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Are your profit margins small? Have you been struggling to build momentum in your income? What does financial security mean for you?
In this podcast episode, Joe Sanok answers the question about how to grow a practice when you have financial constraints.
Podcast Sponsor: The Receptionist
Are you tired of running to the lobby to see if your next appointment has arrived? Would you like a more discrete, stress-free way for your clients to check in?
Take a deep breath — The Receptionist for iPad empowers your practice to create a Zen-like check-in experience.
This episode is sponsored by The Receptionist for iPad. It’s the highest-rated digital check-in software for therapy offices and behavioral health clinics, used by thousands of practitioners across the country including many who are just getting started.
The Receptionist for iPad is a simple, inexpensive way to allow your clients to discreetly check in, notify providers of a patient’s arrival, and ensure your front lobby is stress-free.
The software sends an immediate notification to the therapist when a client checks in, and can even ask if any patient information has changed since their last visit.
Start a 14-day free trial of The Receptionist for iPad by going to the receptionist.com/practice, and when you do, you’ll also get your first month free when you sign up.
In This Podcast
- Define your constraints
- Set out your priorities
- Are your clients short or long-term?
- Is outsourcing necessary?
- What does financial security mean for you?
Define your constraints
It is okay and workable to have only a little money, but you need to get clear on the numbers to define exactly how much you have to get a sense of where you are at, and what is possible.
Look at your fixed costs per month and then your variable costs.
We want to be able to say, on average, [that] my cost of doing business is X number of dollars per client I see. So, if on average I see 10 clients, that means that maybe $35 per session is going towards rent in all those costs. [But] it should not be razor thin.
You should aim for your costs not to be over 50% of what you are bringing in as income. If your profits are razor thin, then look at your fixed costs and see what you can change.
Set out your priorities
Your priority is to get full with clients.
Once you have hired another person, build up their caseload as fast as possible so that they’re full of clients too because this is the income that your business runs on.
Therefore, think about what drives client growth. This could be:
- Writing blog posts
- Networking with people in your community
Most people, when they’re not full … will work 10 or 12 hours and then do laundry … if you want to work 20 sessions a week, it’s going to be at least five hours of paperwork or marketing outside of those 20, so that’s 25 hours a week. You would be working 25 hours a week, every week, until you are at your goal.
Are your clients short or long-term?
If your turnover is quick, you will be expending a lot of energy trying to maintain a constant stream of new clients as the previous groups exit. This means that your cost of marketing and converting new clients will be high.
If they’re longer-term, and you know the average person comes for 10 or 20 sessions, you know that you can put a little bit more money into advertising or things like that because that long-term growth is going to be a lot easier.
Is outsourcing necessary?
If your profit margins are currently very small, is outsourcing worth it? At least for the time being.
Although, if you are doing your best work, and you can see another client within the hour or two that you would have spent answering the phone or replying to emails, then consider it.
If you know that you can make that time count, then outsource the small job to someone else.
What does financial security mean for you?
Define what your financial security looks like.
Put numbers on paper and consider what you would need to have saved up for 6 months to be secure if you were to get stuck between a rock and a hard place.
Often, when you scrutinize your numbers, you may realize that you weren’t as bad off as you thought – especially when you handle the finances well.
Useful Links mentioned in this episode:
Check out these additional resources:
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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This is the Practice of the Practice Podcast with Joe Sanok, session number 808.
I’m Joe Sanok, your host, and welcome to the Practice of the Practice Podcast. This is the Ask Joe Show. We do this every week, most of the time, once in a while we don’t do it. But when we do do it, I do do. My daughters, they’ve been talking poop. Actually, what’s funny is we have one of those signs in the bathroom there where you can like put the different letters on it and have it say things, and my daughters keep changing it. I had this like inspirational quote on it, and then they changed it to be a poop thing in the bathroom. I just recently just had it say like, there is space here. Then my 11-year-old changed it to, there’s space here for poop. So now if I say dooo, of course my brain goes to 11- and eight-year-old humor. But that’s single dad life. I mean, that’s parenting life. I mean, doesn’t do poop jokes really get old. I mean, in my Improv troupe, we are encouraged not to go there because it’s such easy humor. But I just said do do and I just went a one-minute rant about poop and whatever. Who cares?
