E563 | Why You Need To Raise Your Rates Right Now

Today, we jump into a topic that has been covered by myself many times and that is raising your rates. Now is a good time to look at your comp structure and determine if you are undercharging. If you did not do this at any point this past year, you probably are undercharging. 

• Compensation structures
• Maintaining net profit margins
• Raising prices to be more competitive

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Podcast Transcript

Danny: Hey, I've got a question for you. Do you know if you're tracking the right data, the right metrics, the right key performance indicators in your practice? This is something that's huge for us and really helps us make solid decisions within our business, but the prior software that we're using to run our practice made it really challenging.

To actually get that data out and use it in reports. Since we've switched to PPG everywhere, this has actually become way, way easier for us to be able to have the right data. We have a dashboard of all the things that we actually want to see, the metrics that we want to pull, and it makes our life a lot easier to pull the information that we need to make the right decisions within our business.

So if you're running blind and you're not tracking the right things, or you're having a. Hard time actually pulling everything together. I highly recommend you check out our friends at PT Everywhere and see what they've got going on with their software platform. It's what we use for our practice. It's been a game changer for us.

You can check 'em [email protected]. 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 want to 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 Matta, and welcome to the PT Entrepreneur Podcast.

Hey, what's going on guys? Doc Danny here with the PT Entrepreneur Podcast, and today we're talking about the number one reason why you need to raise your prices and charge what you are worth. One of the things that we help entrepreneurs do that we work with within PT Biz is in particular when they're at the stage of business.

Where they're growing and they are hiring is. Put together like compensation structure and how they actually do that. So number one, it would be looking at, all right, where are you at demographically, what does that look like as far as what people are getting paid, cost of living, things like that.

But ultimately just being able to have the right compensation structure. Within a cash practice or hybrid practice that makes sense both for the employee and the employer. There's a lot of different ways to do this. Whether it be, all salary lower salary with bonus structures, percentages.

It could be visit based, like there, there's a lot of different ways to do it. But one thing that I wanna share with you that we're seeing now, really this year in particular, is that the base salary, the actual Just the amount of guaranteed money that somebody's looking at having to pay an employee is going up pretty significantly in comparison to even last year.

And you have to think about, what are the external factors that are driving this well? One is the PT profession. I actually think I think quite a few people have moved on and have switched careers. There's the, like the non-clinical path that a lot of people are taking. I think that.

They're more and more in demand. When I look at like hospital positions that are open PRN positions travel positions even big corporate practices, there's a lot more hiring availability than there, there was even a year or two ago. So I think the demand for the profession is there.

I think. More senior clinicians, less and less of them are sticking around. I think a lot of them are looking for other things that they can do outside of the clinic. I think in healthcare in general, this actually is the case. Not necessarily just our profession. We're a part of this. I see this with nurses, with doctors.

I had, I was talking to my my buddy yesterday that's an ortho pa and he was expressing something similar. Just the lack of flexibility he has with his family is really tough with the clinic hours that he has. I see it happening. So I think that's part of it. So with supply and demand the demand is higher.

So compensation goes up. The other thing is life in general has just gotten more expensive. Everything is more expensive, right? You go to the grocery store and things cost more. You you do a little project at home, you have to buy some lumber. It's lumber is more expensive, right?

It's like everything is just more expensive. And with that, You have to be able to help, your employees pay for life as it's gotten more expensive. So you have to be able to increase your comp structures. And this is, I'm for sure, like as far as like giving people compensation raises and things are concerned I'm not saying you have to do that every single year.

But what we're seeing with new comp plans, with new hires, it's definitely noticeably different. And the amount of guaranteed money as far as like base compensation goes, is going up quite a bit. Probably by, percentage wise, maybe 20%. It's a decent amount. So what do you have to do as an employer?

Do you just take. The hit on your profit, cuz there's gross revenue, which is how much you make top line, like before you take into account any costs. And frankly, this is a vanity number. It's an easy number to track. So we actually tracked this in our mastermind group very closely.

But it's a vanity number in a lot of ways. Because, if you had a million dollar business but you only kept $10,000 of that. Would you think that was a great business? Probably not. It'd be very stressful. Not much compensation for the amount of work you're probably having to put in.

So it's not a great business. So your net profit, your actual, take home profit is very important. You want to have as high of profit margins as you can have without being an asshole to your employees. So keep, just keep that in mind in terms of like compensation and what you're paying them.

It needs to be fair and you should have a profitable business. A lot of these cash practices in particular that we work with, their net margins are gonna be somewhere around 30 to 50%. Depending on if it's just, if it's just you and maybe an admin, like your numbers are gonna be higher.

Once you have more staff, your profit is gonna go down to some degree, but you're gonna have a lot more passive revenue. So that's the trade off. But as you're hiring people and people are incredibly important. Part of the business, they are an asset. They're a huge advantage over not having other individuals involved because it's just more people that are in the community wrapping your business.

So your reputation increases your local marketing increases, but you also get to help more people. You actually have the opportunity to help more and more folks in your clinic. But when we're looking at comp structures, You can either just pay people more and, but your gross revenue stays the same.

