The Private Practice Success Podcast

49. The REAL Reason your Cash Flow Sucks

• Gerda Muller • Episode 49

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In episode 49, Gerda gets brutally honest about one of the most painful topics for private practice owners: cash flow. 

Drawing on her own practice owner experience and countless client stories, Gerda reveals the three biggest reasons why so many allied health businesses are struggling to keep money in the bank and why the usual “quick fixes” just don’t work.

This episode isn’t about surface-level tips or empty motivation. Gerda dives deep into the real mistakes that drain your finances AND your confidence. This episode will have you walking away with a reality check, a little tough love, and a clear path to finally get your cash flow under control.

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

  • Why investing in the wrong strategies for your Level of Private Practice Development can tank your cash flow and how to choose the right ones.
  • The crucial role of wage and contractor payment margins, and why ignoring them can leave you working harder for less.
  • How “gappy diaries” are quietly eroding  your profits and what you can do to consistently fill your books.

Who This Episode Is For:

  • Allied health practice owners tired of the stress and uncertainty that comes with inconsistent cash flow.
  • Leaders who want to move beyond quick fixes and build a financially sustainable business.
  • Anyone ready for a straight-talking, practical approach to turning their practice finances around - once and for all.

Tune in for an unfiltered, empowering conversation that will help you take control of your cash flow and build a practice you can’t stop smiling about :)

Want Gerda's Help with your Business?

Gerda helps allied health group practice owners go from overwhelmed, overworked, and underpaid to fully empowered and financially thriving. If this is you, then make today the day you reach out. Complete this super short Triage Form here bit.ly/triageformpps and Gerda will personally reach out to you. 

Here to help you build a practice you can't stop smiling about :)

Connect with Private Practice Success & Gerda here:

Well, hello there passionate private practice owner. My name is Gerda Muller, and you are listening to the Private Practice Success Podcast, and this is episode number 49. 

Today I'm going to talk to you about the real - R E A L - reason why your cash flow sucks. Yes, unfortunately, I'm a South African, which means that I shoot from the hip. I just tell you how it is, and I'm going to tell you how it is - the real reason - because I love you. Not in a creepy way, but in a very professional way of somebody that has probably been there, done that. Done all of these things, made all of the mistakes, and if there is a mistake I haven't made, I have probably worked with a practice owner that's made that mistake, and I've helped them out of that mistake. So there's experience behind what I'm sharing with you, and honestly, it is my absolute wish for you to avoid these mistakes. Because mistakes not only hit you where it hurts - which is in your wallet financially within your business - but even more so emotionally. 

Because yes, we might be business owners, but we're also humans. We are humans trying to run and build businesses. And these mistakes really mess with our confidence, mess with our self-esteem, and it brings that imposter syndrome to the fore. So I really want to help you avoid these mistakes. So as per usual, here on the Private Practice Success Podcast, we are going to be really real. So I'm going to share with you the real reason why your cash flow sucks, and because I like to overdeliver, I'm going to share with you not one contributing factor, but three of the biggest reasons why people out there right now in the industry are struggling with cash flow. Are you ready for this? Let's get stuck into it.

Real Reason #1 - Investing in the Wrong Strategy for your Level of Private Practice Development

Real reason number one why your cash flow sucks right now, is probably because you are investing your hard earned dollars in your business into the wrong strategies for your level of private practice development. As an example, let's talk about Google Ads. I'm sure you've probably by now heard a lot about Google Ads, and I can tell you now that there are practice owners, maybe even yourself out there spending anything between $1000 a month to $10,000 a month - even more on Google Ads - and they are still telling me that their cash flow sucks.

They still tell me that they don't have enough clients on the books, which then obviously means cashflow sucks. And you would think, wow, okay, if you are spending, let's say, middle of the road, $5K per month on Google ads, surely you want to see a 10 times investment on that. And if you're not seeing it, there's something wrong with your Google Ads. I'm not dissing Google Ads. I'm not saying don't do Google ads, google ads most certainly work. But if you are a level one, two, or three private practice, you shouldn't be spending your money on freaking Google ads. You are not going to get the return on investment. There are other marketing strategies at level one, two, and three that you should be investing in. 

