The Private Practice Success Podcast

19. The 5 Levels of Private Practice Development

• Gerda Muller • Episode 19

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In today's episode of the Private Practice Success Podcast, Gerda delves into the 5 Levels of Private Practice Development - a framework designed to guide practice owners through the various stages of business growth and expansion. 

Drawing on insights from over a decade of working with psychology and allied health group practice owners, Gerda provides a comprehensive overview on how understanding these levels informs strategic and tactical decision-making.

In this Episode, you will learn (among others):

  • The significance of identifying your current Level of Private Practice Development
  • How benchmarking your practice can guide business growth and highlight areas for improvement.
  • The importance of applying level-specific strategies and tactics to ensure sustainable progress.
  • Discover the developmental crises associated with each level and how to navigate them.
  • Learn how to avoid the pitfalls of rapid growth by establishing solid foundations.

Who This Episode Is For:

  • Established group practice owners seeking to refine and up-level their business strategies.
  • Clinicians interested in understanding the levels and hence stages of private practice development.
  • Practice owners who want to create a sustainable and profitable practice.

As always, Gerda shares practical advice and personal experiences to help practice owners benchmark their current position and plan for future success. This episode is a must-listen for anyone looking to build a thriving and sustainable private practice.

Special Bonus:

Download the first two chapters of Gerda's book, "The 7-Figure Practice," for FREE! 

Connect with Private Practice Success & Gerda here:

 Well, hello there, amazing private practice owner. My name is Gerda Muller, and you are listening to the Private Practice Success podcast. And this is episode number 19.  

Today I want to talk to you about the five levels of Private Practice Development. Now if you've previously bought a copy of my book, The Seven Figure Practice, or you purchased a copy of the Private Practice Success Planner, then you will already know exactly what I'm talking about because it's all in there.

But if this is the first time you are hearing about it, then I am so glad that you are tuning in today, because this is really, really important.  This is such an important conversation because once you know your Level of Private Practice Development, it will become the foundation that will inform very important strategic, but also tactical decision making within your business.

Understanding the Levels of Private Practice Development

So what are these Levels of Private Practice Development?  I'm going to talk you through it today, but I like to represent the levels within a table format. At the top of the table, there are five headings, so there's five columns in total, and then down the left hand side, there are 16 markers. So based on where your practice falls on the markers, what we do is we plot you on the table and then it starts to reveal to us at what level of Private Practice Development your business is at right now. So why is it important to know this? I've alluded to it slightly already, but let's think about it.

Once you know where your practice falls on the table, you have done a really important benchmarking exercise. Because now you will know where you are at, at this point in time. When new practice owners join me in my Private Practice Success Academy, this is the first activity we do with them. I like to refer to it as their pre intervention assessment, using clinical terms there, because I see The Academy as an intervention in their business and their world in general.

So just like when a client comes to see me as a psychologist and they come for their very first appointment - what I do together with their consent form and all that type of paperwork - is I give them a DAS 42 to complete, which is a depression, anxiety, stress scale. And this is the pre intervention assessment that we use for this client so we can see exactly how significant are the symptoms of depression, anxiety, and stress.

And then the intervention occurs, so we have five more sessions. And then at session six, I give them another DAS 42, so we can look at movements in this score because we want to make sure that the work that we are doing in sessions is actually the right work, and it's having the desired outcomes. So then we can look at, okay, where are you at right now, so that we can tweak what it is we're doing. Or if there's been improvement we can go cool bananas, this is really great, how do we consolidate and cement those new skills that you've learned and how do we build from there? And I do the same thing with people when they work with me in The Academy. So the first thing they do with me is we benchmark their practice on the table of Private Practice Development, which tells us at what level they're at. Which allows us to then go off, do all the things that we do in The Academy, provide the business coaching, mentoring, consulting, and then we can reassess in 6, 12, 18, whenever we want to basically, and see the growth that has been occurring over time.

