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Episode 195 | Industry Averages for Profit First with Julie Herres

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WITH Julie Herres

  • Episode 195 | Industry Averages for Profit First with Julie Herres 00:00


Have you ever felt discouraged and overwhelmed when it comes to dealing with payroll,  profit, and other financial aspects of your business? Well, now you won’t have to! In today’s episode, I am back again with Julie Herres, owner of Green Oak Accounting Firm to talk about the Profit First System, and how it can greatly benefit you and your business!

In this episode we cover:

  • Understanding the goal of Profit First System
  • How to know the recommended Current Allocation Percentages (CAPS) and Total Allocation Percentages (TAPS)
  • When to make shifts in CAPS and TAPS
  • Why it’s normal to not be in the target allocation at first
  • What to do when the biggest problem is payroll

Links mentioned in the episode:

Profit First for Therapists

This episode is sponsored by TherapyNotes. TherapyNotes is an EHR software that helps behavioral health professionals manage their practice with confidence and efficiency. I use TherapyNotes in my own group practice and love its amazing support team, billing features, and scheduling capabilities. It serves us well as a large group practice owner.

Do you ever wish for a financial therapist who could relieve you from the last few months of bookkeeping, talk you off the edge when you’re running into issues with Quickbooks, or help you work through a profit plan for growth? GreenOak Accounting does just that! GreenOak Accounting is an accounting firm that specializes in working with group practices. Their value goes WAY beyond bookkeeping; they can help you get on track for financial success. Schedule a free consultation by going to


Maureen Werrbach

Hey, everyone. Welcome to another episode of the group practice exchange podcast. This week, I have Julie Harris from green Oak accounting with me. How many times have you been on now? Feel like a handful? Um, it probably, I think this is the third now. Third. Yeah. I’m excited. I always love having you because same, I love being here.

We’re gonna be talking about profit first percentages. and how they vary by side. Cause I feel like that’s something that gets brought up a lot is figuring out your numbers. First of all. And when people put their numbers in my Facebook group, it confuses other people who are like, whoa, like that is a low owner’s draw percentage.

And other people are like, I’m giving 50% on. And I feel like people don’t understand how profit first changes, depending on where you’re at financially and what size you are. Yeah, it varies a lot, depending on the size of the business and also in profit first there are caps, which are current allocation percentages, and taps, which are target allocations.

The cap really is where practices today, not where they wish they were, but like the true realistic where they are today. And so sometimes that’s going to be lower than what you wish it was, but like that is the reality. And then the goal with profit versus that slowly over time, we move toward. The target allocation, but as a practice grows, there’s naturally going to be some changes there because the practice owners is typically doing less and less work overtime having to hire maybe more infrastructure-type people, right?

Like more overhead people like a biller and. Perhaps a practice manager, some overhead like phone or intake positions. Yeah. And then leadership. Exactly. So as you add all of those, you’re making more in dollars, but not always more in a percentage. Yep. Okay. I know I just jumped you right into here, but tell people who you are.

I mean, I feel like, because I mention you constantly when people talk about anything related to accounting or private first, your name shows up. I highly doubt anyone who doesn’t know you. Who are you? Yeah, I’m Julie Harris. I’m the owner of green Oak accounting, an accounting firm that specializes in working with therapists in private practice.

I’m also the author of the upcoming profit first for Therapists as a chair. If you were gonna say it. Yeah. I’m yeah, the cat is out of the bag. We’re definitely talking about that now. So I’m customizing the profit first book specifically for. Therapy just because there are a lot of questions that come up around exactly how to implement it.

Okay. So one question that I get a lot and I give my non-accounting piece of feedback and, oh my gosh. If I’m wrong. I’m sorry, everyone. what do you do with clinician pay? Do you put it in pre real revenue, like in the sub-category or do you count it as an actual operating expense underneath? I know, you know, my answer, so I know your answer.

My answer is different. So I. Like to allocate compensation, clinician comp as a percentage, just because it’s typically the single largest expense in the business. Yeah. And if you’re just taking it off the top as a sub, you’re not really controlling the single largest expense in the business, but the one thing that you can’t do, you can’t just pay it.

So like the whole idea of having these percentages is like an operating expense. If you can’t afford to use it, or you don’t have enough. The operating expense account. You’re supposed to find a way to let go of some operating expenses. You can’t do that with payroll. So I always feel like it’s like the thing that it doesn’t matter what it is.

You have to pay it. So don’t put a percentage to it. I see your point because you do have to pay it, but having it in its own separate account and having a percentage allocated to it, it really identifies a lot faster. Like when there’s an issue coming up if you can’t make payroll, something is going on, right?

So obviously you must pay payroll, but you’ve gotta figure out what exactly is going on. That just comes to light a lot faster when you are splitting percentages off the top. Sorry. I’m still gonna do it my way. I know which is probably why you never told me otherwise. Cuz you see my profit first sheet when I do my stuff to it.

