BoneChat call #15 - Blake Helm (Artelon) - How to build a sales force in a startup.

Okay. Uh, we are live. Okay, Bone Chatters, we are going to have a discussion about the hardest thing to do by far in an orthopedic startup company. That is building a sales force that works with a reasonable budget. And the discussion is going to be led by Blake Helm. He's the Vice President of Sales for Ardalan. So I'm just going to hand the mic over to Blake, and I want this to be very conversational. So raise your hand, ask questions, interrupt.

Thanks, Blake. Thanks, Tiger. Um, I'm actually not the VP of Sales. I'm just VP of Sales for the, the West, uh, Western United States. So I don't want to say I'm somebody I'm not, but I appreciate it. It's an honor to be with you guys and to be part of this, and I'm honored and thrilled that Tiger asked me to do this, share some ideas. This is pretty conversational. I'm going to kind of go through what I look at as the landscape now and kind of my approach. And, you know, there's no right or wrong way, and I may be doing a lot of things the wrong way.. But it seems to be working pretty good, um, in my career. So, uh, first off, a little background. Um, I got into this business in 1992. It's actually, uh, Orthopedic Academy was in San Francisco. That was my first academy. Um, I was working for a distributor in Colorado here for a while. Um, and actually my brother Corey joined, joined me with that for a while, and then I went to work for Striker Endo. And was kind of charged with getting them in the world of sports medicine products. So I flew all over the world, met with a lot of different doctors on ideas they had and to try to develop ACL trays and stuff like that. And then my brother and I started our own distributorship in 1996, and we did that for a long time. We were one of the, one of the highest performing Arthrex distributors in the country for a long time. Had a lot of different product lines, you know, worked with a lot of different manufacturers. So, you know, through that lens, it kind of helped shape the way I, the way I treat what I'm doing now. Anyway, we kind of, we sold out of the Arthrex piece and kind of fell back into distribution. I decided I wanted to do something different. So Corey stayed, I left, went to Lipogems, and I was the VP of sales for them, a regenerative medicine company. They were based in Milan, Italy, and when COVID hit, that was pretty much the end of that. They kind of shut everything down for a while. So I got out of the way. I was doing some consulting and I ran into an old competitor of mine and he was with a company called Artelon. And I said, what are you doing? And he told me and I went home and I researched it and I called him and I said, wait a minute, man, this seems way too good to be true. Usually it's not when we run into these products. And he said, no, that this, this is a lightning in a bottle. And so, um, he hired, he hired me as a consultant originally because they didn't have the money, um, to hire me. So I was helping, helping them find distributors, um, in the West and kind of working with him on that. And then they came to me and, and, um, about 3 and a half years ago and said, we want you to run the West. And so I came on board full-time with them. I think I was like maybe the 6th or 7th employee at Arlon, which is great. I think we're over 50 now. It's been probably one of the most exciting things I've been a part of in orthopedics, and that's saying something after being an Arthrex distributor. We had a lot of exciting, fun products with, with that. But, so the distribution landscape, you know, it's just very, very different than when, when Corey and I first started and, probably what a lot of you on the call were used to. You know, we had a lot of big distributors with scale that were truly independent and, you know, the money was good and a lot of people were coming out with great products and, you know, we were blown and going and we had a lot of fun doing that. And I think now it's just, it's very, very different. Obviously Arthrex distributors, you know, talking in that space, they're not independent. They work for Arthrex. Smith-Nephews direct. You know, all the big boys are all direct. So it's really left kind of a vacuum and there's a big void in my opinion. And if someone's really good and smart, they could start a very large distributorship and absolutely crush it. 'Cause all of us are looking for that guy. And what we're left with now, I think, is I call it the spine model. Back in the, and it's still, I think, a lot of the early days of spine when there's a lot of innovation, there's a lot of companies you know, these reps would say, I'm a distributor, and they'd have 4 doctors they worked with, and they'd have 12 product lines. And so, you know, we've always joked that that's kind of the Spine distribution model. But you see that a lot today, and you see it in, in foot and ankle, you see it in distal extremities. And you're kind of seeing it everywhere where there's companies, you know, that, that don't have the, the money to hire a direct sales force who are looking for true independent distributors. And so you get a lot of B and C level guys like the old, you know, Kornay Helm Surgical. Those don't exist anymore. They just, they're not out there where you have 20, 30 high-powered sales reps who bring a lot of value to the operating room and can sell those. They're not out there. So, you know, I think Arthrex has really changed the face of distribution. Especially in the, in, you know, not only in sports medicine because they do everything now, but, you know, they have $50,000 a year box openers and they want a rep in every operating room. And all they're doing is playing defense. They're not selling. They're not bringing really any value to the OR. And, you know, quite honestly, that's a big reason we wanted to get out because we had very high, you know, high-powered reps who were very, very good, brought a lot of value to the OR. They made a lot of money and Arthrex didn't want anybody making any money. And so they would rather have a rep in every room not making much money, but keeping the other competitive reps out of those rooms. And so I think a lot of these companies have, have kind of gone to that offense to a certain degree. And so you're left with a lot of, of reps who were decent reps who decided they're now distributors and they're picking up some product lines and they've got about 4 or 5 doctors they work with who are, who are their Huckleberrys, and, and they know that those guys will try anything. And, and they're forced, they're forced to really to be on the tile every day. So they're all player coaches. None of them are really on the business. They're all in it. And so they're hard to get a hold of. They're hard to pin down. They're hard to, to, you know, get a meeting with because these guys have to live and die by how many cases a day they do. And a lot of that in the foot and ankle, you know, Arlon, we've got a full body indication, but we're really focused on foot and ankle. And so, you know, when we're looking for these guys, it's hard because they're so focused on how many cases they can do because that's the only way they make money. There's no disposable revenue for them. So there's not like, you know, back when we were distributors, you'd sell shaver blades and pump tubing and RF and you'd get them stocking suture anchors and suture and you know, you just watch the orders flow in every month and you didn't have to be standing on the tile to, to see that, you know, revenue. Um, these guys now, a lot of these distributors really don't have that. And there's not a lot of companies out there independent that bring that type of a product, right? So, so they have to be, um, in the OR. So you, you've got a lot of those guys. Um, you know, and like I said, I think that, I think the industry's ripe for a, for a big distributor. The problem is The cost of employees is really high, as everybody knows, and especially on the West Coast, right? I mean, you've got Stryker and ZB will pay these kids $180 grand to teach them the business. Well, independent distributors just can't do that. And so they're forced to hire. You get what you pay for, right? You're hiring these kids out of medical sales college, which I don't think is the greatest route, but you're hiring friends of a friend or referrals or I'll hire you. I'm, you know, I can pay you $80 grand and that's it. And And so, you know, now they have these guys where the distributor is the rainmaker and the reps are just covering the cases and the rain that the distributor brings in. But those guys end up plateauing, you know, and I've had a lot of meetings and discussions with some of my groups, you know, that I've hired and I end up being a coach to them because a lot of these guys are obviously a lot younger than me. But they're new to it and they're really sales reps that are now quote unquote distributors. And so that's what we have to deal with. That's the landscape now. Um, you know, like I said, there just is not a lot of really sharp, good business people who have an office and, uh, a warehouse and maybe a cadaver lab and a meeting room. There's not a lot of those guys out there, and the ones that are out there are carrying 25 product lines. And so now you're fighting for any kind of their time you can get. And so that's really where, you know, managing the distribution is more important almost than who you hire, because a lot of who you hire is going to be very similar. Um, and you can find, you know, I think part of, of being a good, um, you know, regional VP like myself is, is finding those diamonds in the rough. And Corey and I were very good at hiring reps, and, but we would develop those guys. And we would help them become really, really successful reps. And I think that's what—

