How do you figure out the lifetime value of your clients? What is the relationship between your conversion rate and your marketing budget? Why should you do a time study?
In this podcast episode, Joe Sanok answers the question about what numbers you should know for your private practice.
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In This Podcast
- The lifetime value of your clients
- Your conversion rate
- Number of hours per week
- Health numbers
The lifetime value of your clients
For every new client that comes in, how much are they worth to you? Does the average person come to 10 sessions and then you charge $150 per session? … You would have to know what your average per session is, and the average amount of sessions that someone comes [to]. (Joe Sanok)
Figure out the numbers behind:
- Your average cost per session
- The average amount of sessions that a client comes to
These two numbers help you figure out the lifetime value of your clients.
You can use this number to help you calculate how much you should spend on your marketing per client to convert them.
Your conversion rate
Out of every ten or one hundred phone calls or emails, how many of those people come in to work with you?
If you can start with the entire customer journey and know each of those numbers, then you can tweak each of those dials. (Joe Sanok)
For instance, with Google Ads, for every hundred impressions, you know that you are going to get five clicks, and one person will call or submit a form.
Therefore, to get one person to make a phone call you need to hit one hundred impressions and five clicks. Knowing these numbers can help you understand where the most vital place for you is to put your money.
Open a separate account that is dedicated to taxes where you can pay them every month so that when tax time comes around, you are already prepared.
Have your accountant help you predict how much you need to have saved to pay your taxes.
Number of hours per week
Keep track of your actual worked hours per week. Count:
- Commute time to and from the office
- The time it takes to do paperwork
- Staff phone calls outside of the office
- Working outside of the office
Look at the actual hours worked by completing a time study [which] can be so helpful to say, “right now I am working forty five hours a week. I do not want that for the rest of the year, I want to rein that into thirty eight hours.” So, start rescheduling, setting boundaries. (Joe Sanok)
Ask yourself, “are the things that I am doing the things that only I can do?” If they are not, then consider hiring them out or delegating to someone else to free up your time.
Alongside your hours worked, figure out how many hours you have to yourself. What are you doing each week for yourself to be your most creative and productive?
Look at your:
- Blood pressure
- Heart rate
- Blood sugar
These are important numbers to know when it comes to your business because your business functioning is dependent on you being healthy and able to interact with it, especially if you are a clinician.
Your business suffers if you are burnt out, so prioritize your health alongside the growth of your practice.
Useful Links mentioned in this episode:
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- Ask Joe a Question!
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Meet Joe Sanok
Joe Sanok helps counselors to create thriving practices that are the envy of other counselors. He has helped counselors to grow their businesses by 50-500% and is proud of all the private practice owners that are growing their income, influence, and impact on the world. Click here to explore consulting with Joe.
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[JOE SANOK] This is the Practice of the Practice podcast with Joe Sanok, session number 661.
I’m Joe Sanok, your host, and welcome to the Practice of the Practice podcast. I just got done recording an episode that’s going to go live in March with Nate Page. It’s funny Nate had a question and I was like, I’m about to record the Ask Joe show. Why don’t I just do this right here? So the question is what numbers should I know in 2022? I love this question because oftentimes therapists were not always the most numbers-oriented people. Some of us might have that been. I like numbers, but I don’t always spend the time to make sure that I have all my systems set up to gather those numbers.
So I think it’s important that we, especially early on in a year going to say like, how are we doing in this? Your accountant’s going to want all the tax information. If you have 1099’s, all those are due by the end of the month and all sorts of numbers that you’re thinking about. But I wanted to start with a couple numbers that you definitely should have a decent handle on. One of them is the lifetime value of your clients, the lifetime value of your clients. So the lifetime value is basically for every new client that comes in, how much are they worth to you? Does the average person come to 10 sessions and then you charge $150 per session?
You would have to then to even figure out the lifetime value. I guess if we back up, you’d have to know what your average per is and the average amount of sessions that someone comes, because that’s the info that you’re going to need for your lifetime value. So on average, do you get 150 bucks a session? On average, do you get $91.12 cents per session? Are you on insurances? So to know within your practice, if you just took the entire amount of money that came in in 2021 and the total number of sessions what would that number be? What’s your cost per session that you’re making?
Then on average, how long does the average person come to counseling with you? So if the average person comes 10 times and your amount per session that on average you make is $150, that means that the lifetime value of a client is a $1,500. Do people come for years and years and years? Is it more short lived? You want to just take those averages and figure out all right about what’s the lifetime value? So how long do people come? How frequently do they come? How much do you get per session?
