120 Pay Yourself Properly: Shifting from Survival Mode to True Business Ownership

Welcome to the Treat Your Business Podcast! 🎉 In this episode, I’m diving into the steps to stop underpaying yourself and start earning like the business owner you truly are.

Episode Summary
When was the last time you gave yourself a pay rise? Many clinic owners prioritise others and leave themselves last, staying stuck in "small business survival mode." In this short episode, I’ll help you shift your mindset, structure your finances, and start paying yourself properly.

I’ll explain the Profit First Formula by Mike Michalowicz, how to allocate funds for taxes, operating costs, and owner’s pay, and why paying yourself first is key. From setting profit targets to reverse-engineering your pricing, I’ll share practical tips to ensure your business works for you.

Key Takeaways

• Why clinic owners often pay themselves less than their staff.
• The difference between an employee and owner mindset.
• How to implement the Profit First Formula.
• Setting profit targets and adjusting pricing to meet income goals.
• Tips to reduce expenses and maximise profits.

Actionable Takeaways

1. Audit Your Pay: Are you paying yourself fairly?
2. Set Profit Targets: Define what you want to earn.
3. Adopt the Profit First Formula: Allocate funds for taxes, VAT, profit, and pay.
4. Review Pricing: Ensure your rates align with your goals.
5. Cut Expenses: Focus on activities that impact profitability.
6. Commit to Change: Decide on one thing to improve this week.

Resources & Links

• Profit First by Mike Michalowicz – A must-read for transforming your finances.

Let’s Keep the Conversation Going
I’d love to hear from you! What’s one thing you’ll do this week to increase your take-home pay? Leave a comment, send me a DM, or tag me on social media.

This episode of the Treat Your Business Podcast is proudly sponsored by:

• Nookal – The go-to practice management software for clinic owners. Learn more at nookal.com. 

Treat Your Business podcast is proudly sponsored by MBST, the groundbreaking technology revolutionising recovery and rehabilitation. Offering a non-invasive, drug-free solution for musculoskeletal conditions and nerve injuries, MBST works at a cellular level to stimulate regeneration. Expand your services and deliver long-term patient improvements without increasing your workload.

Learn more at mbstmedical.co.uk. 

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Transcript

Katie Bell: [00:00:00] When was the last time you gave yourself a pay rise? Many clinic owners. And here is a frightening statistic for you that was created by me. Developed by me. Researched by me. And that 100 percent of clinic owners I have ever worked with take home less than their senior staff, even though they bear all the risk, until they start changing things.

Most clinic owners don't pay themselves properly because they prioritize everyone else first. They don't have a structured financial plan and they are stuck in small business survival mode. So today, this is going to be a short and sharp episode. We're going to break this cycle and show you how to start paying yourself like a true business owner.

So welcome to the Treat Your Business podcast. Let's dive in.

Welcome to the Treat Your [00:01:00] Business Podcast with Katie Bell. I am Katie, and this is the place to learn the strategies, tactics, tools, and mindset needed to build your clinic or studio into a business that gives you the time, money, energy, and fulfillment you want and deserve. My team and I work every day with overwhelmed and exhausted clinic owners like you to shift. them from a business that is a huge time and energy drain and is not giving them the income they want. To confident clinic owners that are making money, saving money and getting time back in their lives. So if this sounds like something you want, let's dive in. I'm delighted to tell you this episode of the Treat Your Business podcast is proudly brought to you by Nookal.

The leading practice management software designed to streamline operations and empower every allied health clinic. Their platform seamlessly handles every aspect of your clinic from scheduling and clinical note taking to invoicing and reporting. Their innovative solution will help streamline your clinic and free up your valuable time, allowing you to focus on delivering better [00:02:00] patient care and growing your business.

So if you're tired of juggling multiple systems, I'm wasting precious hours on administrative tasks, then experience the innovation of new coal and discover how it can improve the efficiency and profitability of your practice. Visit nookal.Com today to learn more about how that automated features and user friendly interface.

can revolutionize the way you manage your practice. Unlock the full potential of your clinic with Nookal, the practice management software that puts you in control of your time. Thank you for listening. Now, let's get back to business.

So we have this mindset, the employee versus the owner mindset. The employee mindset is that we pay ourselves what's left over. We are working in the business rather than on the business. Or do you have an owner [00:03:00] mindset? Which is where you pay yourself first, you focus on profitability, and you treat your time as the most valuable asset.

