The Practice of Therapy

Danielle Hayden
Hi, this is Danielle hated with kick started counting. I'm so excited to be here on the practice of therapy, I guess.

Gordon Brewer
Well, hello, everyone, and welcome again to the podcast. And I'm so happy for you to get to know Daniel Hayden. And, Daniel, welcome to the podcast.

Danielle Hayden
I've got to thank you so much for having me be here. I'm so excited for this conversation.

Gordon Brewer
Yes, me too. I know one of the things that you're passionate about, that I'm also passionate about. And that is the importance of therapy practices, or people in private practice of knowing their numbers and really knowing how to navigate the whole business side of, of being in practice, because I think, if you don't know that, you're going to struggle a good bit. But as I start with everyone, Danielle, why don't you tell folks a little bit about yourself and how you've kind of landed where you've landed?

Danielle Hayden
Yeah, I like most entrepreneurs have a very jagad wild roller coaster story. I actually started off my career as, as a hairdresser, so very different than accounting. But I think that I always like to mention that because it gives, it reminds us to give ourselves permission to change an ebb and flow throughout our life as we we make different decisions. And it's part of our story into entrepreneurship. So I had went to college for accounting, I went towards a career helping business owners with knowing their numbers. So when you go to accounting, you can go a few different routes, you can become a tax accountant, we hear that term all the time, we can become an auditor, where you go and audit big companies. But I knew in my heart that what I really wanted to do was make a difference for people, like average people like you and I, right? Not, not the big investors, not the big corporations, right, I wanted to make a difference. I'm a Midwestern girl, I still live about five miles from my parents and 10 miles from my brother. And I wanted to make an impact to the people, the common people who are working their tails off starting businesses and putting their heart and soul in into their business. And so I went to business accounting, I did work with the investors and the board of directors for the past several years. And let me tell you, I learned, I learned so much about what the CEOs and the investors and what they were all looking for. But the reason that's so important is because now I can take all that expertise, and all that information, and I can bring it to entrepreneurship. And so, you know, we were briefly talking about this right before we hit record, that, you know, when you started your private practice, you're really passionate about helping people, right, you are going you you are you want to be a therapist, and you forget that you have to do all of the other business stuff that comes along with it. We hear it from all kinds of entrepreneurs, I'm passionate about this. Now for the nice to know accounting. You know, but we know that it's so important to have a successful practice is to know your numbers and, and then be able to use those that information to make business decision. So totally long winded answer to your question. Yeah. Well, that's

Gordon Brewer
great. That's great. And I think, you know, one of the things that I you know, I think for a lot of us in this particular field, we learn a lot of stuff the hard way. And one of the things that I think is kind of a misnomer for a lot of people going into private practice is that think, Oh, well as be easy, I'll just hang up my shingle and, and people will come to me and they'll pay me and that'll be, you know, make lots of money, but they really don't understand the intricacies of running a small business. And, and, you know, the importance of knowing their numbers. And I think one of one of the things that I have learned from people and just conversations around the the country is just, you know, they're not really sure what it means to look at their numbers and know their numbers. You want to talk a little bit about that of what you want. When we say know your numbers. What does that mean?

Danielle Hayden
Yeah, that's a good question. You hear all these kinds of taglines, especially in this world of social media and all the Guru's out there. And I think one of one of them that you hear all the time is this, know your numbers, and I get it as a business on you're thinking, what the hell? What numbers do I even need to know? And, you know, honestly, we could spend a whole hour on this top one question, but I'm just gonna say high level with you. When we say know your numbers, I want you to understand your financial statements. And I know, I know, a lot of people are a big fan of profit first. And so you can have a combination of knowing your numbers, the profit, first allocation, as well as understanding your profit and loss statement, and how you can prepare for tax season. And that means making smart business decisions all year long, so that you are maximizing your tax deductions, right, and making sure that we manage how much we're going to pay in taxes at the end of the year, making sure that we're structured in the right way, so that we're paying ourselves as business owners, making sure that we're investing enough money in the business, but not too much money, right? There's a balance between paying yourself and investing in your business. And so when I say know your numbers, I want you to understand the profit and loss statement, and then be able to take all that information and have it match your higher level goals, such as I want to be taking home X amount, and my, my, my family, or I want to invest X amount into the business, I want to hire X amount of people, I want to meet sales goals. And so this is the this is the first step is all of those other financial decisions. Right?

Gordon Brewer
Got to kind of know your starting point. Yeah, yeah. So what when you when you're working with people around that what's, what is the starting place for getting to know your numbers better and, and kind of getting your head around all of this?

