STP 93 | HOW AN ACCOUNTANT HELPS YOU SCALE YOUR THERAPY PRACTICE
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[00:00:00] [00:01:00] They want to be really generous with their team, which is very, very kind, but if you are hiring and you are losing money on every single, uh, hour or session that that clinician sees, you are signing your business's own death certificate, right?
[00:01:52] Julie Herres: There will come a point where you personally cannot work more. There is no more. Savings left. There's no additional pot of money, uh, available [00:02:00] to keep subsidizing that team member. Right? So I think every team member, every session should add to the bottom line. of the practice
[00:02:11] James Marland: Welcome to the scaling therapy practice. This is the show where we empower mission driven leaders to
[00:02:16] James Marland: launch life changing online courses. Really excited today to welcome my friend Julie Harris to the show. Julie Harris is the owner of Green Oak Accounting. She's an accountant for therapists and therapy practices. She's the author of Profit First for Therapists. I have my copyright here. I actually read the audio book and listened to that at least one and a half times. So it is an excellent resource and she's also the podcast host of Therapy for Your Money. Julie, welcome to the show.
[00:02:51] Julie Herres: James, thanks for having me.
[00:02:54] James Marland: So today we're going to talk about scaling your practice and how an accountant can help you [00:03:00] and who better, who better, to help us talk about this subject than Julie, who works with therapy practices from solo onto, you know, multi million
[00:03:10] James Marland: dollar practices. So if I was a let's we're going to answer three questions today, maybe four. But if I was going to ask you, Julie, what is scaling mean to you? Uh, or what would if I'm a therapist? I say, I need to I need help. I need help to grow
[00:03:26] Julie Herres: Mm hmm.
[00:03:27] James Marland: account. And what is your first step? Response to that,
[00:03:31] Julie Herres: Yeah, well, really, there's, there's, uh, you can think about it from a couple of different perspectives. One is scaling as far as head count. In the practice, right? So clinicians and the other one is dollars. And really the secret is they're very much intertwined. You cannot really increase dollars that significantly without adding clinicians, unless you're adding a whole new stream of income.
[00:03:53] Julie Herres: But in most therapy practices, scaling means [00:04:00] Uh, but session count is often how we are, how we are growing a practice, or at least the first way to, to grow a practice.
[00:04:10] James Marland: you, you broke it down into like, session count and you can't increase your sessions without clinicians, but you can't increase your clinicians without location. Like, it all seems fairly. Um, interconnected that way.
[00:04:27] Julie Herres: You can increase your session count without, um, without location. You definitely can do that. Let's say you have one physical location. It's not uncommon to look at, okay, how can we maximize the use of this space? So even if you are a hundred percent in person, which many practices aren't quite the same, There still still today, you know, towards the end of 2024.
[00:04:48] Julie Herres: There's a lot of hybrids still happening or a lot of, uh, virtual only practices as well. But even if you have a physical space, you can definitely scale without, uh, without adding locations, [00:05:00] but you usually will want to then take a cold hard look at. What is the space that we have? What is this? What kind of revenue is this space able to generate for us?
[00:05:10] Julie Herres: Right? How many sessions during daytime hour is usually not at midnight, but can can this space generate for us? And then how can we schedule team members in a way that's going to make sense? So in this hybrid world, that often means A single clinician isn't getting their own dedicated office that only they use, right?
[00:05:28] Julie Herres: Especially if they're working two days from the office, two days from home, it is very, uh, wasteful for them to have their own dedicated office that's empty five days a week. So that usually means that multiple people are sharing an office, or you might even have in high Um, high rent areas, you might have a morning shift and an afternoon shift.
[00:05:47] Julie Herres: You might have weekend hours, right? You may have a Monday through Thursday and then Friday through Friday and Saturday, a part timer. There's a lot of different ways that you can maximize the space to increase revenue without [00:06:00] necessarily a physical location. But the traditional way to scale a therapy practice is by increasing sessions to increase sessions.
[00:06:06] Julie Herres: Eventually you do need clinicians to do that.
[00:06:11] James Marland: That makes sense to me. Uh, what, what is, what do people struggle with when they want to grow? Like, what are some of the barriers to adding some of those clinicians or expanding the number of sessions?
[00:06:28] Julie Herres: Mm hmm. Well. I think often the barrier can be the the math piece of it where it feels like this big hairy unattainable goal Uh, and where we don't necessarily know. How are you? How are you going to get there? So I think that's where an accountant can be really really helpful in just breaking down the math for example If you say to me, James, like I want my therapy practice to do a million dollars a year in annual revenue.