so Blake, let me stop you there. So you find a, a young, person that's ambitious and they're on the ball. So how, what do you pay them and how long before they're paying for themselves?

Well, if you, if I'm a distributor, you mean, or for me?

For, for you?

Well, for me. So, you know, they're, they're straight 1099s. I'll sign a contract with them and we can talk about, you know, varying degrees of do you do geography, do you do doctor-specific. I've done both. You know, we have areas where they're overlapping where we have distributors. I try not to do that. Um, I'm kind of a freak about, about having definitive, uh, areas. Um, but yeah, we pay them a commission and for Depends on the company, you know, for Artelon, they don't have a lot of cost of doing business with us. We'll give them the product they need. We'll give them the training. We'll give them samples. We do med ed events where we'll pay for the surgeons. They just have to get their reps there. So we just pay them a flat commission and some of it's tiered depending on, again, where the area is, like Montana, you know, it's 8 hours between cities. So I'll pay that guy a flat. So it's more expensive for him to run the business. So I'll, instead of doing a, you know, percentage plus a percentage based on if they hit their quarterly number. I'll just pay them a flat rate that's a little bit higher, and then they pay their reps, right? And so from there, I think Tiger, you had a question. A lot of, a lot of these are, are very different. They were different when I was a distributor. You know, we had W-2s, so our reps worked for us. They're a lot more expensive that way, but you have total control over them. You can get a non-compete signed with them. You can get non-solicitation signed with them and with your manufacturer, which saved us on a number of occasions where they, you know, guys like me can't come in and hire all your reps. That's a big fear for these guys. But a lot of them aren't that sophisticated and they will just hire reps as 1099s. So there's, you know, and that kind of goes into with what I'm talking about in terms of distribution. Some of these guys who call themselves a distributor, well, you know, you talk to them, well, where's your coverage? Who do you have in Modesto? Who do you have in, you know, You know, Miranda or Rinda, you know, who's here? Well, I've got an independent guy here and I've got a 1099 guy there. And I'm like, okay, well, tell me more about these guys. What are they selling? What else are they selling outside of what you're letting them sell? And so then you start peeling off the layers and you realize that a lot of these guys have kind of a facade of a sales force, if you would. You know, it's just a bunch of 1099s. And a lot of these 1099s will, they don't want to be distributors, so they'll let somebody else sign the contract. But they'll go to the Ardelon distributor and they'll go to the, you know, Treece distributor or whatever, and, you know, Medline distributor and say, hey, I'll sell all this for you in Butte, Montana, you know, but I'm just an independent guy. And so each one of those distributors now says, oh, I've got a rep in Butte. Which is true, but they're not really their rep. They're more of an independent guy. But that's the landscape, and, and, and that's what I've realized. That's what you deal with, right? So most of these guys are not W-2s that work for a distributor. The distributors themselves are 1099s of the manufacturer. And then again, their cost of doing business with that manufacturer varies, depends on the product. I mean, if they're If they're a total joint distributor that, you know, Corey and I used to have to pay consignment fees on, you know, we paid $30,000 a month just to hold on to the manufacturer's implants, which was insane. And we had to buy our own, buy our own instruments, which was insane. That's all changed. And no, these distributors really don't do that anymore. So that whole pendulum has swung to where everyone's fighting for the same distributor. So you have to make it really easy for those guys. You have to make it very cost-effective for those guys. And so, um, you know, that's bringing a lot of the cost back onto the manufacturer, but that's kind of the way, the way it's swung. Um, so it's, you know, I'm just looking through some of my notes. I think it's hard to, it's hard to hold distributors to a quota because they have they don't really care. They're going to make a certain amount of money. They're going to sell when they can sell. They're going to stand on the tile. So, you know, it's not— it's the carrot or the stick. I think it's more of the carrot. My style personally is more of the carrot. You know, Corey and I saw a lot of how to do this and how not to do it with all the different manufacturers. At one point we had 12, 13 manufacturers we represented. And so we saw a lot of different ways that the manufacturers would treat their distributors. And we saw ways that were very helpful for us. And there was ways where we would say, just give us a number and we don't want you. We don't want you in our territory at all. We don't need you because they would do nothing but cause harm. And so I think that, you know, from my approach with Artelon and how I approach hiring distributors, I approach a very, a very, you know, symbiotic, if you will, just, partnership. You know, I call them distributor partners for a reason. And I tell my team, my regional guys that work for me, these are our partners. These are not guys that we're going to boss around. They are our partners. We're in this together. If they're making money, we're making money. If the doctor's happy, the patient's happy, we— everybody's happy. And I've just lived my career that way. And I'm very sensitive to that when I deal with distributors. And so, you know, when I'm out there talking, trying to figure out, you know, who's good and who's not, getting to know them and what are their values and how do they treat their reps, how do they treat their business is very important to me because a lot of these guys will just grab territory and they just want to grab product lines. And then, you know, they'll tell you what you want to hear. And the 6 months later, they haven't grown and they keep telling you what you want to hear. And you can't be afraid to say, you know, we need to make a move. We need to go a different direction. Um, so one of the things, you know, in terms of, of how do you find these guys, a lot of it's networking. A lot of it, I've just been doing this a long time and I'll call people I know, hey, who do you know? And just the normal networking. I've recently started, um, in the last probably 2 years where I get to know the other AVPs of the companies that don't compete with me. And we compare notes. I was just on a call this morning for an hour and a half with, uh, with the vice president of sales for a startup, and we don't compete, but we want to share ideas, we want to share resources. We could do labs together, we could share the cost of labs, maybe doing some, some medical education events, at least, you know, regionally in the West. But more importantly, it's like, you know, hey, who do you got in Sacramento? Tell me what he's all about. You know, well, who do you have in Phoenix? Well, here's who I have. Well, I'm looking at hiring him. Should I hire him? Maybe. Yeah. Yes or no? Yes. But here's what I'd look out for. So you learn a lot from these guys. I was doing a lot of that with Osseo. Those guys are— a lot of those guys are friends of mine and work great. And now they started getting into my kitchen a little bit and they're trying to sell, sell things where I don't want them selling things. So we don't, we don't play too well in the sandbox anymore. Still great friends of mine. And I love their product and I love where they're going. But you got to be careful because, you know, everyone's out to grow everyone's business, right? And they'll use, they'll leverage me and my teams to get what they want. So you got to be a little careful with that. But I think it's very important to know your competitors. Obviously, that's business 101, but knowing who aren't, you know, who's out there that's doing the same thing. And, and we all talk, and I'm trying to teach my regional guys to start talking, keeping your ears open. Um, you know, because you're always looking down the road. If this guy doesn't work out, who are we going to backfill it with? If we got to fire him, who are we going to backfill with? And so we're always planning, um, in that direction.