So this is helpful because sometimes people will say, oh, I would never do Google Ads. It’s going to be $5 per click and even if I put a cap on it, it’s not going to be worth it. Well, if you know the average person that when they do counseling with you or with someone in your practice, it brings in a thousand bucks, even if you spend two or $300 in ads and only one person converts, you’re trading $300 for $1,000. Now, granted you got to do the work and all that.
But if I said to you, “Hey, you give me $300 now and at the end of the year, I’ll give you a thousand dollars,” you would take that deal all day long. You’d be like, “How much can I invest in that?” So that same idea of when you start to hone in on your marketing to be able to say, yes, sure, we’re spending $300 for every thousand dollars we bring in to really get things amped up and going. That can really be helpful in regards to growing your business.
I think also knowing your conversion rate. So out of every 10 or 100 phone calls or emails or contact submissions that come in, how many of those people come in to work with you? Is it 90%? Is it 12%? What is it? Because if you can start with the entire customer journey and know each of those numbers, then you can tweak each of those dials. So say, let’s start with one. So let’s start with say a Google Ad campaign. If you know that for every hundred impressions, you’re going to get five clicks and of those five clicks, we know that one person will call or submit a form. Then we know that of every five people that submit a form, one becomes a client, well, then we can start to run the numbers and say, okay, if to just get someone to make a phone call, we have to have a hundred impressions and five clicks, that means that if we, for every five people that contact us only get one client.
That means we need to have at least 25 people click. That means we need to have maybe 500 impressions. We need to know some of those numbers, because then we can kind of tweak those dials. So if we start there with Google, a Google Ad, we then know this many people call, this many people convert. We know this is the lifetime value. We know this is how much each session is worth. Then you can say, okay, what would it look like if we had better copy where we got more clicks for the same price? What would it look like if for those that click and come to our website?
Maybe it was clear as to how to contact us. If we could have 5% more people pick up the phone or submit a contact form or drop some email than what we do, that’s an extra 5%. And of those that actually get on a phone call or get an email, say we improved by five or 10% conversion there and maybe did some sales training or some empathy training with the person that’s on the other line. Or maybe we use a virtual assistant company that specializes in that.
Then when they actually come in and meet with a clinician, are all the clinicians the same? Maybe people that see me come in average of 12 times, but the people that see someone else only come in three times. Well, that’s something we want to improve on. So if we’re improving 5% at the beginning and then 5% in the middle and 5% once they come in, pretty soon, we’re looking at 15, 20, 30% growth. That’s a big jump for a business without doing any extra major advertising, doing the same things you’re already doing. So knowing your conversion percentage, your conversion rate is a number you absolutely should know especially this year.
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If you’re coming from another EHR, they make the transition really easy. Therapy Notes will import your clients’ demographic data free of charge during your trial so you can get going right away. Use the promo code [JOE] to get three months to try out Therapy Notes, totally free, no strings attached, including their very reliable tele-health platform. Make 2021 best year yet with Therapy Notes. Again, that’s promo code [JOE] at checkout to get three months totally free.
[JOE SANOK] Also we want to know your percentage for your taxes, looking at how are you separating out your money, not just for your tax taxes. Maybe you use Profit First where that money is first going into a profit account and then you’re spending down from there. Maybe you automatically have a certain amount for your quarterly taxes that just go into a tax account. Knowing those numbers of how much does your accountant predict that you should be setting aside? I personally don’t like to have that raise a thin margin. I want to have plenty of money in my tax account in case they’re a little bit off.
I’ve said this before. It was probably five years ago before when I fired my previous accountant. They were off my $30,000, $30,000. I had, I think probably $32,000 in my tax account and I thought, oh man, we’re going to get a great payout because if I have my tax account and then my taxes, say I’m getting a refund or say, I only owe $5,000, then the rest of it, I pay out to the family. So that year I didn’t get hardly anything because my account was so far off.
Now what I had done and I don’t do this fully anymore, but 50% of my net, I would put into taxes every single year. So I had plenty of money. There was some fear and uncertainty there. So knowing your actual numbers can be really helpful to not have too much sitting in there as well. Also just knowing your number of hours worked in a week is so important, and actual hours, counting commute time to run over to the office, counting the time that it takes to do some paperwork. Are you getting phone calls from your staff during inconveniencing times? Are you checking emails in the evening after your kids are in bed?
