How Well is Your Practice Performing?


How do you know you’re earning enough to pay your bills? You may remember that this was a question I addressed some weeks ago, when I showed you how to calculate the Break Even Point for your practice. (You can read the article here.)

Calculating the Break Even Point gives you an idea of the number of clients you need to see in order to cover your costs. Or if you work a consistent number of hours, it tells you how much you need to charge for each hour you work.Closeup portrait of cute young business woman smiling

So, having calculated your Break Even Point, and you know what you need to do, then what?

Well, the break even point is what’s known as a Key Performance Indicator or KPI. In other words, it’s used to help you keep track of how you’re doing in your practice, financially speaking, without having to go to the trouble of preparing regular financial accounts. You find one figure that tells you whether you’re roughly on track or not and use that as a bench mark. KPIs vary from business to business, and from practice to practice. They may be stated as we have already seen, in terms of clients, time or money.

Interestingly, just having the discipline to keep track of one figure can help your practice profitability, without changing anything!

Typically, the KPIs that work best for a small professional practice are:

  • Fees earned
  • Cash received
  • Bank Balances
  • Expense levels (especially if there’s one or more significant costs)

How does it work?

Simply, you decide how you are going to measure how well your practice is doing, business wise, you work out the level of figure that works for you, and then you put in place a system to monitor it.

Let’s take the example of using fees earned as the KPI. You have worked out that in order to pay your way, you need to see 10 clients a week. You’ll remember from the previous exercise we did (you can revisit it here) that in order to take account of holidays and cancellations, that probably means having 12-13 clients in total. An easy way to monitor whether you’re reaching this or not is to count the appointments you have in your diary for next week. One week below your goal may not be a problem, there may be other weeks where you’ll pick it up, but if it’s a regular thing, if instead of averaging 10 paying clients a week, you’re only reaching 7 or 8, then you need to look at ways of increasing your income. There are two ways to do this, increase the number of clients, or increase your fee amount. There are plenty of articles on this site suggesting how you might go about this.

Photo no (39)Let’s look at a different KPI: Income amount, rather than client hours. How do you keep track of that? Again, looking for an easy option, take a sheet of paper for this month or week. Put at the top of the page the amount you want to earn. Then every time you get paid, or see a client, deduct the amount of the fee from your total for the month or week. The balance is what you have still to earn in order to meet your goal. This exercise, done consistently over a period of at least three months will help to increase your income. How? By focussing on how well you are doing against your goal, you will either be spurred on to create the income you want, or you will flush out your resistance to taking the action you need to take.

How do you use Bank Balances or Expense levels to monitor your progress? Using the same principles outlined above, decide what level tells you what you need to know, then monitor it.

If you struggle to earn enough in your practice to make ends meet, perhaps I can help? Please contact me here for your free 20 minute consultation or to make an appointment.