Do you use a financial dashboard to track your practice’s financial data? When I meet with a new client, it’s one the first questions I have. Most of the time, the answer is a pretty sheepish no. If you’re a physical therapist or chiropractor who isn’t using a financial system to track your practice’s financial numbers, you’ve got plenty of company.
But metrics are an invaluable tool for physical therapy and chiropractic practices, and if you’re not tracking financial information for your business, you should be. Why?
- Metrics deliver you an objective, real-time analysis of the efficiency and profitability of your practice. They help you create a business plan that’s rooted in real data.
- Metrics allow you to see quickly, objectively and in detail how well your practice is doing. That information in turn enables you to step back from your involvement in the day-to-day operations—to focus more on growing your business, and to spend more time away from work, with your family or pursuing other passions.
- Metrics provide you a clear, objective, systematic roadmap to grow your business.
For physical therapy and chiropractic practice owners, there are several financial metrics that have tremendous value, including:
- Total expenses
- Billed Charges and Billed Charges/Visit
- Net Revenue
- Net Revenue/Visit
I’ll talk about these metrics more in depth in future articles. Right now, let’s focus on the single most important financial metric for your business:
No surprise, right? Profit, of course, is the money that remains after you deduct your expenses. The goal of your business is to be profitable. Practice owners are driven by being of service—to their patients and their communities. Talking about profit as their primary goal sometimes makes practice owners uncomfortable. The truth is, a profitable practice is a well-run, thriving practice—and those are the practices that go the distance, and can have the most impact in serving their communities.
Prioritizing profits doesn’t run contrary to a mission of service and care: it’s actually in the service of that mission for you to make profit your goal.
Determining profit is pretty simple: it’s Revenue minus Expenses.
The tricky thing about profits? How practice owners think about them. The problem I see often is this: owners don’t think about their businesses as businesses—they think of them as a way to make a salary.
Owners who look at their profits as their salary aren’t really seeing the truth about the profitability of their businesses. And they’re not creating businesses that are primed for growth, or ones that can run successfully without their constant, day-to-day involvement.
The solution is twofold. First, when calculating profit, owners should include their salary as an expense. Obviously, this increases expenses, and lowers profit. But the number is a more accurate, truthful reflection of where your business stands today. Second, pay yourself for only the time you’re working as a clinician. If you’re treating patients 20 hours a week, pay yourself for that amount of time. This accomplishes a couple of important goals:
- You begin to understand what you need to do to improve your business’ bottom line. Whether hiring new clinicians, improving productivity among your current staff, implementing new marketing strategies, or boosting referrals, you can start to identify ways to grow that profit metric—without increasing the time you spend treating patients.
- You begin set yourself up to let your business run profitably without you.
A mentor of mine once told me, all progress starts by telling the truth. It may sound simple, but it’s hard for many practice owners to do. It was hard for me. Before I developed a system for tracking, analyzing, and reporting financial and operational metrics, I spent a lot of time and energy avoiding taking a close, hard look at how my practice was really doing. If I had money in my bank account, that was enough to make me feel good about my practice—and myself. Take it from someone who’s been there—that’s no way to run a practice. It’s not how truly successful operators approach their business.
Going in circles trying to get a handle on the financial health of your practice, and how to improve it? Schedule a free Discovery Call and let’s talk about the systems you can use to stay connected to your financial performance.