The Therapy Business Podcast

Mailbag: Answering Your Questions About Business

Craig Dacy Episode 42

Today we're addressing commonly asked business questions that many practice owners are too embarrassed to ask.

• Insurance vs. private pay 
• Business structures: sole proprietorships, LLCs  and S-Corps- which is the right choice?
• Retaining clients ethically by focusing on their evolving needs and continuing value rather than dependency


Be sure to subscribe, leave a review, and share this podcast with other practice owners. If your practice needs help with finances or growth, head to therapybusinesspod.com to learn how we can help.


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*Intro/outro song credit:
King Around Here by Alex Grohl

Speaker 1:

My name is Craig and I'm the owner of Daisy Financial Coaching. Our team is on a mission to make your therapy practice 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.

Speaker 1:

Running a business, owning your own therapy practice, can feel really isolating. Sometimes it feels like we are on this island and not a lot of people can fully understand what we're going through. You may have friends and family members who are working 9 to 5s, or maybe they own a business, but it's just a slightly different one. We find that not a lot of people can understand fully the stress and the pressure that we put ourselves on under as business owners. So, when it comes down to these things, a lot of times we are afraid to reach out or we're afraid to admit that we don't know certain things, and so, as we meet with business owners and therapy practice owners who come in and ask us questions or maybe they submit questions to the podcast, or these are clients that we already have there's certain questions that come up over and over and over, and a lot of times they feel embarrassed. They feel like they should know the answer to these, but they have no idea that it's a question that every practice owner has and it's, while maybe feels like something they should know. It's okay that you don't and honestly, I don't know why you should. No one teaches us business when we're going through grad school to become therapists. So it's really important to reach out for help and ask these questions, and today I want to highlight just a few questions that we receive, and this will be a reoccurring themed episode that we'll do every so often, where we answer some common questions to make sure that if you have this question burning in your mind but you've been afraid to ask it, one that you see that you're not alone to us, or you can email me directly at info at dacycoachingcom, and I'm happy to take that question, either answer it via email or, if I feel like it's a question that would benefit listeners, we'll add it to one of our future episodes and answer it live here on the podcast. All right, let's jump into first common question, which is should I take insurance or go private pay, or another way of phrasing, that is, should I keep taking insurance or should I switch over to private pay and this is a very heavy question because it depends on a lot of different things.

Speaker 1:

People take insurance for many reasons. Typically, the number one reason I see clinicians or therapy practices take insurance from day one is because they need clients. They have this need to get clients in the door and the fastest way to do that is to work with insurance. Now, obviously, insurance is going to have its drawbacks. It's capped what you're reimbursed on, so you have a certain reimbursement rate that you are stuck with. Now you can negotiate those. We just talked about that in a recent episode. So if you go back a few episodes, you'll see that I talked to you through the process of renegotiating some of your reimbursement rates to hopefully get a pay bump. But all I said, you don't have control over what you are charging clients or what you're getting paid from clients. But it is a good lead generator. It's a great way for people to come to you who maybe wouldn't be coming to you if you didn't take insurance.

Speaker 1:

Now what we find is a lot of people feel trapped in this insurance world and they're trying to get more private pay clients, but they're going. How do I make that transition? And then also, should I make that transition? Should I be turning away this lead flow in order to switch to private pay, or should I be giving up this revenue in order to be charging more? That answer really depends on you. So what is I always say? Start with boiling down to why am I taking insurance to begin with? If it's leads? Ask the question do I still need a lead source If your calendar is capped, if you have a waiting list, if your team is pretty full, you may not need a lead source right now. Maybe you don't need leads coming in. Maybe you're at a place where you could focus more on private pay and taking on higher paying clients. So if it's a lead source, ask that question.

Speaker 1:

If it's a moral thing you're going I want my therapy to be accessible to everyone and have money not be a barrier well then, insurance might be a good fit for your practice, because that is a way for somebody to come to you that maybe they wouldn't be able to privately pay for it. That said, the flip side of that is you are not required to work with everybody, and it's not ethically or morally wrong to turn people away if they can't afford you. You can serve people without actually taking them on as clients. So that may mean you have a referral partner. So if you decide I'm gonna stop taking insurance and somebody comes to me and they can't afford it, but they have insurance, maybe you have a few people in your back pocket you can send them to that does take insurance. Maybe you can send them resources or help them through that process of finding someone who is a good fit even though you are not that fit. You do not have to be a good fit for everyone.

Speaker 1:

So, as you're deciding, should I continue taking insurance? Should I take it to begin with? Maybe you're right now all private pay and you're like maybe is it a good idea to add insurance. I don't know. I think it boils down to those things. What's the purpose of taking insurance? Like I said, most of the time it's leads, but sometimes it's just an accessibility thing.

