Struggling to maintain financial stability in your therapy practice? Let's change that together. Join me as I unveil the Profit First system—a transformative approach designed specifically for therapy practice owners like you, looking to turn the tide on the often unpredictable financial waves we face.
This episode is your guide to setting up a simple, behavior-based financial strategy that promises to shake up the way you manage your practice's money. By aligning with our natural habits of checking bank balances, I'll show you how to gain clarity, control, and most importantly, profitability, through the power of designated bank accounts for different aspects of your business.
Free Profit Quiz
Meet With a Coach
Bank with Relay Financial
Struggling to maintain financial stability in your therapy practice? Let's change that together. Join me as I unveil the Profit First system—a transformative approach designed specifically for therapy practice owners like you, looking to turn the tide on the often unpredictable financial waves we face.
This episode is your guide to setting up a simple, behavior-based financial strategy that promises to shake up the way you manage your practice's money. By aligning with our natural habits of checking bank balances, I'll show you how to gain clarity, control, and most importantly, profitability, through the power of designated bank accounts for different aspects of your business.
Free Profit Quiz
Meet With a Coach
Bank with Relay Financial
If you're sick and tired of riding that financial roller coaster within your practice, I'm going to teach you an incredibly simple money system that therapy practices are using right now to completely change how they manage the finances. You don't want to miss it. 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 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. What's up? How's it going?
Craig Dacy:We are so excited to be talking about today's topic and it's an incredibly, incredibly important one. We're talking about managing your finances in a practice. Now we are profit coaches in our company. We work with a lot of different practices and, truthfully, hearing the word profit coach, we work a lot with finances. Right, that's to us, is such an important foundational piece. Now we also work with people on all other areas of their practice, but we can't really do a lot of work in the practice until we have a money system for your business, for your practice. But here's the thing Most business owners don't have a system, we don't. We go to college, we get our degrees, but no one really teaches you how to run a practice. You learn how to do your craft well, but running the practice itself managing the finances, handling the funds and doing it in a way that not only makes sure that you're paid and the expenses are covered but also is helping you grow the business it's overwhelming, it can be confusing and oftentimes it can just leave us feeling like we're in reaction mode. So what we need is a system for our finances, something that can help us stay organized, that's not crazy elaborate, that's not confusing, but something that we can do, that's going to ingrain itself into our day-to-day behaviors.
Craig Dacy:We had a business, a practice owner, come to us not long ago who was stressed out, frustrated with their finances. They felt like they could never get ahead. They felt like they couldn't get enough money to get any traction in their business. They felt like every time payroll came up, they were overwhelmed, they couldn't get sleep. And here's the thing that happens to so many business owners. And with this specific practice, they weren't paying themselves what they deserve to be paid. They were feeling undervalued, working long hours and just kind of feeling stuck wondering why did I ever leave working for someone else to start my own practice? This specific practice owner when we got into their numbers, they were paying themselves their session rate. So they weren't paying themselves consistently because they were afraid to. So they were still seeing a bunch of clients and they were paying themselves just whatever their rate was, which means they had employees who were making a lot more money than they were making, which great, you know. That means that employee, that therapist, is bringing in a lot of money for the business. But at the same time, you're the business owner. We should be taking care of you. Your money should be taking care of you as the business owner and that may seem like a faux pas, it's a. When we're in a therapy practice, a lot of times we don't want to think about paying ourselves or we don't want to feel greedy or that we're putting ourselves before our clients or our staff, but the truth is we got to take care of you before we can do that, and what you need to do that is a money system.
