In this Therapy for Your Money episode, host Julie Herres, an accountant specializing in private practices, shares insights on creating a million-dollar therapy practice. She clarifies that a million-dollar practice generates gross annual revenue, not profit. She illustrates how practices achieve this, noting it involves robust systems around marketing and client acquisition, ongoing recruitment, and strategic delegation. Moreover, she warns against unsustainable hiring and compensation practices. Julie also promotes her webinar on common hiring mistakes made by practice owners.
Episode Highlights
Webinar
5 Most Common Mistakes Practice Owners Make When Hiring - https://www.greenoakaccounting.com/webinar
Links and Resources
Podcast Production by www.coursecreationstudio.com
In this Therapy for Your Money episode, host Julie Herres, an accountant specializing in private practices, shares insights on creating a million-dollar therapy practice. She clarifies that a million-dollar practice generates gross annual revenue, not profit. She illustrates how practices achieve this, noting it involves robust systems around marketing and client acquisition, ongoing recruitment, and strategic delegation. Moreover, she warns against unsustainable hiring and compensation practices. Julie also promotes her webinar on common hiring mistakes made by practice owners.
Episode Highlights
Webinar
5 Most Common Mistakes Practice Owners Make When Hiring - https://www.greenoakaccounting.com/webinar
Links and Resources
Podcast Production by www.coursecreationstudio.com
You're listening to Therapy for Your Money, a podcast about all things, money and finance for therapy practice owners. If you want to feel confident and in control of your financial life, then you've come to the right spot. I'm your host, Julie Herres. I'm an accountant and the owner of Green Oak Accounting. My firm specializes in working with private practices across the US and my team and I have worked with hundreds of private practice owners. I'm on a mission to share all the best practices I've learned along the way. Because I want you to have a profitable private practice. My new book, profit First for Therapists is available at most online retailers. You can get it in paperback, audiobook, or ebook as well. Go check it out. Hello, hello, and welcome to therapy for your money. Today we are talking about a million dollar practice. We're going to talk about what does it take to get there? What does it look like? Debunking some myths along the way. All right, let's dive right in. So first of all, a million dollar practice means that a practice is making 1 million in gross revenue. That's the top line. That's all the cash coming in. That does not mean that there's a million dollars in profit. Okay. So let's start there. A million dollar practice means that it is generating a million dollars in annual revenue. If you had a completely steady practice, that would mean it's making 83, 333 and some change every single month. But the reality of most practices is not just a completely flat, no growth, always the same. There typically is some up and down or some growth that happens in there. For example, if your practice is currently making about 50, 000 per month, what you need to do in order to be able to have a million dollar practice in the next 12 months from whenever it is that you're listening to this episode, your practice would go from Next month, 55, 128 to in exactly 12 months, your practice would be generating 111, 538. And the number swings that much because you're making up in those latter months, you're making up for. The first few months being at 55, 000, 65, 000, 70, 000, right? So you're making that up in the latter months. So what I find is that often when a practice owner is saying I'd like to be at a million dollars, they're not necessarily saying I'd like for the revenue for the entire year to be a million dollars, but maybe just a million dollar. And so that would mean in that case that you're going from the 50, 000 a month that you're making right now to 83, 333 or more so that if you were continuing at that level, your practice would make a million dollars. So there's a couple of different ways to, to look at it. Now, what can a practice owner expect, uh, at that million dollar mark? So let's say you're bringing in a gross 1, 000, 000 in annual revenue for the practice, chances are that your taxable income is going to be around 200, 000. 200, 000. Might be a little bit less, might be a little bit more, but in that ballpark. Now note, that does not mean that you get to take that entire 200, 000 home. You're going to pay tax on the 200, 000, but there's a really good chance that you're taking home significantly less than that. In part, because, uh, we are always wanting to make sure that there's enough money in the business to run the business. So there's a big portion of that money that is likely going to stay in the business as retained earnings that you are going to be able to take out at a later date, but just not today. So that first year that you have 200, 000 in taxable income. That's not the year that you take home 200, 000. That's usually going to happen at least one year in arrears. So most often what's going to happen there is you are going to pay yourself. Maybe you need 80, 000, a hundred thousand dollars to live on. You're going to pay the tax, which at that, at that point could be, you know, it could easily be 50, 000. And that means there's probably going to be about another 50 to 70, 000 left in the business as retained earnings. That helps pay that very first paycheck in January. Your bank account won't go to zero on December 31st. It has, there has to be money in there to continue to pay for payroll, for rent, for all the other things that come along with having a group practice. Um, and in part because You're generally not going to be able to get to a million dollars in revenue by yourself. Uh, I'm sure that has happened at some point. I have personally never seen it, uh, but it is, it is not something that is common or, uh, that I think is really achievable in, in mental health. Now, speaking of that, what does it take to have a million dollars per year? practice. Uh, usually when you're in a flat million dollars, right? I'm going to use that, that term as in 83, 000 per month. Usually you have at least eight clinicians, uh, eight