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 Profitable Are Your Clinicians?
Ever wondered how to ensure every clinician in your practice is a financial asset? J
Dive into the nitty-gritty of assessing each clinician's profitability. Learn how to navigate complex factors such as average fees, sliding scales, insurance, and session types to enhance your practice’s profit margins.
Discover why reducing your client load can be pivotal in focusing on business growth and management.
Meet with one of our coaches
*Intro/outro song credit:
King Around Here by Alex Grohl
Managing a team of clinicians can be tricky as it is. When we go in and add in the financial side of it how profitable are your clinicians, how much are they making, how much are you paying them All of those things can really create some overwhelm. Now, the main reason we see this is because we care about the people more than we care about the money, and while we want that to be the case today, we're gonna dig into how to analyze the financial benefit the we want that to be the case Today. We're going to dig into how to analyze the financial benefit, the ROI, that you're getting from each of your clinicians. 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.
Speaker 1:This is the Therapy Business Podcast. Whether you have one clinician working for you or dozens, we all know that managing a team can be tricky. Right, it's, you're managing personality types. You're trying to make sure that they feel seen and respected and well-paid and enjoy their job, and that they're seen and respected and well paid and enjoy their job and that they're growing and making an impact on their clients. And then, at the same time, you're trying to run a profitable business and it can feel like those two goals, those two priorities, can clash a little bit. We, as business owners, hopefully care about the people that work for us. That is a priority. I know for me that my employees are a priority to me. That's my job. My job was to work with clients. My employees are now kind of my clients in the sense of they are my top priority, making sure that they are taken care of, that they're happy, that they're supported and, in turn, that their clients are feeling that support. When it comes to the money side of it, though, I wish I could compensate them way more than they're getting. I think that they're tremendously more valuable than what we're paying out. But at the same time, I know that there is a responsibility that falls on my shoulders, and that responsibility is to manage the money well in a way that they have a job to come to, and that means having to closely monitor how profitable are we, not only as a company, but how profitable are each employee, how profitable is each section and what they're doing, and the same is true for you and your team.
Speaker 1:So what I want you to do and I challenge you to do in this next, in this, during this episode is to step back and say I care about my people. Yes, I see you, I know you care about your people, but today I'm going to analyze how they are financially. I'm almost going to look at them like they're products. We can step back and do that and we know our hearts. So just step back and say I'm going to look at them each like they're a product. And you have shorts and you have shoes, each of these different things you're selling.
Speaker 1:We'd want to stop and look at how is each of them performing, how are they selling? Are they things we need to invest more in? Do we need to change pricing? Do we need to change something about it? We want to do the same thing with your clinicians. How are each of them performing? How are they affecting your overall profit margin? Because you may look at your company and see that overall it's profitable, but how much is your client load paying into that? Maybe it's one clinician is really really profitable and one is not profitable and they're kind of balancing each other out. So we need to see that we need to pull that information out. I'm going to walk you through exactly how to do this. Now, this is a service that we do offer to our current coaching clients, so our practice owners. Not only are we helping them put money systems in place, but we will dig into their simple practice numbers. We will pull out a report and create something that shows them exactly how profitable each clinician is and how we can create a game plan to potentially balance things out and create more profit margins so that, in turn that you can serve and pay your clinicians better. So if you're interested in something like that, please, in the link below, you can always connect with one of our coaches to get that report done for you. But otherwise we're going to walk you through how we do that, the things we're looking for, so that maybe you can start to get at least some progress on your own.
Speaker 1:The first thing you want to do is, in simple practice, run a report on fees collected. That's usually the easiest way If you have another way. Whatever system, you may not be using simple practice, but however, you're tracking client fees collected. How much are your clinicians earning, how much are they bringing in? So I know in simple practice you can run a report that'll show every time a transaction was made, so every time a specific clinician charged a client, or that your company charged a client for that clinician. So pulling that report and going through and doing a little bit of number crunching and saying, okay, what is the average fee collected for each of our clinicians? So we're going to go through. Now, if you are a flat rate, you don't do any sliding scales, this could be pretty easy. If you're saying, yeah, this clinician's rate is $200 an hour and that's what it is, it doesn't change at all, well then that might be simple for you. But I know for a lot of people, if you're accepting insurances, that can fluctuate things. If you offer sliding scale opportunities, that can really affect things. If you offer discounts for frequency of whether they're coming to see you more often, if you offer a 30-minute and 60-minute session, so all these different things can come into play. So just know that it might be simpler for you.