Which means, therefore, that we can see what is going well and what is not going well. Are there maybe areas where this business is lagging behind? If so, what does that mean? What's going on here? Did we drop the ball somewhere, what corrective measures can we now put in place? So it's a really fabulous benchmarking exercise because I know my practice owners and I know you probably and what do we like to do? We like to consistently extend and push away the goalposts. We are not really good at measuring our progress. So this also really forces us to measure progress and to go, okay, let's objectively look at the progress that I've made, so that I can celebrate when there's progress. Or if there's not, that I can correct it, maybe pull my socks off, or maybe just have an understanding of what's been happening in my world, and why didn't I get to grow as quickly as I ideally wanted to. So a very important benchmarking exercise. 

The Right Advice for the Right Level

Another really important role that I specifically want to highlight today is the following, and I'm going to give you a bit of a description of how I see this playing out. You know in those Facebook groups for psychology or other allied health practice owners, there might be a practice owner asking a question. Maybe they want to get new clients for their team members to fill the diaries. Or maybe it's a practice owner and they're really struggling to recruit and it's like, I'm pulling my hair out, I don't know what else to do, that type of thing. Or maybe they're having cash flow difficulties and they are actually vulnerable and they're asking the question, they're putting up their hand, which I love. And, and they're going, I've got this challenge. What do you guys think I should do?  Does anybody here in the group have any suggestions for me? 

And then a well-meaning other practice owner will come in and provide them with input and say, “Hey, this is what I did at my practice.” or, “Hey, this is what's working really, really well for us.” And I just absolutely love it when practice owners support one another in that way. Because for a very long time, that was not how it was in our industry.  People can often be really guarded. So I just love it when practice owners share and give input and suggestions.

But unfortunately, I sometimes look at those discussions that's happening in free and private Facebook groups, and I'm thinking to myself, that's not the right advice for this person. Because sometimes I know a bit more about the person asking the question, especially if it's in my own Facebook group, because when people come in, we ask a couple of questions. We always research them to make sure that they are a real practice owner, because we only allow practice owners in my Facebook group, which means we actually look at their website and I get to see how many clinicians they have on their team and so on. 

And very often it might be a level four practice owner giving a level two practice owner very well-meaning beautiful support and saying, “This is what you need to do in your marketing. This is what you need to do for your cashflow. This is what you need to do to recruit more clinicians.”  And sometimes that advice isn't relevant for where the practice owner is asking the question. Because when you're at level two versus level four, yes, you still need to do marketing. Yes, you still need to recruit clinicians. Yes, you still need to work on your cash flow. But the strategies and the tactics that are going to work for that size of business, i. e. that Level of Private Practice Development is going to be different. 

What gets you from level one to level two, ain't going to get you from level two to three, ain't going to get you from three to four. It's why being a business owner is a constant learning. It's why I love it so much because there's so much stuff that we need to learn, it's not boring. I always tell my people that we want to make it as boring as possible, but we want to make certain aspects boring, the stuff that's the golden thread, like you always need a cashflow forecast, at all levels. There's certain things that need to be boring because it's always needed, but there's a lot of change at the strategy and tactic level.

Unless you know at what Level of Private Practice Development you are at, you might be implementing the wrong strategies and tactics. And you might be thinking to yourself, I'm doing all this work. I'm working really hard. I'm sitting up into the evenings every weekend, and it's just not working. And the reason why it's not working  is that you are most probably using strategies and tactics that are intended for different levels. 

The Practice Growth Roadmap: A Level-Specific Approach

So the other thing that I do when I start working with people, I take them through my Practice Growth Roadmap, where I've actually listed what strategies and tactics are relevant to what level of private practice development. So I really try to make that paint by numbers, simple. And that's when I talk about bringing the boring stuff into it, how do we make business as boring as possible, so that we can be innovative and creative when it is needed. 

When that comparisonitis kicks in for a lot of people in Facebook groups, they’re looking at what somebody else is doing and what they're achieving, and a lot of times they're at a totally different Level of Private Practice Development. And then you compare your size or your progress or your own assessment of how you're doing based on the little bit that they are sharing in a Facebook group or even at the networking event and you judge yourself as, geez, I'm a shitty business owner.

But meantime, it's not. You're just at this different stage and Level of Private Practice Development. So that is just a bit of my thinking around why I think it's really important for each and every person to be aware of where they are at. 

Now that we've addressed why it is important to know your Level of Private Practice Development. I want to talk to you about the nature of the levels, which is really, really important.  So there's two main things that I want to cover here because I'm mindful of time, and haven't even gotten to the levels.

