Profit First Method and Mistakes Practitioners Make with Money
Welcome to the Dietitian Boss Podcast. I'm Libby Rothchild, creator of Dietitian Boss. After almost four years of sitting in my dimly lit windowless clinical office, I had enough. I wanted to feel like my work mattered, so I did something about it. I created a program that empowers dietitians and nutritionists to create their own private practice from scratch following my proprietary system.
Before I did this, I had a private practice of my own while working a full-time job, and I learned a lot about building relationships, marketing, and sales. I'm so excited to be able to share my proprietary framework with you. Hello and welcome. I'm here today with Julie Harris, who is an expert in the Profit First method and has helped hundreds of private practice owners gain financial freedom.
She's the founder of Green Oak Accounting, the country's largest firm serving the mental health industry. Julie is an accountant, consultant, speaker, author of Profit First for Therapists, and host of the Practice For Your Money podcast. You can find her at Profitfirstfortherapists.com. Welcome to today's episode, Julie.
Thank you for having me, Libby.
So, so happy to connect. And is there anything I left out from the bio that you'd like to share with our dietitian listeners?
The podcast is Therapy For Your Money and the book is Profit First for Therapists.
Yes. Exciting. Thank you. Excellent. And I had a chance to listen to your podcast and I loved it—can't wait to read your book. You were talking about imposter syndrome with money and celebrating wins. And it was all very aligned with a lot of the information and conversations that I noticed our clients have about money and business growth.
Yeah, my pleasure. Money is a very emotional topic for practice owners. It just brings up a whole lot of baggage and emotion. And I would say that's true for most people. Let me know if there's correlation here with dietitians, although you focus on mental healthcare professionals.
Do you notice that, as primarily heart-centered practitioners, money and conversations are perhaps harder?
I think they are, and I'm not sure if it's because of the heart-centered piece. But I know that everyone in this field is highly, highly educated and usually has received zero—or very, very little—business education within their programs. So even though you likely have at least a bachelor's, maybe a master’s, maybe even more, I think there's a good chance that you don't know a whole lot about money, and that can be a really scary thing when you start your own practice. You definitely have to be good at the work that you do as a dietitian, but you also have to become a good business owner and a business person. And that's kind of a scary thing.
There's a lot of lessons to be taught, to learn, and skills to develop. And thanks to you for offering such a great resource for practitioners as they're on that journey learning to identify imposter syndrome and breaking through their limiting beliefs. So is there anything you want to share? I think that's a great way to kick off our conversation. Is there any thought or a story that comes to mind in terms of imposter syndrome and money? Maybe they’re the most common two phrases you hear, or roadblocks from practitioners.
So roadblocks: I feel like there are not any other industries where accountants have to convince their clients that they should be profitable. This is a conversation that we have often, and this is definitely because of the heart-centered piece where therapists and dietitians tend to want to take care of everyone else first.
“Let me take care of my clients, let me take care of my team, and then the rest will come,” or “if I can just fill in the blank, if I can just hire someone else, or open a new location, or if I can just do something else, then I will finally take care of myself.”
And I would argue that that's crazy and it's not good for anyone.
Every practice deserves to be profitable, and it is in service to your clients to structure your practice to be profitable. If you're able to live well, live your best life, and not be worried about money, I would argue that you are the best version of yourself with your clients as well, and it is in service to them to make sure that you have your oxygen mask on before you help other people.
Yeah, that's a great way of putting it. And when you say there’s no other industry where being profitable isn’t really important or it's not seen as a priority, do you know if there's data on that or are these just your observations?
These are my observations from years of experience and having worked as a generalist accountant prior to really focusing on the mental health industry. And of course there may be some exceptions, right? Like in the non nonprofit space, the profit is kind of viewed differently. But having worked with construction businesses, restaurants, and marketing agencies, you don't have to tell them they should be making good money.
