Building to Sell
Brandon Edwards started his career in the issues management / crisis / grassroots / public affairs-focused healthcare division of a multi-industry, multi-practice Santa Barbara agency. In 2009, a toxic rift developed between Brandon’s growing medical services division and the rest of the faltering agency. Brandon and his division associates bought out their piece of the business and formed ReviveHealth. It took almost 6 years to go from being issue based to what it is today – a full-service. integrated, all audiences, all channels firm serving B2C, B2B, and B2P, the business to physician/provider side. Santa Barbara was “an extremely high-cost market” with neither a strong employment nor a strong healthcare base. In 2011 decision was made to move to Nashville, TN, which Brandon refers to as “the Healthcare Capital of the World.” He cites Tennessee’s central time zone, big airport, abundance of talent, and lack of a state income tax as major incentives for the move. Brandon feels his agency has a “good business moat” – healthcare is an extremely complex business with major regulatory impacts. Even if generalist firms are good at strategy, they won’t be able to deliver in-depth, healthcare-specific strategies or may lack corresponding creative skills. Firms that specialize in “creative” have the potential to propose solutions that could “send you to jail.” In this interview, Brandon explains how too many medical organizations try to bring customers in through “the side of the funnel,” perhaps by marketing heart surgery to people (who may or may not have a heart attack in the next two weeks). “That’s not how funnels work,” he says. “You need to bring them in through urgent care, primary care, preventative care, diagnostic care – some percentage of people that start in the top of that funnel are going to end up needing other services, whether that’s PT or surgery of some kind, and all of the other attendant care that comes with it.” What makes an agency in this niche market work? First, Brandon says, “You have to start with the right people that have the right talent and the right knowledge base.” Even then, it can take 12 to 18 months for a new hire’s skills to become a “mature practice.” Strategy has come from a deep understanding of the healthcare business. To be effective, creative work, which comes from outside of healthcare –needs to be interesting and provocative. And process? “Healthcare is not a hobby,” Brandon says. HIPAA restrictions dictate everything the agency does, including information architecture, how information is shared with clients, and marketing campaign design. One early strategy core to the company was the idea of “being built to be sold,” merged, or transferred to employees through an ESOP (Employee Stock Option Plan). The intention was to always keep the firm as if it were “for sale tomorrow,” which informed hiring, compensation, professional development, branding, business development, and marketing decisions. Profits were consistently poured back into company growth. The agency did not expand by adding offices. Instead, it invested in hiring to expand and deepen capabilities, increasing offerings, and buying the tools, technology and data needed for “doing the job” now and in the future. ReviveHealth was recently bought out by IPG, Weber Shandwick, which Brandon says has been and continues to be “a really positive experience.” From the beginning, he built to sell . . . and then, he sold. All it took was sticking to his plan and “little luck” Transcript Follows: ROB: Welcome to the Marketing Agency Leadership Podcast. I’m your host, Rob Kischuk, and I am joined today by Brandon Edwards from ReviveHealth based in Nashville, Tennessee. Welcome to the podcast, Brandon. BRANDON: Thanks for having me. ROB: Why don’t you kick it off by telling us about ReviveHealth and what the agency’s superpowers are? BRANDON: Revive is a healthcare-only agency. We’re healthcare focused. Located here in Nashville, which a lot of people know for country music, but it really is in many ways the healthcare capital of the world. It’s a pretty phenomenal healthcare city. While we founded the firm on the West Coast, we relocated out here to Nashville in early 2011. Our superpower is really helping healthcare brands thrive. It’s helping healthcare brands that want to lead the way. What we mean by that is really bringing to bear the full spectrum of marketing communications in the truest sense of the word “full-service” in a way that is very strategically focused on what we view as an underserved segment of healthcare. Most healthcare firms are dominated by pharma or government or med device; our clients really focus on the provider sector of healthcare. So hospitals, health systems, large physician enterprises as well as health tech and health services. ROB: It’s an interesting place to get into. I think there’s probably some interesting stories around the conviction to move. How do you go about saying, “I’m in California” – it’s like the opposite of the Beverly Hillbillies. You’re like, “Tennessee is the place where we gotta be.” BRANDON: It might be the opposite of the Beverly Hillbillies, but I’ll tell you the people from Tennessee are probably tired of