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Private Practice Startup Podcast
Episode 169: What to Track to Have a Successful Business
00:30:53
Julie Herres
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A
Welcome to the Private Practice Startup Podcast where we help ambitious private practitioners across the globe to brand themselves and grow their dream practices. We chat with successful private practitioners, business coaches and marketing experts, bringing you tons of practice building Ninja tips. Visit privatepracticestartup.com for awesome resources, attorney approved private practice paperwork, and our signature marketing E course. Here are your co hosts, Dr. Kate Campbell and Katie Lemieux.
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Hey.
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Hey, Startup Ninja. Welcome back to another episode of the Private Practice Startup podcast. We are excited you're here. We're excited to be here. We're going to be talking about accounting and KPIs and making your private practice successful today. I mean, this is right up my alley and my jam. So I'm excited about this podcast. But before we get started, we hope you guys joined us last week as we talked to Barbara Griswold about what is missing in those progress notes. We know you guys have most often a love, hate or hate hate relationship with notes, but Barbara gives some breakdowns of what are some essentials that you need to have in your notes and what sometimes therapists are struggling with when it comes to getting notes done.
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C
So make sure you listen to that.
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B
Because love it or hate it, progress.
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Notes are here to stay. Guys, that is the truth. But before we get started, if you are new here, we want to say welcome to our Startup Nation family. And if you're a loyal listener, welcome back. For our new guest, we want to gift you something. We would love to gift you our A to Z cheat sheet. The essentials for building and growing your dream practice. You can grab that by heading over to Private PracticeStartup.com, head over to the Resources tab and there you'll see it standing out there waiting for you. Go ahead and enter your information and that will not only come with the A to Z cheat sheet, but the five days of practice building emails. We don't want anything from you, we just want to give to you and really support you on your private practice journey, wherever you may be. So our guest today is Julie Harris and she is an accountant and also the owner of Green Oak Accounting. The firm provides full service accounting to private practice owners throughout the U.S. julie and her team have worked with hundreds of private practice owners, so they are uniquely positioned to be trusted advisors to their clients. Fun fact about Julie, she started her own business to have the flexibility her family needed with small kids. Now she's proud to offer a flexible and family friendly workplace to a team of six. That's awesome. Congratulations for your growth. So exciting. Thank you.
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B
I'm so happy to be here.
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C
Yeah, glad to have you here.
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A
We're going to be diving in, talking about what to track to have a really successful private practice today. So, Julie, why don't we just kind of get started on your story and then we're just going to jump into what we talk about KPIs. I know that was a new word to me until I did some business coaching, which is key performance indicators. We were kind of alluding to this on the last podcast, talking about the old saying, if you didn't document, it didn't happen. Well, it's the same is true in business. If you're not documenting and tracking your progress and really looking and analyzing it, it's really hard to change it. So share with us a little bit about your journey into becoming an accountant. Working with therapists, all that good stuff.
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B
Yeah, well, so my foray into private practice accounting was kind of accidental. When I started my practice years ago, I had just one practice owner as a client. And then over months and years, he sent me more and more referrals, and then those referrals sent me more and more referrals. And I started noticing some really significant trends among the successful practices that I was working with and among the ones that were struggling as well. So I really set to figure out what those numbers meant. And that's where some of these KPIs come from, is just noticing what successful practice owners are doing.
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A
I know that when we were trying to figure out a topic, like, one of the things that excited me is that you. One of the cool things that I thought was, you know, not only are you an accountant, but you're really looking at these things that help businesses become successful. And you were talking about, like, what bottlenecks businesses and like that. So I know that we share the topics with Startup Nation and we allowed them to vote on what they wanted most. And so this is again, another topic that you guys really wanted to hear about.
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B
So go ahead, Kate.