Usually you don’t have to tell them, “let's bring it down a little bit and maybe make some investments in your business.” And the opposite happens in mental health.
I couldn't agree more. And thank you for sharing your experience, especially because you're such a leading source for mental healthcare professionals. I fully agree. And now I'm gonna look for some data. I want to see if I can find some statistics on that, because I do find there's actually data that shows healthcare practitioners and especially women have a higher level of imposter syndrome than other industries.
So there's some correlation: with the more degrees and accolades we have, the more we doubt ourselves. And so I'd be interested in seeing if there's some data on the money piece too. We know that's a loaded topic. And I keep hearing from therapists in their grad school program that they were told “you're not going to make money in mental health.” That is taught in programs where you're spending sometimes hundreds of thousands of dollars just to get a license. And you're being told from the get-go, “you're not doing this for the money. You will not make good money here.”
And I think that's a disservice to the industry, and it's probably holding back a whole lot of people from getting into the industry and getting everyone the help they need. It's such a great service to the world and the community, and I don't think that's a service for anyone.
I fully agree. And it's also not a great way to promote diversity, because if you're telling people who have families and children with mouths to feed they can't, those messages are not going to resonate. So I really think that is an archaic way of thinking, and I don't like that either in our field or in dietetics.
What's commonly said is that you need a lot of experience. Like, you have to have two years of clinical experience before you can accept higher pay, negotiate, or start your business, which could mean a plethora of things, including starting side business if you want to do some consulting.
There's a lot of myths around with the same kind of underlying idea of “how can you pay for yourself” Or, or in my position, I had to pay back my student loans, right? And so I ended up having to work a ton of jobs as a dietitian because I was paid so low as an entry level clinician.
I tell that story all the time. I'm going to make today more about you. But all my listeners know my story. So thank you for sharing that, and it probably hits home for a lot of the listeners in thinking about what's a priority.
And I've been told, actually, by another practitioner/business owner that she has to remind our clients that if you don't focus on making money, you're not a business, which is the same thing you're saying. But those are almost things you need to turn into a mantra or affirmation.
And I feel like that's an important thing to say at the top of this conversation because everything else is going to support that first statement or anecdote. And money is my thing, right? As an accountant, everything I talk about comes back to money, but it comes from this place of goodness. You deserve to be able to take care of yourself as a business owner.
And that is for the greater good. I mean, you have to, right? Like you mentioned the oxygen mask, you can't help other people. You can't increase accessibility for your clients if you’re not available to help them. Giving yourself the self-care you need.
All right. Well that was a heavy load we just went through, so now we can get into some other questions. Can you talk a little bit about what the ultimate goal is, in addition to profitability and financial freedom? Can you talk a little bit about why it's important for practitioners to work towards that? Or what does that mean in your experience working with practitioners?
So I think when you're putting on your business owner hat, and you're saying every session every clinician in my practice has to be profitable, you are just going to approach every problem in a little bit of a different way, right? Within the Profit First method or framework, what we do is we reverse the traditional accounting equation.
So traditionally, if you look at a profit and loss, or P&L, you're seeing income minus expenses equals profit within the Profit First method. We turn that around. So income minus profit equals your expenses. So when you're building in profit from the very beginning, that means that you have a little bit less to make do with, but I found that most people are able to make that happen, right?
It's kind of like when you are a broke college student, you make that $50-$100 last a really long time because you know this is what you have. And then as you grow up in the world and your budget gets bigger, you learn how to spend that. But what if your budget never got bigger? You know how to make that work.
And so when you're building in profit from the very beginning, you're able to make all the other pieces around that work. And so what that often looks like for some of our clients is, when they have knowledge based on data, they can make an offer to a clinician and know based on fact, not on feeling, what they can afford.
And I can feel really good about this because I know I'm offering something that is fair for my practice that is also going to make sure this practice is sustainable and is around for the long term. So I know I can feel good with that, and for some clinicians that will work, and for some maybe that will not work.