to 10, probably no more than that. And I have that range just because you may have a part timer or two. Uh, but if you're looking at just full time clinicians, they're typically able to generate about 10, 000 per month for the practice. If they are full time and they are, And they are full. Uh, if you have a rate that is below a hundred dollars per session, that you may need more clinicians for that. But generally speaking, you could get to 83, 333 with eight full time clinicians. Uh, even if you were seeing no one, which you may, you may be seeing a few clients per week, uh, at that point as well. Uh, usually around that point is when, uh, we start to see the addition of a leadership level because managing 83, 000 in monthly revenue. Is a lot, it's a lot of work. Uh, and so you're probably reducing your caseload at that point as the owner, you may be getting a help. Like maybe you have a site supervisor, maybe you're bringing on a part time clinical director and that person is full time in your practice, but the clinical director role is a part time one. So they, there may be spending five to 10 hours a week in that clinical director seat. And then the rest of their time is spent seeing clients as well. So that is typically a. Um, a revenue generating position in your, in your practice in the sense that they are absolutely seeing clients are not spending a hundred percent of their time being a clinical director. Uh, but it is really a position that can be helpful to you. So if having a million dollar practice is one of your goals, or maybe even a multimillion dollar practice. Thank you. Run the numbers, see what it takes to get there. When you're in that period of intense growth, uh, it typically means that you are going to need to have really strong systems around, uh, marketing around client acquisition, you know, how you are bringing clients in. through the door. You're probably tracking metrics like how many phone calls are we getting each week? How many of those are we converting into clients? You know what the metric that is quote unquote normal for your practice is. That's going to be different for each practice, but there's generally going to be a number where you know, okay, we should be converting about 50%, 60%, 80 percent depending on your specific situation, your specialty, the insurances that you take, you're going to find the metric that makes sense for you. Uh, if you don't have. Systems for attracting potential clients and then for converting them into clients, it's going to be really, really hard to scale at that pace. Another system that you're going to have at that point is probably a system around hiring new clinicians. Once you get above 10 clinicians, you're going to have to keep an ad open most of the time. There's maybe always someone who's coming and going. That's even more so true if you have interns in your practice. They're coming to your practice for a very specific amount of time, and then they may or may not be leaving. So you probably always want to be recruiting. Even if you don't have a position open right this moment, you know that at some point you're going to have one open. So you're just keeping an eye on the market to see who's out there, who's looking for a job. Is there someone that I need to try to grab while they are available? You're also going to have systems around credentialing. If you are. And insurance practice, you want to know how are we doing this credentialing process? How long on average is it going to take so that you can then make some decisions as far as when I make someone an offer, when should their start date be? You have an idea of what those numbers are going to be to get to that million dollar mark. There's also a mindset shift that needs to happen. As you're growing the practice, you're going from. Probably doing most of the things at some point to really saying, I need to be intentional about, uh, giving things away to someone else, delegating, uh, hiring people who are in a complimentary skill set to yours and giving them. Not just the, the work or the task, but the outcome because there's a whole lot otherwise of deciding or decision making that is going to remain with you. So delegating the entire outcome and then you, uh, your role is shifting towards making sure the systems are working properly. You're not necessarily operating the systems or even reporting metrics on the system. You're looking at the metrics and seeing, is this working? Do we need to adjust over here? You're kind of shifting into more of a problem solver. Uh, position at that point, one of the biggest mistakes we often see group practices make is hiring in a way that is unsustainable for the business and more specifically compensating team members in a way that is not necessarily forward thinking. It's just thinking of right now. And like, what are, what is the problem that we're solving for right now? And that problem might be, we've got a long wait list. We need to get someone new in the door. It's not necessarily thinking about. sustainability and profitability of the business. So as part of this million dollar practice episode, I do want to tell you about a free webinar that we have around the five most common mistakes that practice owners make when hiring. It is a free webinar. You can go watch it. at GreenOakAccounting. com slash webinar. And in that webinar, I talk about the five most common hiring mistakes we see in private practice. So if one of your goals is to grow your group practice to a million dollars or more, congratulations, that's a great goal. I do hope that is in line with your personal goals as well. But over the years we have helped hundreds of practices grow, uh, to the million dollar point and well beyond that. And we've learned a lot of lessons along the way. So I would love to share those with you through the webinar. So again, go to greenoakaccounting. com slash webinar to check it out. Have a great day and I'll see you next week.
The information contained in this podcast represents the host and guest general opinions and should not be construed as personalized accounting and tax advice. Listeners should consider all facts and circumstances before applying this information and seek appropriate advice from an accountant, financial planner, lawyer, or other professional. Any info provided does not constitute accounting, tax, or legal advice.