Californians moving here. There’s no state income tax in Tennessee. It’s a huge growth market, and yet everywhere Californians go, so go property values. We drive up home values in a very unflattering way. The story is actually kind of interesting. We started in California. I’m from California, my wife’s from California, we founded the firm in California. We started the firm September 1st, 2009, and we all remember what was happening in 2009. The recession couldn’t have been any worse. If you think about the unique aspects of headquartering a professional services business, particularly one that is highly specialized in healthcare, we were located in an extremely high-cost market without a strong employment base – without a strong healthcare base, actually. All of our talent was going to have to come from somewhere else. In 2009, no one could move to Santa Barbara because they couldn’t afford to buy a home there if they couldn’t sell their home. No one could afford to sell their home. If they were married or had a partner, that person couldn’t find a job in Santa Barbara. So, we really reached the conclusion that for purely strategic purposes, we had to go where the talent pool already existed. We considered a couple markets, but it wasn’t even close. Nashville was far and away the lead for us. It has a big airport, central time zone, really easy to get around, and has an incredibly deep talent base. I didn’t initially know I was going to move my family here. We thought we’d open an office and staff it. My wife actually suggested we move here. I’d been on the road 150, 200 nights a year for our whole lives, and I think the entirety of her pitch was “If we move to Nashville, you’ll get to have a lot more dinners at home and be with the kids more,” and that was it. She’s a rare person that volunteered to leave Santa Barbara. ROB: Yeah, that seems like a direction that a lot of people wouldn’t go, except what you said: to an extent, you were a frontrunner. I imagine this past season, you read about what’s going on with real estate prices, and basically everywhere is functioning as a suburb of the California real estate market. I think you might’ve beat some of your friends to Nashville. BRANDON: Yeah. We were maybe the front edge of the wave in the summer of 2012, and now the wave is in full force. It’s everybody relocating here. It’s California, New York, Chicago, big cities fleeing to a slightly smaller city, but a city where, again, there’s no state income tax. From an affordability standpoint, it’s a very different animal. ROB: When we think a little bit about your specialty, Brandon, what is it? What are the distinct needs both from a strategy perspective as well as a channels and distribution perspective of this healthcare group specialty market? BRANDON: It’s a very nuanced segment. On the one hand, I think we feel like there’s a good moat around our business from the standpoint that generalist firms can’t really parachute into a highly specialized area like this and deliver the same kind of value and strategic counsel that we can. So our competitive set is a bit more limited. You also tend to attract people who have more specialized careers. In some ways, from a recruitment standpoint, it’s self-selection. My phrase for it is “healthcare is not a hobby.” It’s an extremely complicated business with an intense regulatory overlay, and it also is highly emotional for people. I think maybe finance is the closest area to it in some ways because of all those factors. From our standpoint, the tradeoff that most clients had before Revive was they could pick a firm that could really help them with strategy, but that firm was going to suck at creative. The flipside is you could hire a firm that was really creative and interesting, and some of the work they were going to propose would send you to jail. Being able to bring together this deep understanding of the business so that the strategy is rooted in a deep understanding of the business of healthcare, how the organization is going to make money if you keep its mission alive, coupled with creative that largely comes from outside of healthcare so that we have fresh ideas and really interesting, provocative, and effective creative, was really not a value prop that existed in our industry 12 years ago. ROB: It would seem to me that part of that story of being able to bring in those outside folks, those new perspectives, but not going to jail, also plays into process a little bit. How have you thought about the emergence of process, of getting that regulatory overlay and consistency across the organization? BRANDON: First, I think you have to start with the people part of it. I promise I’ll answer your process question, but if you don’t start with the right people that have the right talent and the right knowledge base, my view at least is there’s no process that’s going to save you from that. When we look at more senior level leaders in the firm in particular – I would say even mid-career and up – we look at people who already have a pretty deep established understanding of healthcare. If you bring in someone who’s never touched healthcare and they’ve been in business for 15 or 20 years, I defy anybody to sit and explain HIPAA to someone