And that is okay. That is a decision I'm willing to make. Because I know that is for the greater good of the practice, right? That is not coming from a place of fear, or “ I must hire,” or “I must give them exactly what they want.” It's coming from data, and I think that is the most objective way to approach any situation as a business owner.
I'm with you a hundred percent on that. So I love that you are introducing objectivity, but also saying that there can be different ways to approach it. And that segues really well into what Profit First is. Can you briefly explain it? You kind of did, but can you talk more about why this approach is important?
Within the Profit First method, the goal is making your practice sustainable. And that's kind of what we've been talking about so far. We want to build in profit from the very beginning of your business, or at any point from today on.
And as the name implies, we want you to take your profit first. So within business ownership, there’s the money that you pay yourself on a regular basis for the work that you do in the business, and then there should also be a profit. And that is kind of the reward for you being a business owner or a shareholder of the business.
If you own stock in a company, they will pay you dividends every so often, right? Typically every quarter. It might be a little bit, it might be a lot depending on what's going on, but they're rewarding you for being a shareholder and investing in the business. And so we also want, within the Profit First method for your business, to pay you a reward for being a shareholder.
And so that is the profit that we're talking about. We also want the business to pay you well and be able to pay taxes on your behalf. In the US, most businesses are going to be passed-through or flow-through entities, and that means the profit of the business is going to flow through to the personal tax return where it is taxed in most cases. Not all, but most.
And so technically the business doesn't owe tax at the federal level, but that doesn't mean that the business can't pay tax on your behalf so it's not coming out of your personal cash flow. So those are some of the big goals.
And the way we structure your money in Profit First with multiple bank accounts, we're using your existing habits. We're leveraging those instead of trying to change your habits. Most practice owners are going to just look at their business bank account on their phone or on their computer, right? And that's the data that they're going to use. They're going to say, “I want to spend money. I'm going to look at my bank account. This is the money I have. Yes or no.”
And so by splitting money into multiple bank accounts, by just glancing at that bank app, you're able to get so much additional information in just that one glance.
And so when you look at the bank balance of all of those accounts, You're able to see at a moment's notice if there’s enough money in my operating expenses account for this investment you want to make. “Am I going to have enough money to run payroll on Monday?” There's a whole lot of information there so that you can be a good decision maker without changing your existing habits.
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It's time to say “goodbye” to a patchwork of software and “hello!” to an organized, efficient practice. And that's so powerful. Thank you for walking through that for those that are not familiar with how it works, and I love the concept of habits because it's easier for us practitioners to adopt things that we're already doing and then become financially aware through our own habits, conversations, and regular looking at your finances, which I'm sure you coach for a lot of your clients.
Those are what I see as common issues. I have to tell them—I have to create habits for my clients to regularly look at their finances. I’m doing a talk about that next week with my clients, especially those who are further along in terms of making sure they're aware.
Thank you for sharing that process. Now, In terms of the book, can you talk a little bit about how you got to creating this book? I mean, you're the author of Profit First for Therapy, which is a big deal. And that's a lot of credibility for you and your company.
It was quite the labor of love. I knew it was going to be a lot of work, but I was not prepared for all the different steps. But ultimately, in my accounting firm, we've worked with hundreds of private practice owners over the years, and what I realized is that we were implementing the Profit First method with our clients and implementing it very successfully. But constantly, we were having a new inflow of clients saying, “I want to implement Profit First. I read the book and I love it, and I just don't understand how to translate this for my practice.”
Just because this is typically a field where your team members are highly compensated, that doesn’t mean the allocations work. And so time and time again we got requests like “how does it work for my practice?”
So, I thought, “no matter how big I grow my accounting firm, I can never help every practice owner out there. But this information is just too valuable to stay within a few hundred practices. So how can I expand my reach and just really help the industry as a whole stop with the poverty mindset and really step into the reality that every practice deserves to be profitable?”