Yeah. I feel like we’ve had this conversation before. Oh no. ADHD brain might just have. That be like, oh, this is too blacked out. Yeah. Yeah. Okay. So one of the big questions that come up, which is the focus of this short little podcast episode is the actual percentages that people come up with because I see people talk about it.

Percentages. And they’ll say like my owner’s comp or distribution is at 50% and then other people will be like, holy shit. Like mine is only at 10% similar to what mine is in some of these larger practices. And it really comes down to. You know, obviously the size of a business plays a big role in what the percentages are gonna be.

But I think people are having a hard time visualizing if they’re in the right space because Mike’s numbers are a little off from what our numbers are. And so then people are like, what are the right numbers that I should be at? Depending on my size. Yeah. So I separate practices into four main categories.

So I look at solo practices, and small group practices. So that’s typically gonna be under 400 K a big piece here is that the owner is still seeing the bulk of the clients in a small group practice. So like the owner is seeing a SI about 50% of the clients and there’s maybe one or two part-timers or full-timers, right?

There are other people in the business doing work, but. Practice owners doing a lot of work. Then there’s kind of a medium group practice around 400,000 to a million. And then the large group practice over a million dollars. So these ratios work pretty much up until 5 million. This is annual revenue. So depending on where practice stands there, obviously in a solo or a small group practice, the owner’s still seeing a lot of clients or doing all the work in the case of a solo practice.

So of course owner’s comp is gonna. Bigger because you’re the one doing all the work as the practice owner. But as we shift into those larger practices, the owner is doing little to none of the clinical work, right? So there’s still a lot of work to be done. But as far as the clinical work it’s minimal.

So then the percentage is going to go down as far as owners comp, just because there’s so much more revenue coming in for the practice. So as far. Owners pay or owners comp or the percentage allocated to owners, payroll that can go anywhere from five to 10% for the larger group practices all the way up to like 60%, sometimes in a solo practice.

So it depends, it goes down, reverse the larger, the practice, the smaller that number is, and the same is also going to go for tax and for profit, just because there’s a bigger pie, the dollars are going to go up, but the percentages are going to go down over time. The tax percentage goes down as you get bigger.

It can, because as a rule, we are looking for in a large group practice, for example, let’s say a million dollar practice we’re looking for profit and owners comp of 20% or more. Right. So all of those together. So that is the category. That is what goes to you, profit and owner’s compensation. So that thought gets split into three different profit first accounts.

That would be profit tax. And owner’s payroll or owner’s compensation. So if we’re taking 20 to 30% and dividing it into those three categories, you’re going to have just a smaller somewhere in the five to 10%, depending on, are you in a high tax household? What else do you have going on and how much do you need to take home on a regular basis too?

Very interesting. What is your suggestion or is this gonna be in your book? When is it coming out? By the way, do you know? Book will be out on April 20 and 22, but I have a spreadsheet with these ratios already on the profit first for the therapist’s website. If you go look for the profit first assessment, you can see where you are now and calculate yours.

Cap your current allocation, but also see what our recommended taps are. I’ll have our team put it into the show notes as well to make it easier for anyone. I’d be happy to listen to it. Okay. That was what I was gonna ask. Is there some kind of formula available pre-look yes? For recommendation? Were you gonna say something?

I was gonna say it’s really normal to not be necessary at the target allocation. That’s a very normal thing and there’s no shame in that game. Like you just have to start where you are today. One of the most common mistakes I think in implementing profit first is trying to go from where you are today to your target.

Within like a month and that’s just very, very hard to do, right? Just like a crashed diet. It’s easy to fall off the wagon when you’re trying to make all the changes all at once. So starting where you are today, making just small incremental changes. That’s what’s going to have the biggest, long-term impact on the business.

What do you say is a good amount of time to make shifts? If your numbers, your caps, and taps are far off, like a year? Yeah. Six to 12 months definitely is not unusual. There’s impact right away. So there’s a positive impact immediately, but it can take a little bit longer and that’s okay. What do you do if the biggest problem is payroll, as an example in mine, you know, my operating expenses are so anything that I have full control over, like operating expenses.

I am thrifty as hell. Yes. And like, yeah, if we looked at my caps, I feel like I’d be rich in terms of what I could spend in my operating expense account. If I actually was, had that much in there, because I am so minimal with how much I spend, where I overdo it, where I’m over is in any of the payrolls, my admin payroll, my leadership payroll, and then my therapist payroll.

And I guess for practices that just have clinicians, let’s not even take leadership or admin. How can you fix that? Other than literally taking people’s pay away. There are some cases where you literally do need to take some people’s pay away. I know we’ve had clients come in with an 80% split. Yes.

That’s. Once you had payroll tax, like there’s just, the numbers don’t make sense. The mouth doesn’t work. You’re better off having no employees than an employee yet at 80%. Yeah. So there are several cases where the practice owners have had to go back and renegotiate the contract. It’s not fun. It’s not easy to do, but sometimes it is necessary.

