E499 | Here's What To Do With Your Cash

Something we have really been dialing in with the businesses we work with is what to do with your cash. It is very important for you to develop some sort of business finance infrastructure and today I talk more about this. Enjoy!

• Building cash reserves
• Stability and cashflow

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Podcast Transcript

Danny: So there's all kinds of hidden fees within your business that are just part of doing business. One of those is credit. Processing and for us, we didn't even realize how much we were paying in credit card processing with the first management software we were using for our practice. And when we switched over to PT everywhere, we just realized we were saving literally hundreds of dollars a month with credit card processing with their partner with Card point versus who we were using with our prior.

Software. This has made a massive difference. It's more than paid for itself. It allows us to decrease our overhead. It allows us to have more cash flow to reinvest in our people, in our technology, in our facility, in marketing and everything that's gonna drive the business. So don't get abused by credit card processing companies.

Make sure you're paying what you should pay. And if you're looking for a management software, highly recommend PT everywhere directly integrates. Processor makes it very easy and their rates are super, super competitive. So it's saved us a ton of money and it probably will do the same for you if you don't know what you are getting charged.

So head over to PT everywhere. Take a look at what they've got. I think you really like it. So here's the question. How do physical therapists like us who don't wanna see 30 patients a day, who don't wanna work home health and have real student loans create a career and life for ourselves that we've always dreamed about?

This is the question, and this podcast is the answer. My name's Danny Matte, and welcome to the PT Entrepreneur Podcast.

What's going on guys? Doc Danny here with the PT Entrepreneur Podcast, and today we're talking about finance. Don't fall asleep. It's gonna be enjoyable, I promise. This is super important information. Something that we're actually working a lot more on with the businesses that we work with that really help them get dialed in on this side of the business.

And what we found is, especially early on, the ability to develop some important business finance. Infrastructure and discipline is incredibly important. This, it's a skill that's gonna lead you to even more success as you start to have more and more revenue come in. And then the decisions you make are just leveraged based off of that.

This is really gonna apply more to businesses that are smaller. Just just getting started, under probably $20,000 in revenue per month. That is a lot of people that that we work with specifically within our Rainmaker program. Some, somewhere between, honestly, the timeline depends.

It could be somebody that's part-time for a year and then they're, they go full-time and they're able to get to that range. You could just go all in and get there in, a couple months if you do the right things. But either way, this is the the sort of size business that we're talking about.

So the number one thing that you want to think about when you start looking at your finances for your business is early on. The entire goal should not be. To just take that, to take that cash to support your life. If you need that, then you're probably better off doing like a transitionary strategy where you are, still working somewhere or you're doing contract work or PRN or whatever so that you have income.

And then you can take the cash from your business to really start to develop your your financial foundation, I guess is the best way to put it. So the recommendations we have is don't take a dollar out of your business unless you if you can help it, except for expenses, except for your actual expenses for the business.

Don't take a dollar out until you've built three months of cash reserves in the business. So three months of cash reserves in the business based off of what you want to pay yourself. So your salary plus your actual overhead. So let's say you're at $10,000 a month in in revenue and you wanna pay yourself $5,000 and you have fixed costs that are equal to $2,000.

So that's $7,000. You're gonna need to have $21,000 or three months, so three times seven, $21,000 of cash on hand in your business account before you start doing really much of anything else from there. All right? And what will happen is, You're gonna start to build this war chest if you want to call it that, or just this savings account safe, safety net, really in a lot of ways for the business, which then allows you to.

To really take other chances to grow. Now, this is a minimum. There's plenty of people that we have that get to, six, 12 months of cash reserves within a fairly short period of time. If they're not, if they're not paying themselves a ton out of the business. So if you can live super lean and take all that cash and build this massive cash reserve, now all of a sudden.

This is where we're seeing people higher and scale to standalone locations so much faster. Cause if you can imagine, if you spend a year just. Not paying yourself a whole lot, just living super lean. And at the end of that year, you got a hundred thousand dollars sitting in a, in an account.

Now granted, you're gonna have to pay taxes on that, right? So let's call it $70,000 post-tax. But let's say you have $70,000 post-tax. It's a lot of damn money. It's a lot of money to go. Then leverage that into a standalone location. Hiring staff. You have the cash reserves to do and then making smart hires is gonna be.

The growth button, I guess if you want to call it that, to where you're gonna see revenue increase dramatically, because these are service businesses, right? These are local service businesses. They're scaled through people and space people in the space for them to be able to work.

The two biggest constraints you're gonna have are gonna be not enough space and not enough people. But if you have the cash to have confidence to then make these other moves, you're good to go. Also, the cash on hand that you do have helps you get financing. For other things, let's say you want to get a equipment loan or do a a small build out in a space that you're moving into yourself, you wanna put a couple walls up and add another office or something like that you can get loans for the equipment and for the buildout much easier if you are.

Solid financial position with your business and not running super thin margins. This is actually dramatically different than what many other businesses do. So if you look at like the startup world, the software world in particular They don't, they would not follow this guidance at all. I once had the opportunity to go teach at Georgia Tech for their they have a tech incubator and these are all startup companies, people that are computer science folks and founders of software companies that they basically were doing a panel looking at different types of business models.