We have a great question today from Erin at AGH Wellness in Towson, Maryland. I’m so excited about this question because Erin wants to know about practice growth with financial constraints. So what problems and solutions have you overcome, give practical tips? Erin’s saying, I had a lot of mental obstacles to overcome when starting a practice, but I’ve made great progress over the past year. Financial security has always been a sensitive priority for me, and I’m finding it continues to be an issue. Currently I’m transitioning out, I’m transitioning to all out-of-pocket clients as well as increasing marketing and networking with local doctors, lawyers, health professionals, as recommended by Practice of the Practice and starting the process of bringing on another clinician. Good job, Erin.
My question is, what would you focus on if you were in my position of incredibly thin profit margins in order to increase overall revenue and best position myself moving forward? Which should be my focus of my prioritization, it can feel overwhelming when there are so many different areas of growth. It all seem to need 100% of my focus? Thanks so much. I love this question. So I feel like Erin is a brother from another mother because I have had that mindset for so long. My parents, they were great with teaching me about money, about being responsible. When I wanted to skateboard in second grade, I had to save up half the money and do chores for the neighbors in order to buy this skateboard only to have bought it at Kmart and have my friends’ friends that were skateboarders say it was just like a trashy skateboard and I then didn’t even want to ride it.
But that idea of saving up and being smart with your money to me is so important. First thing from your question, I would question would be what do you mean by incredibly thin profit margins? When I look at the profit margins of a private practice, they should not be incredibly thin. I mean, if you’re getting a $100 to $150 per session every 45 minutes that should add up pretty quickly. The profit margins, the way I do the calculation is you’re going to look at your fixed costs per month and then your variable costs. So what do I mean by that? Your fixed costs are going to be the things that you have to pay for no matter what. If you’re renting an office, it’s two grand a month, no matter whether you see one person or 500 people, that’s going to be two grand a month. Your internet, your website, your website hosting, that’s fixed cost.
Variable costs are things that go up based on the clients or your marketing or things like that. So it may be I want to network with a bunch of people, and so you take a bunch of people out for breakfast or for kombucha or whatever, that’s a variable cost. So we want to be able to say, on average, my cost of doing business is X number of dollars per client I see. So if on average I see 10 clients, that means that maybe $35 per session is going towards rent and all those costs. It should not be razor thin. Like you should be making at least 50% of what you’re bringing in. You should not have your costs be over 50% unless there’s something crazy like you have to have downtown New York City property to see people for 500 or 600 bucks an hour. So I would question that razor thin comment that you made and say it shouldn’t be razor thin. If it is, I would look at your fixed costs and say, am I spending too much in some areas that I don’t need to? I would look at your variable costs of the things that you’re putting money into is that actually needed and maybe reign some of that in so that your profit margin isn’t razor-thin.
Next, in regards to what should be your prioritization first and foremost, if you are not full with clients, you want to be full with clients and if you’re adding a clinician, filling up that person too that’s the money, that’s the fuel that runs the whole thing. So we want to think about what are the things that are driving client growth? That would be marketing, so things like SEO, writing blog posts networking with people and making sure that those folks are coming into your practice, that you’re really clicking on all cylinders there. Most people when they’re not full, like say they want to be at 20 clients and they only have 10, they’ll work 10 or 12 hours and then they’ll do laundry and they’ll get their oil changed and they’ll meet with friends.
If you want to work 20 sessions a week, it’s going to be at least five hours of paperwork or marketing outside of that 20, so that’s 25 hours a week. You should be working 25 hours a week every single week until you are at your goal. Work the number of hours that you are going to work when you are full every week. All the time, tell your family, tell your friends, tell your babysitters, tell the school whatever you need to do, I’m sorry, I have to work. I work Monday through Thursday from 9:00 AM to 4:00 PM, that’s when I work. It’s the same way as having an employee job. You need to show up for yourself and do the work and when you don’t have the clients, you got to be out there hustling, trying to get clients, making those connections, writing those blog posts, finding ways for local people to do news articles about you.
