The RDtoCEO Podcast
Dive into The RDtoCEO Podcast, hosted by Registered Dietitian and CEO, Eva Haldis, where she shares her journey in entrepreneurship, with discussions on the basics on building a private practice and becoming a confident CEO. The RDtoCEO Podcast is your go-to resource for mastering the art of transitioning from a dietitian to a successful CEO.
The RDtoCEO Podcast
How to Pay Yourself as a Dietitian in Private Practice
Have you ever wondered how to pay yourself, while also ensuring the financial stability of running a private practice? This episode of RDtoCEO is packed with actionable insights on how to pay yourself as a business owner, featuring a detailed overview of how I use the Profit First method, plus some other alternative options. Drawing from my own journey, I highlight the pitfalls of inconsistent pay and how structured financial planning can make all the difference.
*Important Disclaimer: The information shared in this podcast is for educational and informational purposes only. I am not a financial advisor, accountant, or financial planner. Please seek professional services from a qualified expert if you need financial, tax, or legal advice tailored to your specific situation.*
Some Resources Mentioned:
- Profit First for Therapists by Julie Herres
Visit Profit First for Therapists Website - Level Up Financial Coaching with Joe Maddux (my financial coach!)
Learn More at Level Up Financial Coaching - Financial Feminist - Tori Dunlap
- YNAB - You Need A Budget Referral Link
Want a question answered on the podcast? Send me a message, or a text message, and maybe it'll be featured in an episode!
You can send me a message on IG -
https://www.instagram.com/evahaldis_rd or https://www.instagram.com/rdtoceo
Find more about RDtoCEO at https://www.rdtoceo.com
For episode updates and coaching packages, check out our website - www.rdtoceo.com
Affiliate Links Often Mentioned:
Gusto for Payroll - https://gusto.com/h/eva6486
Practice Better- https://practicebetter.partnerlinks.io/evahaldis9298
*Please note that while we strive to provide valuable insights, our podcast is not a replacement for personalized legal or financial counsel. We strongly advise consulting with qualified professionals for specific advice tailored to your individual circumstances.*
Welcome to the RD to CEO podcast. I'm your host, eva Haldis, registered dietitian, who one day found herself a whole CEO of a business. Join me as we navigate the world of entrepreneurship so you can go from being an RD who sees clients in private practice to a confident CEO growing the practice of your dreams. Welcome back to the RD to CEO podcast. Hi everybody, welcome back to another episode, excited to be here, as always, and talking today about a topic that is a commonly asked question, a question I've asked many times, a question I've been asked, seen, asked, is how do we pay ourselves as business owners in private practice? And there's a lot of different ways out there that people utilize to decide how to pay themselves, and so today I'm going to talk about what I have found to be the most helpful, which, if you listened to this podcast before, you may not be surprised to hear it is the profit first method. That is the method that I use and have found to be the most helpful for me and how my brain works. It doesn't necessarily mean that you have to also do it, but it is a I mean it's a very popular way for business owners across many different business genres, and I'm going to explain a little bit about what profit first is. I'm going to explain a little bit about what Profit First is. I'm going to talk a little bit about Profit First for Therapists, which is a book I've brought up many times before, as well on the podcast, and I'll also talk about some other ways that I've seen people pay themselves. So that'll be today's episode. I hope it's helpful. I mean, I find that I think the most popular episodes I always have are the ones on money. I hope it's helpful. I mean, I find that I think the most popular episodes I always have are the ones on money, which make a lot of sense, because I think the first thing that leads us into working for ourselves and having a private practice, of course, is helping people and wanting to do the work we want to do, and then having flexibility and freedom. And then, of course, there's this looming thing of like well, now I'm making money and what do I do with this money now? Thing of like well, now I'm making money and like, what do I do with this money now and how do I pay myself to make sure that I'm not draining my business and all those things? So, and as your business grows the, I think, more complicated it can get. So having a system in place like the profit first method if you decide to use a method like that can just be a really helpful way to help organize the revenue that is being generated. So we'll talk about that today.
Speaker 1:I wanted to also just give a quick reminder. On my website, wwwrd2cocom, there is a link to be a guest on the podcast. So if you are a dietitian or business owner that's listening and maybe there's an area of business that you love to talk about, I'd love to have you on as a guest. And also, if you'd like to do a complimentary coaching call that will be for the podcast, you can also apply there to do that. Last week's episode was actually one of those coaching calls, so I really enjoyed doing that and would love to do that again. So if that's something that you're interested in doing maybe coaching is something you want to invest in but maybe don't have the funds for right now. Speaking of money, you can maybe do a call with me that we will record for the podcast whether it's something you're struggling in your business or a question you have about something, or something you want to work through and maybe workshop together. Also on the website, of course, are some of my services that I offer and some other resources and my mailing list. So if you want to look at any of those, make sure to check out the website.
