Capture the Moments

Business Week

Department Fireworks

I kicked the week off with a department meeting, that I had to listen to on speaker phone from American Fork. We have fireworks at these meetings sometimes when Willes gets emotional about something. That was the case this time, as we had heard rumors that we were getting smaller offices in the new hospital that will replace the current one. It turns out that we already have much bigger offices than any other pathologists at IHC. Everybody has a reason why they need a bigger office. Mostly the older guys need lots of space for all the outdated books and medical journals that they haven't looked at in years but have to store somewhere. Our administrator, Kyle, tried to smooth it over by saying this was all just a proposal and we could have lots of input as the plans progress, but that wasn't good enough for Willes. He dredged up a bunch of problems that happened last time they moved our offices and wouldn't let it drop. He insisted that nobody could represent him at any meeting and a bunch of other irrational demands.

Then the topic moved to billing. One of our big insurance payers wants us to participate in their plan. The upside is it's easier to collect and the patients don't get angry because insurance covers their bill, their doctors are happy because the patients are happy, and their doctors continue to send specimens to our lab because everyone is happy. The downside is we have to give them a big discount to be on their plan. Willes only sees the downside of this arrangement and he completely discounts the upside. It's a myopic way to run a business, maximizing returns in the short run with no thought for how that affects the business down the road. I argued that if we don't participate with these big payers we will lose work, and it's better to do work at a discount than not have work at all. We didn't resolve anything, except to have the billing guy Craig attend the next meeting. I think I have everyone on my side on this issue, even though they let me fight it out this time.

As the meeting was ending Willes attacked Paul on scheduling. He thinks Paul is sticking him with unfavorable call times. Paul bends over backward to appease Willes on the schedule so he didn't take that accusation well. I had to hang up so I didn't hear that entire fight, but I had to listen to Paul complain to me the rest of the week about how he gets mistreated by Willes.

Property Mine

Eric has spent most of a month trying to find a property for us to rehab, and we settled on a house in Sugar House that another flipper had started but was quickly in over his head. The house needs to be gutted entirely, there is asbestos abatement and problems with city permits. So they want Eric to take over as contractor. The problem is they want us to come in as a hard money investor without selling, and they already have a buyer, so there is no commission for Eric on the sell side either. The way the deal works is this flipper is financed 100% but he needs us to pay his interest and bring the rest of the money to do the project. We should end up with at least 60% equity in the finished house.

Besides the pain of knee surgery, Eric was feeling like everyone makes money on this except him. He will make his 10% contractor fee, but he will have to work for that. He won't get his anticipated realtor commissions, and he doesn't have much equity stake. He saw my point when I explained that the investment returns are only for those with skin in the game. He doesn't stand to lose anything if the deal goes south either. But we agreed to pay him a "finder's fee" and some kind of bonus if it comes in on budget and on time. It's exciting to finally have a project for this venture.

We met with Leland Palmer later in the week to go over our operating agreement. He gave me some good tips, and also asked if he could invest. We figure he's been Dad's accountant for so long he's almost a brother, so we let him in.

Leavitt Medical

We renamed DDx Instruments. The Leavitt name already has some name recognition in the medical world, so we figured instead of trying to build a new identity it would be easier to piggyback. It wasn't Matt's idea, but he's OK with it. Matt met with his dad again, who does a great job of pointing out any mistakes we may have made, so we had to have a meeting to address some concerns.

We need more capital because we will run out of money in 2 months. Matt's family doesn't want to invest yet because we are still unproven, and we have partners who have yet to put up any cash. That was a mistake. We were too generous with Andy and Mark because their stake will come from a bonus they were scheduled to get this year. But I asked them to make that bonus and their equity stake only vest when the company becomes profitable. This will make our balance sheet cleaner for potential investors. Then I suggested that we ask the CEO of another company that we have partnered with, a guy who knows about valuing R&D companies, what he would pay for the company. Then we would have an idea what price to offer shares. There are a few other people who are insiders or contractors who may want to invest, and I may want to raise my stake. Hopefully we can come up with enough money to stay in business for another 6 months without Matt having to sell more of his family stock.

The meeting was tricky because Matt can get emotional about the financial sacrifice he is making for this company, and Andy and Mark feel like he is valuing his contribution much higher than theirs. I felt like I did a good job steering the conversation away from those areas and focusing not on past mistakes or perceptions but future goals. I was happy with how that meeting ended. I don't make much contribution day to day at Leavitt Medical but I can be a sounding board for Matt and a mediator among the partners.