To look at the actual hours, worked and doing an actual time study can be so helpful to say, okay, right now I’m working 45 hours a week. I do not want that for the rest of the year. I want to reign that into 38 hours. So to start scheduling in and setting boundaries and figuring out well are the things that, that I’m doing, actually, things only I can do. Maybe you need an assistant to check your email. Maybe you need an assistant to call back referral sources. Maybe you need an assistant to call back new intakes. Those are all things that is that next level of professionalism that can be really helpful. So hours worked is another number you want to know.
I think also looking at the amount of hours that you have to yourself. Now for a lot of us that are adulting like crazy, this is a really hard thing to confront because oftentimes we’re parents, we may have a partner that wants us to hang out with them, shocking. That’s what it takes to have a good partnership. We may have friends or hobbies or things, but thinking about what are the things that I’m actually doing each week for myself, so that I can be my most creative, I can be my most productive, I can enter into my work week with a brain that is ready to go, not one that’s already burned out from the weekend?
You even just starting to look at how do you do weekends as a family or as an individual or as a single person, or as a partnered person, whatever your configuration is? How do you do weekends? How do you do evenings? Are you burnt at both ends of the candle? Or are you intentionally saying here is what we as a family are going to do. So for example I have a seven and 10 year old girls. I’m a single dad. I don’t want any extra stress than I need. I want to give them space to think and process and be artistic and enjoy nature and to grieve the changes in our family to allow for those emotional outbursts when they come to be handled in a way that I’m proud of how I handle them. I want all of that.
So what that means is we’re not going to do gymnastics five nights a week. We’re going to do it one night a week. Then maybe we’ll do something social throughout the week or maybe they’ll go skiing with their grandma or with me. Every Wednesday I have improv. That’s a non-negotiable. I do improv. I love it. It makes me laugh so hard and I just, my brain transports through a different place. So looking at the way that you are serving yourself for your best self to show up as a parent, as a spouse, as a friend, as a person just for you, that’s a number that is really, really important to me.
Then the last numbers that I would say are really important are some of your basic health numbers, looking at your blood pressure, looking at your blood sugar, looking heart rate, your BMI, all those important numbers. I check my blood sugar five to eight times a day. I’m Type 1 Diabetic, so I can watch the fluctuations in my blood for when I eat an unhealthy meal versus a healthy meal. I have a pretty good sense in what my body needs. So having those numbers here, there can be so helpful to just know, all right, this isn’t a huge weight loss challenge kind of thing, or just buying into what culture says we should be.
It’s what makes me feel good? When do I feel healthiest and strongest and most alert and ready to take on the world’s problems and help the world and to also remember that I get to be human? I get to be human. How cool is that? We forget that sometimes. So those are the numbers that I would say are really important for this year. I’d love to know if there’s numbers that you as well would add to that list. You can tag me on social media, send me an email, email@example.com. Tell me what numbers for you, you would add to that list.
Thank you so much for letting me into your ears and into your brain.
I almost forgot to say Therapy Notes. Amazing. So Therapy Notes is the best electronic health records out there. Use promo code [JOE] to get three months for free. You’re going to get much help in transitioning over to Therapy Notes. They are an amazing company. They’ve been with us for years. Therapy Notes is the electronic health records that you need to help you get to the next level.
So thank you so much for letting me into your ears and into your brain. In tomorrow’s episode, we’re going to be talking to Lauren Sweeney who’s going to talk about how more confidence could create change this year. Then right now, after that on the 25th, we’re going to have David Meltzer about making this the year of priorities. David Meltzer started a sports company that the movie Jerry McGuire is based at. So an amazing guy.
I actually on Thursday of the week of recording this, I’m going to be flying out to Las Vegas to be on his TV show. So pretty exciting stuff to be connecting with some of these people. Then on the 27th, we have Daniel Pink. One of the business writing legends of our generation is going to be on here talking about his new book. So excited to have him on there. Thanks so much for letting me your ears and into your brain. I’ll talk to you soon.
Special thanks to the band Silence is Sexy for your intro music. We really like it. And this podcast is designed to provide accurate and authoritative information in regard to the subject matter covered. This is given with the understanding that neither the host, the publisher, or the guests are rendering legal, accounting, clinical, or other professional information. If you want a professional, you should find one.