Speaker 1:Some of you might have more number crunching to do to figure out what's the average fee that each clinician is collecting. I want to pull out two numbers from this. I want to see what's the average of each person and then I want to see a company-wide what is our average across the board. So if I take each of their averages, average it together, that's going to show as a practice, how much are we charging on average? Is this in line with where we thought it would be? And that's really we're just going to get curious with this. Is this number roughly what we were expecting? Is this less than what we thought it would be? Is it more than we thought it would be? Is it right on target? And using that information, a lot of times what we discover is it's lower than what maybe you would have expected. Maybe you're thinking your average was 175 a session and we run the report and it's actually like 130 or 140. That's why having each individual clinician is going to be really, really valuable to see how they are affecting this system.
Speaker 1:We did this with a practice a couple years ago and they were doing a sliding scale system. We did this with a practice a couple years ago and they were doing a sliding scale system and what we came to discover is they had one clinician who just had too many people on the bottom end of that sliding scale and what we had to ultimately do was they decided to implement a cap on how many sliding scale clients you could have. We came up with a plan to say, okay, everybody needs to have an average session fee of X dollars, and so if you are not averaging that and we'll keep a pulse on it you know, every couple months, every quarter or so, run a new report to see how's your average doing, and if it's below what we're expecting, then we need to reduce the number of sliding scale clients we have, or maybe we need to increase your fees overall. So, having in mind what do you want that to be? What are you wanting everyone's average session fee to be? Do you want everyone to get closer to that team average? Do you have a number in mind that you want to be the target goal? And if you see a lot of low fees on a single clinician, that means we probably need to raise some fees. We need to reduce the number of sliding scale clients we're taking in.
Speaker 1:A combination of something needs to change in order to improve that profitability. Once we know that, we can move on to figure out the overall profit, health of the practice, the way we can do that. We want to see the profit margin of each clinician. So now we know what their average fee is. But in order to see the practice's health, we need to see what is each clinician's profit margin. The way that we calculate this in a profit margin really is what you're earning minus what you're spending equals profit.
Speaker 1:Right Now, I know, in the profit first world we flip that around, but for this sake of figuring out profit margin, we're going to say this clinician how much are they earning? How much are we spending? How much are we paying them? What's that profit margin? Now, in order to find this the simplest, the first thing we're going to look at is what is their fee? Are we giving them a percentage? Are we giving them a flat fee, an hourly fee for each session? So figure out what are you paying them If they are collecting. We're going to use $100 as the example, because it's a nice round, simple number, and you're paying them 50%. Well then you know that $50 is going to them. So that's going to help you kind of figure out how much is our margin. That would leave you $50 for you as the practice.
Speaker 1:However, there's usually a lot more things on top of it. So what I want you to take into consideration are a couple of things like credit card fees. So if you're having to take a few percentage points off the top every time somebody's credit card is charged, typically that's not coming out of the clinician's rate, right? If you give them 50% of the $100 collected, very few practices I see actually say well, actually it was $97 we collected, so you get 50% of that. Usually it's off that gross, off that 100, you pay out the percentage and then you eat the other costs as well. So those are going to chew into your profit margins.
Speaker 1:So, credit card transaction fees, any benefits you're offering outside of the direct pay for working with that client, are you offering any health insurance? Any paid time off? Are you offering any training benefits, 401k matches All of these things are going to come into play. So we want to make sure that we're looking into those. How much are we spending on this clinician? A lot of times I like to go year to date. How much did they bring in year to date? Again, you can find all of these in simple practice or in your bookkeeping software. How much did they bring in year to date? How much have we paid them year to date? And then looking at all of these things to figure out what is their overall profit margin going to look like.
