In this episode, Gordon and accountant Julie Herres discuss common mistakes private practice owners make in regard to accounting. The first mistake is not knowing your numbers. Some standard numbers every owner should know are how much you are bringing in, your overhead, variable costs, and how much you need to take home each month. Another common mistake private practice owners make is not spending enough money?! Julie explains how essential it is to start spending money in order to make more money. For instance, once you have a waiting list, it must be time to start a group practice. Another example of spending money to make more money is when you need to outsource things to become more productive.
Meet Julie Herres Julie Herres is the owner of GreenOak Accounting. The firm provides bookkeeping, accounting, CFO and tax services to mental health private practice owners throughout the United States. When Julie founded GreenOak Accounting she started working with a few therapists. Over time, more and more therapist referrals came in and she started noticing trends across the practices that were thriving. Based on those trends she developed success ratios as a way to quickly determine the health of a practice.
Today, GreenOak Accounting’s focus on mental health private practice is intentional and geared towards helping business owners understand the story that their numbers are telling. Julie understands what’s involved in managing and growing a practice and is uniquely positioned to be a trusted advisor to clients.
Knowing Your Numbers GreenOak Accounting lets private practice owners take a chunk out of their day and allow them to focus on their business. Not knowing your numbers is the first mistake private practice owners make. You need to know high-level things like how much you are bringing in each much, your overhead, your variable costs, and how much you need to take home each month to take care of your family. Private practices owners tend to take money out of the business when they need it. This method can severely hurt business operations eventually when it catches up with you. One example of knowing your numbers is knowing how much your advertising costs. Then, you can calculate how much it costs you to bring in a new patient to your practice.
Not Spending Enough Money Another big mistake private practice owners make is not spending enough money. At one point in your practice, it will make more sense to outsource some of your efforts. For instance, you can outsource answering the phone and working on your website. By paying someone twenty dollars an hour to do these things, you could be making fifty to one-hundred dollars an hour in the meantime. Most therapists outsource their bookkeeping and answering questions from their websites. Whenever something starts stressing you out, stop doing it!
Renting Space Where do you want to be in six to twelve months? If you’re going to start a group practice, set yourself up for success, so you have that room for growth. Cheaper is not always better when it comes to renting space. You could also get a shorter lease so that way, the commitment will not hold you back when your practice starts to grow.
Paying Your First Hire Too Much You have gotten to a point where you are overwhelmed, you are seeing too many patients, and you have a waitlist. At this point, you know you need to hire someone to help out. Many private practice owners will make them an offer that is typically too much and is not scalable. If you were to scale it times ten, you would need a bigger space and admin. Gordon was very generous when he first hired therapists to work for him, and it really was not sustainable. If you know your numbers well, then you will know exactly what your payroll should be.
Profit First Success ratios are when you split expenses into four main categories: