Constant stress about financial security haunts a lot of physical therapy practice owners. Are you one of them? Working all the time and feeling broke, uncertain about uncertain about solid your financial footing is, afraid to actually invest money back into your business?
One of the first steps to getting a real handle on your practice’s financial health is to take a close, objective look at profitability. When you understand how profitable your practice is, and you can start making informed choices about what you need to do to increase revenue. You also have the specific, objective data you need to make smart decisions about how much money to re-invest in your practice.
Using financial metrics means you’ll worry less about money, because you’ll finally know exactly what you’re dealing with. Financial tracking also shows you the places that are ripe for increasing your practice’s revenue. And consistent financial tracking helps you create a more focused, effective, achievable roadmap for growth.
Here are 3 metrics practice owners can use to see a real-time snapshot of profitability:
Your expenses are what it takes to keep your clinic running. The biggest question that comes up is how to account for your own salary and draw.
At Practice Freedom U, we recommend you pay yourself a salary for time you spend treating and include that figure as an expense. This enables you to get a more accurate expense figure and picture of your profitability. When calculating expenses to measure profitability, you can either include or exclude draw. The important thing to understand is the choice can drastically affect your measurements of profitability, especially for small practices.
(Your accountant will have a method of handling salary and draw for tax purposes, which you should follow. These calculations are intended to provide insight on the profitability of your monthly operations.)
Every practice owner should be able to quickly put a finger on this, the number of visits your clinic receives. This is a fundamental metric that you can use to measure profitability, as well as PT productivity and other important stats that indicate the financial and operational health of your practice.
Cost per visit
The first two metrics together deliver you this third one, a really important number that offers you invaluable information about profitability.
To determine your cost per visit, simply divide expenses by visits, to determine the total cost to see each patient.
If the number isn’t where you want it to be, don’t panic. You have options. You can focus attention on boosting your PT productivity, by increasing the volume of patient visits. You can work to increase your collections. You can also set targets to lower expenses. But be careful about rushing to lower expenses. Cutting costs may sound tempting, but it’s ultimately not the way to grow a PT practice.
These are not the only three financial metrics you need to run your practice successfully. But together, these three can quickly tell you a lot about your current profitability.
Interested in finally fixing the revenue drains that are keeping your practice from being more profitable?
For a limited time, get a free copy of my guide, the Patient Visit Multiplier, and use these proven strategies to increase your patient visits and keep your patients more engaged.