Helping people improve their health and make lasting changes is incredibly rewarding, but of course, making a living doing what you love is also equally important.
It can be a daunting experience going from practitioner to solo-business owner which is why we’ve outlined five tips to set you on the road to successful financial planning. We want you and your business to have the tools to meet your full potential and financial goals.
Budget, Budget, Budget
The first step to set yourself up for financial planning success is to make a budget. Yes, I know this may not be as exciting as spending that hard-earned money, but it’s the only way to know how much money you’re really spending. This should be a list of everything you spend money on, from pens and paper clips, up to your computer and phone bill. Be brutally honest. If you go to a coffee shop to work three afternoons per week and end up spending $20 each time, that adds up – you should factor that into your budget.
Next, you’ll want to take your list and divide it up into your “fixed” and “variable” costs. Fixed costs are costs that never change. Your monthly internet bill, subscription fees you pay for the various tools you use, your office rent (if applicable), etc. all fall under the umbrella of fixed costs. You may even decide to pay yourself a salary (ooh la la!) which would also be included under your fixed costs.
Your variable costs are costs that change from month to month or that you only pay sporadically. Under this heading, you would include networking or trade show event costs, yearly accounting fees, or taxes. These costs can be more difficult to control for your business since they can fluctuate, so anticipating them is essential to stay afloat.
We want you to really understand how much you spend from month to month to give you a baseline of how much revenue (money, before extra costs) you need to bring in each month. You’ll be able to use this number to calculate how many clients or appointments you need to schedule each month and how much you should be charging. To learn more about calculating your fixed and variable costs, read this handy guide from FreshBooks.
Know When to Be Resourceful & When to Spend
Now that you have a handle on how much you’re spending each month, you can evaluate where it might pay to be more thrifty and where spending a little extra dough could benefit you.
If your internet and phone costs are high, consider shopping around for a better deal or try calling your service provider and negotiating a lower fee – it never hurts to ask. If you end up overspending each time you go to a coffee shop, consider cutting back the number of times per month you work there versus at home.
Next, figure out where spending a little extra might be a good investment in yourself and in your business idea. For example, spending money on advertising or attending a trade show can end up paying for itself and then some. Say it costs $600 to set up a booth at a trade show and you know that on average you can acquire 3 new clients every time you attend a show. You would next need to know, on average, how much each of those clients will spend with you. If they each buy a package worth $500, then your return on investment for the tradeshow would be $900. This is a very simplified example but it starts to give you an idea of how you can calculate the Return on Investment (ROI) for some of your variable costs and learn what is actually making you money.
Set Short-Term and Long-Term Goals
Setting goals (even if you don’t always reach them!) is a great way to drive yourself and your business forward. Start by thinking about what you would like to accomplish in the near future, anywhere from the next few months to within the next year. Next, think about your long-term goals; the things you would like to accomplish in the next 1-5 years. These goals can be financial or other markers that make you feel successful as a business owner. They should be personal to you and will often change from practitioner to practitioner. They could include:
- Improving your revenue or margins – Decreasing your costs or finding a balanced fee to charge that ensures you’re profitable is a great early goal
- Increasing your number of clients – For some, knowing they are helping as many people as possible is what’s most important
- Becoming debt-free – If you took out a loan or borrowed money to start your business then setting a goal for when you would like it to be paid off is an excellent idea
- Hiring an employee – If you have your heart set on expanding your business beyond just yourself, having the financial stability to hire your first employee could be a worthy goal
- Becoming a known expert – If you have a niche you’re passionate about then you may decide that becoming a well-known expert, someone who is frequently asked to speak at shows or seminars, maybe your ultimate sign of success
Finally, choose when you would like to achieve these goals and write out the steps for achieving them. Include dates for each step and mark them in your diary or calendar. This will keep you on track to achieving your objectives. And don’t be afraid to re-evaluate your goals. What you thought was important a year or even a few months ago may change. It’s common for your goals to mature as you grow as a business owner and practitioner.
Get Expert Advice When Needed and Follow the Rules
One of the hardest things to learn for small business owners and entrepreneurs is when to ask for help. Your clients trust you because you’re an expert in your respective field, but when it comes to the finances of your practice you may not be an expert. That’s okay! It’s always best to consult with an accountant or financial advisor if you need tax advice or help to file your returns. These professions exist for exactly that reason. Never be afraid to seek out this advice, not just at tax time but any time you have a serious question or concern about the finances of your practice. It can and will save you time, money, and stress.
An accountant will be able to handle:
- Compliance – How will you know which returns your practice needs to file come tax time? What about payroll taxes for employees (even if that’s just you!) or sales taxes for services rendered? An accountant knows exactly what needs to be filed and when – and will ensure that your practice is complying with the rules.
- Tax deductions – Like compliance, if you’re a new small business owner you may not even realize which tax credits or deductions you’re eligible for – a small business accountant will be aware of all of these and be able to reduce your tax liability, that is, the total amount of tax debt owed by an individual, corporation or other entity.
- Government audits – A reality of running a small business is that you may be subject to an audit by the government or local tax authorities at some point. Having an accountant will make this sometimes stressful experience go much more smoothly – and provide your practice with an expert who can help advocate for the best possible outcome.
An accountant will keep you up-to-date on all of the latest tax regulations and deductions that you’re entitled to, but there are some basics like simple bookkeeping that will set you up for success. Even without an accountant, there are best practices that you and your small business can be following to keep you out of trouble, such as saving all of your receipts and keeping records of any large purchases or expenses.
There are no guarantees when it comes to taxes or audits though. Never assume that because your practice is new or is not generating significant revenue yet that you won’t be audited by the government. In the United States and Canada, small to medium-sized businesses are amongst the most likely organizations to be audited with substantial resources at both the US Internal Revenue Service and the Canada Revenue Agency being put towards auditing small businesses. Red flags include: Running a cash-intensive business, trying to write off large business expenses, or making large charitable deductions, etc.
If you’re not sure about any of this don’t take our word for it, ask an expert!
Use Practice Better’s Easy Integrated Billing & Payments Functionality
The Practice Better platform has several features that will make your finances clear and straightforward:
- Creating (and editing) invoices in a timely fashion to encourage a quick turnaround time for both billing your clients and getting paid. Follow these steps to set up an invoice, and then set internal timelines for how soon a client will receive an invoice for their services.
- Accepting several different types of payment makes it easier to get paid. Broaden your options – these steps will get you set up using Stripe or Square.
- Add a credit card to a client’s file, set up installment payments, or set up coupons to incentivize your clients – all of this is possible and straightforward to set up.
The Practice Better platform has lots of support to make your invoicing and billing as painless as possible, and lets you focus on what you love to do – help your clients.
We know it can feel overwhelming at first to wade into the financial waters of your business. For many of us, it can be the most challenging aspect of ownership. However, diving in and taking control of your company’s finances will make you a more confident and secure business owner in the long run. It’s also the reason the Practice Better takes seriously the billing, payment, and invoicing side of our platform. We want to make sure you are set up with all of the tools you need to manage your finances easily and accurately. You can do this and we’re here to support you!
Practice Better is the complete practice management platform for nutritionists, dietitians and wellness professionals. Sign up for free today.