in a way that’s going to make any sense to them. There are so many aspects of the industry that normal people just cock their heads and say, “That doesn’t make any sense.” It’s like, you’re absolutely right, and it’s just the way it is. So I think it starts with people. From a process standpoint, you still have to have process and safeguards. We do extensive HIPAA training. HIPAA and the restrictions around use of data dictate everything about our information architecture, how we share information with clients, how you design marketing campaigns that can be effective and still be well within the bounds of those. So you really have to think through the processes in terms of not just what you do in a normal agency to get good work, but to get good work within the guardrails of what’s allowable in the healthcare industry. ROB: That seems like a totally different mindset, and I can see that domain expertise from the experienced voices helping to train and bring up the next wave of talent. One thing I’m curious about – the timing of your focus in the space seems impeccable. The narrative of this past 10-15 years of the consolidation of the healthcare groups, the rise of these regional healthcare-group-sponsored office parks – it’s a real thing. I see it all around me. How did you end up at the right spot on that wave? It could’ve been easy to be too early and easy to be too late. BRANDON: Yeah. I would love to tell you that it was incredible wisdom and vision on my end, and that just wouldn’t be true. [laughs] I wish that’s what it was. There were a group of us that were in another agency. We were essentially the healthcare practice, a place where I was a minority owner, and it was a multi-industry, multi-practice firm but had built up and created this healthcare presence within that firm. But that firm was very focused. It was essentially an issues management / crisis / grassroots / public affairs firm, so the healthcare practice we had built was very focused on those kinds of services and that kind of work for clients because that was the firm’s positioning. And I think it was the right positioning for that firm. We got to 2009 and the rest of the firm outside of healthcare shrunk dramatically. Remember, this is the same time that the ACA was being debated and passed. This was the same time that there was going to be a substantial need for all kinds of expertise in the healthcare space, including marketing communications work. I think unfortunately, when you’re in an agency that may be struggling a little bit – what do they say? Character is revealed by difficult times, not created by it. I think what was unfortunately revealed in that moment was a somewhat toxic culture in the other agency. So, when we looked to buy out the healthcare practice and form Revive, we really viewed it as an opportunity to go from being a healthcare practice in a diversified agency to becoming a healthcare agency, as well as an opportunity to really diversify the offering into truly full-service integrated marketing work. For us, there was this really great established base of clientele to work from and help to fund that expansion, but what started was a journey that took I would say 5-½, almost 6 years to go from being issues-focused to being a truly full-service integrated firm. ROB: From a channel mix perspective, you mentioned a PR and comms legacy; what does the channel mix look like today, and where is it heading within the healthcare space? BRANDON: I think the simplest way to put it would be it’s really all audiences, all channels. We’ve gone from planning for earned to planning for earned and social to planning for every stripe of media and every stripe of channel and bringing in people with integrated planning backgrounds, bringing in people that are deep in digital and social and traditional. We actually plan and buy our own media across all channels. Very unusual for a firm our size. But one of the interesting nuances working with media buying, for example, in this space is that most media buying firms really want to buy large campaigns on a regional or national basis, and hospital media in particular is bought almost exclusively on a local community basis. The joke is if you go to work for a big brand, you’re going to spend $50 million in $5 million chunks; if you go to work for a hospital, you’re going to spend $5 million in $50,000 chunks. It takes a very different structure and thought process to create the media function. And that’s just one thing. You still have to think about all of the creative and all of the different areas. We really think about all audiences, meaning we’re looking at consumers, we’re looking at current and past patients, we’re looking at employers and brokers, we’re looking at physicians and board members and donors, and then the people within those hospital or healthcare organizations that are purchasing from our health services and health tech clients as well. We really have both B2C and B2B as well as B2P, the business to physician side. It’s really a robust channel and audience mix. ROB: It’s a really fascinating mix, and it reminds me, as you talk about the regulatory overhead, I could see somebody 10 years from now – you mentioned Fintech earlier; I think