STP 20 | Every Practice Profitabel with Julie Herres
Julie Herres: So your brain looks at that, and then Parkinson's law kicks in. So that means you, you, you're, Demand tends to increase to meet the supply that is available. And so when you see a bunch of a bunch of money, you're like, okay, we have plenty of money. Let's go. We can spend something. Right? Like if you see a hundred thousand dollars in the bank account and you're thinking about making a $10,000 investment, you're probably gonna say, yeah, okay, sure.
We can afford that. Of course. Yeah. That doesn't take into account. Your tax payment, right? We're getting close to the tax deadline. There's gonna be 2022 tax plus Q1 estimates are going to be due soon. Uh, it doesn't take into account maybe rent is due next week or payrolls in, you know, six days. Like it doesn't take all those things into account.
So when, when what we do in profit versus we separate your money into multiple small plates, those are multiple bank accounts.
James Marland: Welcome to the Scaling Therapy Practice. This is James Marland.
This is the show where we help you take small steps towards big growth. Uh, I'm a little, I'm a, I'm geeking out a little bit here cuz one of my favorite, uh, business people and entrepreneurs are just advice givers and a and a generally good person is here with me today. It's Julie Harris. From Green Oak Accounting and Profit First for therapists.
Julie Herres: Julie James, I feel so good about myself. I'm your f one of your favorite. I dare I say your favorite accountant, maybe. Yes,
James Marland: absolutely. You are 100%. Probably not a long list, right? Accountant outta all the accountants. You, you are at the Pinnacle. Um, oh, thank you man. What's our history? So, uh, you helped.
Uh, your, your practice, uh, served or your company served the company I work for, uh, the virtual assistant company, and I, when anybody asks me who do I go to for accounting and help with my therapy office, and I need to know my numbers, I'm like, Do I have the people for you? It's Julie and her team. Um, they were so responsive.
I don't know how you hired, like, uh, anyways, everybody was great. Um,
Julie Herres: thank you
James Marland: so much. We had, they were so responsive. They answered questions that were probably weren't in the package that we bought. I mean, I'm not like, it was just, uh, a great service in it for about two years. We, um, For two years, I kind of struggled, like, do we have enough money for this?
Or like, what's our numbers? I'm kind of like filling in the blanks, but I don't know what's going on too well, and I just felt this, uh, sense of relief when your team came over and is like, Hey, this is how you're doing. So, hey Julie, welcome to the show.
Julie Herres: Hey, good to see you, James. I'm, I'm so glad to be here with you today.
James Marland: Uh, so a little bit of introduction. Uh, Julie Harris is an expert in Profit First who has helped hundreds of private practice owners gain financial freedom. She's the founder of Green Oak Accounting, the country's largest firm serving mental health, the mental health industry. Wow. Yeah. That's new. How, when did that happen?
Julie Herres: Uh, yeah. I mean, for a while we were the only firm, and now we are the largest firm. So that's, that's the thing. Now
James Marland: you're, you're a leader in the industry. Yeah. Using the trail. Uh, Julie's an accountant, consultant, speaker, and author of Profits, profit First for therapist. She hosts The Therapy For Your Money podcast, which is a show I referenced probably monthly here, especially for your tool on, um, roi.
The roi. Thank you spreadsheet. So Julie, tell us a little bit about yourself and how became the accountant and the author and the speaker that we, uh, know and love.
Yeah. Well, I,
Julie Herres: I think. Uh, numbers are my superpower, right? That is the thing that I, I am good at. Um, and I, I kind of tell this story in the book, but I get asked a lot, why do you work with therapists? Like, how did that even mm-hmm. Like, what is the link? Right? Because for some people it's, oh, well, I have a spouse who's a therapist, or I have this or that.
And like, my story is, is, is a simple one that when I started my accounting firm, we were generalists. Um, and that worked well for a while. But then, um, I realized like what we, the, the team that I had assembled at that point, we really all enjoyed. The relationship with our clients. There were some clients where we had a great relationship with them and some clients that would not return our phone calls or emails, and then we, we just could never get information from them.
And so when we got intentional about who do we wanna serve in a really deep way so that we can have an even deeper relationship, we want, we wanna be able to help people, not just like do the compliance working and get the bookkeeping done, but we wanna be able to help in a, in a really intentional way.
And the people that we loved working with at that point were. Therapist and still are. And so we got really intentional about, okay, let's look at the data here. At that point, we had a number of therapist clients tins to one of our long, longtime clients, Ernie. And, uh, so we, we did good work with him and he asked a lot of really great questions.
He still does. And so we, we kind of kept digging in deeper and we realized like, okay, our clients who are doing well over here, they're doing some things that are similar, and our clients were struggling financially over here. They have some things in common, so what if we just share this information between the two of them?