Speaker 1:Also. It's been really exciting these last couple of weeks because the number of downloads for the podcast have been growing, which is cool to see and also kind of like, are people actually listening to this? So if you're a repeat listener, hi, thank you for coming back. And if you're a new listener, hi, welcome. I am really enjoying talking about these topics and it's always helpful to see that people are actually listening to it as well.
Speaker 1:So if you are enjoying the podcast, I would love if you could leave a review or a star rating, whether you're listening on Spotify or Apple podcasts. I think that just really helps people see it. I think it also sort of like legitimizes it in a way. Not that it needs to be legitimized, but you know, I think when I look up something and I see they have star ratings, I'm like, oh, this must be something that people enjoy. Let me also listen. So it just helps get this message out to more dietitian business owners. So if you've already done that. Thank you so much. I do see that there are some reviews and ratings already up, so I so appreciate that.
Speaker 1:Yeah, make sure you are subscribing so that you can follow along with new episodes that typically come out most Wednesdays. Once in a while there is a skipped week, but since today is October 1st and the episode will be released October 2nd, you can see how well I'm doing at batching and recording episodes in advance. But here we are. It's just the season of life I'm in, so, without further ado, let's get into the episode today about how do we pay ourselves in private practice. Before I get into talking about this, of course, I want to give a big disclaimer. I'm not a financial advisor, I'm not a financial planner, I'm not an accountant, so this is not formal like legal accounting advice. This is just going to be me talking about my experience and my understanding of certain principles and methods, so please take all of that with whatever grain of salt you'd like to take that with. Of course, I'm going to be speaking from my own experiences and I will talk about why these things are helpful for me, but do want to, of course, say that disclaimer before we get into talking too much about money. Course, say that disclaimer before we get into talking too much about money.
Speaker 1:Money is, of course, a complicated thing for so many of us. I think we all have stories when it comes to money and feelings about money and things that have impacted our relationship to money, just like our relationship to food and our bodies, and I think those are really important things to notice in yourself as you are exploring your money in your business. I think those are really important things to notice in yourself as you are exploring your money in your business. I think one of the things that has really shaped my journey in understanding money has been sort of this avoidance that I've had about it because I just sort of it was like I just don't want to deal with it, I don't want to get overwhelmed with it, I don't want to see that I'm doing something wrong and so I'm just sort of going to like wing it until I figure it out. And I think a lot of people do that, because I think it does feel really scary and overwhelming. And I think once I was sort of ready to find a system that worked for me is when I was like I was like ready for it mentally as well, and it really allowed me to sort of just be open to trying something. But yeah, of course all of us have a lot of money stuff and stories about money, so it's important to just take that in and recognize if some stuff is coming up for you as you listen to this episode.
Speaker 1:Before we get too into the profit first method, I want to talk about some other methods I've seen and used myself and also just known other dietitians to use in how they pay themselves and sort of organize their money. I think the first one is, of course, sort of like what I probably was explaining earlier, is like this avoidance and sort of just paying myself, as I needed when I first started my practice and I've mentioned this on the podcast before, but I was working a full-time job, so I had an income and a salary that was already paying for my personal life, and so having my business on the side allowed me to sort of create a nest egg, which I was really grateful for, because once I actually quit my full-time job, I had that money already in the account. That allowed me to sort of start paying myself as I was rebuilding up a caseload coming back from maternity leave. But I never really learned how to pay myself because that first year I wasn't paying myself for my business, I was just getting paid for my job. And then the second year I was sort of paying myself for my nest egg and then sort of what I was making and I didn't have a ton of expenses when I first started my practice too. So that was really helpful. So a lot of the revenue that was coming in was really just for paying me and for taxes. And then slowly, as I started to build and grow and open an office, all the expenses of course went up, up, up. And that's really when I was forced to sort of face the music and see what's actually going on in my accounts.
Speaker 1:But for a long time I just would transfer myself money. My checking out was low. I would just put some money in there. If we needed it for a bill, I would just transfer money to there. That is not what I would recommend, and I don't think your account would recommend that. I don't think a financial planner would recommend that. But if you're doing that, there's no shame, no judgment. I did that for a long time.
