You have to spend money to make money. This tenet of business is as true now as it was when my dad gave me a loan to cover the start-up costs for my lemonade stand back in third grade. And like many small business owners, I had a tough time forfeiting nearly half of my revenue to cover the cost of the lemons and sugar (it was a slow day on the cul-de-sac, and despite my best negotiation efforts, my mom wouldn’t let me set up shop on the high-traffic street a few blocks down the road).
If you’re a PT private practice owner, you’re probably all-too-familiar with the seemingly continuous disappointment of watching your sweet, sweet revenue pour out of the bank like lemonade from a pitcher—but where, exactly, is it going? After all, you covered all of your expense bases in your budget—at least, you thought you did. But all the QuickBooks savvy in the world can’t protect your profits from the following sneaky budget sucks:
1. Legal Expenses
If you ever find yourself in court—and fingers crossed that you don’t—you could be out thousands of dollars. As this Small Business Trends article explains, the cost of a lawsuit isn’t limited to attorney fees: you also could face expenses associated with court settlements and insurance rate hikes. And outside of the courtroom, even a small oversight—like creating signage that violates a city ordinance—could end up costing you a decent chunk of change. That’s why it’s important to invest in legal consultation upfront, both when you’re starting your business and when you make any significant changes that could have regulatory implications. At the very least, make sure all of your employee and patient documents, contracts, disclosures, and waivers are air-tight—before you find yourself at the center of an expensive legal dispute.
2. Employee Turnover
For most business owners, employee salaries and benefits packages make up a substantial portion of the annual budget. What you might not realize, though, is just how expensive it can be when an employee leaves your practice. Sure, you might experience a temporary drop in payroll expenditures, but as this Small Business Trends article points out, you also must contend with:
- Productivity loss. For example, if you suddenly lose a staff therapist, you may lose patient appointments—or even patients themselves if they decide to follow that therapist to his or her new clinic.
- Recruiting. If you’re in a pinch and trying to hire someone ASAP, you may have to pump some advertising dollars into promoting the position. Plus, the process of sifting through applications and conducting interviews takes time away from your actual job duties—which may include treating patients. And that all adds up to lost revenue.
- Training. When you hire someone to fill a vacancy, it could take time for him or her to adjust to your processes and learn how to use your tools and equipment. And as good ol’ Ben Franklin once said, “Time is money.”
Obviously, the best way to combat these costs is to prevent employees—especially the good ones—from leaving in the first place. For tips on how to retain top talent, check out this blog post.
As a business owner, you have to write a lot of checks—to employees, landlords, and utility companies, to name a few. And if you’re a smart business owner, Uncle Sam is on that list, as well—and not just during tax season. According to this Under30CEO article, “Often, business owners hold-off employing a tax service until April rolls around; however, this may not be best practice.” And on the topic of services, the same article strongly discourages do-it-yourself tax prep, as business taxes are much more complex than personal taxes: “While high quality tax services can be expensive, a mistake on your tax filings can be even more costly.”
And there is plenty of room for mistakes. As this Hiveage article explains, in addition to paying tax on your profits and—depending on how your business is classified and where it’s located—forking over an annual LLC fee, you may need to pay:
- payroll tax,
- property tax, and
- sales tax.
4. Association Memberships and Industry Conferences
We’re big proponents of APTA membership—after all, if you’re a physical therapist, the APTA is your association, and it’s the industry’s most powerful voice in advocacy. However, annual membership is a bit pricey—and if you add on state chapter and section membership, it’s even spendier. Plus, if you’re a practice owner, you may cover—either fully or partially—employee memberships as an extra perk.
Even if you’re feeling a budgetary pinch, that’s one expense you definitely don’t want to trim: as WebPT president and cofounder Heidi Jannenga writes in this Founder Letter, “It might be tempting to cut a local or national APTA membership from your benefits package. However, I can’t advise against this one enough. Doing so diminishes the advocacy power of our profession—which we really can’t afford to do.” The key to getting your money’s worth is ensuring that you cash in on exclusive, members-only discounts—like the ones available for continuing education courses.
And speaking of getting your money’s worth: if you decide to attend any industry conferences, make sure you choose the ones that give you the biggest bang for your buck—not only in terms of networking opportunities, but also with respect to educational offerings. Also, keep an eye out for events that cater to your specific interests as a physical therapy business owner—like this one (be sure to use code “WebPTblog” at registration to snag $75 off). That way, you have the best possible chance of gleaning useful, actionable insight that’ll have an immediate—and positive—financial impact on your practice. After all, conferences aren’t cheap—especially when you add travel, meals, and lodging on to the registration fee. But, the payoff could be well worth the price.
5. Equipment Repairs and Replacements
Anyone who has started a physical therapy practice knows that high-grade medical and exercise equipment often comes at a high cost. “The basic equipment includes treatment tables, which retail from around $1,500 each, fitness equipment such as upright bicycles costing from $800, and treadmills, which start at $1,800 each,” this Houston Chronicle article explains. Prices for sophisticated treatment machines are even steeper: the same article notes that ultrasound muscle stimulators sell for “around $3,600 each.” Yikes. And when crucial treatment equipment goes on the fritz, you have no choice but to repair it—or, if the damage is bad enough, replace it altogether. Those unplanned expenses can add up. So, to extend the life of the equipment you have, make sure you’re properly servicing and maintaining it. Or, if you’re looking for a more budget-friendly alternative to an outright purchase, consider leasing instead. (Check out this blog post to learn more tips for furnishing your therapy practice without breaking the bank.)
In this day and age, it’s tough to run a private practice on paper alone. Technology is essential to streamlining and optimizing operations in the modern business world. Of course, software solutions—the good ones, anyway—aren’t free. But if your practice uses a practice management system that charges per-chart or per-patient—or if the vendor tacks on extra fees any time you need customer support—then your monthly bill could be a real pain in the pocketbook. If you’re already in that boat, consider switching to a system that features straightforward pricing on a per-provider basis, free support at no extra cost, and built-in compliance and business reporting to help you maximize the amount of revenue you get to keep.
Whether you’re hawking fresh lemonade or providing life-changing physical therapy treatment, running a business costs money—and it’s important to know exactly what those costs are. That way, you can work to keep them at a minimum. So, if you’re feeling a budgetary squeeze, look beyond the obvious; you might just find that the path to your financial sweet spot is clearer than you thought.
What are your practice’s biggest hidden costs? Share your experiences in the comment section below.