E609 | Real Life Practice Financial Case Study

In this podcast, we discuss the financials of a successful cash-based physical therapy practice located in a mid-sized market city. The practice has three clinicians plus the owner, who sees around 40% of their schedule, while the other providers see between 70-90% of their schedule full.

Despite the pandemic, the practice had an average of $63,000 in top-line revenue in the first quarter, while the average cost of running the business was around $33,000, resulting in an impressive net profit of $30,000 per month.

The owner was able to achieve both financial independence and time freedom by owning and running the practice. The staff is also compensated fairly, making this business a great example of what to strive for if one is looking to build their business.

The podcast delves into the financial aspects of the practice, highlighting its impressive net profit of $360,000 for the year, which is three to four times higher than what most physical therapists thought they would be making.

The podcast also showcases the importance of building and running a successful cash-based physical therapy practice, particularly during uncertain times like the pandemic.

Overall, this podcast offers valuable insights into the financial aspects of running a successful cash-based physical therapy practice and provides practical advice for those looking to build and grow their own business.

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Podcast Transcript

Danny: Hey, real quick, before we get started, head over to Facebook and join the PT entrepreneurs Facebook group. If you haven't done so yet, we have monthly live trainings going on there. There's an opportunity for you to join in the conversation instead of just listening to what I have to say on this podcast, as well as the people that I bring on.

And it's a really cool place to join about 6, 000 other clinicians that are. Honestly, trying to change the landscape of our profession through these cash and hybrid practices. One other thing that's really cool is we have a guide in there. That's a quick start guide. When you join, you can go and check this out.

There's about seven videos that we've curated that are the most common questions we get in the best case studies that we've found to really help you start, grow, and scale your practice up to seven figures. So if you haven't done so yet, head to Facebook, request to join the PT entrepreneurs, Facebook group.

You have to be a clinician. We're going to check you out. We don't just let anybody in. But if you are head there, go ahead, get signed up. We'd love to have the conversation with you in that group.

So here's the question. How do physical therapists like us who don't want to see 30 patients a day, who don't want to work home health and have real student loans, create a career and life for ourselves that we've always dreamed about? This is the question. And this podcast is the answer. My name is Danny Matei and welcome to the PT entrepreneur podcast.

What's going on guys. Dr. Danny here. We're the PT entrepreneur podcast and today we're talking real numbers on a practice that I helped break down some of the financials with just last week. And I'm going to dive into them with you real quick. Not necessarily share what businesses is coming from.

But this is a all cash based practice that is, I would say in a market city that is pretty well developed as far as the scale of the practice goes. This practice has three clinicians and the provider, the the owner, I would say, who is still seeing probably about a. 40% schedule, definitely not full schedule and probably a little less than half.

I believe this person is seeing patients two days a week. So about 40%. And then with a staff that is probably hovering around an average of 70% of their schedule full right now, they have a relatively new provider who's still building their schedule. They have one provider that's a more senior whose schedule is pretty much maxed out and they have another provider has been around for a while.

A while longer, who is also probably around 85 to 90% of their schedule. Being a full, so what are the real numbers on a business like this? So if you say, okay, midsize market and owner plus three clinicians we can throw these fabricated numbers around all we want, but in real life, what does that look like?

And this is a practice I would say has done a really good job of maintaining solid net profitability and not I guess overdoing it as far as the space that they're in. They're very efficient with the space that they're in and with the profit centers that they have. And they have, very fair comp structures as well.

The people that are working there are making more than they would make working somewhere else. And even though they're generating less per person. If we look at what a cash based provider. In a year, it's probably going to be somewhere between 210 to 250, 000 in total revenue.

Now we take that and we apply that to an in network setting and depending on the volume, that's going to be anywhere between 300 and probably 350, 000 if a clinic is, if that provider is seeing a significant volume. depends on their hospital contracts and all that. But let's just say it's about 100, 000 more they can generate from a gross revenue standpoint per provider than we can do in a cash based practice.

But what you have that's a distinct advantage is you have far less overhead. You have far less required in order to get that money to, to run the business. You can be far more efficient with that. So if we look at the numbers on this practice, like I said, three, plus the owner. And then there's there's one administrative person as well.

I don't think there's anybody besides that. They might have a virtual assistant but one full time administrator. And the real numbers for this practice, or at least over the first quarter that I was looking at helping them break down was an average of 63, 000 in top line revenue and an average, Cost to run the business of 33, 000.

So the actual cost overhead not including taxes was 33, 000 top line revenue or gross revenue was 63, 000. So that leads in net profit per month of three of 30, 000. So 30, 000 per month for the first quarter, that means that they had 90, 000 in profit in the first three months. That's pretty great.

If you look at most businesses, if they're going to be running at, which this would be about a roughly 50% profit margin, I think it's closer to 48%. So 48% profits in the business. That's a really healthy place to be. That allows that business owner to reinvest in the business to to have space for the compensation of the providers to grow, but also to make.

A really good income and living running this, even if it's just one relatively small, efficient office, you're talking about 30, 000 a month pre tax, right? Which is going to be about 360, 000 a year. If they was to hold that for the whole year now It's probably not going to hold out for the whole year.

