6 ways to be more profitable in private practice
Are you a mental health professional looking to start a private practice but feel overwhelmed about money?
Or maybe you have a private practice but your budget needs some love.
Either way, you’re in the right place.
Budgeting is one of those things you know you should be doing. But let’s be real…budgeting is not glamorous. You’re busy enough. It’s probably last thing on your mind.
But if you want to be profitable, you need to know your INCOME & EXPENSES.
Let’s talk about budgeting, baby!
As an ex-CPA, I love talking about money. You might not have become a therapist for the money, but it doesn’t mean you can’t work towards living an abundant life.
Here are 6 tips to help you tackle your budget as a private practice owner
(or soon-to-be one).
Understand your expenses
You will have 2 types of expenses; fixed & variable.
Fixed costs stay the same from month to month (i.e. your psychology today subscription).
Variable costs change month to month (like marketing or office supplies)
ACTION ITEMS:
If you are new to private practice: Make a list of anticipated fixed and variable expenses. Total your estimated monthly expenses.
(If you need some help, I have a budget template that is perfect for you here.)
If you own a practice: Do you have a sense of your monthly expenses? Make a list and total them.
Set realistic revenue goals
ACTION ITEMS:
If you are new to private practice:
Decide what your fees will be/what you will get from insurance
How many clients do you plan to see a week?
Account for any other income sources (such as groups, supervising, etc.)
Add up your total estimated monthly income
If you own a practice:
When is the last time you raised fees? Is it time? If yes, what do you want your new fee to be?
Where else could you generate income? (supervision, groups, downloadable content, etc.)
Total up your current monthly income or new estimated monthly income
Calculate your profit
Now that you have considered your expenses and income, start putting the numbers to paper.
ACTION ITEM: Get some paper
Take you monthly expenses total
Take your monthly income total
Total monthly income - Total monthly expenses = Profit
Is your profit not where you want it to be? Maybe you need to take a look and consider trimming some expenses. Or adding more clients/adjusting your fee.
Dig into your expenses
This is sometimes the hardest part. It is hard to face where we are spending our money.
It is so easy to sign up for monthly subscriptions and have the auto-deducted from our accounts, that we simply forget.
But if you want more profit…it’s time to face the numbers. They never lie.
ACTION ITEM:
Got your monthly income & expense numbers from before? Great.
Monthly Expenses / Monthly Income (post-tax) = Expense Ratio
(This is how much of your income you are spending on expenses, you should aim to be LESS than 30%)
Adjust where you can
Not happy with your expense ratio? Where can you cut some costs? Even a 1% cost cut is 1% more money directly in your pocket.
Your variable costs are areas to consider first. Obviously some expense you cannot control (malpractice, rent, etc.).
Looking into some low cost options may help (I have a blog post on that here).
Monitoring your income/expenses every month is a great habit to get into.
Bonus tip: Automatically set aside money for taxes
If you are not already doing this (or if you are just starting out) PLEASE PRETTY PLEASE open up a separate savings account for tax and plan to automatically move about 25% of all income to this account (the % depends on your personal tax situation).
Then the money is out of sight, out of mind. So when it comes quarterly payment time and tax season, you don’t even have to stress.
BUDGET HELP: Here is my template that can help you do this work easily!
Budgeting is a skill that improves with practice. It’s not always the most fun, but if you want a profitable business, it is a MUST.
If you have specific questions or need more guidance, don’t hesitate to book a free 15 minute consultation with me!
I am happy to look into your budget and help you increase your profitability.