So, so let me, let me, let me kick it off with a question. So I mean, you're— Artilon is killing it. You guys are growing 50% a year and you're, you're doing really, really well. But there's about 4 or 5 startup founders here on the call and they have, they don't have sales yet or early sales. So how do you start from scratch? So you're, you're selling product to, you know, spotty here or there. You've got your early surgeons. But, and now you've got a scale, you know, you've got a surgeon interested in your product in Bozeman. I mean, how do you, what do you do? What are the mechanics?

Yeah, I think it's, it's, it's interesting. It's a good question, you know, because, I've seen it from both sides. When I first joined Arlon, I mean, there was nothing going on in the West. And I'll give credit to Mark Wiltshire, who's our VP of sales, who we used to compete. He used to be the Smith-Nephew rep in Vail. So we would just go back and forth, but we always, had a nice mutual respect, and he was one of the few competitors I really liked. Um, I'm not, you know, normally like mean to my competitors, but I don't really hang out with them either. But Mark, I liked. And so I'll give him credit. He, he put together a sales team, you know, me included, that— and I'm a little bit biased, obviously, but again, I've seen a lot of, and I know a lot of regional and AVPs I would put us against anybody in the country, and that includes the big boys. And he, you know, it's a lot of ex-Smith and Nephew guys and ex-Arthrex guys. And, and obviously there's an equity piece for us. We're in this thing for, you know, the, the exit more than we are the salary. I mean, we could all be making probably a lot more money doing other things, but he, he sold the dream and he, and we all saw the product and we see what's going to happen to this company. We want to be part of it.. And so I think if you've got a, a product like that, where you can build kind of a dream team where it's more of what's going to happen, you know, I can't pay a ton now, but you should do pretty well when we have an exit. That's a different approach. But, you know, so you got to find the right, I really believe you got to find the right regional guys. A lot of these regional guys are just, they're, They're kind of retread reps who weren't that great of reps, and they're even worse regional guys, and they don't treat their distributors right, and these guys don't want to deal with them. You know, so it's hard to find, and not to toot my own horn, but it's hard to find guys that have been around a long time that know a lot of people that know how distributors want to be treated. And I know, I still think like one. So I know how they need to be treated. I can be tough, but I can be fair. And I am fair, but I'm very honest. And I think you have to be really honest with these guys because so many companies aren't honest. And they'll, you know, they tell the distributor what they want to hear. Meanwhile, that's not what's going on, right? So I believe in honesty. Um, I want to answer your question though, Tiger. I think, and I'm watching another company, you guys probably all know who it is, but they kind of, and there's a, it's a way of doing it, but it's, I call it the top-down approach. So if you've got a product where you've got 10 or 12 either consulting or KOLs who are all in on this product, whether they're a part, you know, part of the consulting agreement or not, they just, you know, I like your new product, it's groundbreaker. I just say, who do you want to be your rep? And that's where I start. And I'll get a hold of that rep and, and I'll go from there. And if they're not interested or I don't like them or whatever, I'll, who else do you know? Who else is good in your area? And you just start going from there. So having the doc tell you who they like is pretty big because as we all know, you know, these guys aren't going to do business with people they don't like, right? If they like you, they want you in their room and everybody's happy, right? So the top-down approach is great. I think it's limited to some extent, but to get going, with a startup, that's what I would do. I would go to our key opinion leaders and I would ask those guys in their area, who's strong? Who do you like? Not always does it work out. A lot of those guys can't do it or they have a competing line or whatever, but at least it gives you a starting point because you also need to find someone who's going to cover those cases, right? So when you're in the true startup mode where you don't have much out there, you've got to have case coverage guys. So maybe you're paying a Zimmer guy,, on the side to cover cases. And Zimmer, a lot of Zimmer guys can do that. Some can't. Um, so that's probably where I'd, I'd go on that one.

Good.

