Built to Last: The Inspirational PT Leadership Model That Preserves Culture While Scaling Growth to 1M Patients Per Year

Sarina Richard (00:03):
I am Sarina Richard, and you're listening to Therapy Matters presented by Raintree. Therapy Matters, explores the ideas and innovations reshaping rehab therapy. Aaron, thank you so much for being on our Therapy Matters podcast. It's great to have you and thank you for being here.

Aaron Kraai (00:24):
Yeah, thanks for having me. I'm humbled for sure. Seriously.

Sarina Richard (00:28):
You keep saying that and you're seriously one of the most impressive business leaders in our industry today, and I think it'd be helpful just to start off just with your name, what organization you're with, and then we can get into your background.

Aaron Kraai (00:38):
Yeah, my name's Aaron Kraai. I am the founder and CEO of Doctors of Physical Therapy, headquartered at a suburb west of Chicago. And we've got about 165 outpatient clinics. We've got about another 45 or so industrial on sites with large direct to self-insured employers. The self-insured market is in about 27 states, and our brick and mortar clinics are in about 15 states or so.

Sarina Richard (01:07):
Nice. Really great scale. Tell us a little bit about how you got started. So how did you get into the industry and why did you get into it?

Aaron Kraai (01:17):
Well, I was extremely fortunate to have, well, I got into PT because like most of us got an injury and went to a PT clinic, and I was extremely fortunate to have two extremely important people in my life and mentors early on, Larry Brand and Carmelo Tenuta who had just had one location and for some reason they put their arms around me and held me to a certain level of expectation. And I started folding towels and they'd give me articles to read and I became kind of their grunt, which was wonderful because I was in all of their meetings and I got to listen and how they were doing things. And then they started to scale more locations. And then my job at 16, 17 years old was to find the corner through car count referral patterns and competitors. And then once I found the corner, those guys would do the lease negotiations and do all of that. And then once that deal was signed, then I would order the equipment and set up the location for 'em. So I've been in the PT space since I was 14 years old and don't know anything else because of these two mentors. I had actually opened about six or seven locations, helped open six or seven locations before I even went to PT school. So yeah, I bleed this profession and I don't know anything else.

Sarina Richard (02:43):
Yeah, that's great. And I think one of the really special things about you is, so your business is still family owned, but you've kind of taken that family owned concept to a whole new level. So your family has been very involved in growing and scaling your business. Tell us a little bit about how you involve your family.

Aaron Kraai (03:00):
Yeah. Well again, it wasn't by design to start off with. When I mortgaged my wife's wedding ring and my Toyota Camry and my grandfather signed a $65,000 line of credit for me to start a DPT. And then once I left my job or gave notice that my job, we didn't know my wife was pregnant. So in our opening ribbon cutting ceremony, my wife is very pregnant. I opened August 4th and Luca was born November 28th. So we didn't really have an option of not involving Luca and Miabella later on as we grew, we had no money. And so the construction would get to a certain point and then we would go in and paint the walls and put the mirrors up and put the chairs together. And Luca and Miabella, we had no babysitters, and so they had to come with us. And then at one point, once they got old enough, we'd put tape on the ground and Luca would measure out eight feet of green TheraBand and make a cut in two knots, and then my daughter would count pens or whatever. So Luca's probably opened 30 locations with me and Miabella has probably been involved probably 15 or so. My father-in-law, he's a journeyman electrician and been a big part of our industrial build outs. My mom is still involved with the company. She's our corporate compliance person. She actually worked for Carmen Larry 30 years ago or whatever it was. And so it's a family ordeal for sure.

Sarina Richard (04:30):
Yeah, I love that. And there's a real cool photo of you and Luca outside. Tell us about that story and what does that mean to you?

Aaron Kraai (04:37):
Yeah, so when Luca, he was probably like 12, maybe 13 years old, and we were doing acquisitions of mom and pop shops. And so how I started off doing it was simply writing an email to an owner and through the private practice email list or directory. And at some point it got to be a pretty big undertaking. So Luca ended up taking on the email portion of that. He had a standard email, he'd send it out, go through a list, and he would get 20 bucks for every 50 emails or something like that, and then he would get a $250 commission if we signed the deal. So one of the best pictures is in front of one of our locations, and Luca's got his $250 check, we signed the deal, and he had done the email and got the response back. And obviously I took it over from there and got the deal across the line.

