The Practice of Therapy

Gordon Brewer: Hi. Okay, go. Go ahead.
Kristin Meador, CPA: Hi, I'm Kristen Metter and I'm really excited to be on the Practice of Therapy Podcast. And today we're gonna be talking about how therapy practices can have more profit, pay, and prosper. I'm really excited to talk about money and all things finance to help you feel less stress in that area.
Gordon Brewer: Great. Well, hello everyone and welcome again to the podcast and I'm really happy for you to get to know today. Kristen Metter. Welcome, Kristen. Glad you're here.
Kristin Meador, CPA: Thanks so much, Gordon. I really appreciate you having me on.
Gordon Brewer: Well, glad glad for us to connect and Kristen is, uh, is local to me, I guess you could say.
She's in Knoxville, Tennessee. She's a CPA and in practice as an accountant there. And Kristen, as I tell, as I begin with everyone, tell folks a little bit more about yourself and how you've landed where you've landed.
Kristin Meador, CPA: Yeah, sure. So as Gordon mentioned, I'm A CPA, which stands for Certified Public Accounting Accountant.
Um, and I work with small businesses and I love doing that. And recently I have found a niche to specifically therapy practices and it grew really naturally. I got my first few therapy practice clients realized I loved working with these folks and kind of have ex. Expanded that niche from there. Um, but I am based in Knoxville, Tennessee.
I work with clients nationwide. Um, and in fact I like to travel a lot myself. So about three or four months of the year. I'm usually international in Europe or Mexico. I've got, of course my favorite destinations around the world. So I definitely had this mobile office going on, which works really well. Um.
And we've grown gradient accounting, my accounting practice to a team of about five of us now. So we do, um, bookkeeping, tax prep, and planning and business advisory. And really that's kind of where we're growing a lot is because we realize that small businesses need more than just a once a year check-in.
They need that advocate by them, their side, helping to drive their strategy and growth.
Gordon Brewer: Right, right. Yeah. And I know one, one of the things that, uh, for most of the folks that are listening to this podcast is, um, you know, business and finance is not something that we necessarily get a lot of training in.
And so I think it's real important to have folks like you that can kinda guide us through that whole process and just really kind of talk about, I know one thing I. Is just about profitability and just being able to make a profit and also, um, know if you're, excuse me, charging enough or that sort of thing.
Kristin Meador, CPA: Yes, that is key. Um, it's so much more than just filing an annual tax return. Really being a business owner is about taking charge of your finances in a way that drives the results you wanna see. And sometimes those of those of us that have kind of become entrepreneurs by accident and maybe don't have a business background, it all feels very scary and foreign.
But there are some simple things that you can put into place in your business, in your practice that can help help you get the result you want without needing to go back to college and get a new education.
Gordon Brewer: Yeah. So, so I, I guess that kind of opens the door. Um, tell us what some of those things are that we can, uh, make sense for us to put in place that maybe folks.
Might not think about.
Kristin Meador, CPA: Yeah. Great. Well, when I foc first work with therapy practice owners, my focus is a lot is on just making sure that they have numbers that we can trust to make decisions with. So having those fundamental things down, like some sort of bookkeeping, whether it's in a software like QuickBooks Online or Xero.
Or whether it's just on a spreadsheet. For some practice owners, that's really like where they need to be and that's okay. Um, but having clean numbers and books is really important, um, because what we can do is we can use those books to start. Making decisions and, um, creating some other financial processes in your business.
So one thing that we implement with our therapy practice owners is a system called Profit First. Mm-hmm. Have you, you heard of Profit First before?
Gordon Brewer: Oh, yes. Very familiar with it. In fact, I had Mike Mitz on this podcast several years ago, and so yeah, and I've met Mike. You got to spend some time with him.
So yeah, I'm a big proponent of Profit First.
Kristin Meador, CPA: Yes. And we're huge fans of Mike's work. Um, and we're Profit First professionals at our firm. So basically what Profit First is, is it creates a simple system to saving for different things in your business. And by doing that, you're able to pay yourself first in a very sustainable way.
So what I mean by that is. Probably a lot of our mothers or grandmothers had kind of that envelope budgeting system where you get the paycheck twice a month and then you put a little bit towards rent and utilities and whatever, and you set that money aside for those intended purposes. So essentially with Profit First, that's what we do for our businesses.