various dimensions of Fintech seem like they’re positioned both for some real growth versus synthetic growth, but also probably a good bit of regulation ahead. I think if somebody has a brain for that sort of thing, they might do well to start navigating the legality. There might be a good practice there. BRANDON: I’m sure you’re in the same boat; I talk to a lot of younger people that are interning or are interviewing with us or whatever it is, and I think there’s this tendency when you’re younger to think about the sexy things, whether it’s gaming or sports or whatever it is. Yet I believe in many ways, the best way to create a career that’s going to maximize your value is to find these industries where you can develop indispensable knowledge. I think healthcare is one. I think finance is another. I think maybe once upon a time, defense department type work was. Maybe higher ed. There are some industries that require an incredible amount of focus, and perhaps the skillsets aren’t as transferrable between working for one set of consumer products or CPG or whatever it is, but boy, it sure is value-creating for you from a career standpoint. ROB: Brandon, to switch gears a little bit, one part of your story I think we would be remiss not to touch on is the experience of being acquired. Many firms have that wish, but I think I heard recently maybe 1 in 400 agencies will actually ever be acquired. How did that process commence? Was that something you engaged in intentionally? Were you just sticking to your knitting and somebody took notice of what you were doing? BRANDON: We have a lot of flaws as an agency, just like any group of people does. But not being strategic and thoughtful isn’t one of them. In our very first strategic plan, September 1st, 2009, when there were four of us, the strategic plan says “Revive is being built to be sold.” There’s a little asterisk next to “sold” that says “It’s not really about sold; it’s about merged or an ESOP to employees or whatever.” But the thinking was, and I think a lesson learned perhaps from previous agency experience, is the worst thing you can have is an agency that you need to sell and can’t. It’s a bit like owning a home. They always tell you when you’re younger, don’t have the most expensive house on the street. You don’t want to own a house you can’t sell. And most people love their home – of any day they own it, the love it the most the day they put it on the market because they’ve done all the things to make it beautiful and have curb appeal. They’ve landscaped it, they’ve painted it, they’ve fixed all the little dings and scratches. I think agencies are a lot like that. We viewed it as we wanted to keep the firm always like it was for sale tomorrow, and that meant how we hired, how we comped people, how we did professional development, how we thought about our brand, how we did business development and marketed ourselves, how we paid ourselves. We took the view that the owners would comp themselves as employees. We would not take money out of the business; we would pour everything back into growth. So it was always about building enterprise value. We didn’t really set a timeline on it. I think maybe in that first plan we said 10 years, and honestly we just sort of made hat up because it seemed like a long time. It turned out not to be. [laughs] But we went into it with that attitude, and it became a filter for every single decision that we made for the business. And I think in a lot of ways it helps to keep you from being selfish. It’s really easy to have a great year and think “I think maybe we should pull a bunch of money out and go buy something cool” or whatever, I don’t know. We didn’t do that. The only money we took out of the business was for taxes, basically, and our individual compensation, which was set and didn’t change much during all those years. We would call the question every year in strategic planning, and every year the answer was “No, we’re good.” Then we get to the end of 2014. We had grown 60% that year. We had added digital content, social, we had purchased another firm, and we got to the end of the year and called the question of strategic planning, and the group unanimously said this would be the right time to look for a partner. “Let’s find someone who has been through this process of integration and can help us do this better and help us grow faster and help us avoid the pitfalls that come with going from being a single discipline firm to a really diversified agency.” ROB: It’s interesting to hear that intentionality from the start. I think there’s probably some threads to pull on there. For instance, I think you mentioned casually ESOP. It would be good to dig into that. When you think about building from the start, a technology startup will think about issuing stock options to their employees to ensure that they get to share in an acquisition. But that’s so often incompatible with a services organization. How did you think about employee comp, sharing in an exit, that sort of thing? BRANDON: Probably not as well as we should’ve. [laughs] I think you’d always be better at this the second or third time than you were the first time. Let me back up for a second: we had a great experience with the sale. We