(05:30):
But the kids absolutely have seen the whole cycle of what it takes to scale a company and all the downs and all the ups, and we're all very appreciative that they've seen it all. They've seen that you're the last one to get paid many times. And so we didn't go on vacations for many, many, many years because we put everything back into the business. And so now we're not necessarily on the other side of it, but they see some of the fruits of all the hard work after 20 some years. So I think it's a really important life lesson for both the kids.

Sarina Richard (06:10):
Or just the value of hard work. You can't really teach that you got to live it. And I know you say it's accidental, but I think the lessons that you've given to your kids already at this stage of their lives is better than any school they could have because they know what it takes to build something from scratch, and they know what it takes to keep it, keep it going.

Aaron Kraai (06:30):
Yeah, they're a wonderful kid. Thank God for my wife. She's been a big, big part of who those kids are. They're good morally and ethically and smart kids. And again, I can take only so much credit for that, cause she's the one who did all the hard work.

Sarina Richard (06:46):
I love that. What was the hardest part of scaling? So when you went from one to many, talk about some of those early days of when you were like, I want to keep doing this, I want to grow this bigger. What was that like?

Aaron Kraai (06:59):
Yeah, I think the biggest part, so if you have got one or two locations, I think you can come into a cadence. And if you have not us now we have so many people and systems, it's easier for me at least. My strain is different than it was when we were growing and scaling. I had no people. So the hard part for me was really the transition from trying to do absolutely everything to a point where you almost break, then you'll hire that first person that takes something off your plate and then they do it better than you do it.

Sarina Richard (07:38):
It's like a light bulb moment.

Aaron Kraai (07:39):
The light bulb goes on. But I think a lot of people say that you should delegate early. And I actually think that there's a lot to be said about that pain that you feel in that transition because I think you appreciate the other side of it much better. And also when you're scaling, you're bootstrapping everything. You should be outworking everyone. So I think that's been the hardest part in that transition of letting go and trusting the people and then the system that you put together. I think that was my hardest part. I'm assuming most entrepreneurs have that same strain, but I think it's really important of the process of growing as a leader.

Sarina Richard (08:17):
That's a good segue to hiring. Hiring is so hard and you can get it wrong more times than you can get it right. Clearly you've been doing some things. So what's your secret sauce to hiring great talent?

Aaron Kraai (08:32):
Well, I think it's our environment of our culture of brutal honesty, transparency, and trust. I do think that our competitive advantage also, this is my baby, and I think that it's really important. So for a lot of our clinicians, I talk to 'em on the phone, they've already gone through the process of the hiring process, and then I get 'em on the phone and I want them to understand that this isn't just another big PT, corporate PT company. This is my baby, our baby, and we stand on these ethics and these morals and we're going to build this and do this the right way. And it's not just another nine to five job. This is something bigger. And just setting the expectations on what we expect from 'em, primarily morally and ethically and clinically obviously.

Sarina Richard (09:24):
Yeah, I think what's also really unique about you, a lot of people would say, I'm going for that A player right off the bat. And that's not your mentality.

Aaron Kraai (09:36):
We typically will make the assumption that there's a good clinician, but for us, I'll take a B player, a B clinician, and I can mentor and grow them up. But if they don't have morals or ethics or are good human beings, I don't want 'em anywhere part of our company, again, morals, ethics, being a good human being, leaning into the greater good is what we look for first. And with the assumption that you're at least a B clinician, if you're a bad clinician, you'll get weeded out really quickly. But I think it's really important. I can always get a good person to be a better clinician.

Sarina Richard (10:14):
You've shared with me that the way you think about hiring fast or hiring slow, firing fast, which firing is so difficult, it's so personal, is that it's not fair to everyone else if you keep those low performers, but you're not the kind of leader who just fires people automatically.

(10:32):
Tell us a little bit how you will let somebody go.

Aaron Kraai (10:36):
So it goes back to brutal honesty and trust and transparency and fairness. Quite frankly, I don't think it's fair that I would walk into a clinic and just fire someone because I don't like what they're doing. Now, if there's an ethical breach or a moral breach, there's no question there. But if there's someone doing something that we don't appreciate, I'm not going to walk in there and fire 'em. I don't think it's fair. What we will do is go walk in there and tell him, Hey Joe, we don't like you doing this. We want you doing this, this and this. And then I'll come back in 30 days. And now if Joe has been, we've let him know our expectation, and if he hasn't chosen to come our way, well then he's chosen to go away. That's the way we look at it. And it goes the other way too. In our relationship, the trust in our company and the transparency, if you send me a resignation letter without texting me, number one, you'll get a call immediately from me and we'll have an honest conversation. And some of the times I can help, sometimes I can fix it.

Sarina Richard (11:47):
But if you don't know, how can you help?