[00:06:57] Julie Herres: That is all well and good. Right? With a couple of questions, we can kind [00:07:00] of figure out what that, what that takes. So let's say I'm going to, I'm pulling out my, my trusty calculator. Let's say your average fee per session is 125 per session. That's 8, 000 sessions per year. Okay. That's a good number. Um, that would be divided by 12.
[00:07:18] Julie Herres: 666 sessions per month. So what does it take to generate 666 sessions per month? One single person usually is not going to be able to do that, right? There's going to be multiple people. There's going to be multiple people, but you need for that systems, right? So you need clinicians, you need a system around recruit, recruiting, probably you definitely are going to need to know. where those clients are coming from, right? So probably some kind of marketing to be attracting those clients, some kind of intake system so that when they come to your practice, you can convert a potential client into a client, right? All those things have to happen. And really, as we're scaling a practice in a way, we're, we're [00:08:00] always aiming for all, all votes to rise at once.
[00:08:02] Julie Herres: That's often not how it actually happens in reality, right? Where there's kind of a disconnect, but we're trying for all the systems to grow at the same time. Usually there's going to be one area or like, oh, marketing's not quite there yet. Or, oh, intake's not quite there yet, right? Where something's not quite working, but we over time kind of shore all of those up.
[00:08:20] Julie Herres: Um, but you see how quickly we just broke down those, those numbers. Like, okay, that makes sense. That feels attainable all of a sudden.
[00:08:30] James Marland: Yeah. Like when, when you say it, when you say, oh, I want to make a million dollars in my practice, I would not without breaking that down, I wouldn't know what, how to get there.
[00:08:41] James Marland: Like, how would you get there? Oh, you, you just need to have this many sessions if you charge that month. Well, what does that mean per month? Okay, well now we have a goal. We have a goal of 660 sessions or something like that. So how do we go put our actions and line up our [00:09:00] actions so that we can hit that goal of 660 a month? And then it's going to become a little more obvious. There'll be things you try. Do you hire a therapist? Do you set up split the time? Um, what, and everybody's situation's probably a little different. So it's not the same story every time. Um, do people, I came to you with a hypothetical, Oh, I want to grow my business and make a million dollars. Do people actually come to you and say, Hey, Julie, how can I, can I, how can I make a million in the next year to five
[00:09:38] Julie Herres: all the time, like all, all, the time. Yeah, I would say we work with practices of all sizes. When it comes to group practice, I would say, um, one of the areas where we are particularly good is with scaling practices, right? Because there's so many levers that are moving. And I think you, I think you need accounting support at all sizes of business.
[00:09:58] Julie Herres: I think that is always [00:10:00] so important. Good to have someone in your corner. Um, I actually, I'm a big believer that as a business owner, you need accounting support tax, you need an attorney on your side, HR, if you have team members, right? These are areas where there are people with very specific expertise that can really just be kind of, On your team of consultants and really help you grow a better business.
[00:10:22] Julie Herres: Um, but I definitely think having an accountant on board to look at the financials with you and kind of either pat you on the back, right. And say, great job. Keep going because it can be lonely when you're aiming for those big goals. You can't go to your team and say, Hey, we're almost at a million dollars.
[00:10:40] Julie Herres: This is really exciting. Right. Or it doesn't feel comfortable. Um, if you say that to your friend, who's a W2 working a job somewhere, They're going to think that you've got a million dollars in your pocket, which is not at all the truth, right? So there's just not a lot of people that you can celebrate that with.
[00:10:54] Julie Herres: That's one of the, the, the really big advantages. But you can also have an accountant in your corner [00:11:00] to say like, hey, I think we need to slow down here. You're getting into a dangerous cash position, right? So they can help just with their expertise because they see a lot of other businesses. They can help you look around the corner and see when when things are not going well.
[00:11:14] Julie Herres: They're also a great person to just run ideas by right? It's very, very common for clients to say, Hey, I'm thinking of doing, making this move. What do you think? And sometimes we'll give the green light. Yeah, that's, that's a great idea. You have the cash or sometimes we'll say, I really don't think it's time for that yet.
[00:11:32] Julie Herres: Like we need to postpone that six months.
[00:11:36] James Marland: And, uh, I think that's very, very beneficial to the practice owner who just sees their own story. Like, they just see their own numbers, their own forest, or they
[00:11:47] James Marland: hear things, you know, on Facebook or TikTok, and they're just like, they're in their own head, and they don't have that, um, that person who can see the [00:12:00] story, see the numbers, and be able to tell them what's going on with their For their practice based on the numbers like it's it's really hard. I'm sure some people could do it, but it's really hard to fudge the story. The numbers tell
[00:12:12] James Marland: with with your practice.
