Jean Makesh: Why Someone Gave Him 65 Million Dollars!

Jean Makesh is the CEO/Owner of Lantern Of Madison, a premier Assisted Living facility in Madison, Ohio. He designed a state of the art care model called “Svayus” for Dementia and Alzheimer’s clients, which is the first and the only care model that is therapeutic in nature. D&D met the millionaire Occupational Therapist who is bringing the concept of Assisted Living to India in collaboration with the Expat Group.

For someone who didn’t plan on going there, how did you end up in the US?

The US was never on my radar. It happened because of my wife Sapna Dhawan, we fell in love when we met at Kolkata University in 1990. We were both studying at the National Institute for Orthopedically Handicapped, which became a part of Kolkata University. One year junior to me, Sapna looked like a model, and she knew everything about the US. I was a party guy having fun and she came into my life and said you must think about going to the US, there are lots of good opportunities there. She was a Hindu and at that time I knew that the chances of my parents accepting her were not good, so going to America and being independent would score points. I came back to India in 1997, we got married and Sapna joined me in the US subsequently.

In six months your wife Sapna will be a doctor?

Yes, Sapna is in Chicago right now completing her clinical rotations. She has been there since August 2014 and will finish in May 2016. Sapna studied medicine at IAU – International American University, St. Lucia, and she has been away for almost 4 ½ years – I take care of our children – Joshua 10, Hannah 7 and Noah 6.

How was the separation for you as a family?

We found a way to make it work. We have Skype and cameras in both our apartments so that the kids can see her whenever they want to – and when they do they just go and say Hi Mommy. So the distance is really not a huge problem. Sapna always said, “Jean, when you started, I supported you, and I’ve really wanted to be a doctor for a very long time, it was always my passion, can I go to medical school?” I had two options; I realized it was her
dream, so I let her explore that. However I wasn’t sure if she was really committed to it, but she hung on and finished her MD program. Sapna would like to be either an Internist or in General Practice, although I am trying to motivate her to become a Psychiatrist. But again it is her choice.

How did you get into Occupational Therapy?

Like any Indian parents, my folks wanted me to be a physician but I had no interest in that. I wanted to do something different as the rebel in the family. Their dreams didn’t sync with what I wanted, but just to please them I did a Bachelors and Master’s degree in Occupational Therapy. We are three brothers, I am the oldest. The youngest lives in Ohio and runs my IT division and the second is an SAP consultant in Canada. Dad is no more; Mom
divides her time between all of us.

You were fresh out of India, remember anything in terms of culture shock?

Yes, on my first job at Manor Care Willoughby in Ohio, I got fired the very first day! It was my window to reality – I was not very passionate at the time, but that is when I learned to be serious. I realized nothing comes easy, you have to work hard, and you have to be flexible and embrace the culture; no one is going to give you a second chance. I got fired because I was exposed to an elderly client with no experience on the job. Usually a clinical assessment
takes about 30-40 minutes and I was taking 2-3 hours because I was so nervous. I was very good in school and I just couldn’t understand why anyone would fire me – I had to prove myself.

Your next job was a step up?

My next job was with a company called, South Coast Rehab, which was later bought out by the Sun Health Care group, a very large corporation. I had come to America on an H 1 B visa and they were kind enough to apply for my green card. I was with Sun Health for about nine years from 1995 till late 2004.

What were you earning at the time?

At Manor Care Willoughby I was offered $30,000 but at Sun Health I started on $40,000, still substantially low compared to my peers. But to me, money was not a motivating factor, I was still single and learning was important. I felt that Sun Health was a good fit for me to learn and I worked there as a therapist for six months before they promoted me to a Director’s position. After my MBA, I got promoted again to Clinical Director of Occupational Therapy for a year, then as Director of Operations based in Michigan, and again as Director of Compliance with a salary of about $75,000. Sun Health was No.1 in the industry at that time, owning 250 nursing homes & 50 hospitals. I managed the clinical compliance side of the rehab division. At one point I had approximately 120 nursing homes in my territory. I was on an air plane almost every day, with frequent travel across the US; I learnt so much from that company. When I quit I was making about $90,000 plus bonuses etc.

