CEO built LetterLogic from basement up — literally — on her terms

Sherry Stewart Deutschmann kept her essentials — a bed, a sofa, a table, a washer and dryer.

In a weeklong garage sale on Lealand Lane, she sold the remaining items, and despite all warnings, cashed in her 401(k). She was launching a patient billing company, one that would compete with her former employer, and needed money to fund it. In her basement, she set up a desk made of two filing cabinets and a door and began calling potential clients, introducing herself as the CEO of LetterLogic.

The stakes were high. As a single mom, she was raising a daughter and a granddaughter, and she had just left a well-paying sales job to prove a business could be run better by valuing employees.

“I had a lot of rough years when I first moved to Nashville, struggling to keep the light bill paid," Deutschmann said, sitting in her office at LetterLogic’s building on Fourth Avenue. “I had gone from having no money when I first moved to Nashville to making a good living.”

For the past nine years, LetterLogic has been on Inc. 5000’s list of fastest-growing private companies. The company employs 53 people, generates an annual revenue of $36 million and is regularly courted by interested buyers.

Deutschmann, meanwhile, has emerged as a leading business owner locally and nationally. She is a regular speaker on company culture, namely for her emphasis on employees over clients. The U.S. labor secretary visited LetterLogic this year as he pushed for a higher minimum wage. In September, Deutschmann was named to the National Women’s Business Council, advising the White House, U.S. Congress and the U.S. Small Business Administration on economic issues.

Building a career

Deutschmann’s lessons in sales began when she was a child, growing up as a Jehovah’s Witness in Banner Elk, N.C. Along with her six siblings, she would knock on doors to proselytize, talking to those in million-dollar homes and those lacking indoor plumbing.

“You learn to talk to people of every socioeconomic background, and I think that served me well,” she said. “Jehovah’s Witnesses also have tremendous work ethic. Their philosophy is you do everything as if you are doing it for God. You give of yourself 100 percent.”

With religion stressed over education, she made a living as a receptionist and as a house cleaner after high school.

At 25, Deutschmann moved to Nashville with a 2-year-old daughter and a beat-up Volkswagen Rabbit, leaving behind an abusive husband and her Jehovah’s Witness faith. A decent singer, her plan was to become a country music star. She landed a job selling cars at Beaman Lincoln-Mercury to make ends meet.

In 1994, she was hired by National Business Products in Franklin, a company later sold to IXT Solutions.

'I became a professional apologist'

The mistakes were rampant. IXT Solutions double-stuffed bills to patients at times or printed on the wrong hospital’s letterheads. At worst, it was violating HIPAA laws and prematurely pitting collection agencies against patients. At best, it made hospital clients look sloppy, and too often, she was having to smooth things over with them.

“Everything you could do wrong in our business, we were doing it daily, and I became a professional apologist,” Deutschmann said.

She saw where she could eliminate errors and asked executives, including CEO Lyle Beasley, for the authority to lead changes. They said no.

Craig Hodges, who describes Deutschmann’s work ethic and commitment to customer service as “unparalleled,” was chief operating officer at IXT Solutions when she left. Many of the problems she described were the result of rapid growth and tech issues inherited through acquisitions, he said. Those issues were resolved, making the business an attractive buy for Nashville-based Emdeon in 2007.

“We couldn’t get those service woes solved fast enough for Sherry’s desires,” Hodges said. “It’s a small company and a small leadership team and a small ownership group, and the majority owners wanted to stay the course.”

So, Deutschmann left, launching LetterLogic from her basement.

Among her client roster is Medical Reimbursements of America, where Beasley, her former IXT boss and current friend, is now president.

Emphasis on culture

The problem Deutschmann recognized was that workers didn’t care about the results.

“Nobody there had a vested interest in the end quality of the product or the service,” she said. “I wanted to make sure that from the first day I opened the door at LetterLogic that every single employee had a vested interest in the end quality and that they would care as much as I did.”

Ten percent of LetterLogic profits are divided among employees. It’s an equal distribution and ignores rank and seniority so that everyone knows each job is critical to operations.

"When we screw something up, we all feel the effects,” she said. “When everything goes right and we do things perfectly, we all feel the effects of that, too.”

Starting wage is $16 an hour, more than double the federal minimum wage.

LetterLogic also pays health insurance premiums for workers, a choice that is increasingly rare among businesses. That decision was driven by an incident that happened soon after Deutschmann moved to Nashville. When her 5-year-old daughter cut her foot on a playground, she lacked health insurance. The wound became a staph infection, and Deutschmann had to take her daughter to the emergency room for treatment. Had they waited longer, she could have lost a leg — or worse, she said.

