Blood Money

Colleyville entrepreneur Hillary Strasner builds a lab company over 17 years and sells it as her oldest child enters high school. What’s next?

The deal spilled out onto a napkin at a table inside the Chili’s at Dallas Love Field airport. Hillary Strasner, just a few years out of Texas Tech, had gone to work for a health care lab in Tyler, running operations and sales, and was commuting to North Texas on weekends. Joe Bowman, who owned the lab with two partners, wasn’t happy with the partnership. “They each had a third of the partnership,” Strasner says. “It doesn’t work. Somebody has to be chief.”

So Strasner presented a proposal: Bowman would sell his interests in labs he owned in Lubbock and Tyler and go into partnership with Strasner on a lab the company had recently opened without a client in Fort Worth. Strasner would buy into the company for $100,000 on a note Bowman would carry, and Strasner would pay it down from her salary.

Strasner, whom Bowman had employed as a part-time phlebotomist while she was studying at Tech, would run the company alongside the lab manager Bowman had hired to run the Fort Worth lab. Bowman would own 51 percent of the company, and Strasner 49.

And the kicker: “Joe could retire,” Strasner says. “I was 25 when we went into partnership.” That was 1999.

Birth of a Dream ProLab, which collected, transported and processed lab samples around the clock to provide fast diagnostic information for nursing homes, was born. “Within five months, we were rocking and rolling,” Strasner says. “Joe was mentoring me. I didn’t know the lab side,” but Holly Shields, their Fort Worth lab manager, knew it.

Bowman sold a stake from his interest to Shields. Their partnership with Bowman, however, was short-lived. He died of a heart attack on a golf course on July 1, 2000. “At that point, it was up to Holly and me to make it work, and we did,” Strasner says.

Over 17 years, Strasner and Shields grew the company to provide lab services at 15 locations in 11 states including Texas, Oklahoma, Arkansas, Mississippi, Kansas, Alabama, Georgia, Tennessee, Kentucky, Louisiana and Ohio, serving 50,000 patients daily at 500 nursing facilities. Sales rose to $28 million annually, before dropping with Medicare cuts. Then the opportunity to sell came in June last year, and Strasner, Shields and other minority partners bit, selling the company for undisclosed terms to Schryver Medical. Schryver billed the purchase as augmenting its presence in Texas, where the company had launched service six months earlier.

“ProLab provides real-time online access to lab results, and its laboratories are…accredited and equipped with state-of-the-art instruments and information systems,” Schryver said.

Taking a Break Strasner, who turned 43 in February, has taken a months-long break to refresh. She’s doing consulting work, looking at opportunities for a new business startup, continuing to serve on the board of the Entrepreneurs’ Organization Fort Worth chapter, and agreed to come on board TCU’s Neeley School of Business as a TCU Entrepreneur in Residence.

Most importantly, she’s been able to spend time with her three children, the oldest of whom entered high school in the fall. “I’ve been a full-time mom,” she says. “The refresher’s been great. It’s been great to relax.”

Before she sold ProLab, Strasner, who lives in Colleyville, had her workday down to tight increments:
6 a.m.: Get up with her three children.
7 a.m.: Drive them to school.
8:30 a.m.: Back at home, work out for an hour in her in-home gym.
10 a.m.: Be at work.
3:30-4 p.m.: Go home.

“Homework, dinner, cheerleading, football, baseball, you name it,” she says. Then bedtime for the kids and 30-45 minutes with her husband, Michael Strasner, a business coach. “And somewhere in the middle of it, you try to find time for yourself. And it can be done. Everything I do is efficient.”

Before Strasner went into business, she saw herself headed for dance. She grew up in Allen; her father was a Texas Instruments executive, and her mother worked for a dental agency before coming on board ProLab to work in client service. Strasner went to high school in Dallas for dance and secured scholarship offers from several colleges, including a dance scholarship to Texas Tech.

Strasner says she determined quickly in college that, while she appreciated the art, a livelihood in dance would be difficult.

“Whatever I do, I want to be able to support myself for the rest of my life,” she says. “And as a dancer, everything you do has to be perfect. If it isn’t perfect, you do it again. The older I’ve gotten, the less I’m a perfectionist. With marriage and the kids, you learn to let that go in some respects.”