Speaker 1:But it's impossible to keep track of. First of all and also it's hard to know, like what can I actually pay myself consistently? And money's moving around all over the place and it's just an easy recipe to, like, you know, not have enough money set aside for taxes if you're not putting that money aside. And I wasn't doing any of that stuff and so as I started to grow and build, I had to, like actually start putting aside money for taxes and then, you know, figuring it out, all the rest. So the sort of like do whatever method is number one. That's just like the money that you are that's being brought in, that's being like put into your account, whether it's through insurance companies, private pay, that is the revenue that's being generated.
Speaker 1:So the percentages that I always heard was like 50% of that is for you as the owner, or like to pay yourself, 30% should go to taxes and 20% should go to expenses. I would say I think that's like a good general percentage of a starting point because I, generally speaking, that can work, especially depending on your expenses. So if maybe you don't have an office space that you're renting, you're virtual, maybe you don't have a ton of expenses, you don't have a ton of overhead, so 20% or less is probably enough to maintain your expenses. You know the tax piece is really dependent on a lot of different factors. That is where you want to talk to your accountant. But having a general idea can be just really helpful. But you know, it seems like 30% is typically seen as a good general amount. But definitely talk to an account if you can, about what would be recommended based on your typical revenue, what's expected, your life and all those things.
Speaker 1:And then the 50% of it is going to you as an owner. Keep in mind because and I talked about this in another episode when it came to the different business structures and how that's being taxed all of the money that's being generated in your business, so the profit, the money that's sort of left over that 50% is business revenue, but it's also going to be taxed as your personal income. So if you owners draw what I mean by that is like just transferring that money to yourself or paying yourself that money, it's all sort of like going to be taxed as the same income anyway. So that's kind of a simple way that I think a lot of people start and I think is. You know, even though I was saying my, when I really started was like kind of winging it. I was always sort of thinking about it in that way. I was always like okay about it in that way. I was always like okay, if I'm charging $100, like 50% is actually what I'm getting paid as my actual personal income and then 30% of that's going to go to my business taxes and 20% to expenses. So that's sort of the other method.
Speaker 1:And then the other thing I will say I've seen dietitians do more recently is paying themselves based on the amount of clients they saw. And maybe they're using that 50, 30, 20 percentages but say they saw like 10 clients and they're going to set an amount of money that they're going to pay themselves per that client and that's what they're transferring themselves as pay. That's also a good way to do it, because then you are doing if you're using something like a percentage like that 50%, say like you see 10 clients and that brought in a certain amount of revenue, you can take 50% of that and that can be your pay. So that's a good way to do it, based on what you're actually working and not just a willy-nilly number. I was definitely doing a willy-nilly number. I didn't use any kind of amount early on.
Speaker 1:But as I started growing my team and having more expenses and opening an office, I was just finding that I was getting more and more overwhelmed and like also just not knowing. You know, from going from having a very consistent, I knew what to expect salary from my full-time job and how that fit into my family's life and how that fit into our bills, to having this sort of inconsistency with how much I was paying myself. It was feeling really overwhelming and I just like didn't know how to how to do it. That's when I started asking the question how do we pay ourselves? I just don't know. I don't see it anywhere.
Speaker 1:And Profit First was recommended to me a few times. I think it was my therapist and one of my friends, I think Sarah, who I've mentioned before. So I did what probably most of you do when you hear about a book or something that sounds interesting I bought the book immediately and then I put it on a shelf and I didn't touch it for two, three years probably. I don't think I've ever actually read the Profit First book, but I bought it, I let it sit in a pile, I moved it up to the top of the pile here and there just to remind me, but never really picked it up. And then it was one summer maybe last summer, no, I think it was like the year before my husband and I were going on a trip to Boston, which is a couple hours drive, and we were gonna be there for the weekend and I was like, let me bring a book with me. We were there for the car for when we, you know, just at the hotel and I picked up the Profit First book and I threw it into my suitcase and off we went.