I only recommend Google Ads when you are level four private practice or above. And if you don't know what I'm talking about when I refer to the levels of private practice development, well I've got you covered as per usual, so if you go to episode 19 of this podcast you will hear me talk about the five levels of private practice. Development. So coming back to today's topic and our example of Google Ads.

So I would only recommend Google Ads at level four or above. But even if you are at four or above, and you are doing Google ads, you might not be getting the return on investment. You know why that is? So sometimes it's the very mechanical detailed things. For example, you're not effectively using negative keywords. And unless you know how Google AdWords work, you won’t know how to do that. Another mistake people make when they have Google Ads running is they outsource that to an agency, which I do recommend by the way, because it is a freaking science - but, they don't regularly check in with that agency. They just let the agency do it. It's that, oh, they are now in charge of it so I can now focus on other stuff. No, you have to have insights into what is happening. 

Once a month, you should be meeting with your Google Ads agency, and you should be getting a report from them. They should be talking you through exactly what they're doing, what's happening, what is the result, what does the data say, and as a result of all of that, what is the strategy going forward? If you are investing money in something like Google Ads, you want to get 10 times your return on investment. If that's not happening, you need to revisit this strategy. 

Also, you should not be doing something like Google Ads and spending a lot of money on it if you have not properly trained your front desk team in having conversion conversations, okay? You can spend a hundred thousand dollars a month on Google ads, but if those people are enquiring, they're ringing up, they're sending through an email, and your front desk is not following them up quick enough, and having conversion conversations in a way where those enquiries actually turn into booked appointments -  it's not going to work.

And then the next step is if you haven't trained your clinical team in how to properly engage clients and have them coming back for more than 1, 2, 3, 4 sessions - it's a waste of money. And can you see why therefore, I don't recommend doing this until you get to level four. Because we need to get those other foundational pieces in place before we start investing money that's really expensive for a level one, two, and three practice into strategies like this. 

This is where I see practice owners often talk to other practice owners and they're going, oh, they're doing Google ads, or maybe you are doing a search on the internet and you know, you see other people doing Google ads. You go, I should be doing that! That's not how we make business decisions people. We don't just blindly follow what other people are doing, because remember, you've got no clue about what's happening behind the doors in their practice. You do not know how their business is set up, how big they are, where their money is really coming from, right?  You don't have that information, if you are going to be making your business decisions based on what other people are doing, you're going to be stuffed - don't do it. 

That's not where you get your business input from. No, you come to somebody like me and we work together to devise the right strategies for your business, your vision, your goals, and your level of private practice development. 

You are either going to do things right or you're going to just jump at all these things that you see other people are doing. People that might be really going, yes, that's what I'm doing, and I'm sharing this with you because I'm a really generous practice owner. But if they don't know what's going on in your business, that might not be the right decision for you. And then you follow it and it doesn't work for you. Or you go, oh my goodness, I've just invested all this money and I've got nothing to show for it. And you know what happens then? Then you think you're a failure. Then you get hard on yourself and you go, I'm not cut out for this. I should never have done this. Other people are so much better. And then you get onto that downward spiral when it's not you. It's the strategy that wasn't right for your level of private practice development. So please do not do that. Do not do that.

Instead, ask yourself: What is the right pathway for my practice? So within my Private Practice Success Academy, for example, we've got a very clear practice growth roadmap where I very clearly set out if you are a level 1, 2, 3, 4, or 5 private practice - what are those strategies when it comes to marketing, when it comes to building your team, when it comes to building your systems that you need to be implementing at that level. And we get all of those done for level one, and only then do we move to level two. And then we do all the strategies for level two, and then we move to level three and so on and so on.

And you might go, oh, well that sounds really boring, but you know what? I'm all about making business boring. I would rather be structured, do it right, and build a sustainable business, than experience those ups and downs. Those emotional freaking rollercoasters of business, because you haven't been structured, because you haven't done the foundations right.