The Private Practice Development Table: A Guide to Industry Norms

The first thing is this, when you're looking at the table of Private Practice Development, you need to remember the numbers that you see on that table and some of those I'm going to share with you in the description. When I talk about the levels, those numbers are like norms. Okay, so these are very specific numbers on this table.

Just like when you are doing an IQ test, for example, with a child as a psychologist, and you guys will always find that I'm using psychology examples when I talk about clinical work because I'm a psychologist. But let's say it can be any type of assessment, really. Generally speaking, in my world as a psychologist, if we do an assessment, let's say an IQ test, as I said, and the person has a score.

What you then do is you compare the score with the norms. So the norms are based on a lot of research and it says that generally when somebody is this age, we could expect them to get a score in this range. And if it's in this range, it is average. If it's in this other range, it is above average, below average gifted, all of the different things.

So you go and find where this person's score falls, you find out what range that is, and then you can actually make a very clear comparison, right? So in this instance, now that you have the data, you can compare because it's a benchmarking exercise. And the same holds true for the Levels of Private Practice Development, the table that contains the levels,  the numbers does not tell you how things should be or even could be. It tells you what is generally happening out there in our industry.  And when I use the word industry, I'm specifically referring to allied health private practice. 

So the numbers that you will see on the table of Private Practice Development have been gathered through extensive research that I have personally done over many, many years since I've started doing this thing called Private Practice Success Australia. And we are now in our 11th year of doing this. So that's point number one. It works like norms. You're going to  see where you fall and then it's gonna be compared to what generally happens within the industry. 

Which means that yes, sometimes there are going to be outliers. And if there is an outlier, which in the case of my example would be a child that gets, for example, or an adult for that matter, that gets an IQ score and it falls in the gifted range, which is an outlier. Very often businesses come to me and they do have an outlier. Most of their markers might fall on level three, but there's this one thing on level five, or there's this one thing on level one. And what that then does is it prompts a discussion where we can look at, okay, that's interesting. What does this mean? How did we get here? Are we happy with this? How do we ensure it continues to happen if it is a positive outlier, right? So again, it provides a road map for very clear decision making based on clear data. 

Building a Sustainable Practice: The Importance of Each Growth Stage

The second thing that I wanted to share about the Levels of Private Practice Development is the importance of navigating through each level, rather than just jumping over it.

And I'm going to use another clinical reference here, because that's just how my mind works as a psychologist. If you've done any training in child or human development, you would have heard about Erickson's theory of human development. So Erickson talks about all the stages that we go through in our life. And Erickson says that for every life stage you go through, there is a developmental crisis that you need to navigate. 

Now, as an example of a baby, when they're born between zero and two years of age, they go through a developmental crisis of trust versus distrust. And the toddler needs to successfully navigate that developmental crisis and ideally as they move through that crisis they. We would ideally want them to land at a place of trust, where they start to learn to trust the world, where they know that if Mum leaves this room, she's not disappeared and I'm never going to see her again. I can trust that she will come back into the room. And that is so important for them to develop. A child that cannot develop trust but ends up landing in distrust at the end of that developmental cycle, takes that into their adult world, which means that when they get into their first intimate relationship they're going to struggle with trust issues.

Similarly, for example, teenagers go through a developmental crisis where they are working towards the task of Identity versus role confusion. So ideally they want to get to a place where they formed a really clear identity. So they are asking questions like, Who am I? What do I want to do with my life? And they start to separate themselves from those important parental figures in their world. Ask me, I've got an 18 year old in the house.  I know exactly what I'm talking about here,  it's like they're becoming an adult and they have to form this adult identity. And if you don't give them that space and opportunity to go through this process, they won't successfully navigate through the stage. And they will end up with role confusion, which will again, follow them throughout the next life stage and even the next and possibly even the next. 

Now, the third example, and I'm sure this is the one you might have heard about is the midlife crisis. Erickson refers to this as the developmental crisis of integrity versus despair. Where you start to ask yourself questions like “What have I done with my life? Did I make good decisions? Did I contribute? Do I have any regrets?” And if you can answer, yes, I did well, I'm happy with what I did, maybe I've made some mistakes, but you know what? I did my best. Then you're going to end up at a place of integrity, where your ego is intact. Versus despair, where you go, “Oh shit, look at my age. I haven't done the things I wanted to do. I'm not happy with the outcome.” And that's often when we see that midlife spiral.

