The 6 Money Mistakes You're Making in Your Practice
It's a little presumptuous of me, isn’t it? Assuming you’re making the same mistakes I did. But here’s what I’ve seen as I’ve helped people build their practices over the last few years: I see patterns. And the money side of private practice often has the most predictable problems.
You may remember that January is self-care month here at Abundance. You’re probably no stranger to finances impacting your self-care. Getting your finances straightened out can create so much freedom and let you B R E A T H E so much easier.
Let’s dive into a few here:
The vast majority of the time it’s fear. It’s a concern about money/benefits/health insurance. It’s the insecurity of jumping in and relying on themselves completely. The simple answer doesn’t soothe the issues underlying this, but I’m going to give it to you straight anyway. You’ll make plenty of money to be able to take lots of time off (I take 6 weeks a year!), pay for your own health insurance (my family’s is $1,400/month, no problem aside from resenting it), and y’know what, you can count on yourself WAY more than you can count on any agency with their ever-changing funding sources and unrealistic deliverables. You and your family will always be more important to you than you will be to an employer. I’m not a math whiz, but since the $20/hr you're making at your agency job is less than the $100+ you’re making in private practice, odds are you’re losing money when you are at the place where you can’t squeeze any more private practice clients into your schedule.
Let’s look at this mathematically.
Choice A: You stay in your $40K/year job because you have no money to invest.
Choice B: You take out $15K in interest free credit for 18 months. You invest $1,600 in your first 4 months of rent. You spend $500 in craigslist furniture + hand me downs. You invest $500 in networking coffees (if your extraverted, less if you’re introverted). You join a local Board of Directors in your niche that expects at least $100 donation a year. You hire a business consultant in the field who will help you get full significantly faster (this varies wildly from $5,000 to $500). We’ll estimate $1,800 since that’s the cost of my upcoming groups and they’re awesome. You’ve got $10,500 left to float you until you can pay yourself. I’d love to estimate when that would be, but it depends on where you live, if you’re taking insurance, if you’re properly niched (the more honed in on a niche the faster you’ll build), and how much time you’re putting into your practice (more isn’t always better… I don’t want you working 60 hour weeks, but 10 hours isn’t going to cut it. 30 hours is reasonable).
Ok, so let’s say you use all $15,000 and you need to pay it off by 18 months.
My goal for my insurance-paneled practice-builders is that they are “full” (by their standards) by 6 months. Let’s call 23 clients per week full for this example.
Let’s start from “full at month 6” and look at the rest of the year since the first 6 months is building and harder to estimate. Let’s say insurance reimburses you $100 per session (my average insurance reimbursement has been $109 per session). Now let’s add a 2 week vacation, too. So from month 6 to month 12, you’ll pull in $55,200 in 6 months (even though you took 2 awesome weeks off). Which means when you stay full the following six months and take three weeks off (‘cause balance is key!) you’ll make $108,100. Maybe we can stay conservative and make that more of a round $100,000 because of random unfilled slots. Perhaps even more conservatively, we assume that in those later 12 months of interest free financing you make $100,000 total while working less than 30 hours per week. That doesn’t even include the very first 6 months of building. Do you see how leveraging $15,000 of credit can make a ton of sense?
So rather than getting on THAT soap box (believe me, I can hang out there all day), I’ll instead share that I see this exact thing with money. You save and save and feel so noble and good and then boom, you blow at Target or REI or the Anthropologie sales rack. When you do this in your practice you wind up with the 73 books you’ve been meaning to read since grad school (and still won’t), an unnecessary scent diffuser or throw pillow, and a new Macbook. If this is your pattern recognize it ASAP and build in a little fun money. Buying a book or two a month isn’t going to bankrupt you and you’ll actually get to read them.
If you pride yourself on having a ridiculous savings account, I want you to consider investing some of that money in yourself and your practice. Savings is meant to be spent eventually. This is the perfect thing to spend savings on since, as we demonstrated above, it pays off exponentially.
If you ostrich, here’s what I want you to do no matter where you are in your practice: At the end of each month, I want you to print out your business bank account’s bank statement. I want you to look at how much you made and write it in big bold numbers at the top of the page. I want you to go through every single expense and itemize them so you know what you’re spending on networking, office expenses, continuing ed, etc. I love a spreadsheet for this stuff so you can track overtime. Get clear every single month. Adjust as needed. There are some months I’ve done this and was blown away at how much I spent on networking (you know I love it, right?) and reigned it in the next month to balance it out. If you hate seeing the low income numbers now, hiding from them doesn’t help. Someday those monthly numbers may be 5 figures. It’s a lot more fun then.
Financial self-care is just as important as any meditation practice or 30 second pause or engaging in your own therapy. Get on it!
Do you make any of the mistakes? If so, what’s your plan to change things up? Let us know in the comments.
Allison Puryear is an LCSW with a nearly diagnosable obsession with business development. She has started practices in three different states and wants you to know that building a private practice is shockingly doable when you have a plan and support. After retiring her individual consultation services, she opened the Abundance Party, where you can get practice-building help for the cost of a copay. You can download a free private practice checklist to make sure you have your ducks in a row, get weekly private practice tips, listen to the podcast, hop into the free Facebook Group. Allison is all about helping you gain the confidence and tools you need to succeed.