I want you to think if your clinic were a patient, would you prescribe random treatments and hope for the best? Or would you have a structured plan? Of course you would have a structured plan. Your finances need the same structured plan. I think it is wild when I have clinic owners that start working with me and studio owners who may be paying themselves an amount of money, which is usually way below where it should be.

And they have no idea whether they can afford to pay themselves that or not until the end of the year when the accountants run their reports and tell them that they have overpaid what the company has actually made and therefore they now have a director's loan that's owed back to the company. [00:04:00] This is mental.

How stressful that you get to the end of the year, you've taken out more money than the company could really afford to do because you've not been in profit, or you've not made enough profit to pay yourself what you want to pay yourself. Not only do you now owe the company this. But how do you then increase your salary moving forwards when you're now chasing the debt and wanting to increase your pay?

How do you know how much you can pay yourself if you are not looking at your finances week on week and month on month and getting a real hold of what is going on here? And if you are this person, I want to tell you that it doesn't have to be this way and you don't have to be ashamed and there is no judgment.

But if you don't change it, and you don't start looking at your finances, then I am gonna judge you. No, I'm joking. I'm joking. A part of me will be really annoyed because this is [00:05:00] why I'm here, this is why I do what I do. Because I don't want any clinic owner. in the UK and Ireland to be in a position where they cannot pay themselves what they are worth and what they deserve because you bear all the risk, you bear the sleepless nights, you probably put the money in the first place to get the business off the ground, you're working a billion hours a week, probably pro rata for about two quid an hour, if that, and we've had this massive increase in salaries across the board and when you actually look at what you're paying yourself per hour, you are being paid at probably your junior salary rate to three grand a month.

So we need to restructure your mindset. We need to restructure your pay as an owner. And one of the things that we teach a lot in Thrive is to follow the profit first formula. Like we didn't invent this formula. Mike Michalowicz invented this formula, he has a great book called Profit First. Read it, listen to [00:06:00] it, audio it, do both.

But this is about paying yourself f first. It's about setting aside taxes. It's about allocating to operating costs in the right way. We don't have any clarity, but we don't have any confusion, should I say, on where money is being stored for different things. You're taxing your VAT if you are a sports therapist and you're having to pay VAT.

I'm hoping this is going to change eventually when people click on that you're actually health professionals. But if you're paying VAT, that is not your money. That is not yours. Certainly the VAT is not yours. The tax, it needs to be moved because it is ultimately going to the government. We will be tax efficient.

We will look at tax saving strategies. We will do clever accounting shit that I don't know how to do, but my accountants tell me what to do, so that we can pay the tax that we are actually needing to pay, because [00:07:00] that's the reason we live in the UK. We have to pay pretty high taxes, but there is a whole heap of benefits, apparently, to paying those taxes.

It shouldn't come as no surprise to you. If you're a limited company and you file your accounts nine months and a day later, your corporation tax is due. It is not a shock. If you are self employed, your tax is due in January. It is going to be a bigger amount than what you pay in July, but that is just what happens.

So we've got to allocate every single transaction. We'll have a percentage going to tax, to VAT, to profit, to owner's pay, to operating costs. We teach and we really stress the importance of setting up different bank accounts or setting up different structures in your account. I know Starling does it and Monzo do it, where you can move money really easily.

And ideally your VAT and your tax is moved into something that you can't just access at the click of a button. Now, you've got to decide your owner's pay strategy, [00:08:00] and that might be that you have a salary, and that salary will be different based on you being a sole trader or a limited company, and you need to work out when it's best to become a limited company, from a tax point of view.

perspective, but also from a risk perspective. And you need to think about what is your salary and what is your profit distribution? How much should go where? And the profit first formula says that you have profit at the end of the month. And that will be post you taking out what you need to take out.

Your business will have some money left over. And you will put 50 percent of that into a profit account. And at the end of the quarter, you withdraw 50 percent of that profit that is sat there. And do what you want with it. That is a owner's pay. That is your profit distribution. But it's about deciding what's the most tax efficient way of paying yourself.

But then ultimately, I [00:09:00] hate the fact when people like cap themselves at a certain level in their business because they're trying to avoid paying additional tax. We just gotta get on board, tax is a sign that you're doing really well. Be tax efficient, be smart with it, but don't cap yourself and live a really fucking average life just because you're afraid of paying more taxes.