Danielle Hayden
Yes. So usually, when, when we have business owners, who own their own private practice therapy office, the first thing that we do is make sure that we have an accounting software setup. So you'll always have your client management software, and then you'll have an accounting software. And you know, we hear it all the time. Look, I've been in business for a few years, I just started my business been in business 10 years, it doesn't matter where you are, I haven't set up a system yet or set it up, and I never updated it, or I'm doing it. And I don't know if I'm doing it, right. We hear we hear business owners of all spectrums. So just I say that, because if you're listening to this thinking, Oh, my God, I set up a QuickBooks file. years ago, I have no idea of how I'm doing it right or never set it up. And I've been in business for years. Just know, you're not alone, right? You're not alone. There's so many other people and is in practice that are right where you're at. So give yourself some grace. So when we work with a client, we figure out where they're at, right? Do we have a QuickBooks file yet? If not, let's get you in an accounting software. And it's really important for long term, long term decision making, and Tax Management. So once they get you into that accounting software, I like to go backwards before we can go forward. So usually what we do is what we call an air quotes catch up. So when we do that catch up process is taking all of your historical transaction. So all the money that you made, and all the expenses that you've had, or the places you spent money and pulling all of that data into your accounting software. Now we have a starting point. Now we can start started, go play Monopoly, we can now we can start to go. We can we can make the next round around the board. And that is our way of saying okay. Oh, I can look at what I did. What How much money did I bring in? Where did I spend money? It does surprise me. Right? what went well, what didn't go well. So that's the starting point. Now we can start to look forward.

Gordon Brewer
Right, right. Yeah, it's, uh, yeah, it's one of the things that I know, I've heard and talking with other people, when they're trying to get their head around things, you know, you really do need to have the right tools in place. You know, I think some people, you know, I think, you know, you could do it simply by having just a spreadsheet or whatever, particularly if you're just getting started into private practice before you, but I think you really do need to have some sort of solid Were in a way to capture everything. So that so that you can get the reports and the numbers and look at them. What and, and I think I kind of the gold standard is QuickBooks there are there other software's that you recommend,

Danielle Hayden
of course, so, I still love QuickBooks, I'm still gonna recommend that everyone use QuickBooks when we work with clients. We love QuickBooks so much that we include it in our costs. So that's how much we fill up with books. There are other systems out there, zero is another very popular one. It's very easy to us as well. wav is another one, it is a free software, it has some limitations. So each software has some limitations. I always I like to suggest to business owners to plan for where you want to be. And what that means is, eventually you're going to outgrow a system like wave, because you are going to want more reporting, the more as you get a little reporting, and then you get a little bit more reporting, Oh, I like getting this data. Wow, this makes making decisions a lot easier. I don't have to make an emotional decision, I can make a data driven decision. Oh, well, the report does this system has, and a lot of these other systems. They don't have all the reports that folks had. And so that's why we suggest that people want to QuickBooks because we know that it can grow with you. It can grow with your practice, and you will never run out reports that you want to run. Look, if you're just starting out, open yourself a business checking account, keep your business and your personal separate. Take a Google doc or an Excel spreadsheet. Yes, start where you're at. And then you can build on to the more sophisticated software. I do caution people away from using like, there's freshbooks and a few other like invoicing type software's that came into the market as an invoicing software. And then turned to an accounting software like I think GoDaddy has one freshbooks has, but they just they definitely run into some some limitations. So I always tell people, I do caution away from them.

Gordon Brewer
Right, right. Yeah. So when thinking about looking at your numbers, how often should people doing that they doing that and staying on top of that?

Danielle Hayden
Yeah. So when we work with clients, we always give three options. We have a weekly, monthly or quarterly and so weekly is like is your is your premium? Right? That if you are able to be in tune with your financials on a weekly basis, that that is the gold standard, right? And that might just mean a weekly dashboard of where my cash balances. Do I have any, any any collection issues or client issues? Who am I going to owe money to write? Do I have any contract or rent credit card payments coming up? And then what am i sales month to date. So those are the types of things I want you to look at it on a weekly basis, then we have kind of our monthly this is this is if weekly feel too big and too bold. I love for clients to look at their financials monthly. When you do this, you can see what just happened, right? What What was your sales for the previous month, for the year to date and level current year to date. Compare that to prior year right? We did that if we did that catch up. Now we have prior your information. So now we get to look at what do we do this year compared to last year, which is super fun exercise, good to look at where we spent money. And then if we have a profit or a loss, and then once we have that information, we can also know how much money is set aside for taxes. And when you look at this on a monthly basis, you can make super quick decisions, right? It becomes, wow, I spent a lot of money on it. And I'm getting nothing from it, I need it, I need to cancel that software or it cancel that advertising campaign or fire that whatever it might be. You don't you don't let a lot of time go by without making that quick business decision. Right? If that feels like too much, right. You know, there's still people who say, you know, money's hard, and I get it. There's people who say, I can't bring myself to look at my my report card and a monthly basis. I'm going to wait for that to the quarter. And so that's the bare minimum. If you're not looking at it monthly. You know, I want you to at least look at it on a quarterly basis. At least four times per year, you're able to say Do I need to save for taxes? The same same, you know, other thoughts that we talked about with the monthly package about what's working, not working? But those those four times per year what you really think about? Am I making a profit or loss and do I need to change any of my spending habits to minimize or maximize my profit and loss for tax season. So that's, that's another thing to make sure you're doing on a quarterly basis.