Craig Dacy:Now, the problem with most money systems, like I said, they're confusing. We're trying to look at a P and L. We're trying to look at a balance sheet and a cashflow statement. We're using QuickBooks and we're doing all these different things, and yet they don't really mean anything. What are we actually doing? When we want to know how much money we have, when we want to know how we're doing financially, we look at our phone, at our bank accounts. Does that resonate with you? And just ask this simple question When's the last time you looked at a financial document and did something with that? Now, when's the last time you looked at your bank account? Or how often do you look at your bank account? Most business owners, it's daily, or multiple times a week at least. They're looking at their account. So let's leverage that behavior. We need a system for your money that leverages that behavior, and today I'm gonna talk to you about Profit First. That is the system that we teach all of our clients. It's a system we use in our own business, system that you can just plug and play, and it uses your behavior. So I want to walk you through that process, how you can implement it, and I'm going to challenge you to take some action steps at the end of this podcast recording, to open up some accounts and get this thing going Now.
Craig Dacy:Profit First is a book that was released, I think, a little over 10 years ago by the author, mike Michalowicz, and he got tired of the age-old philosophies of accounting and finance. So he wanted to challenge that and use things like cash envelope systems and use those types of systems that work so well back in the day and see how can we integrate that into a modern era of technology where we're not using cash for things and we're using online banking. How can we take that envelope system and plug it into an online banking way? So what he came up with and what we teach people is using multiple bank accounts.
Craig Dacy:Now this kind of goes along with the idea of using smaller plates, they say. Some health experts say that if you're trying to lose weight, we're naturally predisposed to fill our plate. So we get a large plate, we fill it up and then we are always taught growing up to finish what's on your plate, eat everything that's on your plate. Now, whether this was great teachings or not, you know probably not, but that's what we many of us are just naturally ingrained to do. So one way to counteract that, to leverage that behavior, is to just use smaller plates. You still fill it up and you still eat everything on it. However, you're consuming less because you're just changing the system, not the behavior. We're changing the plate instead of our actual habits and what we're doing. So with business and with finance. That's what we're doing with money.
Craig Dacy:When we look at one bank account, we see we have a lot of money. Behaviorally, we're going to spend more. When we see we don't have a lot of money, we panic, we batten down the hatches, we cancel subscriptions and we suddenly hone in our spending and try and tighten up. This is due to something called Parkinson's law, which is, when you have more of a resource, you're going to consume more of that resource, and the inverse is true as well. So how can we take that idea of one large bank account and breaking it up into smaller plates? It's like taking the Thanksgiving turkey and, instead of everyone coming over and eating it straight off the platter, we're going to serve it out onto these plates. Now, these plates in your business are bank accounts.
Craig Dacy:So, opening more than one bank account, we recommend for practices that you have five to six accounts. The five core accounts that we think every therapist should have, whether you're a solo practice or group practice, is an income account, a profit account, an owner's pay account, a tax account and an operating expense account. Now if you're a group practice owner, we recommend a sixth account which would be for contractors or payroll, because we know oftentimes you are paying your staff, your therapists, either on a percentage basis or some kind of commission split, or even if it's hourly. It's good to have that other account open so that you can make sure that they are covered and that you've got it over here and separated out from everything else. It's not getting mixed up. So income owners pay profit, operating expenses and taxes, and then a contractor payroll account.
Craig Dacy:What we want to do is income. The account for income is your serving tray. That's just like the thanksgiving serving tray. So all deposits deposits are gonna go into that income account. You'll go into Simple Practice or whatever platform you're using. We're gonna change our deposits to funnel over to the income account. Now money will sit there until we decide to divide it up by percentages. We're gonna take a percentage of that money and we're gonna put a little percentage into profit. We're gonna put a percentage into owner's pay, taxes, operating expenses and payroll. This way we're dividing that money up.
Craig Dacy:So instead of thinking we have $10,000, we can look at the operating expense account and really see how much money do we actually have to spend. We can look at that owner's pay account and say am I on track to pay myself? Would I need to get paid? We can use that to pay ourselves regularly, to give ourselves regular paychecks. We can break this feast or famine cycle that we have by balancing it out, using the good months to fill up those accounts so that when the down months come, the accounts have money in them and we can use those and stay consistent across the board.