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C
Yeah, I was going to say I'm excited about this topic too, because we haven't had anybody talking about KPIs specifically on the podcast. And it is so important to know what's going on with your numbers in various capacities in terms of your marketing, in terms of, you know, the income that you're bringing in, your expenses, and all sorts of other aspects. Because if you don't know what it is, then you can't know what's working, what's not working, like Katie was saying earlier. So let's Dive right in, Julie.
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B
Dive in. Yeah. And some of the KPIs we're going to be talking about are financial. Obviously, for most KPIs, the base is some kind of financial information. So if you don't have your financial in house in order, this often is not. KPI's is not necessarily the place to start. But if you have your financial data, this is usually something you can calculate pretty easily or set yourself up to calculate easily. And There are some KPIs that are a little less tangible where it's not. You're not necessarily shooting for a specific metric, but you're just trying to get a baseline for what's normal in your practice. So you can see how changes in the business will change the KPI. So, and it's not just useful to track it, you've got to look at the information and you have to do something about it too. So that's my disclaimer is like, do something about it too, right? And so I usually recommend when you're tracking KPIs, looking at starting with one or two things, it can be really exciting and easy to say, I'm going to track all the things. So start with one or two and then slowly work your way up so you don't get KPI fatigue. So my first one is average fee per session. And it sounds so simple, right? It's so, so simple. But it's so surprising how often practice owners don't have a good grip on what that is. So it's a really easy formula. It is just looking at your income for the month, look at how many sessions you had for the month. Divide income by sessions, Right? But usually, almost always, practice owners think this is higher than it actually is. So how you would want to use this, like, what can you actually do with this information? Right? With this KPI is once you have that, like, let's say you find out an hour of your time is worth $85 an hour, as you get busier, then you want to outsource some tasks. Like, that's a good number to have because you know, if you can exchange one hour of your time at $85 for paying someone else $25 an hour, that's a win for everyone involved, right? You get an hour back that you can make more money. So average fee per session, good place to start. Average overhead per session, I think is a really important one as well. And that's also easy to calculate. If you've got financials where you would look at in a month, you can also do this in a week. But a month tends to be a little less overwhelming. You just look at what's your total overhead in one month. And again, how many sessions did you have in that month? So if you had 1500 in overhead for one month, 80 sessions, that's $18.75 per session, right? So that's your baseline. And now you can track it to see if it goes up and goes down. So anyone can track this because you can use this information to figure out how much profit you're making for each session. You can figure out how much to pay yourself. If you're ever thinking of hiring, you can use this baseline to figure out how much you're going to pay someone else to do the work. So there's a lot of different uses to that info. And you generally, I recommend your overhead for solo practices should be somewhere between like the 25 to 50% mark. No more than 50%. And that tends to be more like when people are just getting started. And for group practices, those number would be. Those numbers would be different.
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A
So what, you know, what's interesting is as I hear you kind of Talking about the KPIs and the overhead and stuff like that. And I remember when I went through my year of business coaching, a lot of times, like when you track your overhead and you're like, oh, expenses, like, our immediate thought goes to, where can I cut? Right? And that's great. But if you aren't taking insurance is, you know, you actually generate way more revenue by increasing your fee, right? So, yeah, you can look at cutting expenses, but also looking at what it is that you want in your business. You know, Kate and I really talk about starting with what type of life you want to create, right? How many hours you want to work a week, how many weeks of vacation or sick time do you want to plan in? Those things are really important. What do you want to say for retirement? Those things are like the bigger picture. Looking at that stuff and Julie's kind of really talking about the super nitty gritty of those things. And you know, it's funny, like, as I hear you talk about a lot of times, business owners have a different idea of actually how much they make per session. It reminds me my spouse is a real estate agent and I constantly hear, like, our perspective of things as humans is always different than what it actually is. Right. And you, when we actually take time to really look at the numbers, then we can kind of go through things. I know Kate and I just met last week and we're looking and planning for 2020 and I had a lot of anxiety until we actually looked at the numbers. Then the anxiety didn't decrease. But when we looked at the numbers then there's opportunity to say like, okay, here's where we're at and what do we need to do if we want X or where else can we do Y? And it's just really helpful. What do you find kind of prevents people from looking at these things?