But in terms of my approach, so that, you know, that's kind of landscape. We can talk about it if you guys have questions. That's just from my viewpoint. You know, again, my approach is, um, I'm going, I'm going, I'm calling previous relationships, I'm calling my buddies, I'm calling other distributors. I'm calling, you know, if I've got a good distributor, hey, who sells Medline in Utah? You know, who's— is he good in Utah? You know, who's selling, um, you know, whatever in Idaho or in Southern California? And so to get the opinion of the, of the distributors is good too. But networking with the other regionals, that's a big one. Um, product mix for who I'm looking at is very important to me.. Because I've learned all a lot of lessons the hard way, you know, I mean, there's certain products that even if it's a powerhouse distributor with, with that's, you know, kind of an old school that's got a brick and mortar and a big lab and they've got 30 reps. Most of those guys are spine or total joint guys, and that's all they care about. They want to pick up other lines and they like to tell their reps, oh, we're going to pick up all these other. They don't ever do anything with them. So those guys, you know, I don't want them. I'd rather have the, the smaller, nimble guys that are excited, that are forward-thinking, that will work with me in terms of, you know, where are you going, how are you going to get there. And, and, you know, I've turned into— a lot of times I've just turned into a coach, um, because, you know, I'll build a good relationship with my distributors and they'll listen to me. And we'll work together. And, you know, they'll, they'll implement some of the strategies that we come up collaboratively with. So I never want to get into the situation where I'm telling anyone what to do. This is not my company. It's your company. It's your distributorship. They're your reps. Because there's nothing more I hated when, when distributors or manufacturers would come in and tell me how to run my business or talk to my reps without talking to me or ride with them. I mean, it was just a no-no. Right. And so I'm very, very sensitive to that. I treat these guys as a true partner. If I'm making money, that they're making money, I'll make money and I'll keep my job. And if you're doing your job, you can stay my distributor. And so, you know, let's— how are we going to get this done? I'm a big believer in high energy and excitement and getting their reps excited and being very hands-on with the reps. But I also, I clear that with the distributor. Is it okay if I, if I work with your reps? And almost all of them say absolutely, because they don't have time. They're running around covering cases, right? So they're welcoming that. But I'm very, very sensitive to that because I don't ever want, you know, I never wanted anybody calling my reps ever. I mean, that just was, it would send me through the roof and same with Corey. So, so I'm very sensitive to that. I think coming from where I came from, I have a much different perspective. I don't come from the corporate., you know, growth rate and sending them spreadsheets. And, you know, that's not, that's not me. I'm way more interpersonal. Um, I'm going to give you a number. I'm going to help you figure out how to target your surgeons. And then we're going to come together and we're going to build a plan to get those guys. And every one of those docs might be a little different. Um, but we're going to personalize a plan. And if it's okay with you, I'm going to work with, you know, John here, and I'm going to work with Sally over here. I'm going to work directly with them. I'm going to tell you what I'm doing. Never going to do anything without telling you. And so I'm probably over the top sensitive to that because most guys aren't. But I think if you look at, you know, at least the Western US now with Artelon, I started with nothing. I've turned over a bunch of them already, guys that I've hired. I'm on my third distributor in Vegas and probably want a fourth, you know, so there's, there's certain markets that are just tough., and, you know, you, you get the best of what you can get and then you have to develop them. Um, and so I, I think that my team is very, uh, they're very collaborative. They'll, they know it. A lot of them know each other and, and we'll work together and we see each other at events and met at events and stuff. And, and so I'm just, I'm very into this whole partnership. I'm accessible. Your reps can call me. Um, you can call me. There's not a lot of boundaries. I don't, you know, I get calls at 10:00 at night. I don't like them at my age, but, you know, whatever, I deal with it. I don't ever want to throw a wet blanket on these guys and their excitement to sell my product because at the end of the day, that's what we're here to do.

Okay, Blake, we got questions coming in. Kyle first and then Patrick.

Hey, Blake, question for you regarding kind of uptake of your product line and reluctance for reps to engage take things to their doctors and leverage their relationships with the looming worry that you're gonna have an exit and then the product's gonna get yanked away and they will have ultimately done a bunch of work and offered their relationships up to be just snatched away by somebody larger.

You mean, are you, you saying that I leverage that distributor's relationships and then I end up having to fire him?

No. I mean, you convince someone in Vegas to pick up your product line because they have key relationships with a couple of core doctors that have, attractive influence and volume. And because you're trying to drive sales.

Yeah.

But the independent distributor or independent person that happens to have business with those docs that they've forged over time is reluctant to engage with your product because it'll get taken out of their hands the moment you exit to a strategic and they won't have access to it.

Yeah, that's, that's really hard, Kyle. It's, it is. And it's interesting though, because that was a big concern of mine, um, when I started with Art Along. I said, now I hope we have a pool of options or grants or something that we can offer these distributors. Because, you know, the last probably 10 years of, of being a distributor, we wouldn't deal with a company unless we got stock. Because I'm going to, I'm going to create a market for you overnight. And I get it, you're going to sell, but I want a golden parachute on the way out. Well, Blake, I think the big difference is, is we, we were the 800-pound gorilla in, in, in Colorado. So we could negotiate that. If you're just dealing with these independent guys across the country, they don't have any power. So there's really— you don't really need to give them any stock. No, no, they don't., but you're right. And my, but my point is what's interesting is very few distributors have ever voiced that as a concern because you gotta keep in mind these guys are young. They still think like reps. They still act like reps. They don't think like business people and they don't really, they're not on top of the business. They're just in it every day. And so, I mean, I, I'm shocked how many times that I, I'll send a contract and they have not one question. Wow. And they don't have a question on any of the wording in the contract, which is just shock— and not that it's a bad con— I think it's a very good contract, but gosh, man, you got to have at least some questions, right? Um, and I'm also shocked to how very little time someone said, you know, what's going to happen now? What happens when you guys go away? So two things. One is, um, I think there should always be a clause in there if you can get the board to agree to it, that there's a kind of a trailing— there's a buyout, so to speak. And, you know, for instance, like for every year you've been a distributor, you get a month of average commission, or, you know, you get 90 days' worth of commission based on the previous 90 days prior to change of control. There's got to be something. And because I've found even if it's just little, It's something. And I've even had, you know, I've even had some, I've got some savvy guys that have been around a long time and they come after, obviously they're looking at the contract, they're looking at non-compete and non-solicitation and mutual indemnification. If they come back to me with those 3 things, I know right away they know what they're talking about and they know how to run a good business, right? Then they'll come back and say, wow, we appreciate there is a, somewhat of a buyout, can we talk about that? Because you guys are going to sell someday. So, I think, Kyle, if you can get your board to put something in these contracts. Now, the other thing too is, and I pushed really hard on this with Artelon, you know, if we ever do another raise, there are certain groups I want to be able to offer equity to or offer the ability to buy equity. And, you know, I don't know what ever— know what really happened to that because it didn't happen. But I was pushing hard. And I think part of the pushback from the board was like, you know, if we do this for him, we got to do it for her and everybody else. And, and I, you know, I understand that. But there's— and not every, not every distributor, number one, has the money to buy equity, but they're not interested. Like, they're just— they're so focused on making money every day, and they just don't see that far ahead. But it is a great question, but I'm shocked how little it comes up. Interesting.