That means your profit is gonna go down, or you have to adjust what you're doing on the profit side by charging more money for what you do. And it doesn't have to be a massive increase necessarily in what you're doing. But if you're, let's say you're charging $175. A visit, let's say that's your av, your average visit, whatever.

One person, somebody comes in, you charge 'em 175 bucks for an hour of your time for you to go from. 1 75 to one ninety five, let's call it, is really a fairly negligible change. It's not that big of a difference in terms of how your staff is gonna present it. It's, it doesn't even have a ne a two in front of the, what the visit costs, right?

It's still in the hundred dollars range. 1 95 from 1 75. It's a very simple, easy change to make. And the difference though. Is you're talking about $20 difference per visit if you do that. Now, if that staff member, let's say that staff member is is seen a hundred people in a month, like there's, they have a hundred visits, let's say in a month.

They've now just generated an additional $2,000 for the practice and let's say, That, you time, the time comes when you're reviewing their comp plan and doing their annual review and you're able to give them a, an increase of, let's call it $500 a month of like base salary of where they're at.

That's a big difference to somebody. In a year, and for you, you're still able to do that because you have more profit that you're bringing in there. It's not just salaries, by the way, like rent is going up everything, utilities. So the difference that you're gonna see there, you're gonna have to have a price raise in place in order to maintain net profit margins.

And what you don't want to see is as your business goes along and grows, That you just see your take home or your profit, the actual like money left in the business that you could either reinvest back in the business or you can pay yourself for your own livelihood or to invest in other things outside of the business.

You don't want to just see that your business is growing, but your net. Your take home is going down every single year because they call it like death by a thousand paper cuts. It's just like a little bit here, a little bit here, a little bit here, and all of a sudden you're in a bad position. Your profit is dwindled, down to hardly anything.

And, but yet you're on the surface. It looks like your business is growing. So if you haven't adjusted your prices in the last year in particular, you really should look at. Doing that, even a moderate price change can make a big difference in terms of your net profit and the money that you actually have in the business.

And the more profit you have, the more safety and security you actually have as well. Because it gives you more opportunity to adjust to fluctuations that happen in the marketplace, to also hire people, to hire more talented people, to pay your people better so that they can actually, have a ha a good quality of life as well.

I think it's really important to keep in mind that you don't necessarily just want to like, pay people the bare minimum and in particular, if they're if that makes them resentful because, For whatever reason, like they feel like the compensation and what they're doing is not, it's not equivalently or it's not justified.

It's not an even, playing field in terms of what they should be making. And there's a lot of, there's a lot of variability with what people think they should make and what they are actually making. But you sh you should be paying them what they would be able to make somewhere else in the area.

And in particular, as things have gotten more expensive, you're gonna have to look at. Increasing what you're paying your employees, and not just in our industry, but in all industries. This is the case. And this is what is happening in a business especially one that. There is a higher demand like ours.

We're starting to see that, which also there's a high demand for people that wanna work with professionals that help them with musculoskeletal injuries. It's not like there's less demand for our services, there's more demand for our services, and there's more demand for the profession in general, which is overall a good thing.

So if you haven't raised your prices in a while, you're gonna need to do that because you're gonna need to. Pay your folks what they're worth. You're gonna need to hire people and have comp plans that are competitive. And I'm seeing people who have comp plans turned down that are, last year, I just would've been like, dude, this is really competitive offer.

And this year they're just, they're getting turned down like the it's, and purely for the most part, it's this just doesn't add up. I can make $15,000 more over here. I'm sorry, like I've got. A ton of student debt. I can't do that. I can't make that change. Even though this is a more desirable environment to work in.

There's just certain people you're gonna miss out on and maybe you have to be okay with that. Either way, if you keep getting. Employment letters that are turned down, offers that are turned down, it's probably because there's some amount of compensation structure there that is just off where you're either gonna need to raise your prices to be able to be more competitive, or you're gonna have to change the way in which you're structuring these so that you can get really high quality people in the door and working with your company.

So keep that in mind. This is super relevant, something tactical we're working on right now with all the businesses that we work with. Take a look at your comp structure. Take a look at what people are making in your area, and get a better idea of man, I am undercharging. I need to definitely raise my prices because if you haven't done it in the last year, like you, you probably are below where you should be and below where you need to be able to hire really high quality people.

So hope this helps. As always, guys, talk to you next week.

Hey, Pete, entrepreneurs. We have big, exciting news, a new program that we just came out with That 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 getting 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 that you can take to go from part-time to full-time, and 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 wanna 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 wanna take the Small Business Association, a one day business plan that's gonna help you get very clear on exactly what you need to do and when you're gonna do it.

To take action if you're interested and sign up for this challenge is totally free. Head to physical therapy biz.com/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 gonna help you tremendously, as long as you're willing to do the work.

If you're doing the work and you're getting. 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 physical therapy biz.com/challenge and get signed up today. 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 connect 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.