Episode 106 | Why You’re Making Less Now Than You Were As Solo Practitioner

Hi Group Practice Listeners! In this episode, I’m talking all about why you may be making less now as a group practice owner than you were as a solo practitioner.

In this episode I discuss:

• Growing your practice too quickly
• Not taking time to stabilize between growth
• Investing too much in your start-up
• Paying your staff too much or adding too many benefits too quickly
• Hiring too many part-time therapists
• Low retention rates
• Sales issues vs. profit issues
• Staying small, but spending as though you’re a larger practice
• Working longer and harder in the first year
• Not delegating enough

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Hey, today we’re going to be talking about why you’re making less now than you were when you were a solo practitioner.

This comes up a lot, and it’s a topic that’s really interesting to me. So I decided I want to do a podcast episode on it. So I came up with a probably had two handfuls–maybe 10 different reasons–why you might be making less now as a group practice owner than you were when you were a solo clinician.

And this is by no means an exhaustive list, but kind of the top things that I think are happening when clinicians who are group practice owners are making less as a group practice than they were when they were a solo practitioner.

The first one is: you grew too quickly.

I see this happen a lot, not even just in our business, but in different types of business where we grow too quickly for what we have capable. There’s a lot of businesses that this happens to, especially when it comes to like physical goods, where the demand is just higher than what people can output or the business owner can output. And the same can be true in our case. There are plenty of group practice owners who’ve decided to grow and open multiple locations within their first year. Or hire 8, 9, 10 clinicians in a year before they’ve gotten their systems in place before they figured out what works, what doesn’t.

The kind of the beauty of starting a business, at least in that first year, is to grow a little bit slowly so that you can see what things work and what things don’t before you have to make shifts when you have, you know, 10 plus people.

And so oftentimes, why group practice owners might be making less is because they grew too quickly.

They have all of these expenses tied into hiring, managing, teaching, onboarding all of these new staff in that first year. And so that could be the case.

And I should say, that might not necessarily only be the first year, if you hire too quickly, even in year 10, where you have to invest a ton into that growth. You can also not make as much as you were when you were solo, where things were pretty straightforward, right?

As a solo clinician, where you have your own private practice, you really have a minimal amount of expenses that aren’t going to shift. You know, really at all unless you’re moving into a new higher, expensive EHR or you’re moving into a more expensive office location, but for the most part your expenses pretty much stay around that 30% of your total income range. Or between 20 and 30% of that total income range. So really the first thing I think is you’re growing too quickly.

The second one is tied to the first: you don’t stabilize, you’re always only growing.

And this is something that is an interesting concept, because the thought is, if you’re always growing, clearly there’s a need. And clearly, you’re able to cover the costs of that growing because you continue to grow, right? But the problem with not stabilizing yourself as a business and having growth spurts and kind of flatlining spurts growth spurts.

Flatlining is that the growth always costs money, even if you’re being careful about how you spend every type of growth is going to cost money. If you add clinicians–even if you’re not at growing your space or adding a location–there’s a cost per clinician to have that clinician. Not only just the malpractice insurance and EHR costs and phone lines and all that stuff. But the time you’re investing in, putting ads out, interviewing people, training people on onboarding people, getting them their first, you know, handful of clients, checking in with them.

Just managing staff costs money, it costs your time.

And it’s really important to think about what how much time you invest in each one of your clinicians throughout a year.

So if you’re continuously growing, there’s a cost to that. And there’s value to actually flatlining for a little and just coasting at where you’re at regrouping, seeing what’s working, what’s not before you move on and make another jump to grow.

The third one is: you invested a lot in your startup.

This is very common. It is possible to start a group practice, and be a little thrifty. I was one who was very careful with how I spent my money in the beginning and waited until I had profits to be able to, you know, replace furniture that might have been secondhand with nicer furniture. And it totally depends on the type of person you are and how you want your business to look.

But you can definitely invest too much in your startup. And that can play a huge role in needing to use any profits that you do make with clinicians that you hire on paying off of those profits.

The next one is: you’re paying your staff too much.

And I’m going to add in there or you’re adding too many benefits too quickly. This comes mostly from fear of not feeling like you’re paying them well enough. Or thinking, because you’re a business owner, thinking that everyone thinks similarly to you and that your staff does, in that you’re taking a portion of their money. Or that they aren’t going to be happy to see that your business is making a profit.

And that really comes from a non business side of your brain.

Because obviously, all businesses need to have profit. Healthy profits actually equals a healthy business. And you need to have a healthy business to be able to make sure that you can continue to support the clinicians in them having jobs. So paying your staff too much this is something I see so often.