Okay, Patrick, Frank, and then Stu.

Hey, Blake.

Great points here. I echo a lot of what you said about, you know, you have mostly carrots and, you know, that's generally the way to approach it. From my perspective, you have sort of one stick. Usually you can, you can pull the, you can pull the contract. And if short of that, you know, it's, it's counterproductive to sort of get super negative or, or, you know, talking down to any of these distributors. It just, it sets the relationship on a bad path. My question is, and this could really go for anyone, do you have any proven tactics, strategies, whatever approaches when my experience is that a lot of distributors they run their business on almost like a series of quarterly events on when the guy from corporate comes into town and they can sort of do things great for that week, right? They organize a couple of handful of things that things go well. Guy from corporate comes into town, vibes are good. When everybody leaves, there's this business that comes out of that, but then there's sort of like a 3-month gap until that whole process sort of starts up again. So I'm curious if you or anyone has, you know, tactics on how to, best get a lot of these independent guys to be selling in between those periods of time? Those, those sort of big, you know, when the circus comes to town, that's great, but how to get them active or more active in between that sort of like those, that wave of, you know, you probably know what I'm talking about.

Yeah, we have this discussion all the time with my regional. I've talked every Monday with my regional guys and we talk about it all the time and we're always trying to figure out ways to You know, number one, compress the time from doctor first meeting to first case, right? Like, that's the time we got to compress that. Um, because to your point, you come into town, you meet with these guys, you get them really excited because we can sell better than any of my— I can sell this way better than anybody I've hired just because that's what I do every day, you know? And, and, and I will tell my groups you set up the meeting, we'll come in and we'll close every one of these guys. But then you just have to go follow up and you gotta get to that first case.

Yeah. Put me in a room and let's go.

Mm-hmm.

Give me a meeting. I mean, not, we'll, you set it up, we'll knock 'em down. And you know, and the board has told us there's nobody better that sells Artelon than you guys. So we need more of you guys. So there was a push to, to hire more and more regional guys because we are so effective. And if you've got the right distributor, then you're going to be successful. And what I'll tell my distributors, I'll say, look, if I've got to babysit you, I've got the wrong guy. Like, I should not have to babysit you. And I'll just have to find someone else. And so many words, right? And maybe that's just what I'm thinking. And so I try not to hire guys I think I'm going to have to babysit. But if you do, I think it's really important. We're very hands-on. And I preach that with, with my regionals and I, I really preach it with my distributors and I set that expectation that look, we're going to be following up with you. We're going to take some of that onus on us because we know you're busy. You're in surgery every day. You're running trays, you know, and you're standing there for a $300 plate. That's great. Do you want to do a $4,000 Artelon case or do you want to stand there for a $300 plate? So first of all, you need to make that decision, you know. And by the way, you don't need to run trays around for a $4,000 RLO case. And so you got to get their buy-in on that and get those first wins. Then that time compresses and the amount we have to follow up gets shorter or goes away. But to answer your question, we take a very hands-on approach. So, so we, you know, I'm a very I'm a simple, simple dude. I, I'm not gonna get too complicated with, with spreadsheets. We use some really good tools for surgeon targeting. And so we know when I go in there to meet with the, the reps and the, and the, and the distributors, I know exactly who the busy guys are, how much they're doing, and how much that means for me and our product and for them, right? And so we're gonna focus in on 5 guys. If we get them, we're gonna go to the next 5. If we hit them, we're going to go to the next 5 because too often they just throw everything against the wall and see what sticks. And they're running around like a head with their chicken cut off and they, they have no, there's no effectiveness there. So we've taken a lot of that ownership on and it's almost teaching them how to sell. But we do it in a way to where we say, we're going to help you. We're here to help you make money. That's, that's our whole, that's what we're here to do because then that— I look like a hero, I keep my job, and guess what? You keep your distributorship, but you make a lot of money. So how are we going to get this done? We're going to help you do that if you're cool with it. We will follow up with every doc we just met with. I'm going to follow up those reps personally, and we're going to come up with a plan. So it puts a lot of work on us. It does. But I think it's worth it because that's a huge, huge issue. Soon as you leave town, they're off doing their other stuff.

Yeah, there's just— it's quiet and then they're fine to get back going. You know, you start like, okay, when's the next time and come back in and that goes well again. But it's just, it's this sort of wave of inactivity, not bad activity or negative activity, but just sort of inactivity followed by these sort of bursts when people come into town.

Yeah. And plus, I think, you know, we try and we try and build in a cadence, right? So like, we never wanted to do business plans for manufacturers, none of their business. But I think it's important that, I don't expect my distributors to write up a business plan for me. So what I'll do is I'll hand them, here's exactly, here's what you did last year, here's what we expect you to do this year, here's all of the resources available to you, and here's your target doctors, and here's how we're gonna help you. So tell us how you want our help with all this information. And let's zero in on it. Let's not take all this, you know, I don't want you calling on 50 doctors. I want Joe calling on 5. I want Kim calling on 5. And I'll, you know, wherever you are, let's go get those guys. Then we'll move to the next. And I, I find that approach works. It's more manageable for us because we brought so much of that on, onto ourselves. But I got so frustrated, Patrick, with what you're saying. That I'm like, we got to change the way we're doing this. I mean, we just have to focus in. We got to keep it simple, stupid. Let's, let's figure out who we're targeting and just stay on them, but in a— but not in a boot-on-their-throat way, right? You can't do that because they will run the other way. I, I did. If someone started putting pressure on me, I'd be like, dude, stay out of my territory. I got it. So it's got to be a very collaborative way, and, and from the from the lens of, dude, I'm here to help you. I'm here to help you make money. That's it. So if you want to let me help you, we'll— you'll make money, and your, your doctors will be really happy. Your patients will be real happy. We got a great product, but you got to let me help you, and you got to be receptive for me helping you.