Speaker 1:

Before dropping insurance, we want to make sure that we have a marketing engine that is working. Either you have a large enough client base that word of mouth is cooking, they're referring their friends and family to you and you have enough people coming in not directly through insurance avenues. Maybe you have a lot of online content, a lot of different marketing. Maybe you're running Google ads, whatever it is. A lot of things factor into that. How much can we lean into that private pay? Because if we're going to cut off insurance or we're going to choose not to accept it, then we have to have some kind of way to drive people to our practice. Even if you're full, even if you're at capacity, we still need some kind of traction.

Speaker 1:

One of the biggest mistakes that you can make is to pull your foot off the marketing gas simply because you're going well, we're doing great, we have plenty of clients and we don't need clients right now. Because then what happens is clients churn and then all of a sudden, you are in need of clients and you don't have anything primed. You don't have any marketing really working for you. So insurance or private pay really depends on you. But from a financial standpoint, private pay is going to be better. You're gonna make more money per session, it's gonna make it easier to hire clinicians and to pay them a wage that is really highlights their value. But all that said, if you're brand new and you just need clients coming to the door, insurance is a great way to get into that. Or if you've been around for a while and insurance is your main breadwinner, then maybe keep it for until you have a chance to transition out of it. So that is one of the top questions that we receive.

Speaker 1:

Another one that we receive is really focused on the business structure. So should I operate as an LLC, an S-corp, another business structure? And so I want to guide you through the three different types, three main types of business structures that you're probably going to be dealing with. So sole proprietorship is the first one. That's the easiest one to start. It is just you doing business as you. There's no legal separation, there's no business entity itself. It's's just you. So, as my music business is a sole proprietorship because I'm a contract musician, I have a band I play in, I do contract gigs with other musical groups, and so it is just me. That means when they pay me, it's directly to me, it's not to a business. This is the easiest way to do it. Like I said, however, there's no separation, which means that your personal assets are at risk. If, let's say, I were to do something and somebody were to want to come sue me, they don't sue the business, they're suing me directly because there is no business to sue. So it's all in one. So there are risks that come with it.

Speaker 1:

Typically a sole proprietorship is for, I would say, side hustles, maybe if it's the very, very early stages of your business. But I usually would say, if you are going to be doing this, like this is your full-time gig, then probably a good idea to just go ahead and do an LLC. Now, an LLC is very similar. It just separates it. It's a legal protection for you. It's a business entity. So you have your business and then you have you. It keeps it incredibly separated and this is going to protect you. So if that example I gave, if somebody were to come and sue me as a musician, well, they're going to sue. If I had an LLC, they sue the business, not me. My personal assets are not at risk in that instance. So separating it out, it's better to do that again if this is going to be your full-time gig.

Speaker 1:

Now, an S-corp is an S-corporation is just another level up, an S-corp. Really, the benefit of it is it takes away the self-employment tax. So when you're an LLC or a sole proprietorship, you're going to be paying a self employment tax, which is usually around 15%. When you go through an S corp you're only taxed on what goes through your payroll. And so with an S corp there are added complications, like you're going to have to have a payroll software, you're going to have to pay yourself through payroll, you have to pay yourself a reasonable wage, which is kind of vague, but a reasonable salary so that it's running through. You're going to be paying for Medicare and unemployment tax, all those things. Because it really is like you are an employee of your company. With an S-Corp, you have your S-Corp business and then you have you who is the manager, the CEO, who's being paid a salary through payroll to be the CEO or the manager of the business. Typically, s-corp is going to save you money if you're making over $75,000 to $100,000 a year. So when you pass that threshold, most of the time it makes more financial sense to switch over to an S-Corp. And that's just because there are fees. There are other things that if you're smaller than that, the cost savings of that self-employment tax does not necessarily outweigh the S-corporation side.

Speaker 1:

As far as all of this goes, we are not lawyers, we're not CPAs. So I always recommend, before you make any decisions with these things and this is why we don't talk a lot about these different tax structures and these different business structures is because there's a lot of fact-dependent things on it. So what I've kind of highlighted is some rule of thumbs, but I highly recommend talking to your tax pro, talking to, if you have, a business lawyer, figuring out what is the right timing for me, with what business structure should I be doing? All right, the last question we have is retaining questions. How do I retain sorry, how do I retain clients while maintaining ethical boundaries? This even goes out into that marketing realm of ethical marketing in this space which we have an episode where I interviewed a marketing specialist who specializes with therapy practices all over ethical marketing, and so if you go back, you can find that episode where we talk about ways to market yourself ethically without crossing some of those boundaries.