Speaker 1:Now, if you want to get more granular, you can look at things. Usually it's a direct, again, simple, practice. What is their if they have a membership fee to that, if they have a psychology today profile that you're paying for anything directly related to them? Expense wise is what we're going to calculate. Now we can always go deeper and do the overhead expenses. That's going to give you a much clearer picture. For simplicity sake, at least for today's exercises, you're doing it on your own. I wouldn't necessarily take the time you're welcome to and that's going to be, you know your rent and electricity and any ad marketing you're doing and trying to figure out what percentage of that would be for this specific clinician. It can be just a lot of number gymnastics. We'll say so for simplicity's sake. I typically just can say what are those direct costs? Let's just look at those initially, out the gate. We can always analyze our overhead expenses at a later time and how they affect the overall practice.
Speaker 1:So those benefits, those simple practice, memberships, psychology today, anything that is directly to that person. If that person didn't work for you anymore, would you have that expense? Don't forget any payroll taxes that you're having to pay if you're running their salary through payroll. So if their paychecks are going through payroll and you have payroll taxes, we're going to want to include that, because that's another fee that's yours that you're paying. So you can see how these things can add up.
Speaker 1:And this is why a lot of times practices find themselves in trouble when they do a 60-40 split, for example, where the clinician is taking 60% and the practice is taking 40%, but then on top of that they're offering these things and we have payroll tax, all these other things kind of lurking in the background. That is going to eat out of your 40%. So you're giving them 60 and from 40% you're going to be taking out the simple practice, the payroll, the benefits, anything else, and it just dwindles your portion down and this is not healthy. It's not healthy for the business. And again, if we're looking at them as people, we're happy that they are compensated, we're happy that we're taking care of them. If we think of them as a business owner, subjectively, as a product, it's not a very profitable product if we aren't careful. So figuring that out.
Speaker 1:So once we figure out those expenses, we just divide that number by the total sales. That's going to give you a profit margin. So again we're going to be looking at let's just say $100 is what they're charging for a session. Let's say, after their fees, everything what you pay them, their payroll tax, all those things. Let's say it's $70. So your profit margin is what's left, which is 30. That's 30%. So figuring out what's left, so what is left over, and dividing that by the total sales, is going to give you a percentage. So find those numbers your sales minus expenses and then divide that number by the total expenses. We can always help you again with this. Shoot me an email if you have questions. If numbers are not your thing, if this is just confusing and overwhelming as I'm walking you through this, that's okay, give us a shout, we're happy to help.
Speaker 1:Once you know your profit margin on each employee, we can take a look and once again what needs to change. Are we overpaying somebody? And this can be a really, really hard conversation. I worked with a practice once where we realized they were paying one of their clinicians 70% of everybody they saw and that person was getting some benefits and some other things. Literally, the practice I think it was 95% is what they were spending. So every time a session was had, they got 5%, and that 5% had to go to overhead expenses, it had to go to the owner's pay, it had to go to taxes. Okay, no wonder that clinician, that practice owner, felt trapped seeing clients because they are ultimately diluting the overall expense percentage, the overall profit margin, because when I, as the business owner, am seeing clients, I'm not paying myself for each of those sessions like I would somebody else, and so I can feel trapped, I can feel stuck in having to see clients. Otherwise the business can flip upside down. This is a process that we've walked a lot of practice owners through. It's a process I am still walking through in my own business, as I've been adding team members and reducing the number of clients that I'm working with directly.
Speaker 1:And this process this is the third and final thing we like to really analyze when we're doing a clinician analysis is how do we use your clinicians to take your caseload down or remove it, however many you want to see? And that's something to really reflect on, and maybe it's a conversation for a whole other podcast on how to really pinpoint this, but sit down and think what is my ideal number of clients For me personally? How many do I want to see in a week, in a month? However, you want to calculate it, what is your ideal number of clients? And then, where are you at now? How many do you have? How far away are we?
Speaker 1:We want to start offloading that, because it is really really really hard to work in the business and on the business at the same time. If you are seeing a full caseload of clients and then, on top of that, trying to manage your team, trying to market, trying to do sales, trying to manage the finances, trying to do the day-to-day things that you, as the business, want to direct the ship and create vision and growth plans. It's hard to do that when you're meeting with people you know eight hours a day. So let's work on transitioning that. The best way that we do this is we want to figure out how quickly. That's where this profit margin comes into play. It's going to help you figure out how many clients do your clinicians need to take on before you can release one. Now let me explain why, what this means.