Hey, Frank, go ahead.

Yeah, Blake, um, great stuff. I question, what are your thoughts on commission being a differentiator? You know what I mean? Like, you always hear guys say they take X out of the bag first because they make more money on that. So what do you think on that point? You mean commission from the distributor to the rep? Well, I'm just saying the value of, like you just said, you do $4,000 for yours and the guy's waiting on a $300 plate job.

You know what I mean?

So, so that, that being the variable, you know? Yeah. Oh, it's huge because I, you know, I just think these guys obviously we're all driven by money. They're doing this to make money. Maybe there's some guys out there that just love being in the OR and stand on tile every day. I'm not one of them. Um, but if I'm making money doing that, I'm, I'm happy to be there. Um, but I think, yes, commission is a big deal, but it also has to be coupled with cost of doing business. So when I'm talking to my distributors, it's like, you know, you don't have your cost of doing business with Artelon is so much less than anything else you got. I'm not telling not— you not to sell anything else, but I'm showing you the value if you just spent some more time on Artelon, because your ASPs are going to be higher with Artelon. Your commissions are very competitive with the industry standards, but your cost of business is almost nothing. So, and your cost of business from a time perspective is, is light years ahead of what you're doing now. You don't have to deliver trays the day before, deal with SPD, go pick them up, they've lost half of them, now you're trying to put your sets back together. You don't deal with any of that. Everything's, you know, for me, everything's packaged, everything's sterile, and you don't— and by the way, you don't need to be there. Once you get a guy going He does not need you standing there showing him how to sew Artelon into a, into a MCL. If he needs you in the room, then, you know, that's another story. But, you know, once you get these guys to a point, you don't need to be there. So, so the value of that for, uh, your sales rep and you as a distributor is huge because remember, these guys are dictated— the amount of money they make is about how many cases they can do in a day, in a week, in a month. If you can bring them a product to where they don't have to be there, and I, and I know a lot of people on this call have a product you probably have to be there. We have a very nice thing with Artelon that you don't have to be there. The reps are trained that they have to be there. They think they have to be, even the distributors, they think they have to be at every case. So a lot of times I'm working through that with them, like, you know, listen, train the, train the scrub techs, tell your doctor. I was at a lunch the other day in San Diego and and the distributor and I had talked about it, but we sat down for lunch with the doc and, and he finally said, he goes, you know, doc, is it okay if I'm not at every one of these cases? And what do you think the doctor said? Of course, I don't need you here.

Blake, I've seen that they want to be in the OR for defense reasons, not for, you know, selling and making sure everything's right. They want to keep the competitors from sneaking in there.

100%. And, and I agree with that. But if you've got the— and Cory and I would say to our reps, if, if you got to be in there playing defense, then you don't have a very loyal customer, right? I mean, that's on you, dude. If you feel like you got to play defense all the time, then, you know, you don't have the relationship you thought you had, or he doesn't like the product like as much as you think he does. So, um, yeah, I know that answered your question, Frank. Yeah, no, that's, that's great. Thank you. But yeah, I think, you know, and one other point I'll make on commissions is a lot of these companies now, commissions have jumped, right? It's like, especially the, the, the outside the US, the, the Korean companies coming in are paying, you know, 30 points on a total joint. I mean, that's insane. Um, but they have to do that. Otherwise they're not going to get any business. They're not going to get anyone's attention to try and go market that product. So, you know, biologics commissions are pretty high. The rest of the joint world is, it's going down. I think, you know, Stryker guys make 6%, you know, so they're selling a $2,500 knee for 6%. And okay, would you rather do that or go do a lateral ankle reconstruction and bill $3,500 and be there for 10 minutes and not have any trays? So you, you make that decision, but you know, You know, so yeah, that definitely comes into play, but I think there's an industry standard on commission. No one's really, really high and no one's really, really low. Everyone's about the same. So I think the differentiator is product, it's cost of doing business, it's time.

Interesting.

Go ahead, Stu.

Blake, thanks for sharing your expertise here. I had a couple of questions after a comment you made. The surgeon's interested and then you ask them who their favorite rep is and get them engaged early in the process. How engaged do you expect that rep to be in getting the approval process through the hospital system accomplished? And at what point, you know, I'll go another way with it. What have you seen that's effective in that kind of getting condensing that timeline from the surgeon's interested and wants to use it to the first case.

In terms of when he says, I want Stu to be my rep?

No, not necessarily in terms of— so when the surgeon's interested in the product and, you know, then the process of who would you like to be your rep, they make a recommendation. You get the rep engaged. At that point, how much would you expect of the rep to be pushing things through at the hospital system to get through the VAT committee, the, you know, staying on top of all the administrative functions to get it into the operating room for the first use? And how much would you maintain internally is my question.

Yeah, that's a good question. And I think everyone's different. A lot of my colleagues are very involved in that. Um, I'm not. So again, back to my point, if I got to hold your hand on this stuff, I got the wrong distributor. So I, I want guys that— the reason I'm hiring you as a distributor is because you have market penetration, you have market knowledge, you have relationships, and you have juice, right? I mean, that's really where the value of a distributor.

Why?

That's why we hire distributors, because they have relationships built in and you plug your product into their machine and they start selling it, right? So my view is you should be able to navigate that with your eyes closed. You have connections or, you know, relationships at the hospital, in the back committee. You know, a lot of it comes down to how loud your champion is going to be.. And, um, there's certain systems, it's just a nightmare. There's certain systems that doctors won't even fight. They're like, you know what, I, I'm just— I would love to use your product, I don't, I don't have time to fight this, you know. So I put a lot of that onus on the distributor. They should know how to do that. Now, if they want my help, I'm happy to help them, but they've got to know how to navigate that. They got to know how to do green light. Um, you know, my distributor here in Colorado, they're, they're really good at that because they've had A lot of these guys have so many product lines, they're doing it every day. And there's a new product launch that Acumed has. Well, they got to go to back with all of this stuff. A lot of times they can't just add it as a line item ad. So they should be very proficient in that. It should come very second nature to them. And then again, if you got that, the doc who's, who is going to be loud enough, then you're, you know, the distributor should be able to work with that doc and get it in. I shouldn't have to do it. I don't have those relationships at Providence in Orange County. I don't even know who to talk to there, but my distributor does. But I'll help them, you know, we'll help them where we can.

