Features Practice Technique
Practice Management: Spring 2006

There are a number of ways to measure physical fitness, such as resting and active heart rate, VO2 max, and maximum resistance tests. But how do you measure if you are financially fit? With physical fitness, awareness is key … so too with financial fitness. Ask yourself these questions:

What were my total revenues and expenses in my business last month? Last year?

How much do I spend in my personal life for home, utilities, food, transportation, personal/recreation and taxes?
How much do I need to clear in my business so I can finance my personal expenses?

If you’re not sure of the answers to these questions, you many want to tone up your financial fitness. To be financially fit, we must be aware of our resources, so we can know how much we can extend ourselves, and where we can fall back on if a crisis occurs.

If we’re not aware of our financial picture, we can’t make sound, logical choices about major expenses or future decisions. Look how many celebrities or lottery winners, who make more money in a year than many people make in a life-time, end up financially bankrupt … How is this possible? Financial awareness plays a key role.

Track Your Expenses To Expand Your Awareness
So how do you tone your financial fitness? First, get an expanding file (envelope size is great) from your local business supply store. Put labels on the tabs as follows: therapy business, self/recreation, home (includes utilities), transportation, food, savings/tithing/investment, and, of course, taxes. You can add other labels such as: child expenses, pet, or other significant expenses in your life. Try to limit to no more than eight or nine categories so you can keep things in perspective.

Next, collect all receipts for expenses, including gasoline, coffee at Starbuck’s or Tim Horton’s, transit tokens, etc. If you don’t get a receipt, write the amount on a piece of paper and use that as the receipt. Place your receipts in the appropriate slots of the expanding file. At month’s end, tally all the receipts per group and enter the totals in a spreadsheet.

Examine your spending habits. This analysis will give you very important information as to how you live, what priorities you have set (because that’s where you’re putting your money), and where you can make some positive changes. Do this every month – the 30 minutes a month you invest in this task will yield great returns in your life!

Some may ask “But my accountant does my year-end for my taxes … isn’t this enough?” No!!! To find out that your in negative cash-flow is not something you want to wait the next year to find out! If you’re on top of your financial statistics every month, you will be better prepared to stop the leak of money to non-essentials, plan for a vacation or electric table to save your back, and avoid financial decay. Remember that four out of five businesses fail within the first five years of start up, and cash-flow is cited as the major cause.

A patient of mine shared with me his discovery that he was spending over $400/year at coffee shops. He bought himself a thermos, made the coffee at home and directed his new-found money to higher priorities. This small change made a big difference for him.

Is Your Business Sustainable?
Another aspect of financial fitness is to ensure your business is sustainable, that it generates enough income to cover its expenses as well as a draw for the owner’s personal needs.

One of the most common concerns I encounter in coaching massage therapists is their desire to improve their take-home pay. One formula to examine this is what I call the Sustainability Rate (SR). SR is found by taking your total month’s business expenses and dividing that by the total month’s business income. Then, multiply by 100 to get a percentage.

The SR measures what percentage of your total income is eaten up in business expenses. Seen another way, for every dollar you earn, the SR tells you how many quarters, dimes and pennies you keep for yourself to pay for your personal lifestyle. Your target should be to limit your SR to 50 or less, so that you can take a fair portion home for your personal expenses. If your SR is greater than 50, your business may be consuming an inordinate proportion of your income, and you may have inadequate funds to finance your personal life.

The SR is very helpful in agreement negotiations. A clinic manager may discover they are paying more than their associates to practice from the business. The SR can help the clinic manager determine a fair rent for the associates and bring the expenses in line.

Likewise, an associate can use the SR to determine if working at a clinic is worthwhile, and can argue effectively for the clinic to do more to boost traffic.

The SR is most useful if you have tracked your expenses and know how much you personally need to live, as we described previously in this article.

If your SR is 50, but that 50 per cent isn’t enough to live on, you will need to look at raising your income and lowering your expenses.

