Dava Freed | Crain's San Francisco

In this ongoing series, we ask executives, entrepreneurs and business leaders about mistakes that have shaped their business philosophy.

Dava Freed

Background:  

Freed Associates is a healthcare management consulting firm that helps clients work with health plans and providers in the areas of care management, revenue cycle, operational redesign and program management services. The company, based in the San Francisco Bay Area, is celebrating its 25th year.

The Mistake:

When you first start off as a business owner, there are a lot of hidden costs and a lot of expenses that you don’t think through. It took me the first three years to really start making [Freed Associates] more profitable and not feeling like "Oh my gosh, we’re going to make it through the year.”

I started Freed Associates after I had my second child, when I realized that I could no longer sustain the expectations of my being basically in a man’s world if I’m to compete in the same way and be the same kind of hands-on mother I wanted to be.

Everyone was a parent — except one person. I was concerned with what employees needed to make. People had income requirements that needed to be worth their time and their ability to pay child care; I didn’t pay attention to the margin situation. I was also trying to give clients the best deal and give employees the best I could pay them. I wasn’t thinking about how much I needed to build up the company.

The first thing I did was a mistake.

I hadn’t done a lot of research about how much to bill people out. I wanted to pay people what they wanted to make. In my first business, I wasn’t in the red but I certainly wasn’t in the black to the extent one wanted to be. I had to learn right away how much it costs to run the kind of company I wanted to run.

I take care of the employees, they take care of the client — everyone wins.

 

The Lesson:

I felt like I couldn’t charge near what the big firms charged. I was discounting that we were producing the same or even better results.

Part of the solution was making sure that I didn’t just put rates out there. I felt compelled to explain my rates. (Nowadays, I don’t feel compelled.)

I pay 100 percent of the benefits for employees and families. That meant I had to build that into my rate system in a different way. And at first, people think, “You’re expensive.” I just needed to tell the story of why I’m doing this and why the rates are what they are.

The big drive for me was I wanted women to feel as equal as men in the workforce. They can still have balance of being home with kids, and this applies to men as well. Work-life balance —it was a founding value for us. I had to explain why we were worthy and make it clear that I was building this company.

I take care of the employees, they take care of the client — everyone wins. That’s our philosophy here. It is what has sustained us for 25 years.

Photo courtesy of Dava Freed.