Part of the process of building a private practice is realizing that your private practice is indeed a business and not just a hobby. And a true business requires attention to a combination of proper mind-set, right attitude, effective marketing and lots of nuts and bolts.
Financial literacy is something I address as essential in my mentoring and practice building programs and coaching services. So many psychotherapists were never taught the business side of practicing psychotherapy and many of those I’ve worked with need a lot of help learning about how to have a healthy relationship with money, how to manage money and how to adjust your thoughts, beliefs and even the emotions you have around and about money matters.
For the purposes of this article, I want to provide some resources and tips that will assist you with the financial end of the process of building the business side of private practice.
5 Tips for Supporting the Financial Side of Building a Private Practice
1. Get intimate with your numbers. I first learned this concept from a coach I hired who is a certified Business Advisor for small businesses, Melanie Patterson. She taught me how essential it is to dive deep into the digits and know exactly how much money you have coming in and how much money is going out.
So many psychotherapists in private practice don’t have this basic thing in place. At one time I didn’t either! Getting intimate with your numbers means tracking and studying the dollars and cents on a daily, weekly, monthly and annual basis in various ways. Look at your online bank account statements regularly. Use money tracking software programs. Here is a list of the best 2018 software you can choose from. If you find yourself reticent or hesitant, consider doing some money-mindset work with a financial therapist or a mind-set coach.
2. Keep financial records easily accessed. In addition to the above mentioned software option list, there are many additional online services and platforms that can help you keep track of all your financial records. If you have other professionals who you contract with you provide services you’ll need to collect a W9 and produce a 1099 at the end of year.This online service called Payable can take care of all of that for you. If you need to show your income for a loan or proof for renting a new office space, you can create paystubs which show proof of your income without having to produce bank statements or simply to help you to make sense of your own records.
Keeping a solid filing system in place will always make this part of your life easier. Nowadays, this can often be achieved by scanning your documents with a computer, enabling you to avoid physical records which could easily be lost. Portfolios can often be the best way to show yourself and others down the line the shape of your financial situation with the business. Here is a great resource about software to keep your finances straight.
3. Use the 3 piece pie accounting system. Ideally you need to divide your income into 3 sections and each section goes into a separate bank account for clear tracking. Section 1 goes into a bank account not to be touched until it comes time to pay taxes. This piece of the pie is only for taxes. If you end up not needing all of it after tax season is over you can divide it in half and put into the other two accounts. Section 2 of your income goes into your bill-paying account for your business. If you don’t need all of it to pay your bills by year end you can move into the third section. Section 3 of your income goes into your personal account for whatever you need or want for yourself, your family friends or your community.
This system will help you to know you will never be behind on taxes, will always have your business bills paid first and you won’t be mingling personal and professional funds. When you are first starting out in private practice you may have to pull from Section 3 to meet your Section 2 bills but eventually if you follow this system you’ll have a clean and clear relationship with your money flowing in and out.
4. Study and practice healthy money mindset. I created a very effective training just for therapists and other helping professionals called Money Matters and I urge you to go download it now. Set aside 2 hours of dedicated time and do the exercises with diligence. And keep reading and studying this topic because if you do not get your thoughts and beliefs around and about money straight, you will unconsciously continue to attract deficit, lack and exhibit unhealthy habits where dollars are concerned.
5. Know when to save and when to invest. This goes along with learning how to have a healthy money mindset as I teach in the aforementioned 2 hour workshop but it’s big and important enough to have its own mention in these tips. There is a balance beam you must walk to keep from falling over to one of two sides. The first side you want to avoid is over-saving which may come from fear of not having enough, holding onto your money so tightly that you end up limiting your opportunities to grow and earn more. The other side is over-spending and this is something I like to refer to as leaky bucket syndrome where you end up spending everything you earn as fast as it comes in so your bank account never has a chance to be nourished. Both come from an unhealthy money mindset and both can be corrected with study and practice (see #4 again).
You can learn to walk the balance beam so you are saving just enough to see your wealth grown but you also are knowing when it’s time to invest in a training, coaching, consulting, equipment, bigger office because you know there will be a return on that investment in time. Spending decisions should never be made spontaneously. Be practical. Be smart. Do your research but don’t sit on the fence too long or you’ll just have a sore behind and stagnation. Be mindful of what is in the best interest of yourself and your business when it comes to financial decisions.
If you’d like to discuss whether receiving professional mentoring, consultation or career coaching might be in your budget and best interest please contact me personally and let’s have a meaningful but brief phone conversation.