head and shoulders above on the rest. And for us, that created a perfect Segway. And hence that's why we didn't lose any team members. And people are still incredibly excited.

Paul Martin

So the big fear of many companies out there who are, you know, getting ready to enter into this process is going through that integration process. What advice would you have for owners that are contemplating a partnership potentially in 20, 22, maybe 2023? What advice would you have for them preparing for that integration process?

Erich Herkloz

I thought of a bunch of jokes and I should, but it's like marvel with the blip where you close your eyes and you wake up five years later. Now, I'm just kidding. You know, and I'm working on another group that we just partnered with right now, and I had this conversation with them the other day and I said, Just be patient. Because remember, we're unwinding a business to wind it back up. And if the partnering company is doing it the right way, it's it's not to it's to determine best practices through this entire process for this integration. And through our process, clinician has done a flow and has done a great job but it's the concept of unwinding whatever, how many years of business to then wind it back up so that everybody understands it. And sometimes it's the littlest little things are part of our business. We have a swim science center, which is a swim based business. But the unwinding a little operational things that I didn't think about for months, if not longer. I'm like Oh, I guess I have to explain this to you a lot. That is probably the the biggest thing that will tax the key individuals during that transition is really not only explaining the operational process, but also understanding why you chose that operational process. And then you determine if it's the correct one moving forward. And it's not because my way is better than your way. It's just how are we going to structure this? Now, we all understand why these decisions were made. How do we structure it moving forward? And for us, it's been a very open, dynamic conversation. But again, it's kind of going through like, oh, I forgot we were doing that. All right, let's talk about we've been this is how we've been doing it. This is why. And now what should it look like tomorrow that we're all comfortable with?

Paul Martin

Yeah. You know, Eric, having known you for many years and of course, knowing your partners as well, you guys, your group as a whole, what you just described, I think encapsulates exactly who you guys are, which it's you guys just continue to move forward. I can remember having conversations very early in the pandemic and there was no pause us or, you know, going in reverse for you and your partners and your company. It was continuing to move forward. And I think that when your staff sees the three of you continuing to drive forward, that little issues, big issues, anything that comes up through an integration process when they see the leaders driving that through, that's where you have success. And and I congratulate you guys on that. You guys are certainly one of the best out there for sure.

Erich Herkloz

Well, thank you, Paul. I appreciate that means a lot, given the experience you have with so many groups out there.

Paul Martin

Well, thank you. So, Eric, I appreciate your time today. This has been extremely great information, a lot of really great information. For anybody out there that has any questions about what we talked about today. Just click below. And again, Eric, I thank you for your time and I look forward to talking to you again in the very near future.

Erich Herkloz

Thank you, Paul, as always, it's an honor to be on here and wishing you all the best.

Paul Martin

Thank you. And for everybody out there today, we look forward to talking to you soon. Thank you.

Erich Herkloz

Take care.