Speaker 1:And so because I was like sort of I must have been like in the mindset of like wanting to learn about business stuff or maybe actually face some of the money stuff, I was listening to a podcast and I found a podcast that had Julie Harris on it, who is an accountant who had recently just released her book Profit First for Therapists. And I was like, oh, profit First for Therapists. And so listening to an interview with Julie and sort of her business where she started as an accountant and she has an accounting firm and they started using the profit first method with her therapist clients was finding that there's different things that are going to be important to take into consideration with the profit first method that wasn't talked about in the original, that she wanted to talk about for therapists, and so she wrote the book Profit First for Therapists, which I often recommend. And so literally in that car ride I bought the audio book and all the drive, the remaining drive to Boston, we listened to the book, my husband included, and I think, depending on how you learn and listen, there's a lot of numbers, and I'm going to talk about a lot of numbers and percentages today. I think hearing them was helpful to understand the concepts, but the actual numbers part I had to really listen and do. I had to try it out, because it's hard to conceptualize things for me unless I'm actually actively doing it. So I did end up buying the book to have as a reference, but only really recently because I was always thinking about it. So I'm like, oh, I need to actually see it. So there's a lot of really great charts and if you do end up buying the audio book, you can also download a couple of resources on the website that Julie references in the audio book. So, whichever way, if you decide to do it, I will say, and I'm going to talk about what does Profit First even mean.
Speaker 1:But in the Profit First for Therapists book and probably, I would imagine, probably in the Profit First original book, but it's definitely in the therapist version. There is a little bit of diet culture-y stuff in there, in the beginning especially, and so I just wanted to give that disclaimer for anybody if they find that stuff to be triggering, or just to let them know. Obviously, as an eating disorder dietitian, as a weight-inclusive dietitian, it's not something I love to see in books especially. It's like why are we talking about food and dieting in a book about money? But that's the one disclaimer I will give, just to be mindful of that if that is something that might be challenging for you. Yeah, I mean I listened to the book and then I was like cool, let's do it. And then when I got home after that weekend I started implementing the method and have used it ever since.
Speaker 1:So Profit First in general was created by someone named Mike Michalowicz and so basically the idea was like what happens a lot of times in business is people look at it as like revenue and they have their expenses and what's left over after their expenses is profit. So when we think about that, that makes a lot of sense. I mean, if you look at your QuickBooks or a bookkeeping tool, it's a profit and loss sheet. When you look at it, the very top row is the revenue that's generated and then the middle is all the expenses and then what's left is profit. And so the thinking of profit first and how Mike sort of wants to shift that is, thinking about it as like revenue, and then we focus on taking out profit and then what's left can be used for expenses and really prioritizing profit and putting it into a separate account, putting it somewhere else and like using the rest of the money to fund the business. If you look at it like mathematically, it's sort of the same thing, but having the mentality that profit first is the main thing that we're focusing on makes profit, kind of this pay yourself first approach.
Speaker 1:Now I don't want to generalize because I don't know other business sectors, but I would imagine a lot of helping professions that go into private practice. The creation of the business is a little bit different than maybe a different type of business, like if I was to create a business for you know, and I often want to make a t-shirt that says not everything needs to be a business, because I often will get into something that I like as a hobby and I'm like, should I sell this and make this into a business? But really we want to you, really, when we think about businesses generally people think like it's something I'm going to do and I'm going to make money off it and make a profit. But I think in the helping professions, in private practice and a lot of us just go into it because we want to do the work we want to do and maybe we also want the freedom and the flexibility that comes with it. But we're not really thinking about it from a place of like I'm going to make this huge profit and all this money. I mean, we think that, but correct me if I'm wrong, but I think a lot of us probably have gone into being private practice owners because we wanted to do the work we wanted to do and maybe weren't thinking about the money as the only thing.
Speaker 1:So where I think the profit first for therapist approach was really helpful was because Julie Harris's approach was specifically around private practice. Now it's obviously says for therapists, but it's really geared towards a private practice model and I really appreciate that she took into account when people accept insurance and different practice sizes and the expenses that we have as private practice owners, particularly in group practice, is a lot different than other sectors Because you know, if you have like a business that's selling a specific service, expenses are going to be towards the materials used, the labor and then selling it, but then like, really like, those expenses are all going to be. Maybe the most I'm spending money on is actually the stuff I need to make the stuffed animals versus like the actual labor, which is probably skewed in our you know US economy. But that's our story for another day when I think in our field we're selling a service and, depending on the structure of your business if you're solo or group you know one of the biggest expenses is the actual clinician and paying for the clinician and payroll, and so having the Profit for Therapists book has been just really helpful because it's going to be different and I think ultimately I didn't go into using this method as a way to make more money and how to figure out my profit. Of course I would like that, but I really found it to be a helpful way to just sort of organize where the money is going and how to know if I have enough money for the things that I need to know, and that's really what I found to be helpful, and I think the plus side of it was that there is a focus on making a profit and actually making money. So, all that to say, it can be a really helpful tool, and now you're probably like okay, so what the hell is it? You keep mentioning it, but what is it? So, like I was saying, with the original kind of method, it's this idea that we have revenue and we're prioritizing profit, and then the rest for expenses.
