Know your numbers - Essential for all business owners

Are you frustrated that your practice is ‘busy’ but just can’t seem to figure out why it’s not profitable?
Running a purely service-based practice with no stock or materials makes for a simple business model, there are no shelf lives to worry about, no big upfront costs with pre-orders and no worries about what items will and what items will not sell.

However, this is a trap if not considered properly. In a quest to improve service and experience for patients as well as a little massaging of the ego, chiropractors tend to spend and spend, getting into the trap of having to increase adjustment volume and fees to make overheads and costs.

There is often the wonder, ‘how am I seeing so many people, bringing in so much money, yet at the end of the year that money is not in my account?’

It is quite simple; ‘what gets measured, gets managed’. It is essential to know your numbers from your minimum adjustment fee, to your total staff wages, your break even points and expected profit. This will enable you to see your blind spots, those areas of the business that have the ability to creep up on us, out of the blue and have us questioning ‘where has all the money gone from my account?’

Therefore, it is time to get savvy about money and face the often scary truth of running a business. What does it really take, when can I afford to spend and when should I be doing everything I can to generate more cash flow? What I will go through is intended for you to use to make a profitable practice, not a busy practice.

Shoot for the moon

I want to start with the premise of shooting for the moon, because you’ll land amongst the stars. One thing my father said to me very early on is to always ‘plan for success’. This is a mentality I use in all my businesses; my aim is to grow them fast, and through what I do provide as much service and value to others as possible so that the financial rewards are abundant. I love this way of thinking and I encourage it, HOWEVER!

My wife and business partner on the other hand is more attuned to the risk, the ‘what ifs’ and the ‘have you considered’? Which if you want to take your business seriously and to the next level is ESSENTIAL. Therefore, having a fine balance of planning for success and being cognizant of blind spots and failure is very important.
To do this, the best way to plan your success is on the minimum financial income per product or service. For example, many chiropractors offer plans and discounts. Base all your numbers on the assumption that everyone will pay the minimum possible and balance that against the probability that your fixed costs will be high, essentially rounding UP every number you have. We will cover that shortly.

Know your numbers

Here are the essential numbers and figures you should know inside and out about your business, you should know these so well that if there is a buying or investment opportunity that comes your way, you can make a quick decision as to whether you are able to say yes or no. You should also know it so well that one glance at your patient numbers tells you if you need to increase cash flow or not.

Essential numbers:

·         Fixed costs – annual/monthly/weekly

·         Variable costs – annual/monthly/weekly

·         Minimum adjustment fee

·         Average weekly paid adjustments

·         Break even figure

·         Break even number

·         Number of weeks you work per annum

Fixed costs – annual/monthly/weekly
This is all the costs that are constant for the business. For example, wages, rent, rates, phone lines, subscriptions, debt, equipment leasing.

Variable costs – annual/monthly/weekly
These are all the costs that vary. For example, promotions, events, cleaning, electric.

Minimum adjustment fee
If you offer discounts and plans, this is the minimum someone could pay per visit. Not the pay as you go fee but the plan with the biggest discount calculated pro rata. For example, a pay as you go fee of £50 with a plan available for 10 visits at a 10% discount would mean the minimum per visit is £45.

Average weekly paid adjustments
Be honest, what is the average number of paid visits per week? This is just for adjustments and should not include new patient appointments, reexams or any other paid or unpaid appointments.

Break even figure
The is the amount of money needed to cover your fixed costs and variable costs combined.

Break even number
This is the number of paid adjustments needed to cover your fixed and variable costs combined.

Number of weeks you work per annum
There are 52 weeks in the year, how many weeks do you intend to take off? The majority would be 4 weeks. Therefore 48 weeks is used in the calculation.

So there you go, some work to do. But trust me, you will transform you practice into a real business when you learn to manage these figures.

With love

Tom