Could that help them move the needle? And it did. Mm-hmm. So, so that way that's how we kind of got, got started. And then with every additional client that we work with, that's another data point, right? That's another way for us to see like, is this working or is this, is this not? And so now we're super intentional.
We only work with therapists in private practice. We will work with their, you know, side businesses or something like that. But we only take on clients who are kind of related to this industry because we know we can help them in such a meaningful way. Right? So if someone comes to us and says, You know, I, I wanna hire this person.
I don't know how much I should offer them. We have the answer for that. Mm-hmm. Or if they say, I wanna introduce a bonus structure for my team, what could that look like? We have some options for them. Uh, or if they say, you know, I, I'm thinking about this space, but I don't know if it makes sense financially we have the answer for that.
Right. We know kind of where your. Where your rent, uh, spend should be as a percentage of income. And we can say like, if this, if you're going to spend this much on rent, here's the number of sessions per week that you need in that space. Is that doable? Right. So like, we have all of this data available and so we can help in a way that other accountants just can't because they just don't know.
Right. They're great at accounting, they're great at tax prep, but they, they don't know your industry the way that we do.
James Marland: Yeah. That was, so you kind of answered my next question, like what is, what is. Specializing due for your practice cuz, uh, due for your business that another accountant couldn't. And it sounds like you have the da you've worked with enough people that the numbers to you tell a more rich story than just somebody who hasn't worked with
Julie Herres: therapists before.
Yeah. To, to, to us right. To to, to my team And I, I like to say that we have the heart of a teacher so we can look at. The numbers and see the story that's happening. Right. The wins, the struggles. Mm-hmm. The what's going on over here, and then we can. Help translate that into something that makes sense to a private practice owner.
Um, so we, we might pull the data from the E H R and say, Hey, what's going on with this person over here? Something's going on there, right? We might not know what, and we might not be the ones fixing it, but if we just say, Hey, what's going on here? Then that is something that the practice owner can take action on, right?
They might say, oh, well, this person was out for three weeks because they were sick. Okay. That's then, you know, then you know why this is. But if that's not the case, then what's going on? Did they stop completing their notes? Did we bill for them? Mm-hmm. Like, what, what is going on? Yeah. And then they can, they can look at
James Marland: what's, were they putting in the wrong code for three weeks and Yeah.
And their, their, their payments didn't go through, and then it then, Yeah. Uh, I remember so many times just what you explained. Oh, her name is escaping me. Um, the one who helped us would, would always say, oh, Carolyn, say that. What, what is the name of, uh, what is, what is, so if we had a decision to make, she would just go back and say, this is what, what your prophet is, this is what your expenses are, this is what it's projected to be.
Now you have the information. Can you do what you're. You wanted to do it, it was just, just having that, that knowledge to, to, to lay it out that way was just very helpful for decision making and peace of mind. Yeah. Um, so, you know, you know about staffing. So staffing's a big question, uh, that people have, uh, especially when, you know, can I afford this person or when it's the right time to hire, um, how do you help people?
With the, the staffing decision, how, how does that, um, how, how can you help somebody better than a, uh, just a, a regular, uh, accountant that's not niche down or
Julie Herres: specialized? Yeah. Well, with the, the staffing decision, there's a lot of different pieces there. Uh, I think part of the. Part of the answer is the end goal.
Like what is the, what is the end goal of hiring? Right? Or what is your next hire? Mm-hmm. Some people will say, well, I, I need help. Okay, great. What do you need help with? So if it's a solo clinician, for example, that is getting really close to full, I think before you hire another clinician, you might want to hire a virtual assistant or an odd manner, someone to help you with the, the lower level items that you as the owner.
We're bootstrapping in the beginning and don't need to be doing anymore. Right? Maybe it makes sense financially to offload some of that so you could continue to see the clients that you're seeing or see a few more before you hire, right? And have some systems in place around those things before you bring someone on.
Maybe the, maybe the hiring is because you have a wait list and you want to be able to better serve the community, right? Mm-hmm. And, and like, mm-hmm. You just wanna have a bigger reach. What's the reason? Yeah. Yeah. So okay. Then, then your next hire probably is a clinician, right? But how are you going to support them?
So, so there's a lot of different discussions that we, that we can have there. Um, and then within, within the Profit First with therapist book specifically, I talk, um, I, it's all about profit first, but there's other things as well. So I have a whole chapter on scaling, a whole chapter on compensation.
Mm-hmm. Mm-hmm. Chapter on paying off, paying down debt, like all the things that I felt are really important for PRUs owners. Um, and when we talk about. About growing or scaling. There's a lot of different ways that that can happen. That might be you're growing by adding clinicians. Maybe it's growing by adding admin or leadership team.