Speaker 1:

But specifically, how do we keep clients while maintaining ethical boundaries? And the question behind this question is how do we, why basically keep somebody on continuing to see us, continuing to pay us, maybe when the bulk of the work we're doing together is done? Is it okay to view people as lifelong clients you know what I mean or is it a we need to get them some help and then release them ethically? So this is kind of a heavy question. Obviously, it's going to be very dependent on the person, but first of all, what I always say is let's reframe the way we think about things. It's not a one and done, and so I'm going to talk about my business as an example.

Speaker 1:

So we help people with a lot of different things, but our main bread and butter is helping people put a money system in place in their business. So the bulk of the work we're doing in the first 90 days is creating this system, helping them get clarity on where their numbers are today, helping them get clarity on where they should be, putting the system into practice, guiding them step by step through that process. Now, after 90 days, to three to six months, this system is moving. It's not perfect yet, but we have at least set it up. It's at least got its legs and it's starting to go. We at that point it's maybe six months in and we do a six-month coaching engagement. At that point we could be at this conundrum where we're saying, okay, well, we got the system set up, so we need to let you go or we continue to work with them.

Speaker 1:

Most people stay with us longer, and the reason is because, yes, maybe they came to us because they needed a money system, but what they learn and discover is the accountability is huge. They learn and discover that their business is always changing. They learn and discover that we can help them in different areas outside of just setting up a money system. A money system is the foundation, and then that opens the door for us to explore pricing, for us to explore employer-clinician profitability, for us to explore growth, for us to talk about what does it look like when it's time to hire a team member, or hire the next team member, or to open up an office building? Or what does it look like if my business, which is maybe 100,000 today, what about when we hit the quarter of a million, half a million million dollar? So, as you can see, things are always changing, and I know you know this in life with therapy. Maybe somebody comes to you for one specific thing, but life is always coming, things are always changing, things are always happening, and so a lot of people might benefit from that ongoing support.

Speaker 1:

What I would say is really focusing in on what do they need and are they finding value out of it? We've a lot of times sat back and looked at clients and go man, I feel like we're not. Are we at a place where we're not really helping? They've been with us for years. I feel like we're not really helping them with anything new very often, but when you talk to the client, they're going. No, I love the fact that once a month or twice a month, I get to talk to somebody who is making me think about my money, who's making this stay top of mind, that I'm engaging in, I'm engaging in conversation, and I don't feel like I'm doing this alone anymore. I can have somebody to bounce ideas off of, I have somebody to talk through and strategize with, and so while on our side we're going you know, maybe I feel like we should probably let him go On their side, they're saying I'm still getting tremendous value out of this relationship and I want it to continue. And so just keeping that in mind is what are their goals? What are they hoping to attain and retaining them in that sense? Maybe you feel like, hey, we've worked through this trauma you came to see me about, but maybe they're still getting value out of meeting with you, and so really hone in on that.

Speaker 1:

You can also offer different levels of support. So is there a step-down option? Can you reduce frequency? Do you have different offerings? Do you have different groups, maybe different ways that you can support them in a lower frequency? We usually move clients to a quarterly rhythm instead of a monthly coaching rhythm after a while, because maybe they don't need that month, that monthly 30 day support, but meeting every three months would be super helpful to them. So giving a step down option. Also, maybe you have different clinicians on your team who specialize in different things, and so moving them to a different clinician could also be an option. So finding different ways to serve them and better ways to serve them. Ultimately, of course, you can always let them go. If you have a referral partner, maybe it's time to pass them out to somebody else. Maybe if you have content or workshops or educational content like courses, those are different ways that you can step in and serve people outside of that one on one.

Speaker 1:

If the time comes that you're going, okay, it's time for us to end this relationship potentially.

Speaker 1:

But I always say go back to what do they need?

Speaker 1:

What do they want? Are they getting value? This is a conversation you can have at the end of a session. Talk to them about hey, how are you feeling about your progress and our frequency and where we've come and what are you trying to do next? Staying goal focused, staying forward looking. That's something that we do with our clients constantly, as we are keeping a pulse on what are they trying to achieve in the next few months so that we know what work there is to do and what is our new focus right now and what are we trying to pivot toward. So, opening those conversations so that you know how can I support you best, moving forward and continue to make this relationship valuable.

Speaker 1:

We don't want you to always be seeking out new clients constantly. How can we retain more of your clients, but again in that ethical way where you're not manipulating, you're not pressuring someone to stick around or you're not keeping somebody with you and forcing them to be dependent simply because you're afraid of losing that monthly fee or that session fee? So, really finding that balance. How can we add the value? How can we serve the client so that they want to stay, that they see different ways that you can serve and help them? All right, those are three big questions we get. Please, if you have questions that you want to ask, go to therapybusinesspodcom and you can submit questions to us through there. We would love to answer them here live on one of our future podcasts. 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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