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B
So I think specifically in mental health there's this fear of the numbers. And the numbers are your friend. They're trying to tell you a story. You just have to look at it and figure out what it is. And that's where a firm like ours can help as well. But there's often this ostrich syndrome where you're just putting your head in the sand. I'm like, okay, if I don't look, it's not a problem. Nothing is happening. So don't be afraid. There's no need to be afraid of the numbers. They're there to help you.
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C
It is so helpful to look at them. And coming back to your first point that you shared about knowing what your average hourly rate is. And sometimes therapists just charge one flat rate for fee for service when they're paying, when it's private pay and it's on insurance, so it's easy for them to know or they need to do the calculations like you had shared. But when you look at that and you say, okay, so my hourly rate is $200 an hour or $100 an hour or wherever it lies along the continuum and you're looking at all the things that you're doing in the business and how time consuming certain things are. To be able to look at hiring a VA or an assistant or outsourcing things like you were talking about earlier, it becomes a no brainer. And that's something that a lot of clinicians really struggle with, is spending the money on something like that and they just bootstrap it and they want to do it all themselves. And that really is at your detriment because if you're to outsource those smaller tasks or the things that you don't have to be doing, the time consuming things that you don't love to be doing, it clears up your time to really see more clients and to be able to make more of an impact and make more income as well. And then looking at the I like how you were talking about determining the overhead and really looking at your hourly rate and how much that is for overhead and I can remember going through the group. I have a group practice in a team of 20 and I can remember going through the financial analysis and forecast and really looking at all of those numbers and having that be something that dictated how much I'm charging for the room rental rates. And if I didn't know those numbers, I wouldn't know what to charge. It would just be like pie in the sky number, which doesn't really make sense. So those are really helpful that you're sharing.
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A
And before we dive into the next one, let's just take a quick break.
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For our sponsor, there are so many ways to keep your practice organized, but TherapyNotes is by far the best. They're easy to use, secure platform, lets you not only do billing, scheduling and progress notes, but also create a client portal to share documents and request signatures. Plus they offer amazing unlimited phone support. So when you have a question, they're there so you can get help fast. Get started with TherapyNotes today, trusted by over 60,000 professionals. Go to therapynotes.com and enter promo code PPS as in Private Practice Startup and you'll get two months for free. Also, you can listen to episode 54 where we interviewed Brad Pleiner and took an in depth view into their ehr. Are you feeling stuck, overwhelmed and frustrated not knowing where to start or how to grow and scale your private practice? You've spent years in school and a ton of money getting your degree, but you weren't taught the necessary branding, marketing and entrepreneurial skills needed to be successful in private practice. We get it.
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We've been there. We're Kate and Katie from the private practice startup. We've spent a crazy amount of money and over a decade learning and perfecting a proven marketing strategy that works. Let us teach you the step by step proven system to help you fill your practice with the clients you love and live the life you've always dreamed of. Visit private practicestartup.com look for the e Course tab to learn more and see the amazing results our coaches have been achieving.
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All right Julie, take it away.
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A
What's the next one?
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Okay, so next one is Burn rate and this is a great KPI for people who are just starting right where your revenue may not be in line with your expenses yet, but if you look at any one month period, if you look at your NCASH versus your beginning cash, if that number is negative, then you're burning through money, right? And so just by knowing like you probably had a budget when you started your practice, if you know what your burn Rate is if you know how much money you've got available and how much you're burning through, then you know how long you've got, like how long you have to really turn things around. So negative burn rate is not a good thing. A positive burn rate is a good thing. That means that you're accumulating more money in the business as the months go on. But the burn rate can sometimes be an indicator of other things. Not just that you're starting, but it can be an indicator of a lot of debt or too much personal spending. So that's one that can kind of hide in there where you think, oh, it's fine, I make it on the books on the profit and loss. You're making money, but there's never any money left because you're bleeding the business dry. That happens a lot too. So the burn rate can look at that.