Maybe it's growing by adding a location or, uh, expanding that location, right? Depending on how you're doing that, there's going to be different costs involved. Um, and then just by, by looking at the numbers, the forecast will basically always be wrong, right? It's always incorrect. Mm-hmm. Because we're just estimating, but by looking, we can see.
Does this make sense? Like do we need to be in a complete fringe case where everything goes perfectly right for this to make financial sense or like, or can, can we, can it make sense in most cases, like the numbers will usually give us some information there. Great.
James Marland: Okay. I gotta realize I started asking you all these questions before I got into my segment about the tools and tips, cuz I'm like, everything you say just has another question.
Like how do you do this? How do you do this? So we'll, we'll get to that. Okay. Uh, and your story of, uh, how you, you know, how you came to, to write the book, prophet first for therapists, but let's, let's do our, our warmup segment. We've already kinda, you know, blown through, but the tool tip or tech of the week, I'll go first.
And mine is just a philosophy. Um, it's a, it's a quote from Zig Ziegler, and he says, you'll get all you want in life if you help enough people get what they want and. Love that one. I, I, yeah, I think that's something, something I learned like eight, 10 years ago when I started listening to like motivational tapes and like self-help books and things and just, just, uh, it gave me a new perspective that it's not all about me.
It's like how I can help other people. And, um, you help enough people, you will get what you want to. And I'm just like, That, that's just a wonderful philosophy that I try to live by. You know, I'm here, out here trying to help people and we're all gonna make it to the top together. So that's, uh, that's my tip of the week.
I love it. So do you have a tip or tool or tech? Uh, Julie.
Julie Herres: Okay. Uh, I can share a tech tool that I am loving right now. Um, so James, I have a secret for you. Okay. I am one of those people who has. Usually not when I'm recording a podcast, but I usually have a thousand tabs open. I, I exaggerate by a thousand, but like I am a per, I usually have, I'm with you 30 tabs open.
And so then I never wanna, um, restart my computer because I'm gonna lose all of them. So I discovered. The Chrome extension, one tab, and I love it. So with one tab, I turn it on, it saves every single thing that I have open. I can restart my computer and do all the updates, and they, they, I can, I can restore all of them exactly the way they were.
So that is my little
James Marland: technique. Okay. Does it, opens it back up into a Yes. Is there an interface or does it just say, okay, I'm gonna, I saved your spot. Now you're back.
Julie Herres: So there is an interface, so I usually have like multiple, because I have a, a giant monitor, so I'll have like multiple, uh, uh, groups of tabs together.
Yeah. So it will like, it can restore all of them separately. Okay.
James Marland: Yeah. That's cool because I, by the end of the day, I have 20 or 30 things open. Yeah. And, uh, I'm gonna check that out. So it's called one tab
Julie Herres: One. One tab, yeah. O N E T A B.
James Marland: Awesome. Thank you for that. I, I love tech tips. I'm a geek at heart. I, I have a giant monitor too, and if I'm going to spend something out of my operations or, uh, it's gonna be to buy a tool or a toy.
I mean, uh, you know, a tech, yeah, a tech toy. A tech toy. Uh, cuz I love those types of things, so. Great. Okay, so we've done a little bit of warmup. Let's, let's talk about profit, profit first for therapists. Uh, how did you get it? How did you. Writing a book is awesome. It's one of the goals of my life. And you run a business and you have all these clients and you run staff meetings, you're going to conferences.
How did you get to start writing this book? And it's almost, it's coming out when May,
Julie Herres: May 2nd. May 2nd. It's all it's coming. Yeah, almost there. Almost. Um, so this is, this is two years in the making. Um, it was not a short process, as you said. I have, you know, uh, the business. I run Green Oak accounting every day.
I have three kids. I have three dogs now. Um, for, for part of it, I was also caring for my, my mother who was sick. Um, but I j I believe in Profit First deeply. And. One of the reasons I wrote this book is I wanted a way to help the mental health community. And no matter how big my accounting firm is, there's just not a chance that I'm ever going to be able to help all the therapists out there, right?
Mm-hmm. Like there's just too much need for, for one accounting firm to, um, You know, to handle all that. And so I wanted a way to share this message with the world because I just believe in it, um, in it that Deeply Profit First changed my life. Um, it is how I had the courage to start my own business. Um, I.
I grew up in a household where, um, you know, it was, it was, I had a very happy childhood. My mom was a serial entrepreneur and so she loved the starting a business phase. And then, you know, some, usually it did not work out, so she started the business, she got all excited, let's do the marketing and did this and that, and like she mm-hmm.
You could just, I can just remember her energy and a lot of my. Some of my first childhood memories are from her sewing store. She had a little, like, like a Joann Fabric type mm-hmm. Store. Mm-hmm. And like all the buttons and the, you know, all the, the thing about Bob's and, um, you know, I just loved that store, but that store unfortunately failed.
