Overhead Notes: #
A new practice has an average overhead of $8,000. So your overhead is 100% when your collections are $8,000 a month. If your collections are $10,000 you have an 80% overhead. Your income: 20%. Once you get to $15,000 in collections your overhead is 60% and it stays at that level on average no matter what size your practice becomes after that – if you are doing GOOD!
Most doctors think that after they rise above $15,000 that it’s all profit after that – same office, equipment, etc. It does NOT – when you collect $1,000,000 you will be doing great to have an average overhead of 60% – $600,000! It actually goes UP!We have practices of ALL sizes ALL over the country – this is FACT – overhead does NOT flatten out – it grows WITH the practice! This is a surprise for most!
The 60% Overhead is ALWAYS There – or higher! There is NO FREE Overhead! Whatever DOLLARS comes into the clinic, you must subtract 60% as going to overhead to understand your true profit. You cannot think that overhead counts for chiropractic services but not other services or products “because you are there anyway”. NO business computes overhead that way – because they can’t! What Does Overhead Include?
Office expense – building, utilities, phone, internet , computers, equipment, supplies, management and seminar education fees, etc.
Marketing – the cost of getting new patients and keeping them – PR person, advertising, etc.
Non licensed staff. Front desk, Finance, etc.
Overhead does NOT include licensed staff such as DC’s, MD/s, MT’s, PT,s – all of these professional services comes out of profit – not overhead. If you hire an associate – the salary and benefits of that associate comes out of the profit side – not overhead.
Overhead does NOT include the hard costs of your products. #
When you pay somebody else for their product like an orthotic or supplement – you STILL HAVE your overhead! So it is what you pay for the product PLUS overhead – then you figure your profit. If overhead on those products were truly free – they would sell it without you in a heartbeat – they are not doing you a favor – they KNOW the cost of overhead! How much do you MAKE on Orthotics for example?
To sell an orthotic – you had to provide the advertising costs to attract the new patient – the office costs – the staff costs – everything or you couldn’t have sold that orthotic. How much is that overhead? The same as everything else – how could it be different? So Overhead is 60%.
If you sell an orthotic for $300 – the overhead YOU PAY is $180. You paid $150 for the product. So $180 plus $150 is $330. You actually lost $30.
How Much Do You Make on Massage Therapy?
Let’s say Massage brings in $60 an hour. The doctor provides them with patients, all of the facilities and staff – in other words all the overhead! Is this overhead REAL money? If the overhead was free – the MT would do it without you in a heartbeat! Overhead must come out – $36. The MT’s pay comes out of the remaining $24. They usually want 50% or $30. Leaving a LOSS to the doctor of $6 – no profit!
“I wasn’t using the room anyway.” So is the solution to fill the room with more new patients or massage?
If your room is used for: Adjustments every 5 minutes (12 an hour) at $40 a treatment = $480. an hour or $200 profit after overhead.
If it is used as a therapy room – 3 patients every 15 minutes (12 an hour) – $20 a therapy = $240 an hour or $100 profit after overhead.
If used for Massage – it can only handle one in the room for the hour equals $60 an hour or $24 after overhead. You pay the MT out of the profit so $30 comes out of the $24. You lose $6 per hour with this service.
How Much Do You Make on Associates? #
If you hire an associate at a salary of $5,000 a month and they increase collections by $10,000 a month above the base – you haven’t made any money. $6,000 goes to overhead – that is FIXED – overhead must ALWAYS be taken out. That leaves $4,000 profit – but the cost of the licensed staff – the associate – comes out of profit – that leaves a deficit of $1,000! Most owning doctors thought they made $6,000 – no overhead, but at the end of a year they lost money and are shocked! The associate thinks you made $10,000 because they really don’t understand it either! If you Collect $15,000 above the base: $9,000 is overhead – $5,000 is associate pay and you made about $1,000 not $11,000.