Aaron Kraai (11:49):
Again, I said this earlier today, right? I've been married to my wife for 25 years.

Sarina Richard (11:53):
Congratulations.

Aaron Kraai (11:54):
25 years, that poor woman, 25 years. And you know what? When I wake up next to her in the morning, I don't know what's going on in her head, honestly, I've known her for 25 years. And until she opens her mouth and says, Aaron, I don't like that you do this and let me know, then I can say, okay babe, I won't do it again next time. So if I can't read her mind, how am I supposed to read a clinician's mind? So if there's an issue with our company, you text me. And again, if I can fix it or understand it, and if I don't fix it, then at least I know about it. And I'm sorry if this is a line in the sand for you, then we're sorry we're not for everyone, but at least there's an honest, transparent relationship where there's communication to try to do the best thing.

Sarina Richard (12:48):
Yeah, I love that. Retention and culture are really big differentiators in this industry. And I mean you could leave and go to a competitor tomorrow down the street. What are some of the top things you've done besides your brutal honesty, transparency, which I think is so authentic to who you are as a leader, but besides that, why do people stay with Doctors of PT?

Aaron Kraai (13:08):
Yeah, let me be very clear about this. 1700 employees right now, I dunno, whatever it is, they could all go somewhere else and make more money, especially in this market right now. They could absolutely go and work for someone else and make more money. So I understand that. But there's also something that comes with going across the street and into that potential risk of culture. So some of the things we do, I do every morning, anyone that's got a birthday today, I text 'em in the morning. Anyone that's got an anniversary, I text 'em 15 people a day. I send a text to say, Hey, how's it going? How can you make any feedback for the company? These are techs, these are front desk coordinators, these are everyone. So I think that's a really important component of them having a direct access to me.

Sarina Richard (14:01):
The founder and the owner direct access.

Aaron Kraai (14:03):
A lot times now I've gotten better because sometimes I'll text someone and I'll forget to put my name on it and they'll like, who is this? And then I have to say, I'm sorry, this is Aaron, the founder and CEO of DPT, and then they're embarrassed. And so I feel bad. So now I have that set. But I do think that that connection, when our new moms have babies, they get a little onesie with a DPT logo on it.

Sarina Richard (14:29):
That's great.

Aaron Kraai (14:30):
Flowers at funerals. But I just think it's just that connection that we want to make sure that it's not just a nine to five, it's something bigger and we're all in this thing together and they can go make more money, but there's a trust that the culture is going to protect when things go sideways.

Sarina Richard (14:48):
And this foundation that you've built, it's showing up in some pretty awesome ways for your business. So tell us a little bit about the acquisition you just made and one of the key success factors that came out of building off of this foundation that you have.

Aaron Kraai (15:02):
Yeah, wonderful people with Empower on the West Coast, 55, 55 locations, but they had a real major issue. They had 37% turnover rate in December when we bought 'em, 37%. It's really hard to, number one, provide high quality care and outcomes for our patients and to grow a business when you've got so much turnover. Thankfully now we're just, as of August, we're at 16%.

(15:31):
So I do feel that the energy that I put into it and then the culture that supports it, so people are getting text messages from me now. It's like three o'clock in the morning in California when I'm texting it's five o'clock when I do all this. I just think that it's a different energy and an expectation of our culture and they're staying around, which is wonderful. And now, I mean, we've had week over week growth out in the west since we bought them. We will be at record high this week in visits out there because people are staying with us and providing high quality care and people are getting better and they enjoy it.

Sarina Richard (16:14):
And so with people staying with you, obviously there's a career trajectory path that you have to be thoughtful about for all of your employees. Tell us a little bit about your leadership program.

Aaron Kraai (16:25):
So again, I can't take any credit for it. Just like a lot of the things in the company now, we've got really good people that do really good things. We've got a leadership program where one of my issues with the academic world right now is that they aren't teaching our kids on, they'll teach our kids great academics and how to joint mold, but they'll teach 'em nothing financially or how to run a business or sell our product or make us feel guilty about selling our product. So what this leadership program does is really, it's not about joint molds or plans of cares, it's truly understanding of P and L. Marketing to a surgeon. When you've got a great outcome going in and telling that surgeon, look at this guy that you sent me. He was a train wreck and I got him better. It's now send me three more and not feel guilty about it. It's a one year program that they go through a bunch of different ways on communication. And then really a real big component is how do they replace themselves, right? Because in our company, we promote from within. At our company right now, everyone in any top role has all been promoted in from Jeff Valentini, our Executive Vice President of Operations. He had one clinic and then he went to six and 12 and 32 and 65, and now he's got 110.