When I had my group practice, I was so sick of running to the lobby to see if my next appointment had arrived, or even more awkwardly to have a bunch of therapists run to the lobby when we heard the door open. Maybe you want a more discreet, stress-free way for your clients to check in. Take a deep breath. The Receptionist for iPad empowers your practice to create a zen-like check-in experience. This episode sponsored by the Receptionist for iPad, it’s the highest rated digital check-in software for therapy offices and behavioral health clinics used by thousands of practitioners across the country, including many who are just getting started. The Receptionist for iPad is super simple. It’s an inexpensive way to allow your clients to discreetly check in, to notify providers of a patient’s arrival and to ensure your front lobby is stress free. The software sends an immediate notification to the therapist when a client checks in and can even ask if a patient information has changed since their last visit. Sign up for a free 14-day trial of the receptionist for iPad by going to the receptionist.com/practice. Again, that’s receptionist.com/practice. When you do, you’ll also receive a $25 Amazon gift card. This is the exact solution I wish I had when I had my practice, and now you can have it. Again, that’s receptionist.com/practice.
So another thing you want to look at is, are your clients short-lived or long-lived? Because a couple Ask Joe’s ago, we talked about lifetime value. If you are a short-term therapist and the average person comes three to five sessions and that’s what you do, turnover is going to be very tough. So you’re going to have to constantly be finding new people whereas if they’re longer term and you know the average person comes 10 or 20 sessions, you know that you can put a little bit more money into advertising or things like that because that long-term growth is going to be a lot easier. Also, we want to look at your time and say, is it worth outsourcing? If you have razor-thin margins, it doesn’t make a whole lot of sense to outsource, but then also, are you doing your best work?
So if you saw one or two more clients that fixed cost per client’s going to go down because you’re now spreading it over 12 clients a week instead of 10 clients a week, going from 15 to 20 clients a week, your fixed cost is less per client at that point. So it may be worth it then to have someone answering the phone to have someone returning your emails, to have them reaching out to potential networking folks. Then I’d want to start looking at that layer of it, of the best use of your time. Then lastly, I would really look at like, what does quote financial security actually mean for you? A lot of times we think that we’re financially insecure and when we think through it, we actually aren’t.
For me, being a single dad, I want to have six months of living expenses for my family just sitting in my bank account so that if I have a down month, it’s really easy to not freak out to say, okay it takes, just for ease of number, it takes $10,000 a month to keep the Sanok family going between my mortgage and food and everything. Whew. That means I need 60K just sitting there. If I’m not at 60 k, my financial security needs to be focused on having that. Everyone has their own wiggle room. Usually it’s three to six months, somewhere in there of personal living expenses. If you don’t have three to six months of your business expenses saved up, you probably want that as well. So once you have those things set up where you have that, I almost said Easter egg, that buffer of money, then it’s a lot easier to say, what do I actually need to feel that I’m meeting my financial goals? is it a 100K a year or is that a goal? Do I actually need $62,114? Okay, that means that if I only see 12 sessions a week, I still meet that.
I remember when I was leaving my full-time job and I looked at, I was working 40 hours a week, and then on top of that was working 10 to 15 hours a week at my private practice, so 50 some hours a week. Now that’s a lot of working. I was for a while basing my numbers on that combined income, but when I really thought about it, I’m like, wait, no, I shouldn’t base it on my combined income because for a while we were living off of just my salary. So when I looked at my salary of how many sessions I needed to do a week to just make that salary, I want to say it was like 16 sessions a week, and I was already averaging between 10 and 15. So if I could just consistently be close to that and have a little bit of a nest egg, oh, that’s the word I said Easter egg, a nest egg of money, then that made it easier to say, oh my gosh, I’m already at like 10 to 15 a week depending on the week that’s easy. That’s really easy. So making sure that you have that idea of what financial security is for you.
We could not do this show without our amazing sponsors. This week the Receptionist is our sponsor for the Ask Joe Show. I mean, this honestly is the program that I wish I had with my practice where people can come into your office, they go into your lobby, they just check in on an iPad, it sends you an immediate notification instead of having you or all the other clinicians poke your head out like ostriches being like, who’s that, my client? It’s just so much more professional, so much more easy. It makes the sessions just go smooth. It makes you look good and professional. You can start a 14-day free trial of the Receptionist for iPad by going to the receptionist.com/practice. When you do, they’re also going to give you an extra month for free. Again, go to the receptionist.com/practice to check out the receptionist.
Thank you so much for letting us into your ears and into your brain. Have an amazing day. I’ll talk to you soon. Bye.
Special thanks to the band Silence is Sexy for your intro music.
This podcast is designed to provide accurate and authoritative information in regard to the subject matter covered. This is given with the understanding that neither the host, the producers, the publishers, or the guests are rendering legal, accounting, clinical, or other professional information. If you want a professional, you should find one.