So the point that I'm trying to make is this, that at each Level of Private Practice Development, your business is going to have a developmental crisis. And you know what? A lot of times people come to me and they say, “Hey Gerda, I've been trying to run this business now for five, 10 years. And it's like, There's always something. Why is there always something happening?” It's like, that's just your developmental crisis. And when we can actually look at the Level of Private Practice Development and we can go - level one, two, three, four, five -  Let's make sure that we successfully navigate through each stage, because if I grow my business too fast and I just skip through the foundations, I don't put that important pieces in place.

In other words, I don't navigate  the appropriate developmental crisis successfully. It's going to come back to bite my ass at the next level, probably the next one, and probably the next one. And I for one know how intoxicating it is for your business to grow really fast. It feels so good, but I can tell you now it won't be sustainable if you've not navigated through each level, taking the time that it needs you to put the foundations in place. And a lot of times when people start working with me, what we need to do is go back and go, okay, let's do an assessment on the Practice Growth Roadmap, and let's look at what you've skipped. Where's the gaps in your business? Let's go and fill those gaps because only when we can do that will you have a sustainable business and will you get to that point where you ultimately will have a self running practice. Otherwise, you just stay stuck on the bloody hamster wheel. This is why that happens.

I really hope that the pennies are starting to drop for you when you are listening to this in terms of going, maybe that is why. Maybe it's not because I'm a failure. I just didn't know what I had to look at.

So who is ready to get stuck in and hear a bit more about the actual levels? I sure am. So let's start with level one. 

Level One - The Start-Up Private Practice

This generally consists of a solo practice owner. So you are the only clinician and all the marketing that you are doing is around getting clients for yourself. This practice generally operates from a one room venue. And a lot of times my solo practice owners have no dedicated admin support, some might have a VA, but that is more the exception rather than the rule. 

The solo practitioner usually works a 42 productive working year, consulting with clients five days per week, seeing an average of 4-5 clients per day. Now you might be wondering why I refer to a 42 productive week. That is because of all the public holidays. Did you know that in Queensland there's like 10 public holidays? 10, there goes two weeks. Then you want to take a four week holiday, right? Then you want to have at least two weeks for sick leave. One week to get all your professional development done, because if you don't get that done, you can't re register. So all of those things start to add up. And before you know it, you've only worked 42 weeks in the calendar here.

And when I work with my mentoring, coaching, consulting clients, I always work any numbers out in 42 weeks. Because let's say if you get more productivity out of yourself as a solar practice owner or out of your team then you're winning all the way. But I like to be conservative when it comes to financial estimates so that's just on a side note.

So in addition the level one or startup practice owner engages in approximately five to 10 business management hours a week, resulting in an average of zero to 20 new client referrals per month. Now the client referrals is a number that is dependent on the type of clients you see. I'm not going to go into too much detail, remember, I'm just trying to give you a general overview here. 

Now, this clinician can expect to earn a wage of up to $60,000 per year once a full time caseload has been reached. Which means that they will probably generate revenue of around $142 per year once they've started building their caseload and their client numbers.

And what I have found is that these practice owners generally have a net profit margin of between zero to four percent. So the solo practice owner is really working hard to establish themselves within their referral network, wanting to make sure that there's a consistent stream of income. But they can often find themselves fairly isolated because they are working by themselves, hence the name solo practice owner. And therefore it is really important for them to seek out regular and ongoing supervision.

Now, on another side note, you might be hearing these numbers when it comes to salaries and wages and revenue, and you might be thinking, Oh, that's really low. Or you might be thinking, Oh, that's really high. So I want you to remember. That the numbers on the table of Private Practice Development has relevance to all disciplines across allied health.

So whether you're a psychologist, which is probably at the higher end of the scale, a mental health social worker, an occupational therapist, a dietician, physiotherapist, Any and all of the allied health professionals, their fees, and therefore the money that they generate, and therefore the wage that can pay themselves, there's a huge range.

