An audibly successful venture

CEO of Vancouver-based Audigy Group perseveres

By Courtney Sherwood, Columbian freelance writer

Published:

 

Audigy Group

What: Business services and support for audiology practices.

Where: 11201 N.E. Ninth St., Vancouver.

CEO: Brandon Dawson.

Employees: 145 in Vancouver.

2012 revenue: $26 million.

What's next: Dawson is using Audigy's business model to start businesses that serve other health care sectors.

Audigy Group revenues

2005: $600,000

2006 : $2.5 million

2007: $4.9 million

2008: $5.9 million

2009 : $11.4 million

2010 : $17.5 million

2011 : $24 million

2012 : $26 million

Some executives learn corporate strategy in business school. Others master their industries on the job.

Brandon Dawson's lessons started at a much younger age. He remembers accompanying his mother on business trips when he was 6 years old. She was a hearing aid dispenser, and he was eager to learn. By age 9, he was helping out at Starkey Laboratories, the Minneapolis hearing aid factory his stepfather owned.

Fast forward almost four decades, and Dawson says he's still learning. His Vancouver-based audiologist consulting firm, Audigy Group, reported revenue of $26 million last year. He's applying lessons from Audigy to two new business ventures, which offer support to dentists and ear-nose-throat practices. Now Ernst & Young has named Dawson a finalist for its Pacific Northwest Entrepreneur of the Year award. The winner will be named Friday in Bellevue, and the regional award winners will then vie for Ernst & Young's national Entrepreneur of the Year award. Not too shabby for a 45-year-old high school graduate who was too busy working to finish college.

Overcoming setbacks

Dawson's early start in the hearing aid industry may have set him on his present course, but it's taken years of hard work -- including several professional setbacks -- to finally find his way.

Setback No. 1: A messy divorce. When his mother and stepdad split in the early 1990s, Dawson realized he would never become CEO of Starkey Laboratories.

He was in his early 20s when he left the family business and began to develop plans to provide support to the audiology clinics he'd previously sold hearing aids to.

"I made 132 presentations before I found anyone who would back me," Dawson says. In 1997, he finally found the backers he'd been looking for. A group of Canadian investors appointed Dawson to run HealthCare Capital Corp., which he renamed Sonus Corp. and moved to Portland from British Columbia. Dawson took Sonus public at about $10 a share in 1998.

Then came setback No. 2: A shareholder dispute.

Sonus became the largest audiology-based retailer of hearing aids in North America, but profits did not follow the company's growing retail footprint. Shareholder pressure began to mount.

Investors wanted to continue buying clinics and consolidating them under the Sonus name, but Dawson had come to feel that this approach was flawed. He wanted to allow audiologists to run their own businesses, while Sonus offered a franchise-like set of standards and practices for each member business to follow.

"They said, 'Go consolidate.' I said, 'I don't want to do that,'" Dawson says. "So they brought a new guy in."

He left under pressure in 2002, and investors sold Sonus to hearing aid manufacturer Amplifon USA that same year.

Starting again

Sonus' investors may not have been convinced, but Dawson still believed in the business model he had tried to pioneer. So he decided to try again, tapping into money he'd made at Sonus to launch Audigy in 2004. Determined to maintain control of the company, he decided to raise capital by having customers buy into the company as investors.

This time Dawson chose Vancouver, rather than Portland, for his company headquarters. He has three children -- ages 20 and 17 from a previous marriage, and a 7-year-old with his wife of nine years.

"The quality of life here in Vancouver is fabulous, and I don't think the business climate in Portland is as friendly as it is over here," he says.

Today, Audigy works with 250 audiology practices in 650 locations across the U.S. and Canada, offering a range of services from human resources support to marketing consultations. "It's all business management," Dawson says. "We don't get into patient care, other than helping practices brand themselves. We blueprint best practices, and then offer professional development, training and support."

Two key features of Audigy's business model set it apart from most of the competition: The company turns away more clients than it accepts, and Audigy's clients don't always have to pay for the services they receive.

Audigy will work only with clinics that earn high rankings for quality and customer satisfaction, Dawson says. Clients pay for some services, but Audigy is able to provide other services for free by negotiating bulk-rate discounts with vendors on such services as advertising and marketing, while keeping a portion of the negotiated savings for itself.

Audiologist Amit Gosalia was skeptical when he first encountered Dawson in 2006. The practice he worked at had been targeted by Audigy because of its quality ratings.

"Brandon sat across the table and asked me why I wouldn't want to be part of this," says Gosalia, who at the time was working at an Arizona clinic. "He listened to my concerns and gave me answers. Audiologists don't make a million bucks a year. Brandon helps us ask, How do we capture as much as we can?"

Gosalia says Audigy helped his practice tackle a number of key areas, providing advice on cash-flow management, providing professional development to staff, and offering human resources advice when issues came up.

"It was night and day, the change in profitability" that resulted from Audigy's help, Gosalia says.

In 2012, Gosalia and his wife, Charmi, bought Audiology Clinic Inc. in Vancouver. They say Audigy has continued to be key to their success, helping them to be profitable in their first year as business owners.

While Audigy has posted multi-million-dollar revenue growth each year since its founding, Dawson says there's a limit to how big he expects the business to get. He has signed on 250 audiology businesses so far, and expects to max out at around 350 to 450 businesses. That's in part because growth in audiology as a sector has been flat in recent years, and because growing beyond that might require Audigy to relax its quality requirements. It's also because Audigy allows its clients to become part-owners of the company. Dawson is determined to retain majority control, and to limit the total number of shareholders he signs on.

Michael Gerber, a small-business consultant and author of "The E-Myth Revisited: Why Most Small Businesses Don't Work and What to Do About It," says most of the businesses he works with are founded by people with technical know-how who struggle at the basics of running a business.

When encountering companies that claim to do things right, "I'm always disappointed," Gerber says.

But Gerber says he's convinced by what he's seen of Audigy that its business model is strong. "I have to say, at Audigy, I was not disappointed," he says. "In fact, I was amazed."

Finding new fields

Dawson believes he can learn from Audigy's business model to expand in other fields. After hiring FTI Consulting to review other health care niches, he rejected some possibilities. There were too few opportunities to pass along large-scale savings to optometrists, for example, so he's avoiding that sector. But FTI's research found that independent dentists and ear-nose-throat practices have enough in common with audiologists than Dawson can adapt Audigy's model to those specialties, and that many practices in these areas are looking for ways to resist consolidation.

He recently founded Strattus Dental to serve dentists and Audigy Medical to work with ENT practices. Dawson is CEO and majority owner of the startups, which are distinct corporate entities from Audigy Group. In each case, there are similarities with Audigy Group's model, as well as key differences. Strattus started operating on Jan. 1 and now manages dental practices in 90 locations with $100 million in billings, Dawson says.

Clients of Strattus Dental or Audigy Medical are more likely to pay fees for services than clients of Audigy Group, and will not have the opportunity to become owners of Dawson's businesses.

"That's partly for regulatory reasons," Dawson says. "Also, the economics are not the same across all fields."

Strattus and Audigy Medical could be just the beginning, Dawson says. He's considering opportunities in dermatology, veterinary offices and the telecom industry.

"We only exist to the extent that we add significant, measurable value to our members," Dawson says. Within that constraint, "we can work with any specialty where there's pressure to consolidate."