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A
So is burn rate like a financial word? I've never heard that.
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It's a startup term. So it's something I like to bring up for people who really are starting up, which is appropriate for startup nations. So yeah, when you're starting a business, how much time do you have based on the cash? How long can you operate the business based on the cash that you have?
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A
And how do people get a snapshot of that? Does that. Is it just like it's actually really.
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Yeah. So you could look at your bank statement. Last day of the month minus first day of the month. Is it going up, is it going down? Generally you want it to go up where you're just accumulating more cash in the business account. And it doesn't have to be a lot, but if it's more than zero, that's a good thing.
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All right, lead us through the next thing.
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All right, another one that I love is average cost of acquisition and this is a great KPI to measure if you are a private pay practice. Generally speaking, I noticed that insurance based practices don't tend to spend a lot of money on advertising. So it's not really something that's relevant. But if you are private pay, chances are you're doing some form of advertising. And so you would want to look at all of your marketing costs and divide that by the new intakes in your practice that month. And this is one of those KPIs that's not super scientific. I couldn't tell you this is where you need to be. This is what that number should be. But what you're trying to do here is establish a baseline for your practice. So you kind of have a sense of is it going up or is it going down? But when you make a significant change in your marketing, let's say you double your marketing budget one month, you can track then, because you have that baseline you can track, does that mean I also got double the intakes or does my acquisition cost stay about the same? Like if it was always $150 per new client, does it stay there or does it skyrocket or does it go down? Because if it's staying exactly the same, then keep spending money, right? Because every, every dollar that you spend is bringing in new clients. But if all of a sudden it goes way up, then you can at least take a step back and decide, you know, is this modality, whatever you're using for your marketing, is this working or not? And so you can save a lot of money just by having those numbers. It's not based on a feeling, it's based on actual, actual numbers.
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It's funny, I think about like when Kate and I talk about like numbers, whatever we're talking about, usually it always starts with a feeling, right. We have a, the discussion and we say something like, yeah, I'm just not really sure if the money that we're putting towards, you know, more market for podcasts is working. And then we're like, let's go to the numbers. And the numbers tell usually a different story, but they also help direct us to where we want to go and what we want to do based off what we desire. Right. And without the numbers, we're just shooting in the dark based off feelings. And feelings aren't facts, folks.
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C
Yeah, it's so interesting that you're bringing that up because I'm kind of immersed in that. In my group practice right now, I do a lot of digital marketing and I don't typically do any print ad marketing. And I just, I'm in the middle of a six month commitment for a month to month advertisement in a really affluent magazine down, down here in South Florida. And it's, it's expensive, it's really expensive each month. And I'm tracking all of the, all of the numbers to be able to know whether this is going to be a good reinsurance on our investment, whether this is going to be a marketing strategy that will continue or not past the six months. So. Yeah. Just to share an example.
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Yeah. Well, and the great news is if it's working and you know, then you know exactly what you need to do to bring more clients and right. Then it's not as scary to spend that money because you know, it's working. So it's always exciting to me. Yeah. That it's telling you something. I also, here's another one that I really like and it is space usage. And this one comes into play a lot of times when a client will say, I want to grow the practice, I think I need a bigger space. Right. That's usually how that conversation starts. And then we look at space usage and it's not a financial metric. Right. We're looking basically at patient hours divided by the actual available hours. So we look at the space. Do you have slots available? You know, 50 minute slots between 8:00am and 9:00pm, for example. Right. And not anyone. No, no one person is working all those times. But technically that is available. And then the building is open seven days a week. So that would be 91 spots. And then, you know, if you're seeing 25 clients a week, then that means that your space is, is sitting empty 53 hours out of the week if you're closed on Sunday, for example. So your space is actually empty 60% plus of the time and is only being used some of the time. So this is a case where you think you have a space problem, but you actually just have a scheduling problem where if you look at the schedule and you really could hire someone on and make it work in the existing space that you have. And that's not always the answer. If there's plenty of cash and there's room to grow and there's an expansion plan, then that's great. But this is something I love to look at when a client is not. They're not bringing in a ton of money and they want to expand and that's really going to financially put a strain on the business. This is something great to look at where you can bring in an entire new clinician without spending any more money on rent.