[00:12:14] James Marland: And 1 of the things I've we've talked about in the past is you're you're able to look at the numbers and you can tell what's going on. based on what the numbers tell you. Um, you, you, you mentioned something like, how do you know if you have a cash flow problem? Like could, could some, could most therapists pick up their balance sheet and look at it and say, Oh, I have a cash flow problem because of this. It yeah. Maybe, maybe not. I would, I would, I would air towards probably not, um, right. The cash, that the cashflow problem might manifest to a practice owner. Oh man, cat money feels really tight. I don't know what's going on. Like we're making all [00:13:00] this money, but where is it going? Right. So that would be kind of it before they see it.
[00:13:04] Julie Herres: Yes. They wouldn't necessarily know where it's coming from, but they would feel like, Oh, it feels really uncomfortable. I run payroll and it feels really tight when I do that. Right. So there, those are, those are the symptoms. And that's when, um, Um, you know, if you're going to the doctor and you're saying like, Oh, it kind of hurts over here.
[00:13:20] Julie Herres: And they'd be like, pushing, pushing, like, where is it? Like, Oh, wow, that's, that's where it hurts. Right. So it's kind of that way from a financial sense where we're kind of peeling up the layers. Like, Oh, I think something's going on over here and that uncovers the, um, the issue.
[00:13:38] James Marland: so we've, so problem diagnosis is one way an accountant can help you scale your business. If you, if you could spend another minute or two just talking about what are some other ways a, an accountant or an accountant firm can help a therapy practice scale their business.
[00:13:55] Julie Herres: Yeah. Well, we can help you avoid. Some pretty expensive [00:14:00] mistakes sometimes too. Um, or, an example
[00:14:03] Julie Herres: so avoid expensive mistakes. Um, I, I, I've got an example for that. I also think sometimes we can help you not get over excited and forget about the math, right? So let's, let's, let's unpack those two. So
[00:14:18] Julie Herres: not make expensive mistakes.
[00:14:20] Julie Herres: If I had a dollar for every time a practice owner made a lot more money in their business and spent all of it before their tax balance was due, I would have a lot of dollars, right? So we can say, Hey, hold on. You can't take that money out of the business there. You, you doubled your income. There's going to be a tax balance too, right?
[00:14:41] Julie Herres: So just helping you see around that corner, recalculating that for you, having you make extra payments, if you'd like to pay that in advance, or just helping you see. You're, this is going to be due in April. We need to hold on to this cash. That's a huge, very expensive, um, mistake that a lot of business owners [00:15:00] make sometimes in the later years, very often in the, in the first few years, right?
[00:15:04] Julie Herres: Because you're not used to having, having to pay taxes. So as a business is, is, uh, starting and growing. Um, but I've seen also, this is from earlier this year, we had a client who, um, their landlord was selling. and said, Hey, are you interested in buying this building? And this client was really, really excited at the prospect of being their own landlord, right?
[00:15:26] Julie Herres: And building equity and being their own, um, uh, owning the building and, and have, you know, expanding the practice into Uh, maybe something more holistic with yoga and there are a lot of opportunity and that is really great and really exciting and it's easy to kind of forget about the math in those situations when you get excited about this by this great opportunity.
[00:15:50] Julie Herres: Right, so in this case we have the experience we've seen many many clients buy a building so we can say well we typically are going to need 20 percent down 20 [00:16:00] percent down of this much this building is x dollars. It doesn't look like you have that available in the business. Do you have assets, personally, that we don't know about?
[00:16:09] Julie Herres: Right, that's possible, that could be. And then this is what you can expect after, right? So we were able to just paint the picture, and not, not just be Debbie Downers and say, No, you can't do this, but just paint a realistic picture of, Yes, it sounds like a dream right now, But what we don't want this building to turn into is your worst nightmare, where it is taking every penny of cash that you have available and costing you way more than just your rent alone is costing you right now, and you're now in a really difficult position where you might actually lose your practice.
[00:16:39] Julie Herres: Right? So Oh, kind of painting that, that picture of like, here's what reality will look like. Here's what the bank will ask for. Here's what they will expect. So that you can go in with your eyes wide open and say, you know what? This is just not the right time. We can absolutely work towards this in a few years, but this is not it.
[00:16:55] James Marland: Well, and also, uh, uh, well, [00:17:00] okay. One of the points I was going to make is one of my favorite authors, Jim Collins wrote a book great by
[00:17:04] Julie Herres: Mm hmm. And, uh, he said lead above the death line meant it's been a few years since I read the book, but what I get from the, what it means is take risks, but don't take risks that will kill you.
