The Hyper-Growth Days Are Over. Here’s How We’re Reorienting Tend Accordingly.

I’ve seen my share of economic downturns: In 1991, as a recent college graduate just entering the workforce; in 2008, while building a business called DiabetesCareClub; and most recently, in 2020, while leading Tend through a pandemic.

Right now, there’s mounting evidence that suggests we’re in a period of uncertainty after a year of hypergrowth. I’ll get to that evidence in a second, but first, I want to highlight a famous quote from Warren Buffett: “Only when the tide goes out do you discover who has been swimming naked.” I believe the period of economic instability we’re experiencing right now will expose the companies that have been “swimming naked,” growing fast with no actual business.?

Conversely, the companies that have a business—and that operate them well—will come out of this period stronger.

There are four reasons I think we’re not out of the woods.

While the economy has made positive developments this quarter, like a recent stock market rally and robust job growth, it is by no means at optimal health.

For one, inflation, especially around food and energy, continues to plague the everyday consumer. Two: Rising interest rates which slow down home purchases. Three: a volatile stock market that’s changed investment rationale on funding rounds (Morgan Stanley’s unprofitable tech index was down 64% at the start of June). And the final reason is that Facebook, Apple, Netflix, and Google—the FANG stocks—all have hiring freezes right now.?

The capital markets are clearly sending a message that they’ll no longer reward growth at all costs. The economics of frugality are more important now, and I believe that the hyper-growth days are over. This upcoming period will be about profitability.?

There are a few reasons Tend is well-positioned to deal with economic uncertainty. I’ll start with the most obvious.

Dental is a recession-proof business.

People still have to keep taking care of their teeth, no matter the macroeconomic trends. When patients missed appointments because dentists’ offices shut down during the pandemic, these appointments didn’t evaporate. They were just delayed.?

The dental business also scales. Heartland Dental, for example, has over 1,600 affiliated practices or offices around the country. The Aspen Group has 1,100 affiliated practices or offices in 45 states. Pacific Dental Services has over 850 in 26 states.?

Make no mistake: this is still a “get-real” moment for many businesses, ours included. We need to be profitable, point blank. Luckily, we have a line of sight to get there. Tend has 140,000 members, and because of our great product-market fit, membership is booming. That’s why our customer acquisition cost is so low.?

But that can’t be the entire story. The studios we open have to be profitable consistently. So we’re reorienting to focus on operating profit (versus top-line revenue growth). And while we don’t get to dictate the economic environment, we do get to dictate how fast we grow. In this way, we extend an already-substantial runway.?

Rules for the road in this changing landscape: Prepare your team, slow down growth until the markets stabilize, and operate with discipline.

As a CEO, my first preparations for a period of instability are internal. I’ve got to prepare myself for the fact that this is a different landscape than it was 6 months ago. Then, I’ve got to prepare my executive team and align them accordingly. Once we have this alignment (which we already do at Tend), we cascade that down through the organization. We prepare our entire company.?

That means recasting what our 2025 North Star looks like with a slower-growth mindset in place. We were looking at going to the West Coast next year but have paused that expansion. Distributing our team and traveling out west will put stress on our organization, so for now, we’re staying in markets that we currently operate in (New York, Boston, DC, Atlanta, and Nashville). Slower growth will be our strategy until we see stability in the capital markets.

Cash operating discipline is also critical, but luckily, it isn’t a problem for us. Our executive team spends every dollar like it’s their own.

How we’ll come out ahead.

I’ve built businesses in trying times before, and there are ways to come out the other side stronger. Upgrading talent is one. Companies aren’t hiring as much—or they lay off some great people—and the talent mix in the marketplace improves.?

We’re also a multi-site operator, and we’re going to get better deals on real estate and equipment. Another positive is that our competitors won’t get funded as easily. We’re at the breakout point where people would otherwise try to copy us, but it’s more challenging for them to raise capital and launch in this marketplace.

This is also an opportunity to perfect the unit economics for our studios and become even better operators. When the economy reignites and goes faster, we’ll be ready to run at an explosive clip.?

Finally, we have one last asset: experience. Operating today requires one to recognize the changes occurring and to respond with intentionality. Not to panic, but to reassess. Many operators of companies today — be they founders or chief executives — will be going through their first major event of macroeconomic uncertainty. Their responses to a rapidly changing environment may vary from panic to being in denial and acting too slowly. But if you look across our C-suite, you’ll see people who have been through down cycles and know how to operate.?

We won’t panic. In fact, we’ll come out stronger.