And I was asked to come in and present on service businesses and what's interesting is these local service businesses are. Far slower to scale, but way more profitable. So they'll actually provide for your family. With these startups, their goal is to get somebody else's money as much as somebody else's money as they possibly can get to then throw at this project that they wanna try to grow as fast as they can, even at a dramatic loss.

This is, Amazon did this, Tesla did this with physical, with vehicles. But they had huge growth. And other investors will look at that as something very enticing to invest in. And the whole point of their business model is to grow something very fast. And then sell it and they make their money on the exit.

They don't really make money along the way because they're trying to grow as fast as they possibly can and scale through hiring people and building their software out and, get as many users as they can. Even if they're losing a dramatic amount of money. It's not really about that, cuz they're always gonna try to go get more money to then grow and then ultimately they want to exit.

So what's funny for me was as I was describing our business model and the things that are important to us, this. The term of profit kept coming up. And for them it's complete opposite. They don't care about profit. But for us for these service-based businesses, it's very important for us to to have profit.

And the reason that we need to have that is because the, we're not trying to grow something and exit it for a hundred million dollars. That would be. But the the likelihood of a software company doing that is less than a percent of 1% is so small. The ones that actually work out, the vast majority of them fail.

So they're playing with somebody else's money, but they're very risky about how they do it. I don't really wanna do that. I got some kids, I need to buy groceries. So I like these businesses because they're predictable. They're cash flow, like very cash flow positive in comparison to even other service business.

And they're very stable. So you may not have the scale of software or something like that, but what you do have is stability and cash flow that, can be used for growth and can be used outside of that for other things that you want to invest in that are gonna put your family in a really secure financial position.

So that's what I want you to think about is number one, the most important thing that you can do is live super lean. And, for that first year, build your cash reserves up and then, take a chance on yourself. But maybe it's not even you have to spend a whole year that it could be four to six months where you're just crushing it, but you're not taking let's say you're making $20,000 a month by month three.

If you take all of the money you have, and let's say if it's just you're probably gonna have 80% or more profit you know of what you're taking home after expenses. So that's pre-tax money. So you still have to pay taxes on that. But even still, if you have 80% of $20,000, that's $16,000.

Now you could. $12,000 of that on your lifestyle and live like a baller. But if you spend, $5,000 of that on your lifestyle and all of a sudden you have $11,000 every month that's getting stored in a in a cash account, in an operating account that you're then gonna use to move into a standalone space, like you're gonna get a lot of money really.

And you'll have the opportunity to then grow into whatever you want your business to be after that, in a faster manner than somebody that maybe isn't growing quite as fast and doesn't have the ability to grow cash reserves quite as quickly. But cash is king. It's the truth. It makes people feel a lot safer.

It helps make better decisions. It helps you. Not have to take on as much debt and risk associated with growing and scaling these businesses. And it's a really important thing to do. So just keep in mind the goal is three months at a minimum, before you start to really look at making any other changes in your business.

And ideally a lot more than that cuz it's gonna put you in a place where you can really make the best decisions, make the best impact with your dollars and growth long term, and put your business in a really solid.

What's up, PT Entrepreneurs? We have a new exciting challenge for you guys. It's our five day PT biz part-time to full-time challenge where we help you get crystal clear on how to actually go from a side hustle. To a full-time clinic, even if you haven't started yet. This is a great way to get yourself organized in preparation for eventually going full-time into your business.

So we actually help you get crystal clear on how much money you're actually gonna need to replace with your business to be able to make a lateral transfer. How many people you're actually gonna need to see based on what you should be charging. We're gonna tell you three different strategies you can take to go from part-time to full-time, and you get to pick the one that seems like the best fit for you.

For your current situation, we even show you all the sales and marketing systems that we teach within our Mastermind for people that are scaling to multiple clinicians, past themselves that you need to have in your business to be able to go full-time. And the last thing is we help you create a one page business plan.

This is a plan that's gonna help you get very clear on exactly what you need to do and drive action. That's what this is all about. We want you to win. We want you to take action, and in order to do you have to get really clear on what you need to do next. So go to physical therapy biz.com/challenge.

Get signed up for the challenge today. It's totally free. We think this is gonna be a game changer for you and are excited to go through. Hey, real quick before you go, I just wanna say thank you so much for listening to this podcast, and I would love it if you got involved in the conversation. So this is a one way channel.

I'd love to hear back from you. I'd love to get you into the group that we have formed on Facebook. Our PT Entrepreneurs Facebook group has about. 4,000 clinicians in there that are literally changing the face of our profession. I'd love for you to join the conversation, get connected with other clinicians all over the country.

I do live trainings in there with Yves Gege every single week, and we share resources that we don't share anywhere else outside of that group.So if you're serious about being a PT entrepreneur, a clinical rainmaker, head to that group. Get signed up. Go to facebook.com/groups/ptentrepreneur, or go to Facebook and just search for PT Entrepreneur. And we're gonna be the only group that pops up under that.