Did you quit after gaining experience?

I always had the idea of working on my own. After two years in Sun HealthCare, seeing how they managed their nursing homes, I realized I could do a better job. I started looking for small nursing homes to buy. I was constantly on the lookout but I couldn’t raise the two or three million dollars required. I was young and eager and the brokers were nice enough to show me around – they knew I had the experience and probably figured this guy could do it.

Were you hoping to find an investor?

Yes, In 2003 I saw this property in Madison, Ohio, which used to be an old hospital. I called the broker and he was very kind, I told him that I could turn it into a gold mine, and shared my views and ideas with this young Jewish man. He was impressed and after a few days said that the owner of the property, Edward Dunlap, one of the wealthiest men in the country, wanted to talk to me. So, my wife and I went to meet him and I pitched
my idea to Mr. Dunlap. I was very nervous. Ed Dunlap, the investor asked me a lot of questions. Finally he asked me how much money I wanted. I said how much can you give me? “All I can give you is half a million dollars,” he replied. “Can you work magic? I want you to do everything that you told me you can do with this property.”

Though desperate you struck a good deal with the investor!

Ed Dunlap first said, “I’ll give you half a million dollars, you give me nothing, just pay me a lease.” I said, how about this, I won’t pay you a lease, but let’s work out an arrangement – after eight months I will pay you a percentage of the profits – not a percentage of revenues. Mr Dunlap replied, “That’s very creative, have you done this before?” I said no. “How long will it take you to put the business in the black?” he wanted to know. I said, it usually takes three years but I can make it happen in ten months. Then he pointed out that everything I suggested was advantageous only to me. I told him that’s the only way I could pick up the building. He said, “What the heck, I’ll give you the money.” He wrote me a check for half a million dollars!

You kept your word and delivered on time.

After the eighth month, I started paying my investor about $8,000 a month. Ed Dunlap didn’t want the principal back. He just wanted me to continue paying a consistent flow of money to him for 20 years. That was fine with me, because I knew that banks would not give me the money. Ed would regularly send his accountant to audit my books.

How did you succeed?

Edward Dunlap had done many real estate transactions but they had not seen a guy like me. For me honesty is the best policy. I had a lot to lose, my wife was pregnant with our son Joshua, I had left a great job which took care of everything in addition to my salary; but now I had to put in my hundred percent. When I started, I just hired an administrator and a cook and I did everything else, including housekeeping and taking care of clients.
There were days I worked two straight shifts without sleeping – I was determined to succeed. It took me six months to build 29 rooms, but I had to go back to the investor and borrow another $160,000. We opened doors in May 2004 and I got the place filled up by the end of 2005.

I created a new resort model that no one had done before, a hospitality model because I believe we are not a care provider; we are in the service business. We treat every client like a King. I want every vendor including the mailman to know who we are and go and tell everyone what a great facility we run.  That’s how we started leveraging our services.

Then you borrowed $ 1 million more?

In 2005, I thought we should expand. I asked Edward Dunlap for a million dollars and he gave it to me, but I was over budget and I needed $120,000 more, which he refused to give me. It was peanuts for him but for some reason he was adamant. I was frustrated. I went to my bank but they wanted to see my cash flow statement before they gave me the $120,000. The bank allowed me to borrow the money against my house, and so we added another 24 rooms in 2007.

How did Ed Dunlap invest 65 million dollars?

In 2010, Edward Dunlap pledged 65 million USD towards the acquisition of assisted living facilities in Ohio and West Virginia. Unfortunately, all my acquisitions failed. Something or the other would go wrong with my acquisitions. I got frustrated. I admitted being a failure to the Lord. I would pray before every deal and finally I saw my prayers being answered. I would share all my frustrations with my pastor who said, you are young, you are hyper, you need to step back and think. There is something you are not doing that God wants you to do. So I took a step back and thought about it.