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A
That's so interesting. As you're talking about it, I was getting a feeling, like an excitement feeling like, oh, 53. Okay. Then we would have to figure out where to put that. Like that's exciting. Right. And the numbers begin to share the story with you and help you understand. And the cool thing is then like based off your example, Julie is then you know actually who to hire. Right. So if you wanted to open the office on Sundays, you might look for a therapist who's looking for Sundays. Right. And it helps you just get really crystal clear and communicate that out there in the world. So you know who to bring in and you know how to fill that. But again, unless you're really looking at the numbers and looking at the story that the numbers tell you, it's really hard to then decide what your next move is in regards to being very efficient.
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B
You're right. And I think this is a great exercise to run before you hire also. So you can have in mind what time spots do you have available? If you're staying in the space and you're not expanding, what times are you looking to fill? And if you even don't want to hire but are financially, you could use a little bit more money in the practice. Then you can also look at how can you consolidate your schedule in order to maybe sublet your office some evenings or one day a week? Or there's options to give an opportunity to someone who's just getting started and bring in some extra cash for yourself as well. Nice.
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A
I like that one.
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B
Another one that, excuse me, that we measure a lot is labor usage. And that is billable hours divided by administrative or total hours worked. Sorry, billable hours divided by total hours worked. And this is a good metric to measure if you have employees. Obviously it's generally not just you where you might have an admin staff, but I find this one particularly helpful if you have another clinician also working in your practice that maybe is wearing more than one hat where they're helping with you with some marketing or helping you with some admin. I find that it's often easy for there to be scope creep there and they're doing. You kind of lose track of how many client hours are they actually having versus how many hours are they charging you basically, but doing all the other stuff. And that's where the scope creep can happen, where all of a sudden you look up and people aren't seeing nearly as many clients as they used to, but they're doing more of this stuff that actually costs you money. So then you would look at the total paid billable hours divided by all the hours worked. And that gives you a good sense of what's going on in the business. Because generally, and this is just an average, I noticed that most of my clients have four to five admin hours for every 20 or so hours of client scene. And that goes across the board. So whether the business owner is doing that or an admin or a clinician helping with marketing, like that tends to be the ratio. So if your your billable hours over total hours falls under 80%, then something probably needs to be realigned there.
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A
Very interesting. I would love to hear the conversations that you have with your clients, like do they Come in. They're like, yeah, you know, I think we're gonna get into new space. And you're like, let's look at this first. And then you probably have them go do some homework. Right. And then they come back. And what do they usually say?
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B
Well, usually it's a really positive conversation because just last week, I was having a conversation with a client about billable hours, where she actually has two locations, and she's been working mostly in one of the locations, and the cost just went up very significantly in the location where she isn't. And so we're trying to figure out what was going on. And we ran this ratio, and it just turns out, like, everyone thought, oh, I'm just gonna help by doing this or I'm gonna help by doing that. And they're billing that time, obviously. But because she wasn't there, there was just a ton of scope, crank, and also not a very precise marketing message by accident, because everyone was kind of doing their own thing. But that's one way that we were really able to rein in that cost and increase also income by bringing people back to, like, here's where you need to be and how many clients you really should be seeing a week and realigning those.
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A
Nice. And I always love when, you know, conversations are more about the numbers. It really takes all the feeling stuff out of it. Right. It's kind of like, well, this is just what we realized, and this is what we need to do. You know what I mean? It makes things easier.