So to be clear, I'm not dissing Google Ads. I'm using Google Ads as a prime example of where I see practice owners investing money into the wrong business strategies that's not right for their level of private practice development. And they fail. And when you keep on failing, you're going to get to that point where you're going to close your doors because when you run out of cash, you can't run a business. And I do not want any practice owner to be closing their doors. 

So honestly, ask yourself: How clear am I that I am investing into the right business strategies for my level of private practice development. And if I'm not clear and confident on that, what do I need to do to fix this?

Real Reason #2 - Inefficient Margins in Wages & Contractor Payments

Real reason number two, why your cash flow sucks is as a result of inefficient margins in your wages and contractor payments. Now, I'm sorry to say, but I'm getting very bored with myself, because I feel like I've said this so many times over, but it's just not sticking people. So I'm going to say it again, because it is a real reason why your cash flow sucks. And I get why people aren't listening - because they are desperate - they are desperate for team. Please don't do it. 

Inefficient margin. What do I mean by that? You know, I speak with group practice owners that have got pretty large teams, a lot of people to manage. And I can tell you one of the hardest things you need to learn how to do in business is HR - managing people. Irrespective of what type of business you are in, I can tell you now you cannot be a group practice owner without being willing to deal with HR issues. Because it's people. There's people in your business. If you've got a service business, even more so than a product based business, you still need people in a product based business. But we, in service businesses, there's people. People are all different. We are going to have to learn to embrace managing people, right? And you can work on your management and your leadership skills. 

But the thing is this, if you build a business with a lot of people and you're not even making money in your business, you've got all this hard work, all this emotional energy, all this time that you spend managing your people for zero return. No money in the bank worrying every freaking fortnight - how am I going to pay the freaking bills getting resentful because you can't even pay yourself because you are paying such a large amount in wages and in contractor payments.

I'm not saying don't pay your team well, that's not what I'm saying at all. But what I am saying is that you need to make data driven informed decisions when you're making job offers, or when you are taking on a new contractor. So I want to be helpful here, right? So I'm going to give you some. Some broad spectrum numbers here.

If you speak to any good accountant, an accountant will tell you that if you've got a service-based business, including Allied Health, we are not somehow special, okay? Same business principles apply to us- that, of course is if you're not a charity and not an NGO. If you are a PTY limited business, and you are mandated by the government, by ASIC to actually make a profit - because if you don't, you are operating well insolvent if you can't pay your bills. Then these rules also apply to you. Okay? 

A good accountant will tell you that the team members, whether you've got psychologists, OTs, speech dieticians, social workers, whether you've got lawyers, dentists, architects, engineers. The people doing the billable work, which in our case is the clinicians, that they should be billing three times - three times their annual wages in billing. So do yourself a favour and go and have a look and see what's happening in your practice, because there's not a lot of people that's achieving that in our industry. So that is the first benchmark to look at. 

Another benchmark to look at is the percentage of wages to sales. That should be sitting at 30%, so that's another way of looking at this. All right, so every fortnight we run a report in my own practice, we will look at what's the amount of billings that that person - clinician billed versus what is their wage that we paid and what is that percentage margin. Again, any good accountant will tell you that you should sit at 30%. 

If you want to sell your business one day, you want that to sit at 30%. So have a look at what that looks like within your practice right now.

So that is when you have an employee model. And again I'm not saying you can't pay your people well, but you need to look at all the levers. What does that look like? What are the billables that I'm setting for my team? When I was thinking about this point, it reminded me of a conversation I had with somebody, it's probably now two, three years ago. This was not an allied Health Professional, this person was in a different business, unrelated to Allied Health, and I'm not going to give too much information because I want to protect this person's privacy.

Anyway, we were at a conference and we were talking, and she was telling me that she bought this franchise, and she was incredibly proud of the fact that she decided when she bought the franchise that she was not going to have any KPIs for her team members. No KPIs. Guess what? Two years later, she had to close that business - that's what happens. And this person, you know, she was lovely. So lovely. And when she was talking to me about that, she was so proud of the fact that she wanted to do business differently. She had worked at businesses where KPIs were really so important, and she always felt so much pressure when she worked as an employee and she said, ‘You know what, Gerda, I've decided not to do that. I want to create a workplace that's totally different from what I had previously. So I know my people will do what they need to do. I'm not going to give them KPIs.’ 