And I, I spent my childhood seeing this cycle happen again and again. Right. And so every time one of the businesses failed, we would move. Uh, my mom would take a new job working for someone else. We would have a new home, new school, new friends, new everything. Right. My sister and I, we just. We started over.
And so I just remember so deeply when a business fails, it's, it's not just the business owner, it's everyone around them who goes through that with them. And so I had always told myself as a kid, like, I will never be a business owner cuz this is crazy. If my mom can't do it, I can't either. So I'm, I'm just, this is not gonna work.
Um, but then, I, you know, many years later I met and, and married my husband, who he has been a business owner for, I think almost 20 year, almost 20 years now. Um, and so I kind of started to see like, okay, there's other ways to do this, like maybe this could work. But also with, you know, I started the business when my, my kids were really, really small because I needed flexibility and in the market that just not exists at that point.
So one of the ways, like I could make that leap is with profit first. It is the way that I started my business, made sure that I was able to pay myself, take care of my family, and then later on as my mom got sick, it protected me too. That is the way that I was able to take a step back from working, um, in, you know, late 2021, early 2022 to care for her, um, right before she passed away.
And so the impact is just is, is so big on my life that I can't not share this message. Awesome.
James Marland: So what's it, what's it, did you have to reach out to, um, Mike Mackowitz or did they reach out to you?
Julie Herres: Yeah, so I am, uh, my firm is, um, profit First certified. So we are Profit First professionals, so we work with Mike and his team on a regular basis, on ongoing basis.
Um, that's just how we can use the Profit First System and the Profit First name. Um, and so we started that conversation a couple of years ago around like, Hey, this message needs to get out there. Are you up for it? And I decided I was
James Marland: great. Um, it's so cool to have a, um, a message that you believe in deeply, like something that has impacted you is meaningful to you.
It helps other people. And then you get to share it to a larger audience. That just, that just sounds like the dream, you know? If you were gonna write out a dream job description, you know, Hey, share what meant something to me to help other people. That sounds like something you might put down on that, don't you think?
Julie Herres: Yeah, I, I think so. And, and one of the reasons I wanted to write the book is cuz a lot of practice owners were coming to my firm and saying, Hey, we, I've, I've read Profit First, or I've heard of it and I wanna do it, but I don't understand. I'm not sure how to do this for my private practice. Like it does that the way it's laid out.
It, it's, it's, you know, and Mike's book is amazing. Mike Miklowitz wrote the Original Prophet first, but it is a general book, right? It's meant for every industry. And there are just some things that. Don't quite fit for private practice. So my team and I had already customized this system in a way that we know works really, really well.
And so people needed to know about it.
James Marland: So, without sharing the whole book, can you give us one of those things that you, you, you sure. Updated?
Julie Herres: Yeah. Yeah. Well, for example, um, In the original book, operating expenses and Payroll are together. Um, so I have separated those out in private practice. Payroll is, or in a group practice at least, payroll is usually the single largest expense, uh, for the business.
And so separating it into two different accounts. So we have an OPEX account and a payroll account that helps you control the single largest expense in the business. So if there is an issue, it's usually going to come from one of those two accounts. On occasion, it will come from like a owner's pay, or maybe there's not enough tax savings, but like most of the time, the issue is going to come there.
So it makes it. A lot easier to see where is the issue because your, your bank accounts are giving you information, right? So when you look at the bank account, if the, if it's, you know, a hundred dollars left in your payroll account, like that's your bank account saying urgent. Urgent, right? There's a flashing red light saying, Pay attention to me.
Something is going on over here. So I just find that profit first makes it so simple to see like, where is the issue? Um, and so that's one of the many, uh, many changes that we've made to the system, for
James Marland: example, that that's, it seems so when you're explaining it, it seems simple. Like, oh, like obvious. It seems obvious.
Oh, you would wanna know this, you would wanna pull it apart from some of these other expenses. Because there's, there's, uh, that, that expense has a much bigger impact. The, the staffing I'm saying has a much bigger impact on the, the other things. And if you mix them together, they're hidden, or it could be hidden, like, let's say a bill doesn't come through and so now you have a lot more money in the operating expenses.
But you really don't because Right, because it's, it's not really there because, or, or the, um, you spent too much money on staffing or something happened in staffing and, uh, you don't find out because of the oth, you know, the build that didn't come through yet for the, the operations covers it up like, um,
Julie Herres: Yeah.
Yeah. That, that's exactly it. And so one of the, one of the core principles of Profit first is that we use small plates, right? So if I can take, take a step back to, to the plates so I'm not, um, A nutrition expert. I'm a finance expert, but I can tell you when I eat from a smaller plate, I just tend to eat less, right?
Yeah. That is just, that is at least how my, my brain is wired. And that just happens to be the way that most people are wired, uh, unless they have a will, will of steel, which I do not. And so when you're looking at your money as one big plate, right? If you're, if you have one big checking account for your business, that that's one large plate.