So the table and therefore these numbers for each level is based on the whole of industry averages. So let's say if you are on the higher end of what your discipline charges, then this should really be higher for you, okay, very important to note. So again, remember I said, these are norms for allied health private practice.

Level 2 - The Step-Up Private Practice

At level two, it's called the step up because you are basically stepping things up, and going from the solo starter practice owner, and expanding your business by taking on that first clinician or maybe even two. 

This generally means that you need to upgrade and get an additional room to accommodate the additional clinician that's joining you, which generally means that your overheads are increasing, right? Now, although your turnover is probably sitting on average at around about $315,000 per year, you will find that your overheads have increased and there's probably a bit more pressure to find clients for the one, two, or even three clinicians that you have now hired. 

You also now need to pay your new team of clinicians, whether they are employees or contractors, they don't work for free, right? And you're probably finding that although you love the fact that you now have all these people that work with you, that you probably are still seeing clients five days a week in order to maintain your wage while still having to spend extra time now -  lots of extra hours trying to manage the administrative workload, ensuring referrals are coming in so that your team members can stay busy, and do all the backend work. 

And this for a practice that is probably having a net profit margin, if you do things well, sitting around 4% to 6%. So that is level two. 

Level 3 - The Expanding Practice

At this level, you have what I refer to as a small group practice. You have around about four to six clinicians, probably around about three to four practice rooms. Your turnover now is sitting at around $504,000 per year, and your net profit margin is probably sitting around 6% to 8%. Your new client referrals each month should probably be sitting between 25 and 55 in order to ensure that all your clinicians stay busy.

What I often hear these practice owners tell me is that they are finding it really hard to keep up with all the marketing and again, all the work that they need to do in the backend. But you know what? If you are at level three, you've already done what a lot of people haven't done. You've taken the leap of faith. You are building your group private practice. You might find though, that although you enjoy going to the practice, you always have this little nagging worry in the back of your head.

Are you going to pay your bills? Are you going to be able to look after all the expenses, especially the growing overheads that you have as your business grows? So financially, you might be having a reasonable turnover,  but it's more than managing the flow of money coming in and out of your practice.

Level 4 - The Demanding Practice - AKA the Successful Private Practice

This practice has now grown from level three to four in terms of more clients, more rooms, and more team members. But there's also a big big demand on your time, your human resources, and your financial resources.

By now, your practice is probably turning over on average about $787 a year. Your net profit margin is probably sitting around 8 to 10 percent, but it has its drawbacks, right? 

I often find that when people get to level four, this is when they really start to struggle with team demand. Because level four really requires you, if you've not done so already, now you've got no choice, you have to step into that leadership role because of the number of people that you now have -  not only clinicians, which is probably sitting around six to eight clinicians - but administrative staff, because by now you most certainly would have one and a half full time equivalent admin staff.

You at least have 4-5 consulting rooms welcoming 20 to 30 clients through your doors each day. Now, these can be physical doors or this can be virtual doors, right? So, it's a pretty busy practice. Now at level four, you might find that a big part of your role is that of HR manager, whether you like it or not. Not only for your clinician team, but also for the admin. If you are fortunate, you might have been able to appoint an office manager or maybe an accounts person to also help you with that part of running the business.  What I find is that when practice owners have not put the proper systems in place, and this is part of the norms because 9 out of 10 people don't, they love skipping through the levels, by now you're working like 40 plus hours a week.

This is the practice owner that is at most risk of burnout. But you know what? This is also the practice that looks really successful from the outside. So if you look at their Facebook page, or you look at their website, or you hear them talking in a Facebook group, at a networking event about how big their team is, how many rooms they have, you're probably going, oh, they've got it all sorted. They've got this all under control. I wish I were them. But meantime, back at the ranch, their life is crazy. Their practice is demanding. They are just really good at being that duck on the pond that looks like a swan.  This beautiful swan at the top, but paddling like crazy underwater like a duck that doesn't know their head from their tail.