We know q4 the last quarter of the year is always slower so this q1 is probably a bit inflated, but let's just call it 300, right? Let's say it goes down by 60 000. Let's say 300 000 is the actual net profit of the business for the year That's still an extraordinary amount of money for a physical therapist.

I don't know about you, but when I went to school, I sure as hell thought I was going to make 80, 000 for the rest of my life. That just was the assumption. I'm like, okay, I'll probably make 80 grand working in a clinic. I'm cool with that, and now, we see clinics all over the country and this being in even a midsize market we're breaking down the finances and it's whoa, dude, that's.

That's like a lot more than you probably thought, huh? Probably three times more than what you You thought maybe four times more than what you thought you were gonna actually make is as a clinician and able to do so with really not fulfilling all of the visits, right? Still seeing 40 percent on their schedule roughly but Probably could drop to zero patients if they wanted to, they still like to treat and it's something that they get to do a couple of days a week.

And it's a nice way to have balance between treating and running the business and mentoring their people. But I look at these, I call these kind of like sweet spot businesses. Because for a lot of people, we have this goal with a lot of businesses we work with is to help them grow to a seven figure business.

You don't necessarily have to do that. Like I think it's a bit of a badge of honor on somewhat ego based to be able to say that you've done that. But if we really look at it, like I know plenty of people that have a legitimate, million dollar business and they don't actually net the amount that this business is netting per month.

So it's really not as important what you make as really more important is what you keep. Real numbers. Look at these businesses with a small team in this case, there's four employees plus the owner and they have a. A tight knit group, they they have great culture and, it's a good place to work.

It's a place that's a far better place to work than at a high volume clinic. Pretty much everybody this person is hired has come from a high volume clinic and they know the pain of that and they know how. How good of a position it is within a company like this just because it's just frankly better work by light work life balance, less volume and compensation is at or above where they were at previously.

So it's a win across the board. And this provider, if nothing else ever changes, if they're even moderately decent at investing. If they just literally do the most conservative investing, like they don't have to be Warren Buffett, like they should be able to be a financially independent person very easily and assuming they're living below their means, right?

If they're spending 300, 000 a year, then there doesn't really matter what they do. They're never going to actually be able to save enough money and invest enough money to develop financial freedom. But if you're looking at where's the, the actual target, right? What does this look like?

If you can build a business that has three staff members and yourself, this is also, this isn't even at capacity for the business, by the way. Like they probably can go up another. 10 to 15, 000 per month as they increase the the schedule consistency of two of the other providers. And then there's some other profit centers they can have in there.

So this is a business that, even if they just stayed right here, even though they could go up, this is a place that somebody should be able to generate. Generational family change as far as wealth is concerned, be able to support other business owner or other clinicians and create really meaningful jobs for them and generate, time freedom for themselves and them, their family and also build an entity that other people would.

An investor would buy this private equity would buy this. Another bigger clinic would buy this. You could sell this to your staff. If you wanted to go that route one day you're building enterprise value. So I just want to share this as a case study, because this is a good example of, where you're at and not everybody has financials that look like this.

I see a lot of people that are going through growth phases and their numbers are. Far lower on the the net revenue side and then i've seen people that you know They're doing a lot more work themselves and their net revenue is higher than that but I thought this was a good example a good case study to share of real numbers because money is important.

There's no doubt you need money to pay for things in life. You need money to be able to hire people so you can create time freedom. So you have to have the profit. Even when my wife worked at a nonprofit that she was running called operation home front, they had the same and it was no money, no mission.

Cause they had to fundraise, and if you've ever had to do fundraising, it's not the most fun thing to do in the world, but no money, no mission. That's the simplest thing. As far as a nonprofit goes, like if we don't have money, we can't help people. And if you don't have money in your business, you can't hire people.

You can't help people in your business either. Hope you like this one. It's a real case study as far as breaking down the finances of it, what you're looking for. If you're really going that route or if you're building towards it, it's a good example of what to shoot for.

Hey, peach entrepreneurs. We have big. Exciting news, a new program that we just came out with. It is our PT Biz part time to full time five day challenge. Over the course of five days, we get you crystal clear on exactly how much money you need to replace by getting you ultra clear on how much you're actually spending.

We get you crystal clear on the number of people you're going to see and the average visit rate you're going to need to have in order to replace your income to be able to go. Full time, we go through three different strategies that you can take to go from part time to full time and you can pick the one that's the best for you based on your current situation.

Then we share with you the sales and marketing systems that we use within our mastermind that you need to have as well if you want to go full time in your own practice. And then finally, we help you create a one page business plan. That's right, not these 15 day business plans. You want to take the Small Business Association, a one day business plan.

It's going to help you get very clear. On exactly what you need to do and when you're going to do it to take action. If you're interested in signing up for this challenge, it's totally free. Head to physicaltherapybiz. com. com forward slash challenge, get signed up there. Please enjoy. We put a lot of energy into this.

It's totally free. It's something I think is going to help you tremendously as long as you're willing to do the work. If you're doing the work, you're getting information put down and getting yourself ready to take action in a very organized way. You will have success, which is what we want. So head to physicaltherapybiz.

com forward slash challenge and get signed up today.