went about the process in a very nontraditional way. We had a great experience with the transaction. We had a great experience with the earnout with our buyer, which is IPG, Weber Shandwick. You hear all these terrible stories from people, and I will tell you that we had none of that. we had a really positive experience and continue to. Our executive leadership team – we had no senior level departures at the end of the earnout. That’s very unusual. Just a good experience. That said, I think we could’ve done a much better job – I could’ve done a much better job – leading up to the sale. We did not spread equity around as much as we probably should’ve. It wasn’t so much that we sat down and decided not to as just it hadn’t been a part of our plan, and by the time we went to sell, it was probably too late to make meaningful changes to the equity structure. We had five shareholders and five phantom equity holders just before the sale, and we then converted the phantom equity holders to real equity right before the sale because that was our buyer’s preference. ROB: What is phantom equity? BRANDON: Think of it as another way of creating an incentive compensation structure that doesn’t represent real ownership, so it doesn’t necessarily give a holder rights to a percentage of the firm’s profit or something like that. The upside is it can be given and taken away just like a bonus would; the downside is it gets taxed in ordinary income instead of capital gains. So it’s a little bit more attractive for the company, a little bit less attractive for the holder. It may be a little bit less attractive, but it’s substantially more attractive than getting nothing. I think ultimately, I wish we had distributed a little bit more ownership to some key people, particularly some people who really killed it in the last 5 years, but once you’ve entered into the transaction, it’s too late to change the equity structure. ROB: And it’s definitely tricky often, and not necessarily in your case – turnover in services can be higher. You also are dealing with the multiples that you sell for, typically. They’re not the same in services as they are in startup land. What I want to pull on a little bit now – you mentioned a couple things. If you’re building the sell, what comes to my mind is you have to be carrying decent margins on your services to be attractive to purchase. But then you mentioned that you and your partners were also not taking money off the table. I think where that probably points the flashlight a little bit is towards the question of: how do you strategically reinvest meaningful margins to build a business? I think that’s where a lot of people typically throw up their hands and just take the money off the table. BRANDON: Yeah, and I don’t think that’s irrational. I say this as a predetermined outcome for us because this is what we wanted for our business, but to be fair, it’s not at all irrational or even maybe a negative to say, “I don’t want to sell the business. What I want is to get it to a point where I don’t have to work so hard and I can make pretty good money and it creates an annuity for me and my family.” Yeah, there’s some dangers of that, but there’s dangers in selling too. So I don’t know that there’s a right or wrong answer to it. I think in terms of reinvestment, we really looked at it in two branches. I’ll tell you up front the one we decided not to do, and that was that we were not going to expand on the basis of offices. We were going to look at reinvestment in people and technology as opposed to places. We’ve never opened an office for a client. We’ve never been in that mode. We’ve always had as few offices as we felt like we could get away with and still attract the right talent. So we looked at it in two ways. Early on, it was really reinvestment in hires that would expand our capabilities – sometimes deepen them, but mostly expand them. The reason I think that’s a reinvestment is very often, when you’re bringing on someone to build out a new capability, there isn’t going to be enough revenue there really to justify that hire for some period of time. Typically for us, it was 12 to 18 months from the day we hired someone to the time that was a mature capability or mature practice. We would look at reinvestment in building out these capabilities, and that meant a creative department, that meant a media department, that meant digital capabilities, social media, content, research, all these different areas over the years. I would say hand in hand with that was reinvestment in the tools, technology, and data that could make those people effective. What does our media department need to do its job? What does our analytics group need to do its job? And what are they going to need in the future? What do we need to do in terms of data-driven marketing, whether that’s Salesforce or other platforms that we use? All of which carry pretty sizable price tags and some of which are more difficult to monetize with clients than others. I think those are the big two. I would say a distant third was the constant reinvestment in brand building and business development for our firm. We have spent about 5% of revenue on an annual basis from the time we had 10 people in new business and