The Therapy Business Podcast
We know how challenging growing a therapy practice can be, and don’t think it should require an accounting degree just to run your business. If you own a solo or a group practice, we’re here to help you build a business that creates more time, makes more money and serves more people.
The Therapy Business Podcast
How to Pay Yourself More Money, More Consistently
Ever wondered if your therapy practice is truly serving your financial well-being? Today we unpack crucial strategies for practice owners to establish a consistent and fair self-payment system.
We walk through essential steps to assess core personal and lifestyle expenses, helping you create a sustainable payment plan that respects your dual role as both business owner and employee.
Craig dives into the nuts and bolts of reverse engineering your business finances using the Profit First cash management system, sharing practical advice on maintaining financial discipline and setting boundaries.
Discover how to effectively allocate income across different bank accounts to meet your ideal lifestyle needs, and learn the secrets to achieving long-term financial health by gradually reducing dependency on unpredictable business funds.
This episode is a comprehensive guide for therapy practice owners looking to establish healthy financial habits and secure a permanently profitable practice.
Personal Finance Snapshot Spreadsheet
Meet with one of our coaches
*Intro/outro song credit:
King Around Here by Alex Grohl
One of the most common struggles among practice owners is that they're just not paying themselves enough and not paying themselves consistently. This is, truthfully, one of the things we most often help people with, because it is really challenging to overcome. Today, I'm going to be sharing with you some ways that you can create a system and get organized so that you can start paying yourself what you deserve and the frequency that you deserve to be paid what you deserve and the frequency that you deserve to be paid. My name is Craig and I'm the CEO of Desi Financial Coaching. Our goal is simple to help you run a therapy practice that is permanently profitable. If you own a solo or group practice, we're here to help you build a business that creates more time, makes more money and serves more people. This is the Therapy Business Podcast and serves more people. This is the Therapy Business Podcast.
Speaker 1:There's a common problem across business owners and even specifically in therapy practices, and that's we are underpaid and overworked, and what's worse is, we are the boss. It's not even like we can go blame it on some boss that we have who's not paying us enough. We've asked for raises and it's never happened, and they're expecting us to work long hours. Truthfully, it's us, and a lot of times, if we are really honest, we can be the worst boss to ourselves. So something needs to change when it comes to that. Why do we treat ourselves that way? Truthfully, we probably don't even realize we're doing it, but I want you to stop and take a step back and say if you were rating yourself as a boss, if you were pretending like you and your boss are two separate entities even though it's just you how would you rank yourself as a boss to you? Would you say that you are taking care of you as an employee, or would you complain that your boss has high expectations? Nothing's ever good enough. They're constantly saying negative things about your performance and about what you're worth and what your value is. That's probably a conversation for another day entirely, which is just how that mental breakdown can happen and how we can treat ourselves so poorly in a way that we wouldn't necessarily treat another employee. But today we're specifically talking about pay, how we treat ourselves as employees when it comes to our paychecks.
Speaker 1:If you are not paying yourself often, if you're not paying yourself frequently, if you're not paying yourself what you are worth, you are on the fast track to burnout. Maybe you're already there. Maybe you've been feeling burnout, you've been feeling overwhelmed. You've been almost feeling like why am I even doing this? Is this even worth it anymore? Well, I want to guide you through some processes and some exercises that you can do to start paying yourself what you're worth. If you are like most practice owners, you are paying yourself a random amount every few weeks or every month.
Speaker 1:A lot of times, what we see is people dipping their hands into the business. Just as they need money, when the mortgage is due, when the electric bill is due, when you need groceries, you just pull money out of the business as needed. We want to fix that. You wouldn't accept that if you were working for someone else, right? If you went and interviewed for a job and they offered you the position and you're going, oh great, what's my salary? And they say there's no salary. It's just, you know, as you need money, just let us know and we'll, we'll give you a little bit here and there to cover your bills, right. That that wouldn't work. You would not accept that answer. So we want to treat ourselves with that same respect that we would demand from someone else, and that means a set income on a set, regular rhythm. Now this can be overwhelming if you've never done it before, and so I want to guide you really clearly through that step process of how you can start from where you are now to a consistent paycheck paying you what you need.
Speaker 1:So the first thing that we need to do is a personal finance snapshot. What this is is going through your personal expenses, your core expenses what does it cost to live to cover your basic needs? This is your mortgage or rent. This is your utility bills. This is your groceries, your food, gas in your car so that you can travel to and from work if you are working in an office All those core essentials insurances in an office. All those core essentials insurances, those things that you need to live, the basic needs.
Speaker 1:Now, this first list we are creating is not going to include the fluff. So I know that we have lifestyle things we want to achieve and the things we want to do, but this first thing I want you to really come up with is what is that number every month that I need to cover my basic expenses? We have budgeting sheets. We have Excel sheets that we are happy to share with you. I'll put a link in the description below, where you can get your hands on one of those that will help you go through this exercise of listing out what your current expenses are, if you're not already budgeting in your personal finances.
