How to understand your therapy practice’s profit

Separate money earned, profit and money available today

Money earned, profit and money in the bank answer different questions. Revenue is the amount your records show as earned or received, depending on the report. Profit is what remains after the costs included in your calculation. Money available today tells you whether you can pay bills when they are due. Label each clearly.

For a simple session plan, use what you reasonably expect to receive, not just the fee printed on the bill. Subtract the costs of providing the care. Then check the plan against your accounting records with the appropriate professional help. The calculation below helps you plan; it does not replace those records.

Make the owner’s work visible. If the owner provides clinical care, supervision and management without an expense in the model, the apparent surplus includes unpaid labor. That may be a deliberate early-stage choice, but it should not be mistaken for a sustainable margin.

Work out what one session leaves after its costs

Work out what a session leaves to help pay the rest of the practice’s bills. Subtract the costs that come with that session from the money you expect to receive. The amount left is often called contribution. Costs that rise with each session are called variable costs; bills that stay broadly the same, such as rent, are fixed costs.

For example, suppose you expect to receive $120 for a completed session and spend $72 on costs tied to providing it. That leaves $48 toward rent, fixed salaries and other practice bills. Include all the session-related costs you want to account for, not only one pay line. Put a salary that stays the same in the fixed-cost total, and do not count it twice.

If services have different fees, costs or appointment lengths, calculate them separately before combining them. One average can hide a service that leaves little money or uses much more clinician time. Compare the actual mix your practice plans to provide.

Find how many sessions cover your practice bills

To find how many sessions cover the other bills, divide those bills by the amount each session leaves. This is called the break-even point: the point where the money in covers the costs included in your plan. The SBA uses this same basic approach for businesses.

Using the example above, suppose other monthly costs are $14,400. Each session leaves $48, so 300 completed sessions cover those costs: $14,400 ÷ $48 = 300. If you want another $4,800 left after those bills, you need 400 completed sessions: ($14,400 + $4,800) ÷ $48 = 400.

Check that the weekly schedule can support that goal. With 48 working weeks in a year, there are an average of four working weeks per month: 48 ÷ 12 = 4. A goal of 400 completed sessions per month therefore means 100 per working week. Use your actual working weeks so leave is included.

Try your own figures in the break-even calculator. If a session costs as much as you receive, or more, it leaves nothing to pay the other bills. Simply adding more of those sessions cannot cover positive fixed costs in this calculation.

Include costs that are easy to miss

Check when money arrives and bills are due

Even a session that leaves money after its costs can create a short-term problem if payment arrives late. Rent and payroll may be due first. Make a simple month-by-month list of starting cash, money expected in and bills due. That shows a problem the profit calculation alone cannot reveal.

For example, sessions may eventually bring in $48,000 without all that money arriving in the same month. List what you expect to receive from older sessions, current sessions and later payments. Use the timing in your own records, then test what happens if payment is slower.

Do not use a universal cash-reserve number copied from another practice. The needed buffer depends on commitments, collection timing, planned hiring and the downside scenario you are willing to carry.

Fix the part of the business that needs attention

Choose the fix that matches the problem. Suitable inquiries that never become appointments point to intake or scheduling. Suitable openings with few inquiries point to marketing or referrals. Completed sessions with missing payments point to billing. Full schedules that leave little money call for a closer look at fees and costs.

To test another possibility, change one number at a time. In this example, receiving $125 instead of $120 while session costs stay $72 would leave $53 instead of $48. The calculation shows what a change would mean. It does not promise that your practice can raise fees or obtain a higher insurance payment.

For a possible hire, use the hiring guide to allow for appointments building gradually. A clinician with an established schedule is not a good model for a new person’s first months.

Connect the money review with everyday work

Cortexa Analytics helps you review revenue, sessions, clients, clinician activity and open or filled appointment time. These show the activity behind a financial change. You still need the practice’s costs and accounting records to understand profit; a revenue total alone cannot show it.

Full Service Partner supports the administrative work that affects the model, including intake, scheduling and billing, with payroll and growth work as agreed with your practice. The practice decides its clinical model, compensation and growth priorities. Cortexa helps connect those decisions to a clearer view of the business and the work required to support it.