Live Within Your Means – And Learn How to Expand Your Means
If you find your business is not generating enough income to sustain itself, and provide for your personal expenses, you can generate further income, or cut expenses. Ideally, try to do both for best results.

To raise income, see if you can comfortably treat a few more patients each week. This may mean being innovative in your treatment by using technologies such as ultrasound, acupuncture, pressure bars and less-taxing techniques such as long-lever myofascial release and Muscle Energy Technique to lessen the direct impact on your upper extremities.

Strategies I’ve incorporated include using a BodyCushion and electric table to significantly lessen my strain during treatment. I’ve also set up my schedule to work Tuesday/Wednesday and Friday/Saturday so I have that rest day breaking up my weekly work. All these innovations allow me to provide the maximum treatments
I can comfortably do each week, and have made a great contribution to the fact that I’m still practising almost 15 years after graduation!

If you could manage to provide more care, but have open appointments, there are a number of strategies I’ve written about in past articles of Massage Therapy Canada to help you attract and retain business.

If you’re well-established and have overflow, consider bringing on an associate. Associating in a clinic is much more financially viable for a new therapist than starting their own business, and they will learn greatly from observing your existing business systems in action.

Benefits to the clinic owner include offering more available clinic hours (lessening the need for you to be available at all hours), more diverse therapies, and the off-set of operating expenses. Another option is to sell useful products that compliment your therapy treatments.

If you’re treating as many patients as you comfortably can, then carefully examine your expenses. There may be little things, such as cutting back on eating out, decreasing purchases on non-essential items, or negotiating a better rate with your linen service. You may be able to share marketing and overhead expenses with a complimentary practitioner such as a naturopath, reflexologist, nutritionist or aesthetician.

If this isn’t enough, look at more aggressive approaches, such as dumping your car (with the associated insurance, gasoline and repair charges) for public transit. Downsize your home or apartment, or move in with a friend or family member and share living expenses.

Some changes may take drastic measures, and may feel counter-intuitive to our consumer, gotta-have-it-now culture. However, you may find them more palatable than chronic debt and negative cash-flow.

Remember the German proverb “Whose bread I eat, his song I sing.”

Save, Invest And Tithe For Well-Being And Longevity
As with physical conditioning, you have to spend energy to get energy back. In fact, with the miracle of super-compensation, we paradoxically have more energy when we exercise than what we expended! This is also true with money.

Every book I’ve read on success and financial wealth describe the importance of putting money aside for yourself in reserve for emergencies, to care for you when you can no longer work, and to contribute to the larger good. This is called saving, investing and tithing.

Some may object, “But I don’t have enough money to cover all my expenses, how can I put aside money for savings, investment and tithing?” Our culture, with its high cost of living, does breed a sense of scarcity, that there’s not enough to go around.

Yet, in my experience, when I do, as “Wealthy Barber” author David Chilton recommends, “Pay myself first,” I find that the money is there. The Universe seems to provide us with what we need when we take the action.
 
I have a contingency fund that automatically withdraws a small amount from my main bank account each week to put aside for emergencies. I’m often amazed at, when I check the balance, how much it has grown!

You can do the same with an automatic RSP account through any bank. Even $25 a month will grow over decades to be a formidable amount of money for your retirement when you no longer work.

As for tithing, I have a great technique to get rid of all those pesky telemarketers! Choose one or two charities close to your heart – this could be your church or a community organization.

Decide an amount you can contribute on a regular basis and then commit to making that contribution. Automatic withdrawal from your bank account is offered by many charitable organizations. Then, when you get a phone call from an agency you’ve never heard of looking for money, you can tell them you’ve chosen your preferred charity for your contributions … thank you and good bye!

I encourage you to start with what you reasonably can. Over time, aim to eventually reach 10 per cent of your gross income to distribute among your savings, investment and tithing accounts. You may not see much change in a day, but months and years will show you the power you have with your money.

Being financially fit means being aware of your business and personal needs, ensuring your business is sustainable, living within your means while trying to expand your means, and allotting money for contingency, retirement and worthwhile causes. Make sure to ‘exercise’ regularly!