Two years later, she had to close her business. She lost the franchise actually. The corporate office took it back because it wasn't making any money. I'm not saying get out the bloody whip and burn out your team. That's not what I'm saying. What I'm saying is that there's certain business principles that we all need to adhere to, irrespective of what industry we are in. And the sooner you accept that, the easier it's going to become to run your business.

The sooner you stop making job offers and accepting contract engagements, knowing that there's not enough margin in it, but it's like, oh my God, I need someone, I need someone to see all my clients. No, don't, don't do it. You're just digging yourself a business grave. It's not going to work out and it's so hard to undo it. It is so hard. It's why I wish that everybody that is currently in solo private practice, with the goal of expanding their practice will engage in business coaching before they start. 

Because you know, I love my clients that I work with, but it's really hard - not for me, but for the practice owner - when they come to work with me and they already have 4, 5, 6 people and there's no margins or inefficient margins, or they've got all these people that they need to manage and they're not getting any return on that management, and now we need to engage in change manage. It's so freaking hard. But, you know, I'm happy to do that. I'm good at that. I'm good at seeing where are the gaps, what is the stuff that's holding you back? I'm good at finding it and fixing it and helping practice owners throughout that process in a way that serves them, the business and the team, because I don't want them to lose their team, but it takes time to do that. I'm not going to lie, because it's people. But we need to do it right.  And if you know that you want an actual business and not a hobby, not just a collective of people doing their own thing, then you unfortunately need to accept that business principles apply  to the world of Allied Health.

So my encouragement to you today is to really get honest with yourself and go, you know what? If I've been offering packages that have very little margin in it, that's okay, but I'm not going to continue doing that without looking at the numbers. Without looking at - if I offer X, what are my contributions to OPEX and what is the profit that I make of that? Because I can assure you that you can still make what I refer to as an irresistible job offer. A job offer where that person's going to go, Hell yes, I'm in! - without shooting yourself in the foot. You just need to know what to look at. It is possible. 

And the same with contractor payments, even more so, I hear stories from practice owners and it's like you're just saying yes, yes, yes. Do you not know how to say the word no? Because you're taking on all these contractors, they're just demanding more and more money every three to six months, and you've got no margin in it. Why do it if there's no margin where you've got all these bills to pay? And then we're still, when I talk to people that have services and facilities agreements where the practice owner is actually the service provider, but the contractor is telling them, No, I want to pay you less money.

Have you ever tried to tell an electricity, an internet, or a phone provider that, Hmm, I've been with you now for 12 months, I now want to pay you less money, or, I'm out of here. Maybe you have, but that's really what's happening in our industry when people have services and facilities agreements. And when you think about it, when you have a service and facilities agreement, your cost is going up every year. Your rent's going up, your cost to have that admin team is going up. Everything goes up. 

So in that scenario, you should be increasing your fees to those contractors, and the contractors should be recouping the increase in that from what they're charging the clients. But it's because people don't understand all those dynamics and they are confusing independent contracting with services and facilities agreements. And unfortunately, at the end of the day, you know, who's the one that loses the practice owner unfortunately. 

I want everybody to win. Whenever I do something in my business at my practice, I always ask myself this change or this new strategy, what's going to be the impact on the clients, the team, and the business. Ideally it needs to have a positive impact on all three parties, at minimum two of the parties. If it's only one party, then that's not something that I want to implement - and ideally all three. We need to look at the impact on all three because without all three, the business does not exist.

Without clients, there's no work for the clinicians, so why have them? Without clinicians, you don't have anybody to serve the clients, so you need them. But without the business, there's no home for the clients or the clinicians. So the business is freaking just as important, and it's your job as the practice owner to ensure that that happens.

So it's your job to really get honest with yourself without judgment and go, what is that looking like for me now? And what do I need to do to fix this? And of course, as always, if you want my help, just reach out. This is what I do.