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Completely agree. And we talked about overhead ratio earlier, and that's one of my favorites. Just because compensation conversations can be so difficult and so emotional sometimes and so much about like, well, I think I should pay them this, or I think they're worth that. But if you actually have the numbers, you can just have that conversation in a very objective way. That's not about hurting anyone's feelings. It's just about doing what's best for the business.
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A
Totally. What. Do you have one more for us that you want to share?
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C
Okay.
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B
I have one more bonus tip is conversion rate. And again, it's not. It's not financial, but this is for someone who is maybe thinking of hiring an admin to answer the phones. So I was. I like conversion rates because you, as the business owner, are probably taking all the calls until that point where you hire an admin. So if you are. If you are tracking how many calls are coming in, where are they coming from? What are the objections? Are people just calling to find out if you take insurance or not. Is there any information that you can provide on your existing website to first answer some of those questions so you get a sense of what are the questions that are being asked and then how many of those clients are converting to an intake. Then you can have a baseline for your business. So when you decide to hire someone who's answering the phones, you can. Well, first you have a list of all the objections or questions. You can prepare a script for that person really easily because you've been tracking. But then you also have a baseline for what's normal in your business. And an admin may never be as good as you, but at least you have something to compare it to. So you can keep working with your admin and training them until you get to something that's close to where you were before.
- [27:38]
A
Awesome. Thank you so much, Julie. And you know, when we were talking about you coming on the podcast and I just remember reading the emails back and forth, I just really appreciate that, you know, there's sometimes like, I hear people, it's kind of like they choose whatever, any professional, and it's kind of like you really go above and beyond. You really care about the therapists that you work with and the other people that you work with and specifically, really helping be successful in business. So if you are looking for an accountant and you've heard this podcast, you know, definitely check out Julie. She and I have had a great conversation prior, really just enjoyed speaking with her. But you guys, if you've heard this herbivore podcast for a while, you guys know I love my accountant. So I'm not giving up my accountant. But if you guys are in need of a good one, definitely have a conversation with Julie. Julie, you have a giveaway for our audience. So what is that?
- [28:25]
B
I do. So I would love for you to go to my website. It's greenoakaccounting.com and sign up for five days of profit boosting private practice tips and you'll get my business budget, my success ratio calculator, a checklist with weekly, monthly, quarterly and yearly financial tasks that you need to take care of.
- [28:50]
A
Yeah, that is awesome. And one thing I would say is, you know, some of you, as we've gone through this podcast today, like you got like numb in the brain. I know that you did, right, because we're talking about numbers and measurements and you're like, but I'm a therapist. I don't love this stuff. It is really essential to the success of your business. So having an awesome accountant like Julie, Julie's going to ask you these questions. I know that she is and she's really committed to your success. So you really want to think about those team members in your business that aren't part of your business but really help support your business. That is really going to help you grow. So definitely check out Julie we really appreciate you being here. Next week we have Beth Alford on the podcast talking about three ways your content can ease the stigma of therapy.
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C
If you're loving our podcast, we would love to hear from you and hear your feedback. Make sure to subscribe, rate and review our show and share with your fellow friends and colleagues that we can spread the love and really be able to make a greater impact supporting you guys and growing your dream practices and living your dream lifestyle. If there's an episode that you haven't heard yet that you would love to hear, shoot us an email, let us know. We always want to make sure that our content is on track with your needs.
- [29:55]
A
And don't forget to hang out with us in Facebook. Just look for Private Practice Startup and join our community of over 7,000 now therapists across the globe. So as we always say here from Startup Nation, thank you for allowing us to inspire you from Startup to Mastery. Have an amazing day everybody. Take care.
- [30:13]
C
See you next time. Thanks for joining us on the Private Practice startup. Visit the privatepracticestartup.com for for awesome resources, free trainings, attorney approved private practice paperwork and so much more. It.