You must have a conversation with your accountant about your owner's pay strategy. And you must be able to set your profit targets and reverse engineer then your pricing. Because most clinic owners under charge, how much do you actually need to earn per session to pay yourself well? Thinking about not only what profit does the business need to make, but what does the business need to make to serve you.

And if you're paying yourself now 500 pounds a month, then you can project over the space of 12 months that you want to grow that from 600 to 700 to 800 to 1000 to 2000. And ,, that will then dictate what revenue you need to bring in and what allocation of [00:10:00] costs you have there so that your business is not running at 80, 90 percent cost and there's 10 percent left to pay you and give your business some profit.

So really thinking about what do I want to earn and how do I then make the business work for me? I, one of my very first business coaches said to me, pay yourself first, Katie. And I have done this, I think it was in year two of my business that I just decided I put a what's one of those things, standing order into my accounts that just moved the money out.

And it was the first thing that happened not what happened was. Wait till the end of the month, see what I've got left and then try and pay myself. But what it meant is that because my salary was a non negotiable within the cost of the business, it then set the target for what we needed to be doing to ensure that I've always been able to pay myself consistently and [00:11:00] increasing.

Now, as you become an owner that may be non clinical, it might need to look slightly different within your growth plan and within your the way that you're going to pay yourself. In my clinic, I am not really now a working owner. I am a CEO and for somebody to do my role, it would cost a lot of money within the business.

But I've also got an ops manager. I've also got a practice administrator. I've got people below me. So when we distribute profit share to our ops manager, I need to think about can the business sustain both me at a six figure. A salary and an ops manager and therefore it might be that I have to shift around how I do things so that she gets Fairly incentivized and fairly paid on the profit share And then from there I draw down from the profits that [00:12:00] remain So as you grow your business, this needs to shift all the time But keep it really simple and if you are not seeing your pay rise you're seeing your pay rise, I'm going to tell you, in April, everybody's pay's going up.

Because this cascading scale happens, minimum wage goes up, somebody else in the company above them wants now an increase, because they've had a 6. 9 percent increase, and it just goes up the scale. You don't have to say yes, of course, it needs to be based on performance, it needs to be based on how valuable they are to the company to you.

But we've got to reduce money leaks in the business, we've got to cut unnecessary expenses, you've got to look at what's draining your profits. You've got to look at finding hidden revenue, maximizing what is already going on in your clinic and do more of that. We don't need to keep adding layers and layers of complexity to make more money.

So my actionable takeaways from this very short, I know it is very short episode, it's mainly because I now have three hours and [00:13:00] 25 minutes to get to the airport and I'm recording this two weeks in advance, is that I want you to audit your current pay. What are you paying yourself fairly? If the answer is no, that you are in a industry of very poorly paid directors and owners, but we are shifting this.

We are moving it, we are in control. Nobody else is, but we've all, as an industry, got to up level our self-worth, our pricing, our value set, you profit goal for the next quarter. Even a small shift in pricing or the structure can increase your take home pay, and make a commitment. What's the one thing that you're gonna change this week?

I know loads of you listening to this on your way into the clinic on a Wednesday morning. I know loads of you will be dealing with a massive to-do list, but I want you to look at that to-do list today and decide what is gonna make profit and what is not. What is gonna impact me being able to take more money as a business owner?

And if it's not gonna do [00:14:00] that, get it off your list and focus on the biggest things that are gonna make the biggest difference. I hope this resonated with you and you know what I would love you to do is just if you're watching this on YouTube, give me a comment underneath, if you're listening to it on audio on one of the podcast platforms, then pop something in, go on to the review and leave me a review because it's really great to hear your biggest insights.

It's really helpful to help clinic owners. Get themselves to pay themselves more money. It helps me deliver the content that you guys need to hear week in, week out. Cause you know sometimes talking to yourself in front of a computer, hoping that what you're saying is landing, can be a pretty lonely place.

So I'm gonna, I'm gonna lean into that and ask you to reach out, DM me, tag me on socials, communicate with me after this episode, and tell me what you're gonna do. to move your salary up this year. [00:15:00] I hope you've enjoyed this episode. I will see you next week. I promise I will be back with an actual full 20 minute episode or 25 minute episode.

But for now have a great rest of your week and I look forward to seeing you soon.