People think that they can pay their clinicians you know, their employees 70% of income, and then they quickly realize that with taxes, employment taxes, with business taxes, with operating expenses, with the time that you spend investing in them, which is time you should be paid for. When all of that gets taken into account, you realize that you’re not actually making money, and even in some cases, you’re owing money by having that clinician there. So that’s definitely one reason why some group practice owners aren’t making more. They are investing too much financially in their therapists, and then aren’t having any profits to show for it as group practice owner.

On the same side of the coin is maybe not paying them too much in their hourly wage, but putting too many benefits in place, or maybe putting too many benefits in place too quickly.

I always like to say, to put one benefit in place, and it and not add any new benefits for at least six months. You want to see–and I prefer a year, but at least six months–see what your financial landscape looks like as a business after implementing a new benefit before you even think about adding another one.

I see this so often is that people will add CPU stipends and 401k matching together. And they think well, I’m only going to pay, I don’t know $200 a year in the statements, and I’m only going to do 2% retirement matching. So it doesn’t feel like a lot.

But when you put those things together, and when you hire more people that expense increases. And if you haven’t actually felt financially, what that looks like to give that extra income now out, it can be hard. And so I always recommend doing one benefit at a time. So if you’re making less than you were when you when you were solo, have you been giving them multiple benefits within a six month time period? Or are you paying them too much for it to be sustainable for your business?

The next one is: you have too many super part time therapists.

This one is something that I learned probably two years into my group practice and switched over to requiring people to you know, work full time. And for me full time is 25 hours. With part time people there’s a lot of fixed costs. Now each group practice is different. Some have less fixed costs than others. There’s a fixed cost to having each of your staff and then there’s going to be variable costs, you know, some, there’s going to be some parts where your full time people will have a higher cost. But for the most part, there’s fixed costs, like EHR like malpractice, adding them to your phone extensions, adding them to your email list marketing, and letting people in the community know that they exist.

All of these things and more.

But if you have someone who’s working five to 10 hours a week, those fixed costs, let’s say it’s $300 a month that it costs you to have a person and that’s not including the employer taxes that you’re going to be paying your payroll taxes. But just what I say $400 $500 whatever per clinician, if someone is seeing only 10 clients, and let’s say I’m totally making my math up.

Now, I don’t have a calculator out but let’s say they make $1,000 a month, right? Seeing five clients that $500 now gets washed away costly wise and you’re only there splitting the thousand dollars 50/50. Let’s just say 5050. Right, because most practices that have w2 50 percent, that means you’re making $500 off of that thousand that that person brought in, and you have a $500 cost to having that person right there washed away is zero dollars, you’ve made zero dollars.

Whereas if you have someone who works 25 clients a week, and that comes out to let’s say, $10,000 in the month 50% they take home 5000 you have 5000 left, you pay 500 in just having that person there. That leaves you with $4,500. Obviously you have employer, you know, taxes and all that, that get taken out and your operating expenses, but you have something to work with.

So having too many super part time therapists could be a reason why you’re making less.

Then you have to also consider the more people you have, the more people you have to manage. I prefer to manage less. I’d rather have 10 full time people than 20 part time people. Because juggling 20 people’s schedules and concerns and retention rates and all that stuff is just harder to manage than it is with 10.

You have a sales issue, that might be one of the reasons why you’re making less.

You might not be getting enough clients in the door, or your retention rates with clients is too low, they’re not staying long enough or not staying in appropriate amount of time. And that might be because clinicians aren’t doing their first session well and not explaining the therapy process. Well, it might be that your intake people are referring clients to the wrong therapists. Or it might be that you’re not appropriately billing and maybe you don’t have a billing procedure that is on top of things. One that is sending claims in a really timely fashion, that’s checking in on claims that are past two weeks not paid to see what’s happening.

These are all considered sales issues which play a role in you know how much you’re going to make, right?

But on the other side of the coin which a lot of people see this as similar–and Mike Michalowicz, in his new book that’s coming out next month talks about this–is the difference between a sales issue and a profit issue.

So sales issue would be things like you just don’t have enough clients, you need to market more you need to get the community to know you exist. You’re not getting enough referrals in to keep your clinicians full.

The second piece would be having a profit issue, which is different. And that might come to what I mentioned before, which is you’re paying your staff too much. So your profits are too low. Or you’re using your income to pay all of your expenses for so you have no profits left. And maybe you have operating expenses that are too high. Or you’re splurging on too many things that maybe need to be taken away.