Craig Dacy:We know that oftentimes summers are challenging in your industry. You got families out on vacation, you got people off their routines and schedules, so oftentimes client sessions are gonna drop. But by using a system where we're funneling money into these accounts or going off percentages, you can build up some nest eggs to get you through those times. Now we recommend getting into the accounts weekly. So once a week you log into your bank, you take whatever's sitting in that income account and you divide it out. Now for percentages. This varies on every business. We do have a free quiz on our website that you can take. That'll tell you exactly what percentages you should be going for in your practice. Just go to quizcraigdaceycom. I'll put it in the show notes for you. Go there, it's completely free. It'll answer seven to 10 questions and it'll send you a custom report that'll share exactly what percentages we would recommend for your business.
Craig Dacy:Now, as a starting point, a good rule of thumb I always say is to put 1% into profit If your business can. If you feel like that's impossible, if you're feeling we have $0 left over at the end of the month, your business, if it can't sacrifice 1% to prioritize profit, well then there's bigger problems at stake, right? So we just want to stick 1% over to profit. Then, for your owner's pay, we recommend creating a personal budget. How much do you need to be paid as a business owner to cover your personal expenses? What much do you need to be paid as a business owner to cover your personal expenses? What does your paycheck need to be? And then include some things, some of the extra stuff. We want to know your basic budget to cover your bills. So find out what that core number is and then, if your business can afford to give you a little bit more, let's add in the extras If you have kids, their sporting events, all these other things that you need to and want to do. And then let's plug that in what percentage of your revenue is that? If your practice makes $500,000 a year and you need $100,000, well, there's 20% is what's going to be going into that owner's pay account. So every time you make money, we'll put 20% into that account and you'll be able to start paying yourself a consistent paycheck.
Craig Dacy:Now this idea of profit first and when we say profit first, sometimes there's some pushback because it's again that idea of are we prioritizing profit over everything else? We're putting profit before our clients, before our people, before anything. No, that's not true. We're putting profit first in the sense of we are literally taking it off the top and setting it to the side. So standard accounting says sales minus expenses equals profit. If you look at your profit loss statement, that's literally how it's organized Sales at the top, expenses in the middle, profit at the bottom. That's why they call it the bottom line. You improve your bottom line. We're challenging you to think differently. What if we took our profit out first? What if we, every time we made a dollar, we took a piece of it and we just set it off to the side into a bank account. Now we are instantly profitable. We're intentionally profitable.
Craig Dacy:Too often, when it comes to money, we're reactive and we don't want to be reactive. We need to be proactive. We need to have a game plan and this will help us get engaged and have that game plan. Now the beauty of having these accounts. And sometimes people hear this and they go how many accounts do I need? And they get overwhelmed with this idea of maintaining multiple bank accounts.
Craig Dacy:But the fact is, yes, it might take some work getting it going right, opening these accounts, going through that work to do it, changing over your deposits, changing over where expenses come from, but in the end it's going to offer so much clarity and it's going to help you because if the operating expense account is getting low, that's the business raising a red flag saying something is wrong here in operating expenses and it gives you a chance to fix it. Because here's the thing, that problem the flag was being raised all along. It's just when all the money is lumped together, we can't see it. So if we're over spending on expenses and it's all mixed together, well then we're sitting here wondering why we don't have enough money for taxes at the end of the year or we're frustrated with the fact that we can't pay ourselves a salary, when, truth is, it's because that red flag was raising and we just couldn't see it. And so we just kept spending and we were dipping into that tax money and that owner's pay money without even realizing it. So now that red flag is going to raise when you get to the account and you're going okay, I have an invoice due next week and there's not enough money in the account to do it, to pay it. What am I going to do? And you get to be proactive about it. And you get to do some problem solving. And our clients we always tell them when that happens just give us a call, because what we're going to do is we're going to get a call and we're going to strategize. Do we need to maybe plug a hole? Maybe we need to pull some money out of another account to cover that expense? But we need to stop and say, okay, why is this happening? Why? Why is this happening? Why do we not have enough money? Is it a cashflow thing? Are we not putting enough money percentage into operating expenses? Are we overspending? Did sales go down? It gives us a chance to figure out what's going on, because the flag is raised and we need to figure out why. The system is going to give you clarity and I promise you it's going to make things a lot easier and simpler for you.