Speaker 1:Once we've identified that number, whatever it is I just want you to write it down. If it's $5,000 a month, if it's $10,000 a month, whatever that is, write that number down as your basic needs number. Then we're going to go back through that budget. We're going to start adding in the nice to haves, the things that maybe are already ingrained on the lifestyles that would be really hard to let go of. This could be kids' sporting events. This could be going out to eat. This could be Netflix or one of your subscriptions that you really enjoy. Go through and add those things in. What is that ideal lifestyle? You can even go through and add in things you would love to do, maybe that you just haven't been able to do yet because you're a little bit nervous about the finances. Your business again isn't paying you what you need, so maybe you haven't been doing it. Go ahead and add in what does that ideal? Now write that number down. So you should have two numbers written down your my basic lifestyle need and then my ideal lifestyle needs. So one again maybe 5,000 for your basics, maybe 10,000 is your ideal lifestyle. Whatever your number is, have those written down handy.
Speaker 1:Lastly, with this personal snapshot, I want you to go back and see what is your business currently paying you. If you haven't been paying yourself a paycheck through payroll or just consistently by writing yourself a paycheck, this might be a little tricky, and so you might need to do some digging. Go back through your records and just look what have I been paying myself. If you're an S Corp and you're on payroll right now, you can pull that payroll report to see what you've done there, but then also include any extra money maybe you've pulled out of the business as a distribution to cover your living expenses. We want to figure out what that number is because we want to see is the business currently paying you what you need to cover those core expenses? And then, is it paying you what you need to cover your ideal lifestyle? And if it's not, that's giving us a clear idea of how do we close that gap. What do we need to change or tweak or improve in order to get there? So, if your business is currently paying you $7,000 a month, you've got enough to cover your core expenses, which were $5,000, but you're not quite to that $10,000 for your ideal lifestyle. So we can then look at the business and say is there a way to increase my pay currently, or do we need to slowly increase it over time? And we can introduce some of those ideal lifestyle things, a few things here and there, and then slowly just increase how we're living with our pay. So we have those numbers in front of us. That's super important before we can do this next exercise, which is the second step income targeting.
Speaker 1:This is taking those numbers and figuring out reverse engineering in the business. What does the business need to earn? What do I need to bring in in sales in order to pay myself these target numbers? Now, that core lifestyle number, that 5,000 example I was giving, that is a necessity, right? If you are not making enough in the business to pay yourself that amount, then you're in trouble because you're not going to be business to pay yourself that amount. Then you're in trouble because you're not going to be able to pay your bills, you're not going to be able to pay your mortgage and things are going to slowly spiral. So the business has to be able to pay you that amount. If it can't, if it literally can't, if, let's just say your sales are less than what you need for your personal lifestyle, then something needs to change. Either you really need to lean into increasing that revenue, you might even have to pick up a side job while you're trying to grow the business in order to meet those needs. We want the business to cover your core needs as best as possible. Otherwise, you just have a really expensive hobby, and we don't want that. Now, your ideal lifestyle is really what we're aiming for because, again, no one starts a business just to survive.
Speaker 1:The way we reverse engineer this is, first of all, if you're not doing the system Profit First in your business. I highly recommend it because what I'm going to guide you through is going to be a thousand times easier if you're using that cash management system. Our second episode walks you through that process. I'll link that in the show notes so that you can go back and listen to that if you're not familiar with it. But essentially, profit First is taking your finances and organizing them through bank accounts. We have bank accounts that we're managing. One is for income, where all deposits go. One is profit, one is owner's pay that's your salary One is for taxes and then one is for operating expenses.
Speaker 1:So when we're coming up with what percentage do you need to take? So what does your business need to earn in order to pay you what you need? We're going to say what percentage of my revenue? Figure out what you made this year over the past 12 months or last year, whatever's easiest what percentage is my ideal lifestyle? So if we're saying, let's say, your business makes 20,000 a month and you need 10,000 a month to cover your ideal lifestyle, then you need 50% going into owner's pay in order to cover that lifestyle. So what you can kind of see where I'm going with profit first.
Speaker 1:Making this easier is when we have those other bank accounts and we're dividing money out based on percentages. Already, we can just always take 50%, dump it into owner's pay and you will have enough to pay yourself that ideal lifestyle amount. If you are reverse engineering this and you go okay, I need this amount, but we're only making 12,000 a month, so I need 90% for my owner's pay, you might realize that's not feasible because you're going well, I still have clinicians to pay, we still have this office rent. I need stuff to cover my expenses. That's where we figure out do we need to start somewhere between that core lifestyle, that ideal lifestyle, and slowly ramp it up? What do we need to do there? But come up with that percentage. What does my business need to earn in order to hit that ideal income, that ideal take-home pay? That's what we're going to be aiming for. What does my business need to earn in order to hit that?
Speaker 1:Now, if your business, like I said, can't cover your current needs, your current ideal lifestyle, then we can go back through that personal snapshot and just start taking a couple things away. You're like, okay, well, I threw travel in here. Well, that would be nice, maybe we can do without until the business can support it. I put guitar lessons in here, but I can hold off on that for another six months while I try and get the business up. So, slowly try and bring that number down until you have something that's pretty balanced, because, again, we want the business to be able to pay you all the money out and then the business has nothing to stand on.