There are other cases though, where. In your practice specifically, I know you’ve built the infrastructure for four locations. So there is the infrastructure there. We’re just waiting for the session, which counts the top-line revenue to support that infrastructure. So in those cases, I mean, we know what’s going on, right?

Like it’s a very known fact we’re tracking that closely. And so we just have to wait very patiently, which is not easy. Wait for that revenue to come in because we know if we take things away, then we’re going to have. Come back around and rebuild them in a couple of months. And in your case, I think also you’ve been very intentional and I know you’ve always told me, like, we’re not reducing anything.

This is my values. This is always going to be high. So that means you have to be yes. And yeah. Payroll and benefits, it’s gonna be high. And that means you’ve gotta be thrifty in other areas right there. Isn’t really a choice cuz that’s how it works. So there’s a lot of little. Pieces here, but typically if you’re going to choose to be high in one area, you’re going to choose to spend less in another area.

And that might look like having a virtual practice or having a significant hybrid model so that you can really save there or maybe having less leadership and that the owner is. Doing more supervision and focusing their time there. So there are a lot of little ways that that can still work. Yeah. Now, for those that are wanting help is green Oak.

I always feel like I mention you guys all the time and then I’m slightly afraid that you aren’t available to people, but are you guys still taking new people, new groups? We are taking on new group practice clients. We do currently have a short waitlist. So it is available, but just not quite today, but in a couple of months, we’ve got space available for you.

Okay. So if people wanted to reach out to you or get to know a little bit more about the stuff you offer, because I always, and I have your top tier, what is it? The CFO. Fractional. CFO. Yeah. Yeah. And that really comes with so much. Support. And I think something that any medium to large sites, I guess, based off of your categories.

Yes, I would agree. Okay. Really? Like I I’ve said before you, you help with so much, not only from our limited group practice owners, we have a very limited idea of what accounting and bookkeeping really can include. We assume like the basics keep our numbers of stuff we spent in order and. Tell us when to pay our taxes.

But in reality, at least with the CFO package that I have with you, I get so much support around helping me make decisions. Like I don’t make many decisions at all in my business without consulting with you first. So you and Nikki, who’s my HR person. You are the two people that when I. Wanna make any decision.

I have to confirm that financially, it’s something I can do. And then like from an HR perspective, it’s something I can do. And so from break-even analyses and figuring out how long it should take for a certain new service that we’re gonna offer to be workable. Like all of those things, which I think a lot of practice owners don’t realize fall into that scope if you are obviously willing to pay.

Yeah. But that’s been hands down. I think the most valuable thing for me is I don’t feel like it. Winging it when it comes to yeah. Deciding if I wanna, should I open it location? Like normal people who have regular ass accountants, they would be like, that’s your decision? You’re the business owner. But when you pay and invest in something like your CFO package or whatever, you get the objective qualitative and quantitative feedback on how risky financially, it might be to start a new program or service or location.

And for me, that’s always felt like I’m not alone in making decisions, which is one of the biggest. Concerns group practice owners have is they feel like at the end of the day, even if you have a hundred employees and leadership team members, it’s lonely, right? All fall on you in a lot of ways with the money aspect, even though I can decide or not decide, depending on what you say, I can just say screw Julie and what she said, you have a right of detail.

Always. Yes. But I still feel like you are that expert when it comes to finances. I never feel like I know more than you on that when it comes to my business. And so I always default, which I feel like has been one of. Safety measures for me anyways. Oh, thank you. How can they reach you if we have some people who either have a really basic, boring, not helpful accountant or no accountant at all?

Yeah. So the best way to reach us is to go to green Oak You can schedule a consult to just meet with us. It’s super low-pressure. You can find out about our services and see if it might be a good fit for you. Awesome. Thank you so much for coming on yet again, and I, of course, I’m gonna have you on.

Sometimes right before April of 2023, because we’re gonna have to do a big promo on profit first for healthcare therapists. Is it healthcare for therapists specifically? Yep. Awesome. I’m so excited. Thank you. All right. Well, I’ll see you. Yeah. Sounds good.

Thanks for listening to the group practice exchange podcast. Like what you heard, give us five stars on whatever platform you’re listening from. Need extra. Join the exchange, a membership community just for group practice owners with monthly office hours, live webinars, and a library of training. Ready for you to dive into visit www dot members dot the group.

Practice See you next week.

Thanks For Listening

Thanks for listening to the group practice exchange podcast. Like what you heard? Give us five stars on whatever platform you’re listening from. Need extra suppor? Join The Exchange, a membership community just for group practice owners with monthly office hours, live webinars, and a library of trainings ready for you to dive into visit www dot members dot the group practice exchange dot com forward slash exchange. See you next week.


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* I am an affiliate for some of the businesses I recommend. These are companies that I use in my own group practice, and make recommendations based off of my experience with them. When you use some of these companies through my links, I receive compensation, which helps me continue to offer great free information on my podcast, blog, Facebook group, and website.

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Meet your host


Maureen Werrbach is a psychotherapist, group practice owner and group practice coach. Learn more about her coaching services here:


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