“I said, ‘I’m going to make sure that anybody that I work with will never have to face that kind of decision,’ ” she said.

Other company perks include:

• LetterLogic employees can bring their pets or kids to work.
• If employees need help with tuition, the company will provide reimbursements.
• If they have been with LetterLogic for more than six months, the company will provide $1,000 for a down payment on a home.
• If workers bike or walk to work, they are paid by the mile.
• If they take the bus, LetterLogic funds their pass.
• If an employee wants to start a business that LetterLogic leaders believe in, the company will help fund it.

Longtime LetterLogic printer Patrick Johnson asked Deutschmann for a $10,000 loan four years ago. He was growing a graphic design company outside of work hours and needed printing equipment. She approved the loan and introduced him to bankers who approved a line of credit. Johnson designs and prints banners, posters, uniforms and T-shirts, and he paid the loan back a year ago.

“She went out of her way to help me with my business, to encourage me to do this,” said Johnson, who continues to work at LetterLogic as his business, Pro Graphic South, grows. “It’s a great opportunity for employees to grow.”

The value of these company policies, Deutschmann says, is LetterLogic’s growing revenues and customer satisfaction — its retention rate is 97 percent.

A national platform

Now that Deutschmann has been named to the National Women’s Business Council, she’ll have a bigger audience for her ideas. She wants to encourage women to “think bigger” and scale their businesses, so that they are employing more people. That means encouraging them to raise outside capital or borrow money when it makes sense.

“If you are creating real wealth, you can have the power to make more change and to have more of a voice and to employ more people,” she said. “If I was still operating out of my basement I couldn’t exert much influence. Because I now employ, the way I look at it, 53 families, I can make an impact on the families and on their communities.”

She also supports increasing the minimum wage. She points to the research on minimum wage workers, which shows that the majority are women, many of them single parents.

“It’s really damaging to the businesses,” Deutschmann said of low wages. “You’ve got a single mom who works all day long at a minimum wage job, comes home only to change her clothes to go to her second minimum wage job of the day, and she doesn’t have time to cook dinner for her kids or to even be there for them when they get home because she can’t pay her bills without working the two jobs. She can’t do a good job at either company because she’s so tired.”

If workers were paid a living wage, the single mom could focus on doing one job well and be there for her family, leaving the second job available for another worker. It’s a philosophy that Deutschmann said has benefited her company and she wants other business owners to know it can be done.

“We’re successful because of it, not in spite of it,” she said.

Looking ahead

Deutschmann has considered buying other companies to expand, but she has shied away from it, out of concerns for preserving LetterLogic’s culture.

While she is approached a few times a week by interested buyers, the answer remains no, she says.

“We haven’t accomplished what we’ve set out to accomplish, and we’re still having fun,” she said.

But her ultimate mission has evolved. She has created a company, built the company and validated her theory that if you value employees, your employees will create value for your customers. Now her mission is to share that philosophy with others and continue to prove her business model.

“That’s what I’m all about, and that’s what my leadership team is about,” she said.

Reach Jamie McGee at 615-259-8071 and on Twitter @JamieMcGee_.

The company

LetterLogic, founded in 2002, is a patient billing company that designs and delivers statements for hospital groups. At 1209 Fourth Ave. S., the business employs 53 people and generates $35.6 million in annual revenue.

Inc. 5000 has charted LetterLogic’s growth since 2007:

2015: No. 4,603, 55 percent growth with $31.2 million in revenue

2014: No. 4,627, 54 percent growth with $27.9 million in revenue

2013: No. 3,992, 68 percent growth, with $25.6 million in revenue

2012: No. 2,950, 75 percent growth with $20.1 million in revenue

2011: No. 2,682, 85 percent growth, $17.9 million in revenue

2010: No. 2,335, 108 percent growth, $15.2 million in revenue

2009: No. 1,833, 174 percent growth, $11.8 million in revenue

2008: No. 1,047, 357 percent growth, $9.8 million in revenue

2007: No. 602, 539 percent growth, $7.3 million in revenue

Note: Growth represents a three-year period.

Sherry Stewart Deutschmann

LetterLogic CEO and founder Sherry Stewart Deutschmann was born in Statesville, N.C. She built her company from her basement, focusing on putting employees' needs first as the company grew. In 2009, she was honored by the EY Entrepreneurial Winning Women program, and in September, she was named to the 14-member National Women's Business Council, which advises the White House, Congress and the U.S. Small Business Administration on economic issues.