That is level four for a lot of people and that's often where people get to and they go, “I don't know whether I can continue doing this.” There's also this often where people come to me where they go, “I thought I'd done everything I can, but I'm on this constant hamster wheel Gerda, and I feel like if I were to get off, everything will fall apart. And I know I need to get off because I'm, I know I'm at risk of burnout. I'm tired. I don't have time for my family. But I feel like if I get off, everything's going to fall apart. Everything that I've worked so hard for is going to be gone.” And then they just keep running and they keep running. And I find it really interesting how entrenched running on that hamster wheel is because I would sometimes tell people, like, I would hold up the mirror and say, this is what's happening for you, and it's like, they just can't allow themselves to get off because if they get off, they are scared of what's going to happen.

Needless to say, there is a lot of pressure when you have a level four, which is the demanding, aka, looks like, seems like, a successful private practice. Again, this is often the norm, right? This is not like this for everybody, but I see this so often. 

Level 5 - The Ultimate Practice 

At the end of the day, you are running a business and the goal of having a business is to create a sellable asset. Something that could hopefully be a major part of your retirement planning one day. So that you can sell it, you can have money to spend and blow on traveling the world or do whatever you want, or maybe you leave something for your kids, whatever you do, it's perfectly fine.

The thing is you can only sell your practice for a great price if you have been running it profitably. And ideally you need it to have been running it profitably for three years prior to wanting to sell it. It's really interesting, I've spoken to people that sell allied health businesses and 9 out of 10 people that sell their practice, sell it unexpectedly, and when it's not planned and therefore they do not get the money that they think it is worth.

I'm always encouraging people I work with to plan to go, all right, what's happening. I need to play the long game. When do I think I might want to put my practice on the market? All right, let's work backwards because we need three really profitable years and of course, commercial goodwill. So the higher those two things, and there's a bunch of other stuff as well, but those are two really important things, the higher price you can ask for your business. 

Now at level five, when you have navigated successfully and you've survived level four, you will now have a consistently fully booked practice, welcoming an excess of 30 clients to the practice each day. You've got systems and processes that run very, very smoothly. And this is where every business owner wants to be -  to be able to go on holidays, go on maternity or paternity leave, and you are still able to pay yourself your full wage whilst not working.

That is the level five private practice. Now at this practice, you're probably turning over roundabout $1. 1 million per annum, and your profit margin will be sitting at 10% or greater. 

Now does that not sound awesome? Well, I'm happy to say that it is possible. Not only that, if you do this right, you can have a level five ultimate private practice that can run in your absence. Not only for a short period of time for that holiday or for maternity leave, but permanently, and I refer to that as a self running practice.

Now, if you like to be in the business and you don't want it to be self running, you want to be there, you want to be involved, then that's your choice. But I love to give my practice owners a choice. So, I like them to have the choice to decide - how much I want to be involved this month, this quarter, this year - and maybe I just want to vanish off the face of the earth for the next 12 months, but have my business still pay me my full wage.

And that is what a self running practice can do for you. But you can only get there  when you've put in place what I like to refer to as the self running systems. And that starts by starting at level one and going - Is all my foundations in place, irrespective of how big my business is. You know, a lot of people come to me and the big complaint I get from people at level three and four is “Gerda, I think I've reached this glass ceiling that I didn't know existed in the industry. And it doesn't matter what I do, I just can't break through what is revenue and profit. And therefore, for the business owner, income, glass ceiling,” And a lot of that has to do with not having put foundational pieces in place, and a lot of that also has to do with not having, I'm not going to say the right business model because any business model can be right for you, but they have a business model -  but it's not implemented in the right way. They didn't consider the correct data, they didn't consider the right variables, and they don't have the correct margins built in. And as a result, they think they've done what they should, but things ain't working. 

So needless to say, a lot of what is often going wrong in the business side of your private practice can be found within the Levels of Private Practice Development.

Ready to Dive Deeper? Grab Your Free Chapters!

I honestly hope that this has given you some food for thought.  If you are interested in more detail, I'm going to share with you in the show notes a link to download the first two chapters of my book called The Seven Figure Practice. Chapter two has a detailed chapter on the Levels of Private Practice Development.

I would encourage you to download that chapter, have a read through it and reflect on where your practice is right now. Ask yourself whether you might have grown too fast. Really be honest with yourself and ask - have I skipped and jumped through levels when I should have taken my time to implement systems? And what do I need to do to fix this now? 

Alrighty, thank you so very much for tuning in. As always, remember that I am here to help you build a practice you can't stop smiling about :)


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Gerda Muller

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