Real Reason #3 - Gappy Diaries

Real reason number three why your cashflow sucks is gappy diaries - holes in your diaries. I never thought that I would say this, but these days wait lists are the exception rather than the rule. And I know because I speak to a lot of practice owners that tell me, Gerda, there was a time where I would have 1, 2, 3, 400 people on my wait list. We don't have any wait lists right now, and we even have holes in the diary. I'm looking at it and we are just not fully booked and I don't know what to do. And this is from practices that have been existing for a long, long time, they know how to market. 

And then we've got new people going into private practice, even solo practitioners - and generally solo practitioners I think should be able to fill their books really quickly, but they aren't filling it. Whether you're a solo practitioner or group practice owner, there's different things stopping you from filling your diary. There's so many variables that play a role in - do you have somebody booked in? And it comes down to marketing, right? Again, doing the right marketing for your level of private practice development is so super important. 

Coupled with that, the fear that is currently present in the industry. Fear around things such as NDIS changes - particularly the Thriving Kids program that is coming in next year. There's people going, the bottom is going to fall out of my business once that happens. There's other people going, ‘I wanted to expand Gerda. I work in the NDIS space, but now this is on the horizon. Do I or don't I?’ There is nothing more worrisome as a practice owner when you rock up to the practice on a Monday, you open up the diaries and you see all these empty slots. 

And I imagine seeing all of that on the back of what we just spoke about, when you know that there is little, if any margin, and it's like one person doesn't show or one appointment isn't booked, and I know I'm running at a loss this week. Do you know how stressful that is for practice owners? Can you even imagine if you are listening to this and you're not a practice owner? And please don't let this put you off from starting a practice, because the thing is, it doesn't have to be like this -  If you know how to market, to use the right strategies to do it in a structured manner, and to do it consistently - that's the one part where people fall down consistently do it. Even when your diary is full. 

Your messaging just needs to shift from marketing to branding when you are full. But you should never stop talking to your referrals, talking to your clients, and people just go, well, my diary's full now. I'm going to not do anything for the next month. and then what happens two, three months later? It's like, where's the clients? Ah, let's backtrack. You stopped doing marketing. Marketing has to be planned, it needs to be structured and it needs to be consistent. If you don't do it in that manner, you will have gappy diaries.. 

And like I said earlier, if the front desk team doesn't know how to convert, if the clinicians don't know how to engage and to retain clients, you're going to have gappy diaries. So if you've got a gappy diary, maybe even an empty diary, you really need to sit back and go, what is happening here? Where are those leaky pipes in my system? Where are clients dropping through the pipes? Because every empty diary is a loss to your business because you're still paying all your overheads, including the wages, as you should. You're still paying all those expenses. And where's the money coming from? 

Because unfortunately, when you are in private practice, you don't have government funding, right? There's no grants out there. Well, maybe there's one or two grants that you can apply for, but you know what? 9 out of 10 times we don't get the grants because we are a private business. And a lot of times if you get a grant, you need to spend 10K to get 10K, and you probably don't have 10K to spend. Because you've got a gappy diary because you've got insufficient margins. Because you're not using the right strategies and then you stay stuck on this frequent cycle and you don't know what to do.

And then when you talk to me, you go, ‘Gerda, I would love to do business coaching and consulting with you, but I just don't have the money for it’ - which I get. And it's like, oh my goodness, this is why you need business coaching. This is why you need somebody to walk this path with you - because you don't have money. But unless you are willing to take that risk and to go, all right, I can either continue what I'm doing, continue having sleepless nights, continue being stressed, or worst case - what do you guys do? You go, I'm just going to do more clinical work because as the business owner, I've got a bit more of a reputation. I can follow up my old clients, so I'm just going to do more clinical work , 

I can tell you now, this is not the answer. Yes, it might feel like it because it is a quick fix, but that is all it is. And you're not really fixing it. You're just fixing it in the short term, you're not really addressing the cause of the problem. I have spoken to enough people to tell you, you are going to regret it. And you know, you need to do the hard work. You need to follow the process. It's like when people come in for therapy, right? I'm a psychologist. I so wish that I can fix things for people in one or two sessions, but it's just not possible. And people need to do the hard, painful, emotional work to get through it. They need to trust that process to get to the other side. And the same holds true for business coaching.