Speaker 1:The really big concept of it all, though, is that we're, sort of like, taking money, that we are generating this revenue, this money that's coming in, and we have percentages of that that's going to go into different places. So they recommend opening different bank accounts for the different things that you're going to need. So for us, that's going to be taxes, operating expenses, owner's draw and profit. Yes, they literally recommend opening like four additional accounts. I did do that at first. I've recommended that to people at first. The reason I recommend that is because, when we're putting this money into these different like sort of buckets or accounts, the idea is that we want to put it somewhere that we're not going to touch. So if you have a separate account for your profit, it's like money that's going there and hopefully sitting there and building up so that you can have that money build up. Same thing for taxes it's in a separate account, so it's not something that you can just tap into and use as needed, because you definitely don't want to do that with money that you're setting aside for taxes and then just having a designated place that's just for operating expenses. And that really does help to see how much money do I actually need to have in my account for my operating expenses and having a good idea of that, so I think it's helpful to see it kind of distributed into the different bank accounts. Like I said, I did do that at first.
Speaker 1:I recently started working with a financial coach, joe, who I will link his website in the show notes, and he introduced me to a budgeting tool called YNAB. It's an acronym Y-N-A-B. It stands for you Need a Budget and it's sort of like a virtual budget app and tool, but it allows me to sort of put my money into different categories and different buckets, and so I've actually now I'm going back and like trying to get rid of all my million accounts that I had created, but still using the same system where, basically, I'm taking revenue and I'm putting it into different categories, different buckets, different places that I'm not touching. So I think, whichever system you decide to use, figure that out. Some bank accounts it's really nice. They have like a little bucket system so like you don't need to necessarily open different accounts. You can like put money into like this bucket that's for taxes, this bucket that's for profit, this bucket that's for payroll, you know whatever it might be, so that you don't need to actually open the different accounts.
Speaker 1:But if you think you're the type of person that's going to be too easily tempted to pull into those things, it might be helpful to do the different bank accounts, because I actually had a separate bank that I was using that was outside of the bank that I normally use for taxes for a long time and that was nice to sort of have it separate because, yeah, there's going to be moments that I'm like, oh, I could use this money. It's very tempting to tap into that account and be like let me transfer some money over. But we really don't want to do that because you don't want to put yourself in a position where it comes tax season and then you're like owing thousands of dollars that you don't have. So good way to sort of plan ahead for that. I think that's really one of the benefits of Profit First is thinking about it in this way of like. We have our different little sectors and buckets of places that we're putting money. That's sort of the idea. There's percentages for each of these categories and they're going into different places.
Speaker 1:Now I hope you're still following. I feel like when I start talking about little details of these things for me and my brain, I know I get very easily overwhelmed by it, so just want to check in. Obviously, I can't hear how you're doing, how you're feeling, over there, because I'm talking to myself in a mic. But if this is starting to feel like, okay, I'm following, but maybe I'm getting a little overwhelmed, it might be a good time to pause and come back. But if you're like, nope, let's keep going, let's do it. I'm going to start talking a little bit more about the percentages in particular here, so you might start to hear a little bit more about numbers and things and hopefully you can follow along. I'm going to link the Profit First for Therapists website on here. There's some tools already on that website because I think for me too, I'm like such a visual learner there's some tools already on that website because I think, for me too, I'm like such a visual learner.
Speaker 1:If you have the book I'm going to be talking about page 57, I believe that's going to have the actual allocation targets and then I'm going to explain to you what that means. But so if you do have the Profit First Therapist book, page 57 is really where I'm going to be talking about the percentages in particular. This is where I really found this book in particular to be helpful, because once again it broke it down based on size of a practice, because the percentages are going to change based on your practice's needs. And so the two kind of groups I'm going to talk about today are if you're a solo clinician and if you're in a small group practice, which I believe Julie Harris describes as maybe like two to three, one to two full-time members, annual revenue like $150,000 to $400,000 range. That's like a small group practice. It gets a little bit bigger when it's a medium practice is five to eight clinicians that are full-time and bringing in like $350 to a million dollar revenue. And then, of course, solo is just one clinician, so it's you and your individual private practice. And so they talk about this as an allocation percentage and they give two different terms they use.