So your brain looks at that, and then Parkinson's law kicks in. So that means you, you, you're, Demand tends to increase to meet the supply that is available. And so when you see a bunch of a bunch of money, you're like, okay, we have plenty of money. Let's go. We can spend something. Right? Like if you see a hundred thousand dollars in the bank account and you're thinking about making a $10,000 investment, you're probably gonna say, yeah, okay, sure.
We can afford that. Of course. Yeah. That doesn't take into account. Your tax payment, right? We're getting close to the tax deadline. There's gonna be 2022 tax plus Q1 estimates are going to be due soon. Uh, it doesn't take into account maybe rent is due next week or payrolls in, you know, six days. Like it doesn't take all those things into account.
So when, when what we do in profit versus we separate your money into multiple small plates, those are multiple bank accounts. Typically your existing checking account. And that's one, one of the, gonna give you a bonus. This is one of the other, uh, ways that we've customized it. Your existing checking accounts becomes your income account, especially in a, um, in an insurance practice.
We do not want to mess with where. Insurance payments are being deposited? No. Your existing checking account becomes your, uh, income account. All the deposits come in. Then we add to that a profit account. As the name implies, we want you to take your profit first. That's going to be your reward for being a shareholder of the business.
So that is meant to be profit, not your kind of household expense account. Then we have an owner's pay account that's for the account that's going to pay you as the owner, where whether that's an owner's draw, distribution. Sometimes it can be payroll, right? There's, there's, depending on the legal entity, there's a lot of different ways an owner might get paid, but we have an account reserve for the owner's, owners pay.
Then we have, um, taxes. That's where we're going to have funds earmarked for taxes that the business will pay either for itself or on behalf of the owner. Then we have operating expense account and a payroll account. So by splitting all that cash into multiple five or six bank accounts, then you're those accounts.
Are going to give you some information. So if you have that same a hundred thousand dollars that I just mentioned, uh, a minute ago, but then you have only $8,000 in your OPEX account because all the other money is earmarked for, you know, for all the other things, that $10,000 decision, you might say, uh, maybe it's not time yet, right?
Maybe we don't quite have enough money. Can we do payments? Can we defer this? Right? What can we do to make it work? Because at a glance, you're able to tell how much money do I actually have available to spend?
James Marland: Perfect. It's a, it's a system that gives you the information you need, uh, easily. Because before, before, wouldn't you have to like understand profit loss statements and balance sheets and.
Like how you absolutely
Julie Herres: would, and practice owners don't look at those, right? That's in order to make a financial decision without profit first, you have to look at your profit and loss, your balance sheet, and your statement of cash flow in addition to your bank account. Mm-hmm. That also makes the assumption that.
Your books are current and that they're accurate, right? Which I af you know, I've worked with enough practices to tell you if you're doing them yourself, there's a really good chance they're not accurate, right? Your accountant is having to go in there at the end of the year and like fix some things up because I see some crazy stuff.
Yeah. Um, and so, you know, all you have to make that assumption and you have to actually look at those. And I know that most people don't do that, in part because I don't even do that, right? Like, I don't look at my, at those three reports every day, and I'm an accountant most of the time. I, I look at them every month, definitely.
But most of the time I'm looking at. My Profit First Bank accounts, right? I'm pulling up my bank app on my phone and looking at like, okay, what is available? Let's make a decision. That's just how human behavior mm-hmm. Works. And so Profit First is a way to leverage your existing habits in instead of trying to change them, you're taking the things that you're already doing and that becomes, It gives you now enough information that you can make good sound financial decisions.
James Marland: Okay. Because if you had to, let's say you wanted to invest that $10,000 in a training program or a new hire or a new piece of equipment, whatever big decision you have to make, and you, you don't know how to read those things, you're just gonna wing it, right? Yeah. Like you are just gonna go by your gut and it's like, well, we, we could do it last time and like, Small decisions, like can we, can we buy $20 of soda for the break room?
That's one thing, but $10,000 for, you know, this piece of equipment, a new copier or something. That's a, that's a, that's something you're, you're gonna wanna know if you c you're gonna wanna have assurance that you have
Julie Herres: it. Yeah. Well, and one of the, the things I talk about in the, in the book is that you can sometimes add.
A bank account if it can be useful to you. Uh, for example, an expansion bank account can be really helpful, uh, since, since your podcast is about scaling, right? Like if, if someone is thinking of adding a location, you can definitely open up an additional account beyond the ones that I've, that I've mentioned for expansion specifically.
And so if you're able to, you mark some money every time you make transfers to that account that. That is also information to you, right? That means you have enough free cash flow that you're able to actually allocate some money there. So that means you can reasonably assume that you might be able to continue to make that kind of investment.
