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How do the numbers work in a million-dollar practice? How much should an owner get paid in a solo and group practice? What is the standard practice for dividing up income?
In this podcast episode, Joe Sanok speaks about how much an owner should get paid.
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In This Podcast
- The Profit First method
- Some basic numbers
- A million-dollar practice
The Profit First method
The traditional business system follows that money is first spent on paying for expenses, processes, and transactions, and anything that is left over is then given to the owner as their income.
Mike [Michalowicz] flips that and says, “Well, why don’t we pay the profit off of the gross first … and we’ll just make sure that the operations align after that,” which in some situations does make sense.Joe Sanok
This formula can work really well with some slight adjustments.
To use the Profit First system, you need to set up different accounts and pay your profit into an account at the same time that you pay your expenses.
There’s a lot of great things about [this system] because then you’re allocating for your taxes automatically, allocating for your operations, your payroll [and so forth].Joe Sanok
45% of the net income. So, if you’re bringing $100k as gross income, you need to take $45k home and the other $55k goes towards taxes and business expenses.
1 – Solo practice:
$100k total income in the business:
- 30% goes to expenses
- 15-20% to your tax bracket
- 50-55% as owner pay
The tax numbers I’m using are based on Michalowicz’s and other accountants’ … but you always want to check with your own tax and accounting professional.Joe Sanok
2 – Group practice:
$100k to $250k total income in the business based on a 50/50 split:
- $75k is paid to clinicians
- 10% for operating costs
- 15% for taxes
- 42.5% as owner pay
3 – Group practice:
$250k to $500k income based on a 50/50 split:
- $200k is paid to clinicians
- 25% for operating costs and taxes
- 40% of total gross profits as owner pay
A million-dollar practice
(Based on a 50/50 model)
- The owner bringing in $100k
- $450k is paid to clinicians
- 25% is paid to operations and taxes
- 38.57% as owner pay
If you’re [using] a W2 model, these numbers will definitely shift and change where you have some very clear fixed costs.Joe Sanok
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Meet Joe Sanok
Joe Sanok helps counselors to create thriving practices that are the envy of other counselors. He has helped counselors to grow their businesses by 50-500% and is proud of all the private practice owners that are growing their income, influence, and impact on the world. Click here to explore consulting with Joe.
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