Craig Dacy:Now, one of my favorite things about Prof First, a lot of times, and maybe even as I'm talking about this, you're wondering okay, so there's money in the profit account. What do we do with that? Well, at the end of every quarter we use that to pay you a profit bonus, a profit distribution. This is your reward as the business owner, as the practice owner doing the day to day work in your business, for tape or not just for the day to day. I'm sorry, but for investing in the business, for being a business owner. Your salary covers your day to day, the work you're doing in the business. Profit rewards you for being a business owner, the work you're doing on the business, the risk you took by going out there and starting your own business. You get a percentage and we recommend you use this for yourself. So, whatever's sitting in that profit account, we typically say you take half of it out as a bonus.
Craig Dacy:I know here in Q1, at the end of Q1, we usually use my Profit Distribution to get our water park tickets. We've used it to do some sod for the front yard. We've used it to buy furniture. We've used it for a lot of different things, but it's used for fun things, for things that we want, for goals. Now, if you're in debt, you can use that money to start chipping away at that debt. If you're trying to get rid of that, if you're trying to build up your retirement portfolio, we can use that money to seed some of those retirement accounts the accounts. The point is we want to do something for the owner's benefit. Now, the other half that we're leaving in there is retained earnings. That's emergency savings, that's cash to have on hand for when things someday go wrong, which they will.
Craig Dacy:Business, as we know, is a roller coaster. It's not a linear line that just goes straight up. It is ups and downs and, yes, the trajectory is that you're growing, but you are at some point going to have a down quarter, a down month or a down year, and we just want to financially be prepared for that. So, every quarter, you're going to be saving some cash to be putting over into that nest egg. Here's the challenge for you. So, if what you're hearing is overwhelming. I get it. We're trying to challenge the way you see money, the way you view it, the way you think about it. So my challenge for you is to open up a profit account. If you do nothing else. Go open up that profit account and start allocating one, two, maybe 3% of all your money towards that profit. So every week, log in, see how much money came in, move one to 3% over into that profit account and then celebrate being a profitable business.
Craig Dacy:Now, when it comes to opening these accounts, we encourage you to find some free accounts out there. So there are a lot of banks that will offer free business checking accounts. Typically it's gonna be credit unions, so you can look at your local credit unions. One of our favorite ones is an online banking system called Relay Financial. I'll put a link in the show notes for that as well. It's super easy to use if you're open to using an online bank, but typically you can open up your account in the same day. They an online bank, but typically you can open up your account in the same day. They don't have. I think. They let you open up like 20 bank accounts and they make it incredibly easy and in fact, they even let you automate those transfers I was talking about, so you can set it up to, once a week, move a certain percentage from income into those other accounts that we were just chatting about. So check those out. But otherwise, local credit unions typically have free bank accounts.
Craig Dacy:I encourage you to find free ones, just because those monthly fees at a big bank are gonna add up and we're trying to cut expenses. So I encourage you to find something that's free. But if that's a hindrance moving to a different bank, then open up and pay the monthly fee. If you can afford it, if that's okay too. But really what we want is to you to make that change.
Craig Dacy:All right, guys, this is what we do. So if you are stuck, if this is your, if what I'm talking about is resonating and you're going, this is what we need and we want some help. We would love to hear from you. So in our show notes I'll put a link to schedule a call with one of our coaches who can at least talk you through the process, so that you can either kickstart it on your own or learn about how we can help guide you through it. All right, you got your homework assignment, open that profit account, start this process and we can't wait to hear but all the amazing things in store for you. 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.