While in college, Strasner dropped by to pick up a roommate who was working at Joe Bowman’s lab in Lubbock and met Bowman for the first time.

“He had this big personality,” Strasner recalls. “He asked me if I had a job. Well yes, waiting tables. Within a week, he was training me to be a phlebotomist,” and within a few weeks, she was drawing blood from patients. “I was very good at it. I really enjoyed it, which made me very good at it.”

Strasner says she drew inspiration from Bowman’s passion for the elderly and worked for him until she graduated from college. “He was passionate about nursing homes,” she says. “These people are so full of life, still.”

After college, Strasner got a job working for Andersen Consulting in Dallas, but says she didn’t enjoy working for other bosses. She stayed in touch with Bowman and, during one phone conversation, he offered her the job of working at a lab – his second, recently-opened location – in Tyler. At 23, Strasner jumped on the opportunity, something she counsels young adults on when she gets the chance.

Why Not? “Why wouldn’t you?” says Strasner, who recently helped a 25-year-old acquaintance analyze an opportunity that presented the chance to own. “What if it doesn’t work? You’re a fool if you’re young and you don’t step in and take advantage of it. Plan B is you’re still doing what you’re doing today.”

Strasner joined the company in 1997 at the Tyler lab. It grew quickly to 30 employees. Within months, however, Bowman’s dissatisfaction with his partnership surfaced.
Strasner recognized the opportunity in Fort Worth, where the company had launched a lab off of Loop 820 with no clients and little business. “Nothing happened” after the company opened the lab, Strasner says.

In August 1999, she and Bowman went into partnership in the Fort Worth lab, with Bowman selling his interest in the others. Strasner estimates it took less than a year to pay off her $100,000 note to Bowman.

Eight months in, they drew Shields, whom Bowman had known as a lab manager at a hospital in Lubbock before hiring her to come to Fort Worth, into the partnership and lowered his ownership stake in the process. “She knew the lab side,” Strasner says. “If any employee called in [sick or absent], I could fill in any slot except the lab.”

Know Your Partner Strasner calls the first few years after Bowman’s death “a hard couple of years. We had competitors who were sure we were going out of business.”

But the partnership between Strasner and Shields eventually flourished, Strasner says, because the two had complementing skillsets and were at the same points in their lives. Shields’ side of the business required licensing and strong background in compliance.

“We both had specialties in different things,” Strasner says. “She knew how to make the lab successful. I knew operations, sales, financials. It really worked well that we focused on the pieces of the business that we knew. If I was to ever go into business and have a partner again, it would almost need to replicate what Holly and I had. We avoided conflict because she had her area.”

Both were also newlywed and having children. “We had a different kind of relationship than most partners do,” Strasner says.

Major competitors – other labs and hospitals – weren’t interested in the service-intensive nursing home business, leaving that to players like ProLab.

“Hospitals didn’t want our stuff, and major labs don’t want the nursing home business,” Strasner said. Physicians at nursing homes need fast turnarounds for quick diagnostic capability. Seventy-five percent of ProLab’s employees – more than 200 when Schryver bought the company – had direct contact with patients, going into nursing homes, interacting with patients, and collecting specimens.

The major labs “take two to three days to turn around” specimens,” Strasner says. “The whole service model was not something [the big labs] wanted.”

Following the inspiration of Bowman, Strasner and Shields built a culture with care and commitment at the core, Strasner says. That required attentive employees. “These patients are our moms, our grandparents,” Strasner says.

Lessons Learned Lessons learned came quickly. “Always expect the unexpected,” Strasner says she learned. In 2007, the company opened a lab in Mississippi, its seventh location companywide. Strasner did her due diligence and saw a strong market, but she miscalculated how strong demand would be.

“I did all the stuff I’d done before,” Strasner says. “Grass roots research, cold-calling, [asking] who’s your lab?”

She planned to secure accounts for 30 facilities within the first year. “We had 30 facilities within a couple of months,” Strasner says. “This was the farthest away [from Fort Worth] and had the least competition. I overestimated the amount of competition we had.”