Speaker 1:There's current allocation percentages and then target allocation percentages. The target is like the goal, that's like what we want to work towards, it's what we want to like, figure out. But then there's also a current situation, right, there's like a current model that you have. There's a current amount of money that's going in different places. So when you first are starting to use this method, don't panic. If you're like, well, I have to put a lot more into my operating expenses than she's recommending, you know that might allow you to see things are out of balance in your finances and so maybe you're spending too much money on expenses and you don't actually have enough money to pay yourself, let alone set anything aside for profit. So that's going to allow you to start to see that. And this is where we can start to shift and make our target, which is what we are striving what the goal is, the percentage to get to.
Speaker 1:And so in the book like I said, page 57, when you're a solo clinician, I'm going to tell you what she recommends as a percentage of revenue. So the way that they recommend doing this and I still actually do this every Wednesday they say to do it whether you want to do it weekly to start, or I believe they say it's like the 10th and the 28th of the month, picking two days of the month. I like doing it weekly. That just has what's worked for me. I do it on Wednesdays. But basically what you're going to do is you're going to go into your checking account where that's going to be like your main account, where all the expenses are coming out of, like you probably or have already have all of the like revenue going into. So, whether insurance payments, you know people, the private pay, all the money that's where that money is going to is probably your main checking account. So let's say, on Wednesday, like you want to do on Wednesdays, like me, you go in and you have a thousand dollars that's the amount of money that you're going to take and then distribute into these different percentages and that's how we're going to sort of use this system. So for a solo clinician, this is what Julie Harris recommends.
Speaker 1:For operating expenses, she recommends anywhere between 10 to 40%. This is like what the goal should be, and obviously it's like a pretty big range, but I think it's going to matter based on 10% or like on the lower end. If you don't have an office space, if you're not paying rent, the things that you're probably paying for outside of that when it's lower, is any kind of software subscriptions, professional fees, licensing fees, any educational fees, cu fees, anything like that are going to be operating expenses. Obviously, if you have an office space, rent utilities, the things that are going to be into the actual office, that's going to be under operating expenses. So the range is there to be 10% to 40%, because it's going to depend on how your business is structured.
Speaker 1:For owner's pay, she puts the range at 30% to 60%. Once again, depending on what your actual expenses are. It's going to be what's going to be allotted for your pay and then for taxes, she puts five to 35%. So earlier in the episode I was talking about the 50-30-20 method. So keep in mind this is what you're doing. This percentage is based on the amount of money that's currently in your checking account. So that's a range. But this is really where I think an account can be helpful, because they can give you a certain amount that you should be striving to have enough money for, so you can see, once you start putting money into your tax accounts, like am I getting close to that number? Will I be able to get close to that number based on the percentage that I'm using for taxes?
Speaker 1:And then the profit is 5% to 15%. I'll be so honest when I first started doing this, I think I only would put like 1% towards profit, because my expenses were really high and there was not enough revenue to cover those things, and so I had to make sure that all their expenses were covered, and so there really wasn't enough money for profit. So I had to really like lower the profit amount to make sure that I didn't drain the business. But that was something that I was like okay, this is something that's important to notice that I'm unable to put in more for profit, and what can I do to sort of adjust for those things? And one of the biggest things, of course, is increasing revenue and making sure that we were starting to bring in more. You know, see more clients. So that's for a solo clinician and then for a small group. Remember, that's like one to two full-time clinicians and, you know, small group, remember, that's like one to two full-time clinicians and a revenue that's like up to I think she said 400,000 a year. So the allocations are going to be a little bit different.
Speaker 1:This is really where I find the Prof First Method for therapists is important to use, because in other businesses the expenses, like I said before, is going to be very different. In group practice, our biggest expense typically is payroll. So for operating expenses, like I said before, is going to be very different. In group practice, our biggest expense typically is payroll. So for operating expenses, so these are the expenses that we need to like operate, which is once again, software subscriptions, office space, licensing fees, anything like that. That is going to be 15 to 35% of your revenue. For payroll, it's going to be anywhere between 25 to 45%. For owner's pay, it's going to go down. So for a solo clinician, the owner's pay recommendation was 30% to 60%, but for an owner in a small group practice it's 10% to 30%. Now, keep in mind, your revenue is higher. You should be having more actual money that you're starting with to have these percentages. So it's not necessarily you're making less in money, but the percentages are gonna be a little bit different. And then, lastly, of course, profit five to 15%.
