E757 | Two Growth Stage Paths

Mastering Cash Flow Management for Physical Therapy Entrepreneurs

In this episode of the PT Entrepreneur Podcast, Dr. Danny delves into one of the most critical yet often overlooked aspects of running a successful physical therapy business (or learning how to start a physical therapy clinic): cash flow management. Whether you're just starting out or looking to scale your practice, understanding cash flow dynamics is essential for long-term financial health. In this episode, Dr. Danny shares insights and strategies that can help physical therapy entrepreneurs better manage their finances and navigate growth.

Why Cash Flow Management Matters

Dr. Danny highlights a common mistake many business owners make: relying solely on their bank account balance at the end of the month to gauge financial health. This simplistic approach doesn't take into account key financial obligations such as annual expenses and tax payments, leading to a potentially misleading picture of your practice’s financial stability. By conducting a detailed cash flow analysis, both for business and personal finances, you can make more informed decisions that positively impact your long-term success.

Financial Challenges When Scaling Your Practice

As a physical therapy practice transitions from a solo operation to a more structured team environment, financial challenges often arise. Dr. Danny outlines two primary strategies for managing this growth:

1. Building Cash Reserves: Saving up a substantial financial cushion before expanding your team or services.
2. Taking on Debt: Using loans or other financing options to support growth.

Both approaches have pros and cons, and Dr. Danny stresses that practice owners need to "earn the right" to leverage debt effectively. This means having a thorough understanding of your cash flow and ensuring that taking on debt is a responsible, strategic decision.

Financial Literacy: The Key to Sustainable Growth

Financial literacy plays a significant role in the long-term success of your practice. Dr. Danny explains that improving your understanding of cash flow and key financial metrics will help you make smarter business decisions, whether you’re looking to expand your team, invest in new equipment, or open additional locations. The more you know about your finances, the better equipped you'll be to avoid common pitfalls and ensure sustainable growth.

Personalized Financial Assessments

For those seeking personalized guidance, Dr. Danny offers a detailed business assessment to help clinic owners evaluate their financial standing relative to industry benchmarks. Understanding how your practice compares to others in the field can give you a clearer sense of what steps to take to improve your financial health.

Key Takeaways from the Episode:

• The importance of comprehensive cash flow analysis.
• Common mistakes entrepreneurs make when managing cash flow.
• Strategies for scaling a physical therapy practice, including managing debt and building cash reserves.
• The role of financial literacy in ensuring sustainable business growth.

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Podcast Transcript

Danny: And then all of a sudden you get access to 200, 000 in, business capital to expand, to have to have capital on, to build a higher staff and do so in a way where you can pay them a really, a solid salary to be able to, to buy equipment Build outs, all this stuff.

Let's say you had 200, 000. Would you make decisions differently? Hey, are you a physical therapist looking to leverage your skillset in a way that helps you create time and financial freedom for yourself and your family? If so, you're in the right spot. My name is Danny Matei. And over the last 15 years, I've done pretty much everything you can in the profession.

I've been a staff PT. I've been an active duty military officer, physical therapist. I've started my own cash practice. I've sold that cash practice. And today my company, physical therapy business helped over a thousand clinicians start growing scale, their own cash practices. So if this sounds like something you want to do, listen up.

Cause I'm here to help you.

Hey, what's going on? Dr. Danny here with the PT entrepreneur podcast and. Let's talk capital constraints today. This is a bit of a somewhat more advanced topic. This is something that, that in the last few years in particular I met an entrepreneur at an event that is, he's in a CPA, but does a lot of CFO, sort of chief financial officer work for for other companies.

So we'll come in and he'll get their financial side of their business in order. Really smart guy. And one of the things that he said in this talk that he was giving that I thought was really interesting was someone asked him, what's the biggest mistake companies make?

And he said a lack of understanding of cash cashflow management. And I thought that was really interesting because what he basically meant was they didn't understand how to allocate money. And also how to understand what payments were coming up, what what money they had to set aside for taxes.

And this is actually a a pretty challenging skill to learn. And a lot of reason why a lot of people shy away from, Any sort of finance thing is because it just takes a little bit of time to really start to develop that skill. And you don't have to be like this guy's level to to do a good job with your business and understand how to manage your finances.