Um, you can, you can save up money in that account for. You're a new hire. If you're hiring a new clinician, you might be paying them before you've been paid. And so it's a good idea to have like two to six weeks worth of their wages saved up. Um, and so that's a place that you can go park that money. And when you have that money available, then you're like, okay, now I'm ready.
This is information to me. Even though they, they might not generate revenue right away, I know I can pay them before, um, before I get paid.
James Marland: Yeah, like if, and, and the information is, if you, if you start looking at that account that you set aside for a new employee and you start taking from it, then you know you might not have enough to exactly to afford that person yet, and you're gonna, that's another piece of data.
Okay, what cost can I eliminate? What can I, can we make more money in a different way to afford this person so that we can float their salary for four to six weeks? So, Yeah.
Julie Herres: Yeah. And sometimes that means like making some really tough decisions for yourself, right? Maybe you're reducing your take home pay for a little while to make this work.
Maybe you're going to, uh, see more clients temporarily. Mm-hmm. Like, you could make those decisions. But if you're not able to consistently, um, fund that expansion account, or you're constantly borrowing against it, that tells you there's a good chance that you, you can't afford this, so something needs to change.
Or you, you. You won't magically be able to, um, yeah. Afford it. And there's always a part of, of scaling that is a leap of faith, right. Of like, okay, we're just gonna f like there's a little bit of magic in it. But it can't just be, magic is my, is my point. Like there has to be some planning or some idea of like, how.
When you're, how you're gonna pay people when you're taking their livelihood into your hands. Like it's reasonable for them to expect to get paid and get paid on time. And, um, like having a plan is just going to make also you, you, as the owner, feel better and sleep well at night when you know you actually can do that too.
James Marland: that, that comfort. Is, it's, it's priceless. You know, that that's that ability to know you, you, you have a plan, you're affording things, things are working. Um, that, that's something that I bet people without a system don't have, or they're just ignoring, you know, they ignore those thoughts. Uh, so. So we talked a lot about constraints and, uh, like saying no to yourself a little bit, but how can a practice scale or grow while using Profit First?
Julie Herres: Um, I, I am a firm believer that I. You don't need to go into debt to scale a practice. Um, and so you can go into debt, right? That is a choice that you can make, but you don't have to. Uh, therapy has a, a low barrier to entry, um, especially these days as far as like getting set up. So when you're looking at, uh, Let's say just opening a new office, which is probably going to be the most expensive way that you can expand.
Mm-hmm. Because then you're going to have your first and last month's rent. You're likely going to have some kind of leasehold improvement, right? Like, um, arrange, rearranging the space, maybe some carpet, some soundproofing, this and that. Mm-hmm. Some, some furniture. Right? So this is your most expensive, um, investment.
There are ways still to make that work without having to, to go into debt. Um, you might. Uh, one of our, our clients, I, I call her the, the Facebook marketplace queen. Like she will furnish her therapy rooms for so, so little money by just looking for the right fines and they look amazing. Not everyone, I don't have that talent, but a lot of people have that talent, right?
So you can make decisions on where that money is spent. Other clients will say, okay, I'm not going to, um, I don't wanna pay rent while we are. Improving this space. So I'm going to ask the landlord for three months free rent upfront so that by the time we have to start paying, we're ready to already start making money in that space, right?
Mm-hmm. There's a lot of of different ways that you can, you can do that. Uh, but having a plan is always going to set you up for success more than just saying like, oh, well, let's see, and we'll figure it out. Cuz when you get to that point of like, okay, there is no more money left and payroll's due tomorrow, what are we going to do?
Those are the moments that you're not making the best financial decisions. Mm-hmm. Right? It's kind of like, If I have a really busy DA day and I don't eat all day, when I get home, I'm starving and cranky and I'm not going to make the the best eating decisions, right? Mm-hmm. So when your businesses start for cash, you're not making the best decisions.
You're looking at what is the most recent. You know, a line of credit email I received or where can I get quick funds? And those are not loans that are good for businesses. They're usually predatory loans with really high fees, high upfront fees. Sometimes their rates are completely insane. Yeah. And like that is not a good path for, for a business.
Um, so by planning ahead, you do leave a little room for that magic, but you are able to have a plan for financially how you're going to, to pay for that. And then that means that instead of. Having to, to take some profit to pay back your loan later. Like you get to actually keep that. So you might make sacrifices now for future rewards versus taking out a loan now and having to delay that reward even longer because you're having to pay that.
Pay back the loan.
James Marland: Yeah. Uh, when you were talking about. Uh, when you're, when you have to make these decisions and you're not in the best frame of mind, I went to like hiring decisions. Okay. Like, I started thinking about hiring decisions because if you have to hire somebody now to fill that space, yeah.