Speaker 1:When I started this I was in small group practice and, like I said, I started with like 1% that I was putting towards my profit, and so I think breaking it down this way allows you to see it from the actual money that you have and using the actual money that you have to put things aside. Now, how you figure out how to budget all those things, that's going to be sort of more of the personal journey For me. I love using YNAB I think I got to do an episode on it, but I don't know if I'll be able to explain it in like a podcast forum but knowing how much money I had going towards expenses or how much money I was going to go towards that I could put aside to pay myself, and having these different things organized in this percentage way was just really helpful for me to look at, because I think before what I was doing was I was looking at it from at the end of the month in QuickBooks and it's not real-time money, and so I think this method really helps because you can see it's not real-time money, and so I think this method really helps because you can see it from like a real-time place, and so what's helped me is and this is no surprise if you've listened before, if you're one of my coaching clients is that I have a spreadsheet.
Speaker 1:I love using Google Sheets for pretty much everything, but I have a spreadsheet that I keep every week and I've been able to put the formulas in, so that does the percentages for me automatically, and so on Wednesdays I'll go into the account, I'll see what's the money that's in there, that's the money that's being broken up, and then the formulas will then break up into the percentages and then I know how much money to put into what bucket. So this is how much money is going to go towards taxes, this is how much is going to go towards profit, this is how much is going to go towards payroll and the rest is for operating expenses, and it just helps see everything and break it all down nicely and organized. This has been a method for me that has just felt very organized, consistent and allows me to start to see a range, and this is why I also love to keep track of things like this, because I can start to see what are the trends. What are the trends generally of how much money is in the bank every week. How much money am I putting aside every month for expenses for paying myself? And then that's when you can start to get a kind of like expected amount that you're going to start to pay yourself. So if you start keeping track of it not only through actually distributing it in all these different places, but actually seeing it on like a spreadsheet you can actually see okay, last week I did this much, this week I did this much, and then the next two weeks are similar. Okay, now I can look for a month. I can expect to pay myself this much money if our revenue doesn't change right, and so it helps you to sort of anticipate what's going to be happening in your business finances. So of course, this is like a very like TLDR version of Profit First for Therapists and I would really recommend reading it because it's going to go over in much more detail.
Speaker 1:She talks about a lot of the different issues that can come up, a lot of different like scenarios. It's going to be impacted by a lot of different factors. If you accept insurance, like me, we can't really rely on what the clinician saw this week isn't necessarily going to be in my bank account for another two, three weeks. So really the money that's in the bank today is from two, three weeks ago. Because of just how insurance payments process, if you're in private pay and the money is sort of being generated weekly, it gives a little bit more consistency, which is nice, of course, because you can kind of expect and anticipate how much money is going to come to you that week. But it's really going to vary and I think in the book she has a really great job of breaking that up in the different ways and sort of how to do it.
Speaker 1:I think understanding your money is one of the best ways to limit anxiety that comes with money and I think it's one of the hardest things to do, because facing the money is also something that produces a ton of anxiety for people, understandably, and I think it's like we don't want to see something and be like, oh no, I'm trapped. Like I said in the beginning of this episode, I had a lot of money stuff and a lot of avoided money stuff and this year I was like I want to just learn it, I want to face it, and I started working with Joe Maddox who's, like I said, my financial coach. Anyway, joe helped me with learning how to use YNAB as a budgeting tool. Use whatever budgeting tool you like, but it has helped me to sort of like have a plan, know where all the money's going, and that's where the next step, I think the next step is do I know how to sort of budget for these things in my life, because it's very easy to get quickly caught up and start building up credit card debt and doing all these things, and that's a place that you don't want to get to, but it's a place that I was both in my business and in my personal life and have been working to sort of get control of this last half of this year actually last six months and so it's been really helpful to have that support. It is something that I also help some of my business coaching clients with. I actually just helped one of my business coaching clients set up YNAB as a tool for budgeting and we'll be helping her to sort of like utilize it within the Profit First method.