corporate marketing, brand building, for Revive to always be punching above our weight, always be growing. As a result, we’re showing 12-year compounded annual growth rates of about 25% a year. ROB: Wow. Sounds like a good company to buy if you’re IPG. That’s good. And you’re still there, which must mean it’s also a good job. BRANDON: I would like to believe that they could’ve bought anything they wanted and chose us. I find that flattering and a statement of confidence from them. But yes, they’ve been great to deal with, and honestly I’ve been glad to be here. It’s nice to be part of a really great company. ROB: That’s great to hear. That’s a good acquisition story. Brandon, when you’re looking ahead a little bit, what’s coming up for ReviveHealth, and maybe more broadly healthcare marketing, that you’re excited about? BRANDON: I think in some ways, in our segment of healthcare marketing, the pace of change is accelerating to where many of the things we’re seeing now in healthcare marketing are the things that you would see more commonly in other industries. Typically, hospital marketing in particular trails other industries by a few years. We’re starting to see that gap close. We’re seeing a great deal more emphasis on data-driven marketing and personalized marketing. We’re seeing a great deal more emphasis on social media and social media engagement – which, given how personal and human healthcare is, is sort of strange that it’s just catching up to other industries now. But I think the biggest shift we’re seeing is a mindset shift from hospital operators who have been accustomed to spending the bulk of their budgets on traditional advertising to build brands to hospital executives who see the power of real 4 Ps marketing that will drive volume and profitable growth to their institutions in a way that I think is almost taken for granted in many other industry sectors. ROB: Right. That’s actually really interesting because many hospitals are massive institutions, but now they’re also living under an umbrella where there was just one location and now there’s four, and there’s an attendant group of facilities around it beyond that. It’s “Who’s the brand?”, but also “Where is my local version?” That’s what it seems like to me as a consumer. BRANDON: Not to be too flippant about it, but I think we all drive around town and you see these billboards with “heart surgery this” and “knee surgery that.” Does anybody really buy on that basis? I mean, it’s not like you drive around and say, “That’s interesting. I hadn’t really thought about it, but my knee does hurt. Maybe I’ll have surgery after all.” It’s sort of silly when you say it like that. To me, this industry just begs for highly targeted, highly personalized, data-driven marketing. If I get you into what we call the top of the funnel – urgent care, primary care, preventative care, diagnostic care – some percentage of people that start in the top of that funnel are going to end up needing other services, whether that’s PT or surgery of some kind, and all of the other attendant care that comes with it. I think most hospitals have tried to enter the funnel from the side, and it’s sort of a joke for us. That’s not how funnels work, right? You pour things in the top and they come out the bottom. We don’t get to come in and say, “I just want to find those people that want to have heart surgery in the next two weeks.” It’s like, no, let’s engage people who are going to need heart surgery in six months, in a year, in two years, in three years. Look at more the lifetime value of the consumer as opposed to the transactional value of the consumer, and recognize that physicians play a huge part in it. Most of us go where our doctors tell us. ROB: Right. It starts with being in the provider network at some point. BRANDON: Absolutely. Who you have contracts with from an insurance standpoint, what your medical staff looks like, how effectively referrals are processed, if you provide easy access for consumers – telephone, digital, as well as other methods. It really is all 4 Ps of marketing. It is not just promotion. I think the industry was pretty dominated by promotion prior to maybe 5 to 7 years ago. ROB: That is tremendously interesting. Thank you, Brandon, for sharing your journey. Congratulations on everything you accomplished leading up to and even after the acquisition. It’s a great part of the story to tell, and it sounds like the national marketing community is better for it. BRANDON: We have a great team, and anybody that does what we’ve done in the last few years and doesn’t acknowledge some meaningful amount of luck is probably not being honest. [laughs] You can work hard all you want, but if you don’t have a little bit of wind at your back, it’s going to be pretty tough. ROB: The humility is definitely welcome. We all need a little bit of that luck, and sometimes you have to survive long enough to be lucky. Coming out of 2009 is nothing to dismiss either. Thank you so much, Brandon. We wish you and your team the best. Thank you for sharing your story. BRANDON: My pleasure. Thanks. ROB: Thank you for listening. The Marketing Agency Leadership Podcast is presented by Converge. 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