Because you're behind, you might hire like you're the red flags that you would normally see, you know, a mile away. You'll be like, oh, I can work with that, or I can, I can teach that or train that. And then you make this really bad. Hiring decision that you never would've made if you had a, had a plan and you were in a better frame of mind.
Julie Herres: you're, you're absolutely right.
James Marland: Well, so that's how it can help. But what are some of the, what are some of the ways practice owners get in trouble then financially when scaling? I. Yeah.
Julie Herres: Uh, I would say, I mean, the loan piece is really tough. Like the last minute, where am I going to get cash for tomorrow?
Right? A loan can be a great way, it, it can be a good way to grow, but the last minute loan, uh, is a really, really tough place to be. Um, So I would say that is probably one of the biggest ways that we see people get in trouble. I like to say, um, failure to plan is a plan to fail. And so not having a, a plan for like, how much are we actually gonna spend on this?
What do we estimate it's going to cost? The reality of expansion is always more expensive than what we had planned. But if we at least have some kind of idea, we could start thinking about where is this cash coming from? Um, and if there is a plan, we can usually figure out a way.
James Marland: So you've mentioned cash a lot.
This is, this is not in the script, by the way, but I figure you can handle this. And you mentioned the term free cash flow, and I've come across that in some of the business books, but free cash flow is really important, but I don't think we understand it. Like when you hear words that that free cash flow carries weight to it, that if you don't know, it might not be.
Um, you might not understand it. So for the practice owner who's like, what is this free cash flow and why is it so important? And just, just, just a little bit, can you tell us why that's important?
Julie Herres: Yeah, well, so in profit first we talk about, um, allocations typically, right? So percentages, so ultimately, you know, if there's money coming into the business, that's your gross income, and then you, that is the money that you have available for your, for your practice and how you spend that money ultimately has to equal a hundred percent.
Because that's how, that's how math works, right? You, that's the, that's the, those are the funds that you have available. So of that money, you might be spending 55% on therapists payroll. You might be spending 6% on admin, right? And then at the end, you're going to have some additional, a avail money available for your, you know, owner's pay for your profit, for your taxes.
So if you have some percentages to play with there, that is going to be your available. Cash flow. So if you're able to say, you know what, we have 3% available that we're, I'm gonna save for expansion, or I'm co. Whether that's expansion, emergency, a future project that has no name, uh, side gig, whatever it may, buying a building, right?
There's so many different things that it can be, then that means that you have free cash flow available if you are. Using every single penny that you have on operating expenses and payroll, and you have nothing left for yourself, for taxes, for profit. That's a, that's a problem, right? Like the, the, your numbers equal a hundred percent, but it's in a problematic way.
There's some cases where there's a negative amount left where. You know, a hundred percent is coming in, 105% is going out. That means you're funding that with either loans, negative personal cash. I definitely have seen that more times than I can count the personal cash where personal cash is coming in.
Uh, or having to be contributed. Uh, right. Or like parents are investing. Mm-hmm. There's that, that ultimately is what happens when you have that negative cash flow. It's coming from somewhere or it's last month's profit. That is now being eaten away. Right? So the, the, there's, there's many different ways that that can happen.
But, so in a business, ideally there's going to be some available cash flow for other things, um, that might be on months that you're not. Um, Planning for an expansion or investing that might be for you, right? You get an additional distribution that might sometimes go to your taxes if you have a, a larger tax bill than you had expected.
But that's kind of how I think of, uh, the amount of money that's available. And,
James Marland: and that's also just another indicator of health, right? Absolutely. Like yeah, you have to, in fact, a business that has a negative free cash flow is probably not super healthy.
Julie Herres: No, that's typically the situation where my team and I get an email saying like, I need help.
I think I, I might need to close my business. Right. From a perspective client saying like, can you guys help me save this? Yeah. Um, so it's a tough situation. It's, there's, in most cases it's fixable, but you have to take action before you're completely outta money.
James Marland: All right. Well, we have just a few minutes left.
Um, I have a couple questions here. Do you have the list of questions in front of you? Do you wanna answer one one more? Um, like Sure. Uh, how, oh, how can a practice owner know that they're on the right track? That is a good question to end up with.
Julie Herres: Yes. So how can a practice owner know that they're on the right track?
You are able to pay yourself a living wage. Um, I think that's a really important piece to do that sometimes you have to run the numbers and figure out how much you need to pay yourself a living wage. But I, um, I'm always a fan of a practice supporting the lifestyle of the clinician. So that, and that is your household, right?
So what does it take to pay your mortgage or your rent and your car payment? Put gas in the car, food on the table, right? What does it take to kind of maintain your household? That doesn't mean that you're going on, you know, a vacations to Fiji twice a year, but like what does it take to maintain a. Your comfortable life with the things that you need, right?
