158 How Private Equity Works

In this episode, Herb welcomes his close friend and operational expert Brian August, who shares his extensive knowledge of finance and the medical field. Brian discusses his diverse career, which spans private equity and venture capital, and serving as a captain for Southwest Airlines. They delve into the complexities of short-term capital infusion, especially in pediatric and physician practices, revealing the benefits and pitfalls of private equity investments. Brian offers invaluable insights from his career, including his experience running and eventually selling an allergy practice. He emphasizes the importance of efficiency and the potential for internal fixes within practices. The episode provides a comprehensive guide on the value of understanding financial metrics, leveraging business acumen, and contemplating strategic exits to maximize long-term gains in medical practices.

00:00 Introduction and Guest Introduction
00:19 Discussing Private Equity in Medical Practices
02:19 Brian's Background and Career Journey
04:49 Owning and Managing an Allergy Practice
08:42 Short-Term Capital and Bootstrapping
14:25 Challenges with Private Equity and Billing
30:04 Exploring the Supply Room
30:17 The Year-End Sales Strategy
30:46 Inventory Management Issues
31:28 The Trash Can Fiasco
32:54 Lessons from Brian
34:38 The Importance of Hiring Right
37:58 Operational Contingency Planning
41:45 Understanding Earnings and Margins
43:56 Valuing a Medical Practice
56:14 Private Equity and Medical Practices
58:30 Conclusion and Final Thoughts