But you do have to spend some time on it and get really clear on where your business is. And this is what most people do. And if this is you. Stop it. You got to be better than this. We look at our bank account on the first of each month or the 15th of each month or whatever. And we compare it to the month before.

So this is what I used to do. If it was the 15th of let's say, it's the 15th of October and I have 10, 000 in our business account. And I look back at the 15th of September and we had 9, 000 in our account at that time. I was like, hell yeah, we're up a thousand dollars. We're making great progress, but there's, but that is such a flawed approach because there are so many factors that can cause that to, to be either higher or lower than it was the previous month.

Because you could have, what if you have a an annual payment for your business insurance that happens. That month it could drive you down. What if you have unusual amount of new patients that come in that pay for packages all at once that could drive it way up.

You could think you're doing amazing and what you're not really looking at is the actual cash flow in the business on an annual basis as well as a monthly basis and understanding Where you need to allocate money. So that skill is really important. And that's something that's, for most of the business owners we work on, them understanding how to run their payroll, what to pay people, how to manage their cash reserves.

All that stuff is really incredible, incredibly important skillset that that we really help people understand better so that they can have a better understanding of managing their finances on the business side, but the same thing is applied to the personal side. Cause the same thing happens on the personal side.

If you don't manage your expenses on a monthly basis, when your mortgage is coming out, when you have student loans are due, when you have to pay car insurance, whatever, like these are things that you have to understand cashflow personally as well. So it's a very similar skill.

It's just applied in a little different way in the business. But one of the big things that I see as far as cashflow is concerned is during this scale phase, where you go from an individual practitioner to then. Almost everybody is bootstrapped. They're not taking any loans out.

They're just paying for everything themselves and growing that way. And there's a lot of advantages to that. Early on, I think that is absolutely the way to go. I think you've got to you, you got to get scrappy, you've got to learn how to. Make it work without taking big loans on to try to, grow fast by throwing money at problems that you don't understand, like you haven't earned the right to do that just yet.

In my opinion, I think you would put yourself in a really poor position, but, and we're fortunate to have businesses that we can do that with. I have a friend that's a veterinarian and for a vet to start a clinic. They're looking at three quarters of a million to a million dollars in loans just to get started.

Because of all the equipment they have to have and the build out the specialized, medicine and stuff that they have to have for their practice. And we don't have to have that. You need a table in your hands, like maybe you need some needles or some kettlebells or something, right?

But a lot of times, you can get a little subleased office and you can get going for very little money. And that's great because it's a low risk business to start, right? You can dip your toe in the water. And not ruin yourself financially, but when you have success and your schedule is busy and you're like, okay, man, I need to bring somebody else on because my schedule is saturated.

That next stage is really tough on the finance side of things because you have to do one of two things. You either have to. Build up a bunch of cash reserves, which we recommend, three to six months of cash reserves that people have, and that is like what your overhead is and your business times three to six and doing that before you then scale into a a bigger space.

The, you can bolster that with things like lines of credit. Sometimes people will use like 0 percent interest credit cards to buy equipment. And then, obviously pay that off while it's still in a 0 percent interest environment. And then the other option would be to take on debt.

So to capitalize yourself with a bank loan or a private loan and, the there's different ways to do this. People that we've worked with more people that have bootstrapped their way through growth stages. And the advantage to that is you never take on debt. You never really put yourself at more risk of of bankruptcy per se, because you're not going to default on a loan and no one's going to take your house.

Because of that, worst case scenario, you you shrink back down and you have to Save up for a longer period of time before you then try to grow again. But when we look at the speed of being able to take on debt, there are some significant advantages to that. If you had to ask yourself this question, if you're in this stage and you're busy, and then all of a sudden you get access to 200, 000 in, business capital to expand, to have to have capital on, to be able to hire staff.

And do so in a way where you can pay them a really, a solid salary to be able to, to buy equipment build outs, all this stuff. Let's say you had 200, 000 would you make decisions differently? Probably so probably very differently. But again, here, my, my point with this is as far as the finance side goes, You got to earn the right to use stuff like that.

You can't just start out with that. You probably wouldn't even get a loan for that to be honest with you. Just starting out, but you got, you have to earn the right to be able to allocate capital outside of your own money. And that's what I think is so cool about these businesses is, you can bootstrap, get started.