Gordon Brewer
Right, right. Ya know, one of the, one of the things that I'm a big proponent of and really talk with people with, in regard to their numbers, when they're first getting started, is really focusing on building a reserve for themselves. You know, particularly for things like taxes, also, you know, with, with the way therapy, practices go, we can go through a period of slow times, and, you know, and also being able to build into that, you know, all of us want to have some vacation time and that sort of thing. And as a business owner, you know, if you're not weren't particularly in our, our, our field, you know, if we're not working or seeing patients or clients, then we're not getting any income. And so you need to plan for those things. What sort of, what sort of recommendations would you have about, you know, building a reserve?

Danielle Hayden
Yeah, I love that you're talking about this, because this is one of the things that can go into knowing your numbers, right. So when you know your numbers, and when you have your financials in front of you, you can start to look at how much do I need to reserve? Right? What does that even look like? Because a lot of people say, these three to six months of expenses? Well, great. What's that number? Right? How do I even get to that number. And so when, when we work with clients to to look at that number, we'll call back in that those historical financial. So you'll hear me say over and over again about the store. Because your numbers are trying to tell you a story, it's your job to read the story. So as a business owner, you got to look backwards, right? So let's look back over the last, I like to go six to 12 months to find trends. And I say 12, because when you look at the last 12, you'll remember a little thing, oh, blast, I forgot that I have that giant subscription coming up in the month of May. Right? And, and that cost me $5,000 a year to to keep that license or that subscription, whatever it might be. So I want you to go all the way back and look at the last 12 months, you can run some averages. What's your what's your average read costs, your average utilities cost? What's your average subscription costs? If you're if you have anybody working for you? What are your average contracts or costs, now we have a monthly average of operating expenses. Now, I know that that number might feel daunting, you don't have to save that number tomorrow, right? We'll just say that number next month, you would slowly have to get there, right? So you can slowly transfer money over to a savings account, that is your rainy day operating fund, or your vacation fund, as as you mentioned, and start moving that money over there so that you can build three to six months worth of savings. And you mentioned one of the things I just want to hit on is knowing your slow times, right? When you can look backwards in the last 12 months of your financials, it's really important to note those slow months, right? Are you do you experience a dip in the summer months? So a lot of a lot of the practices that we work with, have a dip in summer and around holidays? And so knowing that death, do you take intentional breaks? As a business owner, I know I'm going to be slow during that time. Do I take my vacation at that time and maximize that? Do I consider that a CEO retreat and go work are my numbers and my CEO planning during that time. But again, going back to looking at those trends and saving for it for that time period and start slowly building and working towards it. Right.

Gordon Brewer
Right. Yeah, that's another thing I would add to that Danielle is, you know, for particularly for practices that are maybe insurance based where they're getting, being being re reimbursed for their services by insurance companies is understanding what your average average income or your average rate is per per client, because that can vary a good bit and I think that the thing that you know, to love is just being able to, to work from averages because I think that is some kind of what we see in this particular field is that we don't necessarily get exactly the same thing from each client. It can vary a good bit and and I love to what you said about being gone. going back and looking at when are the times in which, in which you've got greater expenses? I mean, just because I can think of several things like, like you mentioned, you know, licensure, self employment taxes. That's, that's a whole other topic. And, and all of those things, so, yeah, so being able to know when those things hit and being able to track that. So, yeah, so you want to Yeah, speaking of self employment taxes, what you want to talk a little bit about, about that.