Speaker 1:Let's go back to that $100 session example, let's say everybody on your team is charging $100 a session. Hopefully you're charging more, but $100 is nice and simple. If you are making $100 a session, you have $100 to help with overhead costs and taxes and paying your salary, all those things. So it's almost like you get to keep that $100 for the sake of this example. If you're paying someone else, let's say you're paying them $50. Let's just again, for simplicity's sake, it's $50 a session is what it's costing. So you have a 50% profit margin. Well, in that case you need them to have two clients in order for your business to make $100, right? So if they have two clients, that's $200 they're bringing in. You're paying them 50 for each session. So that's $100 out. That means you keep $100. Versus, if it's just you and you see one person for $100, your business keeps that full $100. Does that make sense? I hope so. So in this example, you know that you need for your clinician to take on two clients for every client that you lose. So every time you let go of a client, that means they need to take on at least two clients to offset that cost. That's going to keep you in the same revenue financial place that you are currently.
Speaker 1:What often happens is we start offloading our caseloads too quickly and we might let go of 10 clients, while our clinicians only pick up 5 or so clients. Or even if they pick up 10 clients, that's cutting half. We now have half the money that we were bringing in before by paying them, and a lot of times it's less. I mean, a 50% profit margin is usually pretty high. So typically what we see is about 3. Every time your clinician takes on 3 clients, you can let go of a client. So figuring out that number is going to help you with that transition plan. And then you can look and say how many leads are we getting, how quickly are we filling up their calendar, and just be really strategic about how you let them go. This can be a balance.
Speaker 1:Typically I say just the first thing you want to do is just stop taking on new clients. So you're kind of drawing the line of I'm not going to take on new clients anymore, I'm going to pass them on. But if you have something come up, let's just say you lose three clients in a single month. Well, if you're not getting your clinicians three clients, so that'll be nine clients that month for your clinicians. You might have to think about taking one on again just to help balance that out. So just keeping a pulse on how quickly am I draining my client load, to how quickly are we filling up our client's load.
Speaker 1:So this is the value of a clinician analysis and I recommend doing this at least twice a year looking at your average fees collected, your profit margins, having conversations with your clinicians about these things. As a team, we're going to work on this. We're going to try and work on increasing our fees. Maybe it's been a while since you've increased your fees across the board. Send out some letters to raise your clinicians' fees. I am confident that your clinicians will be on board, because usually that means they're going to get paid more, especially if you're paying them a percentage anytime you raise their fee. That's more money in their pocket If they're paid a flat rate, which a lot of times I prefer when possible, because if you raise their fee, you don't have to directly raise what you're paying them in relation to it. So you can even create a little bit more profit margin in there by if you raise their fee by $50, maybe you raise what they take home by just $5 or $10, whatever it is, it's not always directly related.
Speaker 1:So figuring out those numbers is going to help you drastically and again every six months or so, taking a pulse on this and making some hard decisions. Sometimes, if a clinician isn't cutting it, odds are in your gut, you already knew it and now we can look at the data. And if the data is saying they are just dragging the profit margin down, it's time for some tough conversations. And that might just simply mean we need to rethink your process what we're charging, what we're paying you. Sometimes it might mean we need to let you go depending on everything. So really look at those things and subjectively back up. Look at it just as numbers an overarching thing. If it helps you to not have names, you can remove their names off of there just to look at their numbers. Sometimes that can help take the personal side out of this. But look at those numbers, use them to guide your growth and I promise you your business will be tremendously financially in a financially better place.
Speaker 1:Once again, this is something we do with our clients. So if you are hearing this, you're going. I need this. But, craig, you just literally firehose me with overwhelm In our description below. Please reach out to us it's a free call. We can talk about, see if we can help you and this is something that we can deliver to you run the numbers for you and literally say here is all of this information, here's how, and then together we can analyze what to do with it. All right, take this info, look at your clinicians and here's to being more profitable. 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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