The next is you decided to stay super small as a group practice.

Maybe it’s like one to four therapists that you want to bring on and you don’t plan on getting any larger. There are group practices that are small. When you when you want to stay small and being big is not the way you need to go. I want to say that outright. It is just as amazing to stay small and boutique-y as a group practice as it is to get large and have 100 clinicians under your wing.

The problem is, is if you are going to stay super small, you need to be very careful with how you spend in operating expenses. And how you spend your time in managing staff, because you’re going to need to continue to see clients.

And so you’re going to need to have a system set up where your clinicians are a little bit more independent, a little bit more self sufficient so that you’re able to invest your time in continuing to see clients.

So when you stay super small if you’re spending as if you’re a larger practice, which often happens, because you know, face it social media now we can see how other group practice owners are running. The technology they’re using the things, the benefits they’re giving to their clinicians, the pay that they’re giving their clinicians, it’s really easy to feel like you need to compare yourself to them and be where they’re at.

But when you are a smaller practice that has one to four clinicians, and that’s where you want to stay, you definitely need to be more aware of how you’re spending, because your profit pool is smaller. So you need to either diversify your income, or you need to continue to see clients. Or you need to make sure that you’re not offering all the benefits in the world, and that you have systems in place that allow your clinicians to be more independent.

Next: you work longer and harder the first couple of years.

This is just mostly a fact. I mean, there’s are probably some group practice owners who aren’t working longer hours than they were when they were solo or not working anymore, but 99% of group practice owners those first couple of years, you’re working longer and harder. And your time involvement is worth money. That’s something to note.

And so I want to give a little bit of grace period for when you start a business. If business ownership and starting businesses was easy, everyone would be doing it.

So there is something to be said that you might make less in that first year. And I don’t necessarily see that as a problem.

I think that’s an investment in a business. As long as you know, you’re being intentional about it.

And knowing where that where that ends so that you don’t continue to get into this habit of overworking, overextending yourself working longer and harder while also not making more money. There needs to be a goal in mind for that.

And so, although it’s not expected that every group owner is going to work longer and harder those first one to two years, while also making less. There are definitely group practices that make profits right from the beginning. But those that I’ve seen, who are making less, it’s just because they are really grinding those first couple of years to build something up.

And so if that’s the case, I reflect in on the work that I’m doing if I’m in my first year, and I feel like oh my god, I’m making less than I was when I was soloing, this is so hard. I would look at what are the things that I’m doing as this new startup group practice? And is is what I’m doing? Is it purposeful? Is it intentional? Does it make sense in terms of, you know, one year from now I can see myself being able to take a few steps back and have things automated and delegated, so that I’m working maybe a little bit less in some ways, or I’m making a little bit more in profits? If that’s the case, then then this this bullet point is perfectly fine. But one worth mentioning.

The last one is you don’t delegate so you spend your time on that lower hanging fruit that could be delegated out, so that you can spend time on those higher hanging fruits like visionary work.

Increasing community awareness, branding, culture, profits, all that stuff. So this is a really common one. Because as a solo clinician, you tend to wear all the hats. It’s hard to take a hat off and give that hat to someone else. And so a lot of our practice owners are making less because they’re doing it all. They’re still answering the phones, they’re still doing billing for their therapists. They’re, you know, really just doing it all marketing, all of that.

And so, the group practice owners that are really making more as a group practice owner and making healthy profits have learned to delegate some of these things. They’ve put good systems in place, and then handed them off to other people to be able to do.

So those are the 10 ish reasons why you might be making less as a group practice owner than you were when you were a solo clinician.

If there are others, I’d be happy to hear those. But those are kind of the top common ones that I see.

And if you’re doing any one of these I would reflect in on what needs to happen for you to get out of that. So if you’ve invested too much in your startup, what can you do to rectify that? If you grew too quickly, what can you do? It might mean stabilizing. It might mean adding in some leadership support because you grew so quickly you need more leadership support. If you are staying super small, and you aren’t having profits, looking at what do I need to do to make having my small boutique, amazing group practice be financially stable, and having profits that keep the business healthy.

Take a look at which one of these is maybe playing a role in you making less as a group practice owner and see how you can rectify that. Because I truly believe that if you are in a business like this, you should make more than you were when you’re solo. You are shouldering so much more as a group practice owner than you were solo. You have not only your own solo business and your clients to work but now you also have employees or contractors and all of their clients to worry about.

And so you want to make sure that you’re running your business in a way that can sustain and you know, outlast you.