At the end of the day, you, as the business owner, have the responsibility here to make the hard decision to go, even though my cashflow sucks, I am going to invest in me as the business owner to get the skills, but also the freaking support during implementation. Because a lot of practice owners go, I just want to learn the skills and then I'll implement by myself. You know what? Getting support during implementation is even more important than learning the skills. Because your business is different from the other businesses. Yes, as a collective allied health industry there's a lot of similarities, but the people you have in your team are all different. They're unique. The work that you do, the clients you have, the area you are in, the referrals you get - it's all different. It's very nuanced. 

So business coaching becomes even more freaking important when it comes to the implementation. But you need to decide that just like your team, your clinicians, your admin deserve support by getting a CPD budget. So do you, as the freaking business owner, not to learn more clinical skills, because I'm going to venture a very confident guess that you are highly skilled clinically. So it's your job to invest in the CPD in how to run your practice like an actual business. That's what you need to do.  And I can tell you now. hands on heart that that's the best gift that you can give yourself. 

Because that's what I did back in 2012. My cashflow sucked at that time. From the outside looking in, you would've thought that I was very successful and I was. Revenue was amazing. We were helping so many people. I had a great team, but I had no money. My cashflow sucked. And I met with my business coach, back then, and he told me that it would cost me $2,200 a month. And I remember thinking to myself, I just don't have this money. I just don't have it. Luckily, in 2011 was when I started my second practice, and during that whole setup period, I actually got a line of credit. I started a four room practice that I had to furnish, do all the things, and I went, okay, I'm going to get a line of credit as a backup for if I need it. So I had that line of credit and I went, all right, I'm just going to dip into my line of credit and I'm going to do this for three months and I'm going to go all in.

I knew one month would not be enough, and I knew two months might be like, ah, but I knew that if I commit to doing the work after three months, I would know whether this is going to work for me or not. And I was willing to take a three month risk, which I then did. And it worked and it paid off. It was the best investment I've ever made. I actually continued to work with that business coach for four consecutive years. Now you can go and do the maths. I don't want to do the maths, but you know what? I also know that I don't have to do the maths in that investment because I know that investment paid off a hundred times over, probably more. It's the best gift I ever gave myself. 

It was scary, it was stressful, but it was so freaking worth it because it changed the trajectory of my business, of the people working in my business. It served the clinicians, the admin team, and the clients, and it changed the trajectory of the life of myself and my family. I'm so, so grateful for the gird of 2012 that made that decision. But I also know, therefore I know how hard it was. I had to sign like, this really big contract with this person is like, it was, it was hard, but it just went, this is me backing myself, backing myself that I'm going to do this. And I did.

And I know you can do the same. And this is not me pushing you to come and work with me. This is me advocating for you, advocating for your business, advocating for your team, and the clients advocating for your community. Just like you would probably advocate for your clients, for your community. For them to get the help and the support that they need. This is me advocating for you because you matter just as much as your clients. You matter just as much as your team. 

Alright, I'm going to leave it at that. Thank you so very much for listening. Thank you so much for allowing me this opportunity to be so straight with you, to be so open with you, to just stand up and say that you matter.

For some of you, this is going to be helpful. For some of you, this is going to be triggering. You know what? As long as it stirs something within you, I have done my job. Because I know (just like as a psychologist), I can't help people unless they are sitting in the therapy chair in front of me. Similarly, I know that I cannot help you unless you are in my program working with me.

Yes, I can support a lot of people with this podcast by this free information that I'm sharing. But all of this is little pieces of that puzzle, and what you need is you need the box, you need the lid, right? You need to have the whole lid, and you need all of the pieces so you can try and continue building a puzzle with half the pieces missing and not even knowing what the lid looks like. Or you can say yes to getting the help and support you need. You can say yes to building your very own level five, ultimate self-running practice.

Thank you so very much for tuning in, and 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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