You're where your kids are doing activities, you get to go out once in a while and do something fun, right? Like tho those things. Um, and so when you're at that point there, that is, um, that just significantly reduces the stress typically of the, the practice owner to know that like you are secure and you're able to continue to run your household.
Um, and so I feel like that is one of the big key indicators that you're on, on the right track. You might still want more. But you're okay. You're going to be okay. Um, and I think every practice should be able to do that for their, for their owner. And if, and if it doesn't, then sometimes there's just some small little tweaks that need to happen, right?
Maybe you need to focus on revenue generating activities. Maybe you need to reduce expenses, maybe both, right? Maybe you need, um, some kind of help so that you can be more efficient. There's, there's a lot of different ways for how that can happen, but it should happen.
James Marland: Great. Well, that's a, that's a great, great question to end up on and, uh, I think that's, that's a wonderful message for, for therapists like you des your practice is something that should give you, uh, a livable wage, something that is taken care of you and your needs and you're not super stressed out about.
Where's, where's the money coming from and how's going? Cuz you have goals, you have a plan, and you are taking those small steps to move yourself forward. Yeah. Uh, so, so Julie, this has been wonderful. Where can people find you and find more about your, you know, your, your podcast and your services? Like you got so much so, uh,
Julie Herres: there's so much going on.
Also stuff. Right now, uh, I am promoting the book, uh mm-hmm And so Profit first for therapist.com/scaling. Uh, for your listeners specifically, James, we have our Profit First workbook available where they're going to find a checklist on how to get started with Profit First, the instant assessment. Um, they can also order the book directly, uh, from the website.
So that is a great place to start. We also have a free Facebook group, uh, specifically for profit first or therapist. So if you're kind of thinking about it, sort of, kind of maybe implementing Profit First, that's a great place to go. Um, you can find my [email protected] and my accounting [email protected].
And we always offer a free consultation for anyone who's interested in just finding out if we are the right fit for them. Low pressure, informational, um, that's available to you.
James Marland: Awesome. Yeah, you have so much like you, you have a, you have a lot going on, but a lot of those resources are very good. And thanks for the, the workbook and the offering people the workbook.
Uh, that's very generous. Um, I think, uh, it's a great first step for getting things under control for your office. So let's, let's, uh, wrap up with one thing you want people to know from the episode. Uh, I'll go first and, uh, the one thing I want people to know is, Like, like Julie's a great example of like following your passions, like something that she's passionate about that she knows how to do, she can help people.
She believes in it and she's sharing it with other people. And it has, it has worked out, it's worked out really well for her. You know, the leader in the industry and the, for people who are scared about like, developing niches and like, oh, I'll get bored, or, you know, uh, I'm, there won't be enough people to help.
I gotta. Serve the masses. I think, um, you know, if you find something that you love and passionate about and you can lead people to their desired location, you're gonna find enough people to help that they're gonna support you, and you can make that, you make, you can, one, make an impact on the world, but also make an, IM a living at doing, helping the people you can help the best.
So, follow your passions. That's the one thing. Um, That I wanted people to remember. How about you, Julie? What's, uh, what's your one thing that you want people to remember?
Julie Herres: Okay, my one thing for today, I'm showing James you, although you won't be able to see it, listeners, but I'm showing him the back of the book and it says, every practice deserves to be profitable.
Mm-hmm. Um, so if I, if I had one thing that I would love for you to remember, every practice deserves to be profitable. I often feel like I have to convince therapists that they should have a profit in their practice because it feels like. Like it's a dirty thing. Right? Oh, wow. Well, you know, profit, we're not in it for the money.
We're here to help people. But I think to have a profitable practice is in service to your clients, to your community, to your team if you have one, and to yourself, like you have to put on your oxygen mask first. Mm-hmm. And make sure that you are taken care of to do your best work and be able to take care of more people.
Um, so that would be my, my wrap up.
James Marland: Awesome. Well, thank you for that message, Julie. Thanks so much for being here. Thank you James. So this is James Marlin with uh, Julie Harris, our special guest. Uh, thanks for listening to the Scaling Therapy Practice, the show where you take small steps for towards big growth.
We'll see you next time,
Well, that's a wrap for today's episode of the scaling therapy practice. I really hope you enjoyed listening to the show as much as I enjoyed interviewing guests and talking about profit first with Julie Harris, before we go, I just need to remind you that the information and advice.
In this episode is from the guests and hosts. And is not intended. For personal consultation. If you need an accountant, a lawyer, a therapist, I recommend you go hire a professional in those areas. If you're looking for more support and guidance for accounting, you can go to the green Oak accounting.
Page or the therapy for your money page, especially for, uh, accounting services for your office and Julia and her team would be happy to help you there. Anyways, thanks for tuning in. I hope to catch you next episode. And keep making those small steps towards big growth. We'll see you next time.