[00:17:18] Julie Herres: Yes. Yeah. I've read that book and And you got to take risks as a business. You don't have the full information. Absolutely.
[00:17:26] James Marland: But if you're traveling to Antarctica and you don't talk to somebody who's been, you know, to the cold climate before what you need, the, the, the, the, the supplies, the dogs, the
[00:17:34] James Marland: whatever, if you go, if you go there without being prepared or without your eyes open, you're, you're just going to die.
[00:17:43] Julie Herres: Yeah. Yeah. And sometimes these risks are calculated, right? They make sense. We're going to make an investment for the growth of the business, but often, like in this specific case, it's, it's, not really a risk that is worthy of like, yes, that is a good thing to buy an asset for you personally. But if it [00:18:00] puts the business at risk, that's actually a bad risk.
[00:18:03] Julie Herres: Risk, uh, where it's not going to grow your business, right? That alone will not make your business bigger or better or generate more revenue. Um, it will actually take away from it. So that's just one of many, many examples, right? A building comes up quite often. Sometimes it's a great idea and sometimes not.
[00:18:21] Julie Herres: But just one of, one of the ways that we can help, uh, as accountants. Uh, business owners can look at reality.
[00:18:31] James Marland: 1 of 1 of the other recent things, um, you've done and I and I sent out some emails about it was the compensation. Like, how can an account and help you create a better compensation package for your, for your team? My story, I've told this, like, 6 times is I had a friend hire staff. She was solo. She hired staff, but kept paying all the taxes and all the insurance and everything. Uh, and was, uh, and kept their rate the same. So basically [00:19:00] she was working more and, uh,
[00:19:03] Julie Herres: Mm hmm. and, and she hired people. And now she was even working even more to support her practice rather than earning more money. So that's my example. What is, what is the way an account can help you develop a compensation package?
[00:19:18] Julie Herres: Yeah, well, I don't know that every accountant can do this because most accountants don't know the mental health space. Um, but often an accountant will be able to say, well, you know, here's what your overhead is. And here's what we're, you know, what profit they'll ask you, what profit margin do you want to have?
[00:19:36] Julie Herres: So then you can afford to pay about this much. Uh, when it comes to the work that, that my team and I do at Green Oak Accounting, we, all we do is work with mental health. And so we actually know in a much more granular way, like here, the industry, Standards and that's by years of our our research and here's what we recommend And here's the structure that we recommend so that you can still make a money [00:20:00] Uh still make a profit.
[00:20:01] Julie Herres: I'm a big advocate that every practice should be profitable. I know a lot of practice owners when they They want to be really generous with their team, which is very, very kind, but if you are hiring and you are losing money on every single, uh, hour or session that that clinician sees, you are signing your business's own death certificate, right?
[00:20:25] Julie Herres: There will come a point where you personally cannot work more. There is no more. Savings left. There's no additional pot of money, uh, available to keep subsidizing that team member. Right? So I think every team member, every session should add to the bottom line. of the practice because that is in service to everyone around you.
[00:20:44] Julie Herres: If you have a practice that is profitable, it means it will continue to exist. You will continue to be able to serve your clients, have a high impact in your community, but you also get to keep your clinicians employed, which is a really good thing, right? If the practice eventually fails, you're bouncing [00:21:00] payroll.
[00:21:00] Julie Herres: You are, uh, you know, people are leaving because they're not getting their paychecks. Like that's not a good situation.
[00:21:08] James Marland: Yeah, definitely. And, uh, I forget, I forget you're not, not on purpose because I mentioned accounting your, you do work with therapists. Like you work with therapists, you know, the numbers, you know, the compensation, you know, the ratios, uh, that is a very valuable, uh, knowledge to have. And it's really probably difficult to acquire unless you work in the, in the field, in the business.
[00:21:36] James Marland: I want to shift a little bit. Uh, we've, we've talked about how an accountant can help you scale your business. We started talking about mistakes. Uh, how can I, uh, you started, uh, scaling a little bit with online courses, uh, and helping people with their, um, uh, with certain Areas
[00:21:59] James Marland: of their [00:22:00] business. What, uh, what's, uh, what's your experience been with, uh, starting to offer some courses for people?
[00:22:07] Julie Herres: Yeah, I think it's a great way to expand your reach and diversify your income. Um, so for a lot of, uh, of therapists, when they are wanting to maybe do something else that's not just sessions that I think that's a great, uh, great direction with a low barrier to entry, right? There are definitely costs associated and a lot of time, uh, time associated with recording a course, but once it's done, the continued investment can be minimal.