On top of that, typical lengths of time in Medicare’s reimbursement for services – 30 days to six months in a new location – meant a drain on the company’s cash. ProLab had a $2 million credit line, but “we drained the credit line,” Strasner says. “We ended up outstripping everything we had.”

Medicare reimbursements were shrinking, making efficiency critical, Strasner says. “We knew the industry was going to be growing, but reimbursement was shrinking.”

The company also maintained a simple accounting system that meant it couldn’t easily determine how its individual locations were performing. “We had all the money come into one place, and all the expense,” she says. “We didn’t have individual location profit and loss centers.”

Strasner says she was too narrowly focused on revenue goals. “We had revenue goals; I was so focused on the next revenue goal, and the next revenue goal after that, I didn’t step back and [determine] where’s the cash flow to pay for all this growth?” she says. “It was a huge mistake.”

ProLab opened a lab in Alabama soon after the Mississippi launch, which further drained cash.

At one point, ProLab’s accountant warned the company would be out of business within three months, she says. “Our bank demanded proof we could handle credit. We had to go to the bank and plead for time. They put us on a quarterly note. We had to come in every three months and prove we could handle it.”

Strasner says she let go of the company’s chief financial officer and took control of the finances. She pared expense, stopped pursuing new accounts, and set out to determine how well individual markets and clients were performing. “Within three months, we were back to break even,” she says.

The company, now pivoted to focus on profitability goals over revenue goals, shut down some of its labs. It also started flying lab specimens to two central locations, paring the full lab expense in multiple states. At its peak, ProLab had 380 employees and the 15 locations in 11 states. Five of the locations were in Texas and 10 outside the state. At the peak, ProLab had nine labs. When it sold to Schryver, ProLab had the two central labs.

ProLab ended up giving up some clients, based on the formation of a process for evaluating profitability, Strasner says. “If a client isn’t profitable, we can’t service them,” she said.
ProLab used Southwest Airlines to fly specimens. It even built expansion strategy for new markets around where Southwest flies, Strasner says.

“We learned to fly specimens around and still achieve same-day turnaround,” she says. “Southwest was always on time, always dependable, and always in every market. We were making business decisions in part on where Southwest was, where they fly, how many stops.”

The company also learned to pay for projected growth organically, rather than through debt, Strasner says. “If we didn’t have the finances, then we didn’t expand. We didn’t want to owe the bank money again.”

The Mississippi chapter in ProLab’s history “was a lesson for Mississippi, but it was a lesson that changed our whole company,” Strasner says.

Nearest Exit: No The matter of when to potentially exit the company developed over time, Strasner says. At the end, she held 53 percent of the company, with four partners, including Shields, owning the remainder. “When we started the business, the goal was to be successful,” with no real exit strategy put into place at the start, Strasner says. “We were just focused on doing the best job we could.”

Schryver, based in Denver, approached ProLab about selling, and it wasn’t the first potential buyer to call on ProLab, Strasner says. “We had multiple offers over the years,” she says. “It was the right time for the right reasons.”

Schryver needed a flagship lab, and Strasner says she’d been interested in looking to sell the company once her oldest child entered high school.

“They kept most of our employees; we were able to be the flagship lab,” she says. “We were able to see what’s next for the company. That helped, knowing [employees] would be taken care of. It was a win-win all the way around.”

Both she and Shields have moved on. Strasner is now thinking about the next business she’ll start. “I don’t know if I was meant to be an entrepreneur or if I just fell into it, but I loved it,” she says.

She’s interested in coaching and consulting women in business. “The next business I’m going to create will hit entrepreneurial strategy, business management,” she says. “If I had a vision to focus my next career on, it would probably be supporting women to start and grow their own business.

“We need more women entrepreneurs,” Strasner adds. “I know what women balance and the challenges they face on a daily basis. Who better to understand what it takes to juggle it all than a woman who has done it for 20 years?”

There’s no chance she’s creating another healthcare business, Strasner says.

“I’m 100 percent, I am not going back into health care,” she says. “A thousand percent, it’s a hard industry. It’s too unstable right now. From a profit standpoint and a cash flow standpoint, it’s unstable. My next business will be one I control and is not based on who’s president.”