Speaker 1:Once you know your number, your percentage, you have your personal expense number, you have the percentage that the business needs to, or the amount the business needs to make in order to pay you. What percentage is that of your overall revenue? Now we're going to establish a paycheck rhythm. This is the third step. We've set up the business to pay us what we need. Now we need to set up how often it's going to pay us.
Speaker 1:Now, the beauty of owning your own business is you get to choose how frequently you want to get paid, that's whether it's weekly, biweekly, monthly. Come up with that rhythm. The key here, though, is that it is a rhythm that it's set. What would you like to be paid? I personally pay myself monthly. That's largely just because, when I was in education, that's what we were paid. We were paid once a month, and so I just got super used to it, and now, when I started my business, I was like well, I'm just going to pay myself once a month, if you like. Biweekly, weekly. Come up with that rhythm that you want.
Speaker 1:Now here's the thing that we want to set a boundary on for yourself. No more dipping into the business to cover your personal expenses. No more pulling money out as your personal account gets low. Cut that off Again, just like I was talking about you interviewing at a job and they said they wouldn't pay you consistently. I want you to flip that around. Let's say you own your business and an employee. Every time they needed money, they came in and pulled money out of that business to cover their expenses. If their personal account was low, they reached into the business and pulled some cash out Once again. You wouldn't accept that, so let's not allow ourselves to do that. Give yourself that respect that you would demand from other people. So we're going to stop pulling money out of the business just as we need it. We're going to set up that pay schedule. Now. This is your regular paychecks. Now, if you remember, I was talking about those bank accounts. We do have a profit account that you're going to be putting some money into if you're doing profit first. And our clients? They take a quarterly bonus at the end of every quarter. So they take the amount that's in that account and half of it gets paid out to them as a bonus.
Speaker 1:This can be used for a lot of different things. It can be used to pay down debt. It can be used to just celebrate. That's usually what we encourage people to do. Use that to pay for a trip or for a big ticket item. There was a year where we used it to put new grass in our front yard. We use it to get water park tickets, usually on our spring distribution. We get season tickets to go to the water park near us. It's usually on our spring distribution. We get season tickets to go to the water park near us. We've used it for vacations. We've used it for furniture, for house updates. That's what the profit bonus is for.
Speaker 1:We have clients who use it to build up their savings. Some of them put it into retirement accounts, into investing, and again a lot of them may use it to pay down some debt. So that money really is yours every quarter. So that's, on top of your paychecks, money for you to use. The other half. I told you you take half out of that account and it gets paid to you. The other half gets to stay in the business as an emergency fund. So if you feel like the money has just been super tight, super stressful in that business, now we have a way to systematically build a cash reserve inside that business.
Speaker 1:Lastly, an optional step four if you want to, if you're worried about investing in retirement, not investing enough, you could always open an extra bank account, nicknamed retirement savings, and you could take a percentage of all your sales and move it into that retirement account and then you can, once a month or however frequency usually it's monthly or on your paycheck rhythms you just go ahead and invest that into a retirement account. You can set it up even on auto pay so that whatever platform you're using pulls the money out and invests it on a regular rhythm schedule. So if you are worried about that and a lot of times when we are working for someone else it's behind the scenes because the 401k, maybe it's pulled out of the check before you ever see it when you're a small business, you don't always have the luxury of being able to afford a 401k plan. So if you're investing in an IRA, usually you can have it auto chart, auto pull out, so that it's out of sight, out of mind, and it just kind of is investing in the background, which a lot of times is the beauty of those 401k plans is it's in the background, we don't even notice it, but our nest egg is growing. So those are the steps.
Speaker 1:Like I said, they're simple but they're not easy. It's simple in practice Figure out what you need to make and then set up the business to pay you. That right Seems like duh, craig. That seems pretty easy, but it's not. It can be challenging. So don't feel overwhelmed, don't feel like you are failing as you're going across this. Give yourself grace. This is baby steps walking through this.
Speaker 1:Like I said, we're going to set that boundary not to dip into the business anymore. But you know what, in the first month or two that you're doing this, if you have to dip in, that's okay. We just want to slowly bring it back. If you are dipping into it weekly or a couple times a week, previously, maybe we if that first month, if you only had to dip in and pull a little bit of money out twice, that's a win. And then the following month, if there's only one time the money got tight and you had to pull money out, that's a win.
Speaker 1:As long as you are really purposeful, trying to get into this rhythm, over time it's going to flesh itself out and you'll one day sit back and realize I haven't dipped into my business in months. I've been living on my paychecks. It's been great. So the consistency, the rhythm, is so, so important. As business owners, Treat yourself with the respect that you would demand from someone else. Pay yourself what you're worth. Pay yourself regularly. Thanks for joining us on the Therapy Business Podcast. Be sure to subscribe, leave a review and share it with a practice owner that you may know. If your practice needs help getting organized with its finances or just growing your practice, head to therapybusinesspodcom to learn how we can help.
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