There’s a dirty secret when it comes to growing wealth. Unless you’re extraordinarily lucky or born into money, the key to building wealth is smart, continuous, everyday steps to increase your net worth. The same reality exists for building a private practice. Setting financial goals will help you guide those daily practices as you grow your business.
This can feel difficult when you work for yourself, since you’re often reliant on people walking through your door. Even when you know the goal, achieving them can be a whole other can of worms.
But through precise targets and clear steps, you will find that your goals can grow larger than you ever thought possible.
Goal: Increase revenue by 10% in the next year.
One of the most common financial goals for private practice therapists? Increasing revenue. It’s important to place a specific figure to this idea of growth.
The 10% mark is always good because it’s double digits, it’s more than inflation – so you see actual impact from the increased revenues – and it’s also doable. If you’re finding that you’re getting many new clients, then you can increase it to 20% or 30%.
How do you achieve this? First, make sure to incorporate an annual cost of living increase to your current client base. Whether it’s $10 or something different, you need to raise rates to encourage growth and keep up with inflation.
Be prepared, though, if some clients leave. While most won’t, it’s possible that some will. Now, to replace those clients, make sure to ask for at least $10 more than what you did previously when new clients walk through the door.
If your highest rate asked was $175. Now ask for $185. You can do this, and be prepared to hear ‘no,’ since you’ve raised your rates with current clients. More likely, the person came to you for a reason and will say ‘yes.’
Goal: Reduce expenses by 5% in the next year.
Reducing expenses is another important financial goal for your private practice. It can help you to increase your profits and achieve your other financial goals more easily. Look for areas where you can cut costs, such as office supplies, phone and internet bills, or insurance premiums. Negotiate with vendors and suppliers to get better rates.
Often business owners fall into a trap of thinking they can spend the money since they can just write it off on taxes. Remember, these expenses count as a deduction. So say you’re in the 24% marginal tax bracket. Well then what you spend, you still spend. You just end up reducing that expense by 24% during tax season.
But you’re still spending 76% of the total cost. Reducing your expenses helps far more than deductions.
To achieve cutting your expenses by 5%, take your total expenses for last year and multiply that by .95. Now what can you do to reduce the expenses to that number? Be brutal and honest with this analysis.
Maybe it’s a technology tool that you have but you don’t really need. Maybe you see that you’re spending 90% of your time on virtual appointments, and paying for office space seems frivolous.
It’s a personal conversation, but one you have to be honest about with yourself. In the process though, don’t cut items that you need to provide a quality service and care. It’s not worth it if your client experience will suffer.
Goal: Save for financial independence.
Those in private practice often view retirement a little differently. They love helping others and cannot imagine not doing it. This turns retirement into something that they may or may not want to plan for.
But it’s important to remember that while some people want to work for as long as they can, no one wants to be forced to work for the rest of their life.
That’s why, instead of saving for retirement, let’s talk about saving for financial independence, or the point where you no longer need to earn money or work.
Saving for this goal looks a lot like saving for retirement. But it’s also one of the most important moves a solo practice or small business owner can make. That’s because by doing so, you’re 1) cutting your taxes, 2) keeping more of your revenues and 3) building a secondary income stream.
Look into opening a Solo 401k, a SepIRA or another account, if you don’t have one, to help you achieve this. Set a goal for the amount you can part with every month. Say you want to save $10,000 this year. Divide that number by 12, so $833, and put that aside in the retirement account at the start or end of each month. You can even have this process automated.
Then, as more clients come in, you can increase the amount.
Remember it’s there to protect you in case you don’t want to work. It’s not to force you out of work.
That’s what a powerful goal can provide – a way to build your security, while also strengthening your business.