This was the answer: writing the book. So I put in all the tips and tricks I have, all the tools that we use for implementation with our clients, all the allocations, and I also included other things that I knew practice owners needed as well. For example, I talk about some tax basics, right? A lot of our practice-owning clients have no accounting background. And so what are some of the terminology items that you need to know? How does quarterly estimated tax work? I included that. I included a whole chapter on clinician compensation. What are some of the methods that you can think of for clinician compensation? What are some of the considerations that you should look at when you're deciding what that's going to be?
Because I was tired of hearing practice owners say, “well, I decided on this compensation model because I asked Ron in a Facebook group, and so-and-so said that this is how they do it.” I'm like,” did you ask them if they're making any money? Because this is unsustainable, right?” So I added a whole chapter on that.
I also added a chapter on scaling. I really feel like I tried to encompass all the basic foundational finance and accounting knowledge that a practice owner needs in their business into this book in a way that is approachable.
And is this geared then for solo practitioners and group practitioners, considering that you have different sections throughout their customer journey?
Yeah, absolutely. So I talk about the whole gamut from pre-revenue to a large group practice. I have ratios or allocations in the book for a solo practice, a small group, medium group, and large group, so it really runs the whole gamut. And for some, for a handful of people, maybe scaling won't matter.
But I've met a lot of accidental group practice owners over the years, so I felt like even if you don't need it now, it's good to have it there just in case I need it later. I also talk about adding revenue streams. Like, what if you're adding a side business? What does that look like? What if you have multiple owners, like some of the less common scenarios? But that can be of interest if you're thinking of bringing on a partner in the business like this.
This is good information to know. And it's really good to be abreast of all these topics in this space, and in the mental healthcare space as well, or the private practitioner space since our listeners can benefit. So thank you for writing the book, and I know Mike Malowitz, his mission is to eradicate entrepreneurial poverty.
So this book is in alignment with helping with that message, right? The first thing we talked about was being profitable. And then the second thing—this is what drives me nuts—is when people just ask other people what they're charging or how to do splits for clinicians and whatnot, and they forget to ask if that person's profitable. And it's hard to compare your business to someone else's.
Many practitioners don't want to take responsibility for looking at their own numbers. And it's hard to do that work. It's easy to go look at someone else's but not have the full picture. But that gets you into worse situations long term. So, ultimately, it's really about improving your education and building those habits.
It can feel uncomfortable, and the information that you get in Facebook groups, or even just from asking other practitioners is not always what they seem on the surface, right? We've seen hundreds of practices under the hood, and just because someone looks like they're profitable, that's not always the case.
And I tell the story in the book of Stacy, one of our clients who first heard of the Profit First method when she heard Mike speak at an event. And she was sitting in the room, and had just been chatting with her colleagues, saying, “oh yeah, things are great. I just opened another location, “ like everything's fine. And then inside she knew she felt like a fraud. She was listening to Mike speak and felt like, “I know that I have -$4,000 in my bank account right now, and I know by the end of the day today I'm going to get another text message from my bank saying something else has bounced. And here I am telling everyone that everything's fine and everything is not fine!”
So, sometimes something looks like it's working and it's not, and that's okay. There's no shame in that. You don't have to wear your practice finances on your sleeve. But just taking a moment to really look at the numbers and do the work, that's the only way to profitability. And Stacy—this specific client—is now in a really healthy financial position. It didn't happen overnight. But she did the hard work and she had the conversations with her clinicians and changed her spending habits and is now putting a child through college, which was her ultimate dream.
And that is now reality. And I think that's amazing.
Thank you for the story. I know the stories are helpful for us to put our mind to apply the concept. So thank you for sharing that. You go Stacy! You go, girl!
You might have already answered this, but what are the most common mistakes practitioners make? Can we get a little more specific since we have listeners that are further along, like mistakes that private practitioners are making earlier on pre-revenue, and then the biggest mistakes that they're making a little further down the road?