Danielle Hayden
Yeah, and here, we could do a whole nother podcast on on this too. One thing that we're working with a lot of our practices who are growing and growing quickly this year, this has been a wild ride for people in general, and we have a major mental health crisis here. And I think it's, it's causing a huge amount of growth that we've seen, and our clients who have therapy practices, it is really important to watch your growth and to, and to decide how you're paying yourself and how you're going to continue to pay yourself. So look backwards in your historical financials, again, if you are structured as an LLC, and you are taking owner's draws today, that means you're just a cash expense of your business. And you are not able to actually be a tax deduction of your business. What that means is that you will pay self employment tax on that profit or loss of your on your profit and loss statement right on on your on your income statement. And that's what you're gonna pay self employment tax on, is that number is getting close to 50,000, it's time to really start to think about an S Corp. And maybe it's only 35,000. But you grew fast last year, and you know, you're growing this year, it's really time to start thinking about moving yourself to an S corp, putting yourself on payroll, once you put yourself on payroll, you can become a big business expense to your business, you will reduce the amount of profit, you reduce the amount of self employment tax that you pay and your business to become a W two employee of your business as well. So you there is some tax payments that you make. But we see the tax benefits outweigh that. And so work with your tax accountant, work with your bookkeeper, make sure you're having these conversations and look, and knowing your numbers. And when you know your numbers. And when you look at that information, you can have that conversation with them. Or, you know, if you don't, if you haven't had this conversation, you're paying yourself as an LLC, this is your reminder to go and look at it and make sure you're structured right for the next year. So that we can maximize how much money you're taking home in your pocket.

Gordon Brewer
Right. Right, that that is such great advice, because I know that one of the things that people think is really kind of surprising to them. And I've known a few people along the way where they have really gotten this huge tax bill at the end of the year. And it's because they really weren't aware of the difference between being self employed, versus being employed by somebody and and that whole decision around becoming an S corp is one that I would recommend you talk to a professional about that. Because there's a lot of different ways to look at that and understand that. I know, that's been a conversation I've had with my accountant on several occasions about Windows, you know, currently I'm not an escort, but we're looking at Okay, is this the year that we need to to make that change? And, you know, to with the change in administration, politically and all of that sort of thing? The tax laws change and so you got to kind of look at the the pros and cons of all those things. Yeah,

Danielle Hayden
yeah, yeah, definitely be weighing that out. Definitely be talking to your your bookkeepers and your tax accountants about it. It's a it's a big decision. But the biggest thing is to make sure that, you know, if you're looking at those numbers, if you're looking at that profit loss statement on that monthly or quarterly basis, you you won't be hit with that surprise. And at the end of the year, you know, that's part of what we send our clients this, hey, make sure you're saving this right, this is how much we estimate that you're going to owe in taxes. That's poor guys, you know, it taxes can be such a stressful pain point for people that we tend to just avoid it. And it really needs to be something that we just tackle head on. You know, my mother always said, there's two things that we we that are for sure in life that We're gonna dive into taxes. So, you know, let's, it's a given. So let's approach it and save for it and be prepared for it. That way, we're not angry and we don't, you can you can start to get resentful of your business, if you are surprised with this tax bill every year. Right, that could become a point of contention for you. And I want this to be a place of passion. You know, you're passionate about what you do, and I want it to stay that way.

Gordon Brewer
Right? Well, I know that there's so much we could talk about around this topic of knowing your numbers. But I know I want to be respectful of your time, Danielle, but I know also, you've got some resources available for people. You want to tell them a little bit about that.

Danielle Hayden
Yeah, come download our financial goal setting worksheet. This is a great way to start a lot of the things that we talked about. And it can be a launching board for you. I always tell people, you got to start small, right? You don't go run a marathon if you sign up for the five day, thing, weeks and months to get there. So go download the financial goal setting worksheet. It's a great place to get started. Don't let this be analysis paralysis for you. You know, we have the resources there for you to make this more doable and not so overwhelming.

Gordon Brewer
Okay, yeah. And we'll have links in the show summary and show notes for Danielle's resources. You want to mention how they can get in touch with you and your your website and all.

Danielle Hayden
Yeah, come to pocket planner, bookkeeping calm. You can see all those resources there. If you're curious about how we work with other private practice owners, you can come book a discovery call, I actually hold every single discovery call on my own. So there's no high pressure sales tactics. You will talk to me directly and I, my passion is hearing about your business. And so come talk to me, I'd love to learn more about you. So you can book a discovery at profit planner, bookkeeping calm, or call me on social media. It's Danielle Hayden, underscore o h, I am from Ohio. And COVID. That's the questions in the comments. We spend a lot of time energy putting out really helpful tips and tricks for business owners. And so if you have questions on this topic, come check out the information comment there. And we're here to be a resource for you.

Gordon Brewer
All right. All right. And again, we'll have those have those links in the show summary and show notes. Well, Danielle, I'm so glad we connected. I think this is such an important topic. And I know as we're recording this, we're all only a month away from the tax deadline here in the United States. So it's kind of a no, I'm sure it's a busy time of year for years, and they count it. So but yeah, thanks again for being on here. And hopefully we'll be able to connect again.

Danielle Hayden
Oh, yeah. So let's do it. Thank you.

Gordon Brewer
Thanks, Danielle.