Some of that work is the difference between 6% and 25% commission in my mind. It's like these guys come from a corp, like they come from the big company world where a lot of these things do get taken care of. There's a full corporate accounts team and contracts just get sort of delivered on their doorstep and that's their mindset. And you know, it's like they just think it's almost like an expectation. I get all the extra commission, but I do the exact same sort of minimal access type work.

Yeah, it's a good point, Patrick. I mean, you know, with Artelon, I've been begging the board to hire a national sales, national accounts person because that's our only barrier to entry. It's our only barrier to growing 100% is getting into Providence, HCA, you know, IHC in Utah. I mean, these, these are just almost impossible and they just don't play ball. And, you know, but to To your point, Patrick, that's a good point. It's like, you want to make the high commissions, this is what you'll do. Now, if I had a national accounts team, I would do everything I can. Well, I don't care how much commission I'm paying, I'm going to help them. And we will get involved and I'll say, figure out who I can talk to. I'll talk to them. But, you know, a lot of times it gets to a point where like, I don't even know who else to talk to. I've gone to everyone I know at the hospital. It's got like Providence. It's so hard. And they won't even tell you who to call. Right. So if a company has those kinds of resources, like an Arthrex, Smith-Nephew, whatever, and they're already on every contract anyway, it doesn't matter. But these, these independent distributors know that's part of the, that's part of what they've got to do every day. They're representing a lot of companies no one's ever heard of. And the hospital and surgery centers don't really want them in there. They don't want to add products to their SKUs and their, you know, loss in numbers and all that. They don't want. They don't want it. So they're used to dealing with that.

That's their world.

They're not used to somebody else doing it.

Good segue to Dr. David K. Yeah.

Yeah. Thanks, Blake. I sent you a message. We can carry on a conversation afterwards. You'll hear my theme. So as I, I think I'm the only surgeon here who actually does these surgeries. So a typical patient, chronic ankle instability. And they have a medial tailor dome defect and somebody's about to smile. Um, so to fix it, I've got to do a medial malar osteotomy, put a little button on the medial side, and fix her lateral ligaments. That's 3 different products, 3 different companies, and 3 basically pains in my ass to arrange, as opposed to saying, oh, that's not that unusual, why do I have to call up 3 when I can just go to 1? And Oh, by the way, they're going to need rehab. And this is what I want to talk to you about. It's a special little brace. And I've got the, like, the most premier KOLs on the planet involved on that brace that fits in perfectly with Ardalan. And they're all going to get a brace and they're all going to go through rehab. And I've got to arrange all this stuff. And you know what? I keep getting paid 3% less every year and it's getting to be a real pain for me to coordinate all that. So that's point one. And then I'll like to shift to point two. To do. So you say, okay, well, who do you want to be your rep? And I'm going to ask you, what do you pay your rep? Oh, they get 20%. Okay. What if I said, give me a 20% discount and I don't need a rep? What would you do then? Because I'm in an orthopedic-only hospital and guess what? We're pretty good with all this. And you just said, you know, you want to get to a point where you don't need a rep anyway. So, you know, hospitals are getting pretty cash-strapped.. And I wouldn't be surprised if you don't get hit with that more often. I'm not asking anything for me. I'm just saying, hey, what, what, why? I don't need a rep, so let's go repless and let's take that discount that you would ordinarily pay to a rep regardless. It doesn't affect what, you know, you're, what you're going to be selling it for regardless.

Now, I never, I never said, I never said you don't need a rep. I said you don't have to be there for every case.

Right. You don't have to be there for the case.

Those are two very different things.

Right. But in an orthopedic hospital, oftentimes, you know, they're pretty good with just ordering what we need. And a lot of times reps don't even bother showing up even when they're requested. I had that this morning, by the way. Yeah. So I again, just kind of asking some questions. It was not our line. And yeah, I'm up, I'm up on your website. I talked to Aaron probably 6 years ago when he first got the arrangement to head things up. So yeah, I've kind of been, you know, been keeping my pulse on Ardalan for a while now. So just a few thoughts, you know, it's— Yeah. Right now, especially when we have procedures that do require multiple different types of implants. So, you know, I've said foot and ankle is the trifecta. We need biologic soft tissue and bone. And nobody else really does that to the extent foot and ankle.

Yeah.

But it's getting, it's very difficult to coordinate that. And I gotta tell you, it's very difficult even in one company because, for example, Stryker, their anchors are with their sports med. They're not with their foot and ankle. Their foot and ankle guy gets nothing for using an anchor. Now I've got to go contact 3 different reps in the same company. Yeah, that's not a lot of fun.

I think you're right, and I'm noticing that too, um, in the foot and ankle world, because I think a lot of— there's a lot more innovation going on in foot and ankle. There's a lot more startups. There's a lot, you know, there's a lot of excitement in foot and ankle where I don't think you're seeing that definitely in the— in adult recon, not as much in, in sports because the big boys own, own the sports market. But foot and ankle is really, is really active right now. And so you do have a lot of companies and you got a lot of reps, you know, wanting you to use their product. And there's, you know, well, there's nothing else like Ardalons, so I definitely need Ardalons. But, you know, I use Paragon 28 and I want that for my plate, but I want this hook plate that Zimmer makes. I really need that one. So you guys are a lot different with, with a lot of that. Um, so, you know, in terms of a repless model, I, I mean, it's never worked. People have tried to, try to use to, they've tried repless models in the past. It's never worked. But I fear that the value the rep is bringing is, is being diminished. And it's being diminished in a lot of ways, but it's mostly by the big boys like we talk about that are $50,000 a year box openers. You know, we, I still always take a lot of pride if, if I've got a rep standing in a room, they better bring value. To somebody, whether it's the scrub tech or the orderly or the surgeon, but they better be bringing value in that room or don't be in there. If you're, you know, so I feel very, very strongly about that and I don't think a repless model will ever fly. You know, we can talk about discounts and all that stuff offline, but yeah, it's part of it.

Lisa, she's been patient in her car.