Yes. So, earlier on, not saving for taxes is one of the mistakes that we see really often, especially in that first year of business. It's not uncommon for someone to go from working for someone else, maybe getting a W2 where taxes are withheld, and then you move to private practice. Maybe that's a solo practice. Nothing is withheld. You have paid tax on nothing. All the money's coming in: let me go spend it all. Poof. It's gone.
And so you get to your first tax season and think, “oh my gosh, what did I do?” So that is one that comes up early, kind of in that mid stage.
Then we see this transition where that solo practice gets full and things are going well. It's not uncommon to have to bootstrap things right in the beginning of a practice, and that's normal. I think it's good to know how to do all the things in your practice. Maybe you're doing the website, you're doing your own billing, you're doing all your intake calls, and then you get busy. And you just hold on tight to all of it because you're so afraid of “oh, what if it all goes away?”
And so there's this point where a shift has to happen, where you are way better off financially seeing one more client and letting go of some of the things that you hate doing. So starting that shift of not just working in the business, but working on the business. How can you get other people to help you?
And that's one of the big, big things that we see also in the larger group practices.
There is this shift again where the large multimillion dollar group practices have surrounded themselves with a team of experts that know more than them in their own respective fields. They will typically have an attorney, sometimes multiple attorneys. Maybe one for employment, one for leases, etc. They have an accountant and definitely a tax preparer, and they have an HR professional. They've surrounded themselves with people who are really, really good at what they do, who can help them see around blind spots.
So, starting to pick out the professionals that are going to support you is one of the ways you can really start flourishing as a larger group practice and be able to truly put on your visionary business owner hat. Letting go and delegating is really hard, and I feel like people that don't break through won't get to the next level.
But it's interesting that you're saying this holds you back from your financials. It holds people back for their mental health, because they end up being really burned out and frustrated, but then they're the ones getting in their own way. I mean, I've struggled with that myself too, with the whole spectrum of micromanaging to not having enough controls with delegation.
Are there any other mistakes you see between those two groups of people?
Yes. During that in-between phase there is a lot of learning how to be a leader and learning how to decide what you want in your practice and holding people accountable. That can feel really, really hard in that middle stage. Let's use the example of hiring a first clinician. There's often this shame of like, “well, I can't offer full benefits or maybe I can only give them 10 hours a week,” right? Or the person that you're hiring as that newer group practice is probably going to be different from the person that you hire as a 30-person group practice.
Those are probably different people and they're looking for different things. And I think it's always okay to be wherever you are today and just be honest about what that is. But then as you're hiring this person, if you say, “I'm bringing you on for 10 hours a week,” and then they're consistently seeing six clients, you have to become a leader and say, “hey, what's going on? Am I not giving you enough referrals? Are you discharging quickly? Or, do you not have enough hours on the schedule? This is what I need from you in order for this relationship to work.” And being able to say those words out loud can be really, really hard for a practice owner.
And the willingness to keep people accountable for what they've committed to can be difficult. We see a lot of practice owners get in trouble where they hire people at rates. It only makes sense if everything works out perfectly. And then they don’t hold them accountable when they're not holding up their part of the bargain.
And so there's that leadership development that has a lot to do with money. It's adjacent to money management, but affects the money piece that I think is just a rite of passage of someone moving towards that group practice.
And I think that's a lot of my perspective. That’s an employee mindset, where you're so used to things not going badly if your metrics are off. So there's always that padding in place. And from my experience and teaching our clients that, I guess you call that leadership. But it's really having that agility and adaptability, not to mention the economy and other factors to have to go into it.
And that's a great example of the skills you need to build. That might be that in-between phase as you're delegating or you're getting to that next level.