Speaker 1:But having a good organization of it all is just can be so vital. But once again, I just want to validate how understandable it is to like want to avoid it because it is scary and like it's hard, like you're like I'm a dietitian, I didn't plan to once again be a CEO and now have to like balance all this money that's coming in, but you don't want to drain your business, and this is something I find that group practice owners do a lot is and I almost made the same mistake is sort of like jumping ahead too quickly and wanting to offer benefits and do all these things before you're ready financially. You know, last year more at the beginning of this year we added health insurance for our team and I really wanted to add 401k on as well. And when I was getting up all the health insurance stuff set up at the end of the year, in 2023, I was setting up the health insurance stuff and then trying to figure out the 401k and it was just feeling really overwhelming and I was like I just don't know how to, I don't know the right decision here and I don't want to rush this decision. So I'm going to just and I felt it sucked. It sucked on my team that because I did tell them that was my goal was to add health insurance and 401k and to tell them that we're just going to do the health benefits for 2024. But I'm so glad that I did that because I really think if I had a 401k this year, I would have been so stressed about money because I don't think my business had enough to cover that yet. That's where I'm hoping to go next year, and doing it in a smart and sustainable way is key so that you don't burn yourself out and that you also don't burn your business, because, at the end of the day, this is the thing that's going to allow it to keep running and allowing it to also provide for you in your personal life.
Speaker 1:I think one note on profit first that I didn't say, which is like the biggest part of the whole thing with profit is there's this like profit account. You're probably like what do I do with this profit account? So the whole idea of this profit first method and having this profit account that you're putting money aside for profit is, at end of each quarter you are going to just give yourself 50% of what's in that account or in that folder or in that bucket as a personal bonus for you as the business owner. I started very, very low and it wasn't a lot of money coming in and as I've sort of organized funds, you know, as a business owner I make less than my clinicians do, because of just the structure of the business. I also work less, you know, having a child who's in almost full-time child care now, but still, you know I work five to six hours a day. So I do have a lower salary than some of my full-time clinicians. But the profit first method and having these profit buckets and allow myself to have these sort of bonuses allows me to feel like I'm starting to be compensated, as also like I was in my full-time job before I quit my full-time job.
Speaker 1:The other part of it so we're distributing 50% of it, but the other part of it says stays in there for savings. That's the other thing. It allows us to also save money for an emergency savings. Because if you guys remember the beginning of the year with change healthcare and there was all these insurance delays, I was like, oh my gosh, thank goodness we weren't impacted by that, but if we were, I would have needed thousands of dollars to pay my team. That I would not have if insurance companies were having these delays and not paying. So having an emergency fund through this profit first method, it's like the same bucket You're putting in profit 50% goes to you, the other 50% is going to stay, as that savings allows you to have some savings as well, so keep that in mind too. That can be important.
Speaker 1:Okay, this was a lot. I hope it was helpful. I'm curious to hear I would really really love to hear from you if this episode was helpful, because I think it's hard to talk about these concepts without it feeling overwhelming and confusing, so I'd love some feedback. There's a text option. If you see in the show notes, I think it says text me. That's through my podcast hosting, but that message will come to me, and so if you have feedback, I would love to hear it. You can, of course, always reach me Instagram, too, and send me a message or DM there. But, yeah, I would love to hear, if this was helpful and I hope it was If you're feeling confused and you're still like I don't know how to pay myself, find a system that feels like it's going to work for you, whether it means looking at how many clients you're seeing a week and maybe start with that 50, 30, 20% thing and pay yourself 50% of the amount of clients you saw that week, based on what the revenue is. So based on if you are charging people $100, like for each client you get $50. You can do it that way, but I think once you start kind of growing bigger, the profit first method is going to be one way that can be really, really helpful.
Speaker 1:One last resource I want to share with you all too, is the Financial Feminist book by Tori Dunlap. I think that was also sort of my entry into like caring about money is. I listened to her audio book as well and I was like, oh my God, I have not put any money into like a retirement savings since I quit my full-time job. I don't know anything about this stuff, and Tori does a great job of breaking it down and explaining it and also explaining why especially for particularly for women and female identifying folks like why this is so different, for how it's been presented to us in our lifetime, why it feels so confusing, and I think her book was just so, so helpful too in learning about more about money, and I think that's like my new journey that I've been on, so that's a great one that I would also recommend, and her podcast is phenomenal, so I'll be sure to link all that in the show notes. Okay, I think that's enough for the day. I think that kind of sums it all up there. So check out all the links that I'll have in the show notes If this feels like something that could be helpful for you to just like talk through with someone.
Speaker 1:This is certainly something I do offer in my coaching services, so feel free to reach out on my website if that might be something that you are looking for some support around. Thank you so much for listening. It's always a joy and I always hope that it helps. Of course, be sure to continue to like, subscribe and follow wherever you're getting your podcasts and I will talk to you next week. Bye, thanks for listening to the RD to CEO podcast. Be sure to check out the show notes for any resources mentioned or find more at wwwrdtoceocom. Never miss an episode by subscribing wherever you get your podcasts. See you next time.