Thanks, guys. Blake, great presentation. One thing that I think that was missed from or wasn't discussed on the side of starting is you have to make— I've seen this happen time and time again where new companies, they don't put focus on their—

on the—

on things that the distributor and the reps need. For example, there needs to be a portal that's easy and streamlined. As a distributor, I didn't have the patience. As a distributor of 11 companies, I didn't have the patience to go and call somebody every single time I needed something. You need to have a system, a portal set up with value analysis packages, pricing, margins, commissions, research. All of that infrastructure needs to be in place to get the best of the best distributors because you have one opportunity to gain a good relationship with them. And if you you show that you're professional and you're not some— you're not willy-nilly with, with commissions and, and, and, and their process, then, um, you've earned their respect. Yeah, no, that's, that's exactly— I agree. And that was— it's, it's frustrating, but it's also fun, and it's part of the— it's part of the ride with a startup. Like, you know, when I started with Artlon, we just didn't have much. And I think you guys heard from Jansen maybe last week And so he's, you know, he was really busy, but I'm, I'm leaning on him. I need surgical techniques. I need animation. I need this. I need that, you know, because I'm, I think like a distributor and he's like, we just don't have the money for that. So you have to come up. So us as AVPs and regional guys, I mean, my counterpart in Texas went and rented a storage unit. He makes all of his own sawbones and he, he has a certain way he wants to do it. With his groups. And I think a lot of us in the beginning had to adapt to that. Um, you know, Jansen wants everything to be digital. It's the world of digital age, and I'm an old school guy. I think my surgeons— I love when I drop off a little something on their desk and then a month later I drop back by and it's still sitting on their desk. I love that because they're looking at Ardalan every day because they haven't put it in the round file yet. So that is a big challenge. It's frustrating, but it's also, it's also fun. But that's part of the deal with a startup, you know. And I, I'm, I came from selling for companies like Arthrex who would send us complete launch packages and have million-dollar animations. And I mean, everything just over the top. And I'm like, we hardly have a surgical technique. It's pictures that I can't even tell what the heck they're doing in there, you know. So Um, we use Box, which I thought has been very good. And so we'll send a Box invite to, to the reps. They can get on Box and everything they need is in there. I found that to be a really good, it's inexpensive, but it's, um, it's a pretty good tool, especially as a startup. We don't have that kind of money to put into that stuff, but they can go on Box. They can print, everyone's got a color printer. They can print things out. They can email right to surgeons, uh, articles off Box. All the information. I think that's been a good tool and that's a very cost-effective way to do it.

How do you spell Box, Blake? I mean, is it a website?

Box.

Box.

Okay.

There's Dropbox and there's Box. Dropbox is more personal stuff. Box is, it's just kind of like Google Share type stuff. Got it. But you have your own, you have your own domain within Box. And so when you send a rep an invite, they get their own invitation to your Box domain. And then, you know, it's up to marketing or whoever to organize everything in all the folders in the Box. So I found that pretty useful. You can even do it, it's an app on your phone. So if you're standing in the OR and you're talking, or a scrub sink, you're talking to a doc and you're like, have you seen, you know, have you seen this for EHL, whatever? And you can go into Box and just email it to them right out of Box, right off your phone.

Cool.

I want to go back to what motivates and how to motivate. And Blake's absolutely right. You can't, you can't bludgeon these people. But one thing that motivated us and one thing that I think Blake probably uses a lot is comparisons. So if you're having somebody that's not paying enough attention, you can say, look, here's a, here's a similar distributor with, with a similar territory and he's doing 5 times the business that you are because it motivated us when we were distributors. We'll be looking at other, other, you know, distributors that were doing more than us. Now they had probably 5 times the population, but it's still— we wanted to be up, up there in those numbers. So you compare them. Yeah, I've always been a fan of stack ranking distributors just to get the competitive juices going. Um, I've got, I've got some pushback from that from, from the higher-ups where I'm at now. Um, but that was more in the beginning because we were really protective of who we had and we didn't want a lot of people knowing who our distributors were because things were a little funky. Now it's like we're big enough to where everybody knows who our distributors are. So, um, yeah, what Corey's talking about, one, one of the metrics we loved was dollars per doctor. And so our distributorship was I think number 1 in the country for 6 years in a row, dollars per doctor, meaning we do more business per doctor than anyone in the country. So it's hard to do that because surgeon counts can fluctuate. So I'll do it a little bit with population. I'll look at, you know, what's the population of my guy in Montana? I think they got 2 million people in Montana or 3 million or whatever to my maybe my Bay Area guy. And I'm like, my guy in Montana is doing twice as much as you're doing in the Bay Area and you've got 5 times more people, 10 times more, whatever. But yeah, I agree. You got to be a little bit careful with that, especially in the beginning as a startup. It takes a while. You know, last 2023 was the first year I had where I had every one of my groups was in place. And nobody was brand new. So when you're cycling through distributors and you're especially in a startup type mode with a smaller company, you're going to cycle through a lot of people until you figure out, hopefully not, but it happens. And so you don't have a lot of historical data to where you can really give them an honest quota and you don't have a lot of ways to compare them because, you know, there's no one's tenured enough, you know, Corey. So it's harder to do in the small, really hard to do in the small companies. But you can, you can stack rank the distributors. Interesting.

Anything, Anthony?

Barry?

It's also a great chance for— I mean, so Dr. K is, he's built orthopedic device companies, he's an active surgeon, and he owns a hospital. So if you want to get the customer, uh, you want to ask what does a customer need from sales, it would, it's hard to beat his perspective.

Yeah, it's a lot. We love that perspective.

It's a tough world right now.

It's, it's changed. It's changed a lot and it's continuing to change, but it's also exciting.

Surgeons make less money per case, right? And, and in general, reps make less money per case nowadays.

Oh, hospitals make less money per case.

Hospitals make less money per case.

So who's making the money? Insurance companies?

Yes.

That's a lot of fun. Yeah, I love when Blue Cross Blue Shield puts you on there as their experimental, even though you've been around for 25 years. Well, thank you guys for listening. I hope I added some value to everybody, and I always like to learn, and I look forward to hopefully interacting more with this group and others because learning every day is part of the joy of life. And hopefully I imparted a little bit of at least my perspective. I obviously don't have all the answers. I'm not the best at what I do, but hopefully you guys learned a little something.

Great stuff. Thanks, Blake. Hot topic.

For everybody. Thank you.

See you next week. That's a wrap.

Thank you all. Thanks, Blake. Welcome.