The secret of success and growth isn’t simply maintaining a narrow focus, says Charles Davidson, president of the 120-employee company, but rather developing business units that complement the other things your business does.
Managed Care of America is an amalgam of businesses that logged $85 million in revenue in 2005, all related to the health care industry. Several of them were started out of a confidence that the company could develop a better service than it could otherwise purchase or the recognition that it could bring in additional business for its existing product lines.
Smart Business spoke with this lawyer-turned-entrepreneur about how he turns business needs into new ventures and builds businesses for the long term.
Maintain an open-minded approach to business. We’ve expanded in what I consider nontraditional ways, but that’s been because we’ve been very open-minded about business opportunities and not had that narrow focus on doing one thing well process claims or do stop-loss insurance.
If we did only those things, we would still be a very small company and we would not have been able to grow the way we’ve grown.
We take a product that makes sense, that’s tangential to our existing business, and we say can we turn it into something else we can sell. That’s what we have been successful at, and that’s really what I would call the entrepreneurial side of us.
We have been very fortunate that we’ve had enough vision to seek business opportunities to develop things that come out of our existing business model that we can morph into a new business opportunity.
Build a business with the long-term in mind. If you listen to people on Wall Street, and I used to be a lawyer representing people on Wall Street, they have a very short-term view of how to run a business. Their first focus when they get into a business, particularly venture capital folks, is ‘What is my exit strategy?’ I love that phrase. ‘What is my exit strategy?’
We did not build this business for an exit strategy. We built the business with the thought process that we want the company to be here for the next 25 years. If it just so happens that we do something really well and someone comes along and wants to buy it, that’s great, but we’re not here to try to spend two years building something up and then flipping it.
We built it with the idea that we wanted to create value, create jobs and do well for our employees which was part of the reason that we built our Employee Stock Ownership Plan, so that every single employee, from the president to the janitor, participated in the well-being of the company. That had a dramatic effect on the profitability of the company. It gave everybody a sense of ownership. It gave everybody a sense of understanding that this isn’t just a job, this is something that I own a piece of.
On getting things done
It pays to do some things yourself. Why did we go into 20 different lines of business instead of just one? Each line of business that we went into, in one form or another, was tangential to something we were already doing, and it made sense to do it.
I’ll give you an example: Five years ago, there suddenly started appearing everywhere in the health care business small start-up companies that said, ‘Put your benefits on the Web, let us take your claims system, claims data, put it on the Web so people can see their claims on the Web.’ This was something typical that virtually everybody in the health care business did.
We looked at all the different vendors that were developing these things for people and felt pretty strongly that while there were some good products out there, everything was either a mile wide and an inch deep, or it might do one thing great an inch wide and a mile deep.
A million-and-a-half dollars and a year-and-a-half later, we had a product that we felt was better than anything in the marketplace, so we implemented the product, first with our groups on the Web, and tested it with our third-party administrator. Once we knew we had it working, we built it as a separate, standalone system.
On maintaining objectivity
Don’t fall in love. If you’re going to have the mentality of building multiple lines of business, one of the things that you can’t be confused about as an entrepreneur is that you don’t fall in love with a business, because it is just a business. If someone wants to buy a business for a fair price, you owe it to yourself and the shareholders to sell that business, because then you put your efforts and energies into something else.
Because if you have enough confidence and common sense and intelligence about what you’re doing, you should be able to be successful at those different things.
On finding clients
Look for ways to match your existing skills with new opportunities. There is a group of companies on the West Coast that are workers’ compensation third-party administrators which I got to know in a nonbusiness relationship.
I started giving them little bits of advice and I ended up on their board of directors. Those workers’ compensation TPAs, as I started spending time with them, I discovered there was little being done to manage claims in workers’ compensation compared to how we managed them on the health side.
I helped them marry some of the ancillary products we’ve developed at Managed Care of America into their workers’ compensation, and they’ve become very significant clients of ours.
Trust your people. You have to have the ability to say, ‘I’m not going to do it all myself.’ You need to be a strong leader and you need to be able to say, ‘I’m going to tell people what it is that I think needs to be done,’ and then you need to be strong enough, delegate and be hands off and let people make mistakes.
If you try to do it all yourself, the one thing you can guarantee is that you’re not going to be able to do it well. So with all these different lines of business we’ve created, we do give autonomy to people.
People make mistakes, but if you’re smart about who you bring in, if you’re smart about who you surround yourself with, more often than not, they’ll make the right decisions.
How to reach: Managed Care of America Inc., www.mcoa.com