[00:22:38] Julie Herres: Usually do need to keep marketing it. Um, but it's really, it's possible to generate some income, however, uh, minimal or large it may be. And so, you know, That's always a good conversation when you're adding any kind of additional income stream to your practice. It's a good conversation to have with your accountant to say, should [00:23:00] I leave this in my existing business?
[00:23:02] Julie Herres: Should I have a separate entity for it? Right? It can be part of a larger discussion because there's no magic. You should always do this answer. I wish there was, but it depends on the circumstances. So the conversation we might have with our client is, well, okay, you want to start a course, who is it for, right?
[00:23:20] Julie Herres: Is it for CEUs, for clinicians, in which case that makes a lot of sense to keep in your mind. practice. Is it a course for your clients? Well, maybe we don't want that to be construed as providing therapy right outside of the therapy room. Um, that maybe it does need to be in a separate entity, right?
[00:23:40] Julie Herres: Sometimes you will want to talk to your attorney about this as well. Um, but when it comes to, um, another consideration could also be Are you planning to sell the business in a few years? Would you want to keep these courses, right? If you did sell, would you continue to do this? In which case, having it in a separate entity [00:24:00] could make sense.
[00:24:00] Julie Herres: So there's a lot of ifs, ands, or buts here, like depends on the specifics. Um, but your accountant, your attorney, you know, possibly together can help you figure out what is going to make most sense for you.
[00:24:14] James Marland: So if I was going to come to you and I'm a therapist and I say, Hey, Julie, I, I want to create an online course for my business. What's a couple of questions you would ask me, uh, to get me thinking about, you know, what I want
[00:24:29] Julie Herres: Yeah, I would ask who the course is for, like what, what is the audience, um, how much money you're expecting to generate from that course. Uh, that would kind of be the starting points. Um, and, and what's a long term plan for this? Like, is this one of many? Is this just a one and done? Is it a passion project?
[00:24:47] Julie Herres: Um, the answer to that would, would help continue, continue the conversation on. Um, it's also possible from a tax perspective, really, [00:25:00] of course, being in the same entity as your business, it doesn't matter, right? The IRS is going to tax all the revenue that you make. Either way, either way they're getting their money.
[00:25:08] Julie Herres: Uh, but the, the consideration is often legal as far as like, does it exist within the current business or separately? Uh, depending on, you know, licensing requirements in your state and, and what's going on there. And if it's related in any way to what you, to what you do. So I'm an accountant, I'm not an attorney, but like there, there are some legal considerations there too often.
[00:25:31] James Marland: Okay. Uh, so what, uh, what have you been up to or where can people find you on the, uh, the internet?
[00:25:40] Julie Herres: Yeah. Well, we have, um, so therapy for money is probably. One of the best places to, uh, hear what I have to say. I talk about all things money for therapists and private practice. Uh, the podcast is just back up for season five as of the end of September. Um, and so that's very, [00:26:00] very, very exciting. We have a lot of exciting episodes this, this year.
[00:26:03] Julie Herres: Um, you can also find us at greenoakeccounting. com. Kind of bread and butter is a monthly accounting services. So we support therapy practices all year long and we provide all the, the regular accounting services that you would expect, like bookkeeping and tax. Uh, but where I think we really make our mark is in our advisory services that we layer on top of that.
[00:26:26] Julie Herres: because we know therapy so well. Um, so you can go to greenoakaccounting. com and we always offer a free consultation. So you can see if we might be a good fit or not. So you can meet with our team and just low pressure, check it out.
[00:26:41] James Marland: All right. Well, Julie, thanks so much for being on the show.
[00:26:44] Julie Herres: Thanks, James. It was great to chat with you.
[00:26:47] James Marland: This is James Marlin for the Skilling Therapy Practice. Go put your mission in motion. Julie made a course for therapists called The [00:27:00] Financial Side of Adding a Revenue Stream to Your Practice. it's a straightforward guide to the financial essentials of adding an online course or other, other revenue stream to your practice. You can find that in the larger course called charting your course build a solid foundation for your online course business.
[00:27:20] Go to the store page on coursecreationstudio. com and get your copy today. What'd you think?
[00:27:34] James Marland: I wish I would have said, how are you instead of jumping into my questions. I got nervous.
[00:27:40] Julie Herres: No big deal. I did not even notice. I did not even
[00:27:43] James Marland: I was like, Oh, I should have asked her how she's
[00:27:45] Julie Herres: Not a big
[00:27:46] James Marland: you know, tell me, but tell me about your family. I don't know. How was your trip? Uh, you, you took, uh, uh, where did you go? I'll stop recording.