(17:50):
So having them understand that they have to, if they want to move up in our company, they have to replace themselves. We can't afford to move you up and have that clinic go down. One of the biggest things that we've seen time and time again in our industry is when companies scale, one of the reasons is that they implode is because the bloodline that started it, the bloodline that started this whole thing and made it successful for so long, got so far away from the trenches that the middle management, it imploded from the middle.

(18:24):
And so by promoting from within, it guarantees the bloodline that I started and the expectations that we have as a company, and it goes all the way down into the trenches. So no matter what clinic you walk into, there are absolute pillars that has been there from day one. And that's part of the growing from within. That leadership program promotes it. The great thing is that we always look at year over year growth every year in our annual meetings, and we take a top 10, usually six or seven of those are from that leadership program.

(18:57):
Which Is really cool because those leaders, those clinic directors get a portion of the profit. And so if they can take their company from one to one and a half x, their families are eating more. So there's not only a history of moving people up as we grow, but there's also they eat more, their families eat more, they're better off. And we all win. When the pie's bigger, we all win. And so that's really important to our company. It's why we've been able to scale even before the Empower deal to 110 locations and not wobble. We didn't wobble one bit on our morals or our ethics or our quality care, our outcomes. And that's because of that.

Sarina Richard (19:37):
Well, it's easy to talk about successes, but in your history, you've also been through quite a number of trials and tribulations. Can you tell us about a near miss moment or maybe growth you were worried that you would see the next day? What was that moment and how did you get through it?

Aaron Kraai (19:55):
Yeah, well, there's a lot of errors and mistakes along the way. And we tell this to our younger clinicians for sure, our new leaders. Here's the two guardrails. Don't kill a patient and don't bankrupt the company, but make a decision that's in the best interest of the patient and of the company. And that's our philosophy. Pull the trigger, make a decision. And if it's not the decision we wanted you to make, thank you for being a leader and doing what you felt was best for the patient and for the company, but next time, here's what we're going to do. So that's kind of the philosophy. So one of the, I would say probably the biggest point in probably all of our lives in the last seven, 10 years has been COVID and how we looked at COVID, right? So our philosophy was either we have to cut the bottom 15% to get from losing money or we can all take less. And again, the culture is alright, we're in this thing together and we're not going to let anyone's family not eat. So I went to zero, my C-suite went half our clinicians went to almost like a per click visit. You got paid per click or so

Sarina Richard (21:15):
You didn't pay yourself.

Aaron Kraai (21:16):
I didn't pay myself. No, not at all. Our whole C-suite went to half. And again, that again, leading from the front, part of what we'll talk about probably is people first and I outwork everyone. And that's an example. How would I expect you to take a 40% cut in your pay and me continue to get paid a full salary? I mean, that's just not going to happen. I'm going to go to zero. I don't expect you to go to zero, but I'm going to show you how we're going to lean into this. So we didn't cut anyone. I'm very proud of the company actually. I think it built significant trust because our competitors, because they're in different situations and there's no judgment, a lot of companies eliminated a lot of people. And so we are fortunate enough to show, hey, when times get real bad, here's how we're going to behave. Because it's easy to be a good leader when things are going great, when it's up and to the right and things are cooking, it's easy. But when things go south, how do you act? What's your character when things go south, like a COVID, right? We didn't reduce one job. A matter of fact we increased jobs through acquisitions. But

Sarina Richard (22:30):
Yeah, tell us a little bit about that you doubled down on your business in COVID when a lot of people were trying to figure out how to weather the storm and cut back.

Aaron Kraai (22:38):
It was an opportunity where a very good friend of mine who everyone knows, owned a lot of clinics and he needed to reduce counts, those clinics. And we happen to have the infrastructure in that area in the Midwest. And so the way we looked at it was, as long as we break even, we can ride this thing out and we can save some jobs. And we actually bought, I think it was like 12 clinics during COVID. And our revenue actually went up during COVID real revenue, not adjusted revenue for PPP or whatever. That real revenue went up because of the acquisitions we had, the infrastructure in place, we could support them where some of these, the CEO of this company, the headquarters was way a couple states away where we were right there. So they became part of our family, and those people have never forgotten it. So it's pretty cool.

Sarina Richard (23:33):
So to get a little tactical as you scaled, what types of systems or things were most critical to keeping both the quality of care and employee engagement high? Was there anything you did that?