So we set money aside into different accounts. So we open up a few different bank accounts. So setting money specifically aside for tax savings, specifically aside for business expenses, specifically aside to pay yourself. Um, having like money hygiene and habits like that is so important and takes a lot of the stress out of the business ownership in the running of the business.
Gordon Brewer: Right, right. And I know one of the things that I, I liked about, uh, profit First is to make it simpler. I think when, um, people think of budgeting or, you know, coming up with, uh, the numbers that they're gonna spend, um, the problem for therapy practices is our income flow or our cash flow can vary. Month to month, just depending on the number of clients.
And by using, uh, I, I like to refer to it as an allocation system that's based on percentages. It just makes it simpler, uh, to know what to kind of budget, if you want to use that word with things.
Kristin Meador, CPA: Absolutely, and I have the same struggle in my business because we get a big infusion of cash around tax season, but a lot of times that money has to kind of sustain us through the rest of the year.
So there's some things we can do with different accounts and setting money aside to where we have this slush fund, so to speak, to help sustain our slower periods. And that's the biggest thing. Like as business owners, we don't want to have to cut our pay willy-nilly when the business takes a small dip.
We wanna be able to kind of pay ourselves a stable salary, like if we were just a regular employee and profit First really enables us to do that. Right. Um, another big thing business owners get into once they start scaling and building a practice, um, is your expenses can really balloon without you really knowing.
So with most of the clients that sign on with us, we spend some time doing just a detailed expense analysis and trying to trim the fat, so to speak. And often we find thousands of dollars in savings. Um. For things that really don't affect their business, so, mm-hmm. That's something really important to do.
What I recommend, if you wanna do this yourself, is to print out your bank statements. And do an analysis called CRK. So take a highlighter one. Color is your C, which means cut. So highlight the things that you think you can cut. One color is your R, which is reduce. So highlight things you can reduce. And then one color is keep.
So that's the things you need, you know, you can't live without. And highlight those a different color and then schedule some time to come back and actually make those changes. But that's a really easy way to kind of start to tackle that exercise. Yeah.
Gordon Brewer: Right, right. What are some typical things that you find that people can easily cut that maybe they don't think about?
Kristin Meador, CPA: Software. There's a lot of redundancies with a lot of the software that we pay for. Mm-hmm. And a lot of shiny object software out there too, where it's like, Ooh, I, mm-hmm. I think I need that. And then you don't really end up using it. Or maybe there's a different tier that you can drop down to and you're not even really aware.
Mm-hmm. So that's a big one. I would say that often we have to have conversations with. Clients about just like their team makeup. So sometimes, um, we see like a bit of organizational bloat, so clients have people on their team that maybe they don't really need or aren't really, um, aren't really worth what they're paying them.
And obviously like. My job is not to tell someone to fire someone, right? Mm-hmm. But it's important to have that thought exercise and to bring those things up because often when you're growing a practice with mult, multiple clinicians, like payroll is gonna be your biggest expense. So just making sure you've got close tabs on that is really important.
Gordon Brewer: Right, right. Are there other things that people maybe might be spending money on that they're, besides software that they might not recognize as, okay, this is something I can maybe cut or reduce kinda thing?
Kristin Meador, CPA: I would say a lot of business owners. Um, and I'm a really big advocate for coaching, so I don't wanna.
Put any shame or blame on that. In fact, I do coaching, like I know you do coaching Gordon. Mm-hmm. But I think a lot of business owners aren't clear when they hire a coach. So maybe they hire one too early or one that's not in their industry, or one that charges way too much. And so thinking about your investment in things like that critically, um, before you kind of sign on the dotted line to pay $5,000 a month to a coach that might not get you the ROI that you need.
Gordon Brewer: Right, right. Yeah. Yeah. And I think that's, uh, that, that's a, um, of course, yeah. As you are too, Kristen, I'm a big proponent on, uh, getting mentorship and getting help from people that have, have had the experience and had the life, you know, the life experience, I guess is the best way to put it, of knowing how to run a practice and have run into.
Things as I like to say, I've learned a lot of stuff the hard way and I don't like for other people to have to do that, but, uh,
Kristin Meador, CPA: exactly.
Gordon Brewer: Yeah. Um, you know, another area I know that we um, we had kind of highlighted, um, was, uh, knowing what to charge, knowing what your fees are and uh, what sort of guidance can you give around that?