You can stay that path if you want to do that. And we've seen people grow, seven figure plus businesses off of just being bootstrapped, never taking any loans on. And then we've seen other people that have been able to take a loan. Be able to grow faster and establish a more, a credible brand and clinic in a shorter period of time, because they've been able to accelerate that with outside money and then be able to pay that back over time.

So there's a couple of different paths to go. These are the two I, and for me, what I wanted to do with this is just share with you the paths that I'm seeing the day to day things that I'm helping people with. Because for you, you may be living in a bubble, just like in isolation. Most business owners in general, this is the case, but most clinicians that, we end up working with, they have been doing it on their own for a while and they don't, they don't have other people to bounce this stuff off of.

Maybe they have some local entrepreneur friends that they know or something like that, which can be good. But they're not getting any sort of like industry standard from, All these other clinics, right? We're working with hundreds of clinics that are, actively going through stuff like this So so I think if anything if this is helpful just sharing with you what i'm seeing from a high level so you can have a better idea of what's appropriate for a next step You know within your own business and you know If you're something that you're tired of doing this on your own and you want to get some help Then you we would love to see if there's a fit for us to work together.

And I'm saying that there is, if there is, we would love to help you take that next step. The easiest thing to do, if you're interested in that, go to physicaltherapybiz. com. You can just click on, jump on a call with our advisors. And next step for that is really taking you through a detailed business assessment.

Like we take you through and look at how you stack up to the benchmarks of all the clinics that we work with. So that. Where you stand as far as sales, marketing, finance, people, processes concerned and what areas maybe you're deficient in. And I think it's, this is the most valuable free call that I think you could ever have as a cash or hybrid, hybrid based clinic owner, because you're going to get a really clear idea of where your business actually is and not just you comparing yourself to whatever it, but we're comparing you to the average of what we see as a successful clinics that we're working with.

And that's a pretty cool thing to benchmark yourself to. If that makes sense. Head to physicaltherapybiz. com. Take a look at that. In, in regardless, here's what I'll leave you with. As you're looking at growing your clinic, you have these two paths, right? You have bootstrap. You can maintain that the whole way.

There's more security with that. It's going to be slower. If you go and capitalize yourself with a loan, you can grow much faster. You also take on. Debt, which has a risk associated with it. But as long as you manage that risk, the thing is you probably have taken on you obviously taking on debt with student loans, maybe even bought a house, right?

So you didn't save up all your money to buy that house in cash. Most people don't do that. They get a mortgage. And if you don't pay your mortgage back, they will take your house back. And if it doesn't have enough equity in it more than that, right? Like you've signed up for it, whether you know it or not.

This is the same thing on business. If you take on debt, then the next steps really are are you, how do you feel with using that? Or do you feel like you have the skillset to use it? If you don't, then please don't take on any debt. It's not worth it. But if you feel like you have the financial understanding and a plan and a credit card, Clear idea of what to do with allocating that capital.

It can be a really smart move to grow much faster. Hey, Peach entrepreneurs. We have big, exciting news, a new program that we just came out with. It is our PT biz part time to full time five day. Challenge over the course of five days, we get you crystal clear on exactly how much money you need to replace by getting you ultra clear on how much you're actually spending.

We get you crystal clear on the number of people you're going to see and the average visit rate you're going to need to have in order to replace your income to be able to go full time. We go through three different strategies you can take to go from part time to full time. You can pick the one that's the best for you based on your current situation.

Then we share with you the sales and marketing systems that we use within our mastermind that you need to have as well if you want to go full time in your own practice. And then finally, we help you create a one page business plan. That's right. Not these 15 day business plans. You want to take the small business association, a one day business plan.

It's going to help you get very clear on exactly what you need to do. And when you're going to do it to take action. If you're interested in signing up for this challenge, it's totally free. Head to physicaltherapybiz. com forward slash challenge, get signed up there. Please enjoy. We put a lot of energy into this.

It's totally free. It's something I think is going to help you tremendously. As long as you're willing to do the work, if you're doing the work, you're getting the benefits. Information put down and getting yourself ready to take action in a very organized way. You will have success, which is what we want.

So head to physicaltherapybiz. com forward slash challenge and get signed up today.