Aaron Kraai (23:45):
Yeah, I think the biggest thing from my standpoint, now obviously we've got infrastructure IT infrastructure and RCM and all that stuff, but my role is really people and strategy at this point. And so I think the biggest thing was the transparency and the communication. So one of the things that when we were growing on the industrial side is that I'd have a location, New Jersey and Florida and Texas, and there were one clinician inside of a machine, a car factory or a slaughterhouse or whatever, and they felt like they were on an island. And so what I started to do was biweekly videos, updating of business, how's the business doing what we're doing, things we're working on, new hires, we celebrate, and then there's a shout out list. So I've got about 75 leaders in the company that on Friday morning, really early, I send 'em a text. They send me back a text on people that they want to shout out. And so I think it's really important, not everyone on the communication. And also it takes away all the rumors. It's from the horse's mouth every other week on where the business is at, what we have to work on. The shoutouts are great.

Sarina Richard (24:55):
What's been your favorite one?

Aaron Kraai (24:56):
I just had one other other week. It was outstanding where 18, 19-year-old tech, it was raining out. She grabbed the umbrella and walked this old lady to her car, opened her door. That's the kind of people we want in this company. I don't want to overstate it, but from the CEO saying to 1700 people, this is a behavior, and I saw it. I saw you in the middle of northern Michigan or the middle of Texas or wherever you're at. I see it. I see it. And thank you. Thank you for representing our company and the morals and ethics that we expect.

Sarina Richard (25:29):
Yeah, and you represent too.

Aaron Kraai (25:30):
Exactly. Right. That's amazing. That's pretty cool. It's about 15 minutes. I've gotten a lot of feedback over the years. It started off at 30 minutes live, got feedback that that was too much. Record it so that they can do it on their car ride home or whenever.

Sarina Richard (25:46):
And you always do it too. You keep up with it no matter what's going on in your life.

Aaron Kraai (25:49):
Yeah. I can't tell you how many airports I've done it in. I do it in my deer stand out on northern Wisconsin. I bow hunt a lot, so I'll do it out in the middle of the woods in full camouflage. It's important to me and it's important to other people. And again, it just goes back to the honesty and transparency and the morals and ethics that we expect kind of gotten us where we're at.

Sarina Richard (26:11):
Yeah. Well, to bring this full circle, I mean, you really live this authentic life and it really shines through with everybody who interacts with you.

(26:19):
You are someone who is a man of your word. You have built this from the ground up with your own two hands. You show up. And I think that's incredibly important these days is not just talking the talk, but walking the walk and really being true to who you are as an authentic person, these ethics and morals that you have, and being able to create this scalable foundation where everybody in the company knows exactly what your expectations are and what will happen if they don't meet those expectations. And that's super important. So if you could give one piece of advice to someone who wants to scale, but maybe fears losing the culture that they have created, what would that advice be?

Aaron Kraai (27:05):
For me, it's people first. And I outwork everyone. That's it. People first and outwork everyone. No matter what it is. You can't expect people to do something if you haven't done it. Or again, how can I expect some of our C-Suite people to work 60 hours a week sometimes and I'm working 20 or at a golf course or whatever, right? No, that will never happen. If I expect 60 out of you, I'm going to be at 80. Right? I can guarantee you that. And so I think it's just part of it. People first, the infrastructure and everything else supports the people. And then as the owner and the founder and the face of it, you just have to outwork people. It's the respect that you owe them when you're expecting them to do over and above. How can you expect them to be at 120% if you're at 80%? And it just won't ever happen. It's not possible for me.

Sarina Richard (28:01):
Well, Aaron, thank you so much for joining us. You're so inspirational. Your work ethic that you've instilled not only in your family, but also in your business. It really shines through and even meeting people on your team, it's clear how much of an inspiration you are to everybody that is in your orb. So thank you so much for your time, spending time with me today.

Aaron Kraai (28:22):
Like I said, I'm humbled to even be sitting here, and there's a lot of really good people that do a lot of really good things at DPT. I'm such a small part of it, it's actually kind of humbling for sure. But thank you for having me. I Appreciate it.

Sarina Richard (28:41):
We appreciate your humility as well. Thank you, Aaron.

Aaron Kraai (28:45):
Thank you. I appreciate it. Thank you. Thank you.

Sarina Richard (28:48):
Thanks for listening to Therapy Matters. Presented by Raintree. Raintree Systems is the rehab therapy software of Choice Links to learn more about Raintree Systems and anything else mentioned on today's show are available in the show notes. To learn more, go to Therapymatterspodcast.com. Follow Therapy Matters on YouTube, Apple Podcasts, Spotify, and anywhere you listen to podcasts.