Kristin Meador, CPA: Yeah, that's huge, especially in. You guys as line of work because, um, well, I think that there's a bit of pressure to charge low prices, and I think a lot of therapists get into practice to help people, right? Mm-hmm. So, raising your prices can feel very, very hard, and you feel like, oh my gosh, I know this person needs me, but I know they can't pay this fee.
So often there's a hesitancy to raise prices and unfortunately, the fact of the matter is. Every year, all of our vendors and expense providers are raising their prices. So really we should be raising prices every single year no matter what. And I know that hurts to hear, but it's, it's really true. Um, and then I think that.
It's also hard for practice owners that do take insurance because often you're at the mercy of their rates and their payment terms. And so, um, there's a real consideration with how much in your practice you want self-pay clients versus, um, will take insurance and what insurances you are going to take.
So, um, what I've developed, um, and I am giving this. Away completely for free for this audience is a three minute pricing checkup. So you can put in basically how much you wanna earn as the owner put in the, um, a few other inputs like, you know, the rates that you charge for self-pay clients, for insured clients, um, how much you would pay your team members, if you have any team members that are, um, also seeing clients.
And then it spits out kind of a, are you priced okay or are you priced too low? Mm-hmm. And so if, um, someone was interested in downloading that, they could go to grading accounting.com/therapists with an S on the end. Okay. And download that tool for free.
Gordon Brewer: Yeah. Good. Well, I'll have links in the show notes, but, um, yeah.
Um, you know, one, one of the things, um, you know, with, uh, the, you mentioned insurance versus self-pay, and I think that is always a, a hard decision for a lot of people to make. I know. In my own practice, that was something I kept going back and forth on, and I think you just have to take into, uh, take a lot of things into consideration.
And uh, the big one for me was, is just knowing the demographics of the area that we live in and the clients that we serve. It really was important for us to be able to, um. Accept insurance, but it doesn't mean that you have to accept every insurance. That's right. And I think that's a, that, uh, one, one thing is to look at, um, you know, what's the predominant insurance that most people carry in your area, and also just picking the ones that are gonna tend to pay a little better.
Fortunately, I think at least a, a trend I'm seeing is, is that insurance companies are finally kind of coming in line with. Paying, paying really what we're worth a little bit more. It's never gonna be what you could get for self-pay, but, um, yeah. But I think, uh, uh, and, and also knowing the numbers around that as far as, uh, being able to figure out your profitability based on those numbers, um, and what your average procession rate is, even though you're, uh, what your.
Real session rate is, might me be a lot higher.
Kristin Meador, CPA: Right. Right. I think that's also helpful because that's how you can make business decisions as you grow and scale your practice. Mm-hmm. Um, it's really hard to commit to paying another clinician when you don't really know what your session, your kind of fully weighted session rate is, so mm-hmm.
It's important to know that.
Gordon Brewer: Right, right. One, one of the things you mentioned, uh, that spreadsheets, one of the things that I do, um, I try to stay on top of at least quarterly is, um, I created a spreadsheet that, um, just looks at it, breaks it down into what is the profitability per session, and also, you know, what is the expense per session and, and all of that sort of thing so that you can kinda keep an eye on.
On that number to know if you need to go up on your rates or whatever. Um,
Kristin Meador, CPA: yes. That is such a good idea, Gordon. Mm-hmm. Yeah, that's so helpful.
Gordon Brewer: Right, right. It's, um, and you know, one of the things too, and not to, not to get too much on a, on a tangent here, Kristen, but one of the things that, uh, has worked well, at least in my practice, is we've, um, for PO folks that don't have insurance, we offer a sliding scale fee.
Um. But the, the thing about that is, is that our lowest rate on the sliding scale fee is close to or equal to our average procession rate. So, um, that, that makes it easier to kind of do the numbers and know what you can do with Profit first and all of those, all those kinds of things.
Kristin Meador, CPA: Yeah. It's like your floor is that average that you know, you need to get to keep your business running.
Right? Like that's a great thing because. Yeah. If you can go above that, it's more upside. Yeah. More profit.
Gordon Brewer: Yeah. You wanna say maybe a little bit about, uh, paying, paying for, if you're a group practice, knowing what to pay your people, um, and what's, uh, what's a good strategy there?
Kristin Meador, CPA: Yeah, that's, that's quite a, um, interesting analysis because I think that.