Tell us about Alzheimer’s, your niche project

I had written a project report for an Alzheimer’s care program, complete with technology, concept etc., and I had done nothing about it. I told my pastor this is what I have which I am not doing. He said, “I think you should do it.” I told him that I didn’t have the money. A couple of days later Ed Dunlap called me and said what about that Alzheimer’s project you pitched? I told him that it was going to be very expensive. Every facility would cost 4.5 million dollars.

Was $4.5 million the cost of each facility to be paid for from the 65 million dollars?

No, we did not use that that 65 million USD that Ed Dunlap pledged. The 4.5 million USD was a new investment because the Alzheimer’s project was technology heavy. He said fine, go ahead and do it. That’s how we ended up building the Alzheimer care facility. Its our niche business and I’m presently building a 66 unit facility in South Russell and a 94 unit facility in Saybrook, both are in Ohio. My goal is to build one every year. Every month I am paying my investor about 10% of the 7,160,000 USD I borrowed – that’s about $78,000 a month.

What awards have you won in business?

The interesting part is that everything that I was pursuing started coming to me. I was awarded the Entrepreneur of the Year award; another for Occupational Therapy and another for the fastest growing small business. Carly Fiorina, former CEO of Hewlett Packard presented me another award on behalf of the Ohio Chamber of Commerce. When I was in business school, she was someone that I dearly admired. At that time, women CEO’s were unheard of.

In 2012 you had trouble – what happened?

I had started enjoying the accolades coming to me and neglecting my business. In June of 2012 I looked at my cash flow statement, I was losing money. We were the first ones in the market but I was negative $540,000. My investor was so confident of me; he had given me an open cheque book. I shuddered at the thought of facing him, wondering that’s it, my life is over. My bank had given me a line of credit that I wanted to use. I wrote a cheque and deposited it but two days later the cheque bounced. My private banker told me someone had accidentally pushed the wrong button and deleted my line of credit! To reinstate it he needed my cash flow statement. I said oh my God I am negative $540,000.

I was under tremendous stress and thought the only thing I could do was to sell the business.

How did you solve your cash flow problem?

Just then Ed calls me and says, “Jean I am throwing a party and I want all my partners to come.” Now, I am paying him $67,000 a month. I went late to the party and when I walked in everyone got up to shake my hand. Ed Dunlap had told all his other partners what a great job I was doing, but at that moment, I felt like a loser. I didn’t know how to break the news to him.

After lunch, I asked Ed if I could have a few minutes of his time and he graciously agreed. When I explained to him that an expert had valued the company at anything between 15-18 million dollars, he was excited, “Wow! Are you kidding?” He asked. I said no. Then I told him how my line of credit got cancelled and he asked, “How much do you need?” I said about 300,000 dollars – he gave me a cheque. It was a safety net and a huge relief to me. We quickly evaluated what was going on in sales and the other departments and within a month we sold the 41 vacant rooms, so I didn’t really need that loan.

How does your business model work?

We were serving the top three percent of the market and I thought how do we serve the bottom 97 percent? Many people were calling and we were turning them down. So I created three pricing models: Cadillac is $7,000/month, Ford is $4,500/month, and Kia is $3,000/month). We are the cheapest and we provide a lot more for the money. The deposit for a client to enter our Alzheimers facility is only about $4,000. I found a way to cut the construction costs, which is a big fixed cost that drives the mortgage. I keep that in check and take that saving and give it back to the consumers. I started educating them… and they all signed up.

You have plans for ‘Assisted Living’ in India?

The facilities in India are not really offering what the consumers need. We have so much more we can do for people. My management staff will run the operations, and train the local team in India. Our time frame to launch is March 2015 and we are looking at Pune, Bangalore, Delhi etc.

Frank Raj is the founding Editor of D&D