Something else that I think happens in that middle phase, as a business owner, you have to be prepared for the fact that things will go wrong. I say that with certainty because something will go wrong in your business at some point. Someone will leave unexpectedly, a client's unhappy, someone makes a mistake somewhere—that will happen. A HIPAA violation, whatever it may be, a mistake will happen. And as you're growing as a group practice owner, what often has to happen is the letting go of “things will happen” and it becomes “how do we deal with it?”
I think it’s a good place to be. Maybe it's cynicism, but, just as an example, we were working with a client this week who's saying, “well, this is how I want to structure compensation.” Well, we've run the numbers. This doesn't quite make sense based on this, this, this, and this, your existing expenses.
They came back to us and said, “well, what if we exclude this piece and exclude that? And what if this happens? What if I stay above 28 sessions per week, for example? Then, then will it work?”
And what my team and I were discussing in our meeting this morning is, yeah, it can work, but that's not reality.
You're excluding a bunch of stuff that is actual reality, not this dream world. It's reality. So you have to be willing to actually look at what's happening—not this idea of what you think your business should be—but what is actually happening today? And what do you think builds that skill? Looking at your numbers with regularity.
I'm a big fan of QuickBooks Online. That is all we use in my firm. And one of the reasons I like is because you can have fairly accurate records at any given time. You can go in, you can see what your accountant is doing, and you can go in and say “where are we to date?”
And it might not be precise, right? It takes a couple of days for transactions to get in, but you can have a pretty good idea of what's going on, and I think that's helpful. You can look at your money once a week for 15 minutes. As a business owner, I think that is time well invested.
It kind of seasons you to the ebb and flow of money in your practice, and that's one of the many reasons I like the Profit First method; it forces you to sit with that money. I recommend every week or every other week spending 15 minutes and asking “how much money is in this account?”
When you're looking at that every week it will give you so much information about what's going on in your business. You might self-diagnose. You have a billing issue— “Why is this account so low? What's going on over here?” You are able to see and feel immediately when something isn't quite right, and you're able to troubleshoot so much faster than if it's mixed into everything.
Thank you for giving that specific example. It’s very on brand of you to say, “look at your numbers” Of course you would say that, and that really can help build confidence. I just want to go back to how, knowing that being adaptable and being open to their being mistakes is part of business and having a team, what actions you can take.
You're saying weekly or biweekly, for 10-15 minutes, look at your numbers through something accessible like QuickBooks online. And that can really help I would say at least once a month. But you're the expert here, so if you're saying weekly and biweekly, that's even better.
I would recommend looking at the reports on a monthly basis, absolutely. I would love for every business owner to do that. You should be asking “where did money go? Is this normal? Was I expecting this because I've seen stacks of unopened IRS letters or bank statements?” I don’t want to see people running their credit card or their debit card, and wincing and wondering if it’s going to go through. That's not a good place to be. You should know if there's enough money or not in your business. There's a lot of peace of mind that comes with that.
I think that's a really great tactical piece of advice. So thank you for sharing that. It was really helpful. This was such a pleasure, Julie, to talk to you about not only your experience with private practitioners, but also the methodology that you teach, and you’ve written a book which is so exciting! Congratulations on that. Is there anything that you want to add, or any final thoughts or calls to action you want to leave the listeners with today?
Well, I truly believe that every practice deserves to be profitable, so I hope that you also believe that as well. I would be honored if you would consider ordering my book Profit First for Therapy. It’s out on May 2nd. I think that no matter where you are in the stages of practice, this will apply for many, many dietitians. Whether you're from pre-revenue all the way to group practice, there's something in here for you. And I've tried to make it really accessible. There's examples of every size practice, and it's also available on Kindle and Audible as well.
Fantastic. Excellent. I will be reading it and thank you so much. Thank you. If you're looking for support to start, grow, and scale your dietitian private practice, I want to invite you to work with me and my team, and learn about the Profit First method.
We have a few different options. Head over to Dietitianboss.com and apply to have a conversation with somebody from our sales team. To discuss your options for your budget and stage of business, head over to Dietitianboss.com and we look forward to connecting.