It's really hard when you're growing and scaling your practice to commit to. A full-time salary, right? Like that's a lot of money a year, especially when you factor in payroll taxes and benefits, if you're gonna offer that. Mm-hmm. So, um, I often recommend if, um, scaling practices can kind of dip their toe in the water.
So maybe start with a part-time. Employee and see how that goes. Maybe start with someone that is willing to accept an hourly rate instead of biting off a salary. Mm-hmm. So things like that, just to get yourself used to the mechanics of paying payroll and, um, and consider doing that every time you make a new hire, you know, like.
It doesn't really get any easier. Right. It's still scary. Mm-hmm. When you commit to a new person. So could they start part-time so you can kind of test them out and then flex with you from there? Um, and then. I always say, if you can try to set us before you hire someone, set aside three months of their pay, and basically pretend like you're already paying them for three months and put mm-hmm.
Put it into a savings account. And then when they come on board, you've got three months of their pay saved. So if something were to go haywire, you could still pay them to weather that. And, you know, you can do it because you've been doing it for a few months. Mm-hmm. Um, so those are my biggest advice pieces of advice around hiring someone in your practice.
Did that answer your question, Gordon? Yeah. Yeah.
Gordon Brewer: Yeah. And I think, uh, one of the things to look at too is, um, you know, as again. Uh, particularly for insurance practices, you've got that variability in what you're getting paid per session. So you really have to look at, you really do need to know your numbers well in order to know what to pay.
And, you know, at least in my practice, we pay, uh, um, it's not necessarily a, it's a, it's a graduated system based on the, the volume of clients that the, that the clinician sees. But we use a flat rate per clinical RA for. Uh, per clinical hour. Yeah. And so that makes it easier to kind of calculate and plan ahead and that sort of thing.
And it's all based on, again, those numbers of knowing, um, what we're bringing in, what our average per session rate is, and what our, you know, our monthly costs are.
Kristin Meador, CPA: Absolutely. And on average. For example, if you determine that your average revenue per session is $150 or something like that, don't think, okay, I can pay a clinician 75% of that because that's too high, right?
You've got all of your company expenses, you've got a factor in profit, and your pay, you've got a factor in taxes. So typically what we see is that. Per session amount you can pay is more like 35% of your revenue per session. Mm-hmm. So it's a lot lower than you might think.
Gordon Brewer: Right, right. Yeah. And I think, uh, again, it's, um, again, that's why it's so important to know your numbers and, and have people like you, Kristen, that can help guide people through that.
Um, yeah. And so, yeah. Yeah, so, well, Kristen, I guess what I need to be mindful of your time and. And, and all of this, and I know we could probably spend all day talking about these different topics, but tell folks how they can get in touch with you and the different things that you're offering for people.
Kristin Meador, CPA: Yeah, sure. Um, so my firm's called Gradient Accounting and our website is grading accounting.com. Like I said, if you were to go to grading accounting.com/therapist, you can download that free three minute pricing checkup. And right now we're taking, um, clients in our full service package, which is basically all you need.
So it's bookkeeping, taxes, and, uh, business consulting so we can have conversations like this specific to your business. Um, so yeah, I'm really excited to connect with anyone that wants to connect, um, and help you build and grow your practice.
Gordon Brewer: Yes. And it's, uh, and I will say that having a good, uh, CPA is always a good return on the investment because I've, the people I've consulted with, um, over the years, one of the things that is just heartbreaking is for them to get towards the end of the year.
Particularly at tax time and realize they don't have enough money to pay their taxes. And that's just always a, and so by staying on top of it and, and understanding all of that, and then just also being able to support the lifestyle that they want to keep for themselves. Yes. It all has to do with knowing your numbers.
Kristin Meador, CPA: Yes. And thank you for saying that, Gordon. I, I feel like. This stuff doesn't have to be as stressful as it sometimes feels. So if you're feeling like you're in this stress cycle around your taxes and your finances, reach out to someone for help. Um, I think you don't. Mm-hmm. It's really important to know you don't have to go at it alone.
Gordon Brewer: Right, right. Yeah. Well, Kristen, hopefully we can have another conversation again and um, and again, folks will have the links to, uh, gradient Accounting and all of that sort of thing in our show notes and show summary so you can get to it easily. And so, again, thanks Kristen for being on the, on the show.
Kristin Meador, CPA: Thank you so much for having me, Gordon. It's been great.
Gordon Brewer: Yes.