Nov 2, 2020
In this episode, Julie Herres interviews Gordon about how great clinicians can fail. First, clinicians can fail when they don’t know their numbers. It’s critical to understand the profit and loss of your business. Another significant mistake clinicians make is not charging enough for their sessions. A therapist must understand how their money mindset is holding them back from making enough money to run a private practice. Plus, we talk about the importance of having six months of income saved for emergencies, how to avoid debt, and why you need to stop bootstrapping.
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.
Understand how the money is coming in. How are your patients paying you? Then, what do you do with the money after that? How are you paying yourself and your expenses? Most people don’t have a clear picture of what those numbers are. A big mistake people make is paying their clinicians too much when you start a group practice. Gordon made this mistake! He was paying his clinicians way too high, and he wasn’t covering overhead. It’s possible to pay clinicians a fair and competitive wage without having to overdo it. If Gordon knew his numbers better at the start, he wouldn’t have made this error.
Many clinicians grow up with money shame. We think that money is evil or making money is bad. As therapists, we have a caring heart. Sometimes we feel like when we charge people money, then we are doing something wrong. Therapists will think that if someone is paying you for something, you are putting a burden on them. It’s a myth! Most people that go to therapy expect to pay. It’s one of the mistakes that a lot of people make. Then, therapists won’t charge enough for their services.
Set aside a reserve so you can pay for expenses or substantial tax bills. The minimum is at least two months. This money shouldn’t be touched unless you get into an emergency. However, six months of a money reserve is more ideal. This reserve should be created for both personal expenses and business expenses. When COVID hit, the people with reserves were better off than those who did not have a reserve. When thinking about switching to private practice, make sure to have your reserve first! Gordon spent a year accumulating his reserve before he made the dive into private practice.
There’s a way to avoid debt when going into private practice. For mental health, there isn’t as much equipment that needs to be purchased. It can be relatively inexpensive to start your practice – you only need a few basic things, and then you are ready to go. Make your practice pay for itself instead of getting a loan to get started.
Doing it all is not a good return on your investment. Sometimes you have to spend money to make money. People will hold off on spending money because they are trying to save. However, you are hurting yourself in the long run. For instance, you can hire a virtual assistant to help answer phone calls. If you can hire someone to answer the phone, then you can spend more time seeing clients. The less you are seeing clients, the less money you are going to make. Answering phone calls will not bring you income. Your time is better spent in the room with clients. Even if you pay someone $30 an hour, you can make $150 in a session.
Being transparent… Some of the resources below use affiliate links which simply means we receive a commission if you purchase using the links, at no extra cost to you. Thanks for using the links!
(Coupon Code: Julie2020 for 20% off)
Gordon is the person behind The Practice of Therapy Podcast & Blog. He is also President and Founder of Kingsport Counseling Associates, PLLC. He is a therapist, consultant, business mentor, trainer, and writer. PLEASE Subscribe to The Practice of Therapy Podcast wherever you listen to it. Follow us on Twitter @therapistlearn, and Pinterest, “Like” us on Facebook.