How can you achieve your income goal?
I’m going to keep it simple. Let’s say you want to put $100,000/year into your personal bank account before tax. If you want twice that, just double the figures. If you only want $50,000, cut the figures in half.
“I want to work less and make more money.”
I had a drink with a colleague. She said, “I want to work less and make more money.”
I asked, “What is your income goal?”
She said, “It changes all the time.”
I said, “I know your income changes, but what is your goal?”
She didn’t have one. If you start with a goal, you are already way ahead of most professional entrepreneurs. Once you have a goal – how do you make that goal a reality?
If you start with a goal, you are already way ahead of most professional entrepreneurs.
We’re going to make a few assumptions. Let’s assume that you want a 2-week vacation every year. That leaves 50 weeks.
I don’t know how many holidays you want to take. Let’s just assume that you will work 4 days/week. You are planning to work 200 days/year in your profession.
Now let’s make another assumption. Average overhead is often about 50% of gross revenue. In other words, for every dollar that comes across the front desk, 50 cents go to your personal bank account.
So to net $100,000 you need to gross twice that or $200,000.
Divide that by the 200 days you work, and your collections must be $1000/day.
Here is the formula for calculating revenue needed to reach your desired net income before tax.
R – R x O = NIBC
R = Revenue
O = Overhead as percentage of revenue
NIBC = Net Income Before Tax
What if you were super lean and your overhead was only 30%? We plug in the formula and find your yearly revenue needed is $142,857. Divide that by the 200 days you work. You would only need $714.28 per day.
Some professionals reduce their overhead and still make more money. Knowing that, you can look at different aspects of your business and decide if those are worth the effort. That was one of the things my colleague wanted to look at – how to reduce overhead – that’s the kind of thing we can get into in Insights webinars. You must understand accounting and how to look at your numbers.
You must understand accounting and how to look at your numbers.
We’ll stick with the 50% overhead now and look at generating $200,000. Here is the formula for how many billable hours per day you must work to meet your income goal.
Daily revenue divided by your hourly revenue = number of billable hours per day.
If you charge by the hour, divide $1000 by your rate/hour to determine how many billable hours you must work per day. If you can collect $250/hour, then you only need 4 billable hours in a day to collect $1000.
Alternatively, you could divide your daily revenue by the number of billable hours you want to work per day and determine your rate per hour. If you divide $1000 by 24 you get $41.67 So if you charge $41 or less, you could work 24 hours a day and not make $1000.
I’m being ridiculous to make a point. If you know your fee cannot be more than $42/hour, you are not going to make a 6 figure income as a solo entrepreneur. However, if you charge $84/hour you’d only have to work 12 hours.
Double the amount per hour and half the number of hours.
$168/hour would only work 6 hours.
Keep in mind that many executives in top companies are working 60+ hours/week.
If you are in healthcare in the U.S. and accepting insurance, you are paid for procedures. There are two basic types of procedures – time value and non-time value.
Here is the formula for a timed procedure:
60 minutes per hour divided by the minutes per procedure times the payment per procedure equals your revenue per hour.
Let’s say a procedure had a time value of 15 minutes and the insurance paid $50/procedure, then your revenue per hour would be $200/hour.
Using our previous formula, substitute in $1000 for RD (revenue per day), $200 for RH (revenue per hour) and we get BHD (billable hours per day) = 5. Work five billable hours per day and you have the $1000 goal.
If the procedure does not have a time value, you are only limited by how many you can perform/hour and the amount the insurance pays for each procedure.
The formula for a non-timed procedure is number of procedures you can perform per hour times the payment per procedure = revenue per hour.
For example, if the you can perform 10 per hour and payment is $25 per procedure, RH would be $250. That would be $50 more than the timed procedure.
Back to the example with my colleague. I know something about her practice. She has two procedures. One procedure she sees a client every 30 minutes for $75. That’s $150/hour. The other procedure she charges much less but sees multiple clients at the same time for over $300/hour.
I said, “Quit doing $150/hour and only do $300/hour.”
She said, “But I’m not full so I don’t make $300/hour.”
I said, the question is: “How do I fill up my hour?”
Then she said, “But some clients really need the other procedure.”
“Do you want to work less and make more money? Or, do you want to help every person that needs help? You can change your goal. It doesn’t matter to me. It is your goal.”
Do you see how her vacillating mind was limiting her success? Controlling your mind really is the first essential.
Controlling your mind really is the first essential.
We know it’s not just about the money. Most of us did not spend years getting our professional education to spend all day at a job we hate. It all starts with you, what do you enjoy doing?
This is where mental mastery comes into play.
You must be brutally honest with yourself. What do you really enjoy? What do you think about? Is that what you want to do, or would you rather change your thinking?
I watched a movie last night. One character said that he often felt such rage that he wanted to fight the world. The other character said, I felt the same way. I decided that if I fought the world the world was going to win. So, I decided to change the feeling.
Again you see the importance of getting control of yourself.
Focus on procedures that you enjoy and give you the highest billable income per hour. Non-timed low pay procedure might gross more than a timed higher pay procedure.
Consider staff – can you pay someone to help you perform more procedures? It only makes business sense if the additional money is above the cost of the staff. For instance, if you can perform two additional procedures per hour at $20/procedure – $40. If you paid a staff person $20/hour to help you, you’d still be ahead $20. That help might also make your day happier.
A problem occurs when professionals don’t do the math. Often the owner of a big organization is making less than when it was smaller. A dentist told me that many dental hygienists make more than the dentist – because they don’t have the overhead.
A chiropractor hired a coach. He doubled his practice and isn’t taking home any more money. You have to know and track your numbers – accounting.
You have to know and track your numbers – accounting.
Consider procedures not covered by insurance. Many doctors are getting into spas, weight loss, and other programs that are not covered by insurance. Their fees are based on what the clients are willing to pay instead of the insurance.
One coach told me that he called a client who was a medical doctor. She was delighted to hear from him and wanted his help in hiring massage therapists. Her comment was, “Everybody knows there’s no money in medicine anymore.” She was doing things other than treating disease.
The main thing is finding what YOU enjoy and making it profitable. What do you enjoy doing and who is your ideal client? If you are not having fun, you will sabotage your success. Visualize yourself doing what you enjoy with your ideal clients. Now visualize yourself doing that for the length of day you want to work to meet your goal. If you feel excited and enthusiastic, great! If not, what would have to change?
You are beginning to think of your profession as a business. It is not as easy as many think.
Where I live, most doctors work for the hospital. They just get a salary. They aren’t free to call the shots for their own business. They must put up with corporate demands on their time and what they do. They must put up with corporate politics. Why do they do it? Many went broke trying to be professional entrepreneurs.
In fact, a friend of mine just came to see me. He had his own business. He even has an MBA. He had to close. Now he flies around the country as a locum tenens emergency room doc. When I asked how’s it going. He said, “Working more and enjoying it less.” He’s been saying that for a few years.
Difference is – now he has a count-down to retirement.
Once you have set your income goal and you know how to achieve it, the next step is a marketing plan. Read Marketing Your Professional Practice for some tips.