You may remember that January is self-care month here at Abundance. You’re probably no stranger to finances impacting your self-care. Getting your finances straightened out can create so much freedom and let you B R E A T H E so much easier.
Let’s dive into a few here:
- Not having enough money to float you while you build
- Holding on to their full time job even though it’s costing them money.
The vast majority of the time it’s fear. It’s a concern about money/benefits/health insurance. It’s the insecurity of jumping in and relying on themselves completely. The simple answer doesn’t soothe the issues underlying this, but I’m going to give it to you straight anyway. You’ll make plenty of money to be able to take lots of time off (I take 6 weeks a year!), pay for your own health insurance (my family’s is $1,400/month, no problem aside from resenting it), and y’know what, you can count on yourself WAY more than you can count on any agency with their ever-changing funding sources and unrealistic deliverables. You and your family will always be more important to you than you will be to an employer. I’m not a math whiz, but since the $20/hr you're making at your agency job is less than the $100+ you’re making in private practice, odds are you’re losing money when you are at the place where you can’t squeeze any more private practice clients into your schedule.
- The “debt is bad” mindset.
Let’s look at this mathematically.
Choice A: You stay in your $40K/year job because you have no money to invest.
Choice B: You take out $15K in interest free credit for 18 months. You invest $1,600 in your first 4 months of rent. You spend $500 in craigslist furniture + hand me downs. You invest $500 in networking coffees (if your extraverted, less if you’re introverted). You join a local Board of Directors in your niche that expects at least $100 donation a year. You hire a business consultant in the field who will help you get full significantly faster (this varies wildly from $5,000 to $500). We’ll estimate $1,800 since that’s the cost of my upcoming groups and they’re awesome. You’ve got $10,500 left to float you until you can pay yourself. I’d love to estimate when that would be, but it depends on where you live, if you’re taking insurance, if you’re properly niched (the more honed in on a niche the faster you’ll build), and how much time you’re putting into your practice (more isn’t always better… I don’t want you working 60 hour weeks, but 10 hours isn’t going to cut it. 30 hours is reasonable).
Ok, so let’s say you use all $15,000 and you need to pay it off by 18 months.
My goal for my insurance-paneled practice-builders is that they are “full” (by their standards) by 6 months. Let’s call 23 clients per week full for this example.
Let’s start from “full at month 6” and look at the rest of the year since the first 6 months is building and harder to estimate. Let’s say insurance reimburses you $100 per session (my average insurance reimbursement has been $109 per session). Now let’s add a 2 week vacation, too. So from month 6 to month 12, you’ll pull in $55,200 in 6 months (even though you took 2 awesome weeks off). Which means when you stay full the following six months and take three weeks off (‘cause balance is key!) you’ll make $108,100. Maybe we can stay conservative and make that more of a round $100,000 because of random unfilled slots. Perhaps even more conservatively, we assume that in those later 12 months of interest free financing you make $100,000 total while working less than 30 hours per week. That doesn’t even include the very first 6 months of building. Do you see how leveraging $15,000 of credit can make a ton of sense?
- The restriction/binge cycle
So rather than getting on THAT soap box (believe me, I can hang out there all day), I’ll instead share that I see this exact thing with money. You save and save and feel so noble and good and then boom, you blow at Target or REI or the Anthropologie sales rack. When you do this in your practice you wind up with the 73 books you’ve been meaning to read since grad school (and still won’t), an unnecessary scent diffuser or throw pillow, and a new Macbook. If this is your pattern recognize it ASAP and build in a little fun money. Buying a book or two a month isn’t going to bankrupt you and you’ll actually get to read them.
- Money-hoarding in general
If you pride yourself on having a ridiculous savings account, I want you to consider investing some of that money in yourself and your practice. Savings is meant to be spent eventually. This is the perfect thing to spend savings on since, as we demonstrated above, it pays off exponentially.
- Ostriching.
If you ostrich, here’s what I want you to do no matter where you are in your practice: At the end of each month, I want you to print out your business bank account’s bank statement. I want you to look at how much you made and write it in big bold numbers at the top of the page. I want you to go through every single expense and itemize them so you know what you’re spending on networking, office expenses, continuing ed, etc. I love a spreadsheet for this stuff so you can track overtime. Get clear every single month. Adjust as needed. There are some months I’ve done this and was blown away at how much I spent on networking (you know I love it, right?) and reigned it in the next month to balance it out. If you hate seeing the low income numbers now, hiding from them doesn’t help. Someday those monthly numbers may be 5 figures. It’s a lot more fun then.
Financial self-care is just as important as any meditation practice or 30 second pause or engaging in your own therapy. Get on it!
Do you make any of the mistakes? If so, what’s your plan to change things up? Let us know in the comments.
Allison Puryear is an LCSW with a nearly diagnosable obsession with business development. She has started practices in three different states and wants you to know that building a private practice is shockingly doable when you have a plan and support. After retiring her individual consultation services, she opened the Abundance Party, where you can get practice-building help for the cost of a copay. You can download a free private practice checklist to make sure you have your ducks in a row, get weekly private practice tips, listen to the podcast, hop into the free Facebook Group. Allison is all about helping you gain the confidence and tools you need to succeed.
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