There are numerous metrics a physical therapy business owner should monitor in order to make adjustments that improve top-line revenue and bottom-line profitability. Some of these metrics are more operational in nature:
But if you have contracted with a solid management company that works up your financial statements, you will have the added advantage of numerous financial schedules that blend your operational statistics with your clinic’s financial performance.
Financial schedules can be made more understandable to the lay person if they
In the case of a break-even analysis, we use the basic patient visit as the lowest common denominator.
In short, you want to know how many patient treatment visits are needed each week or month to cover your clinic’s operating costs.
For example, let's say 200 patient visits are needed to break-even each month. That means that beginning with the 201st visit, you are taking the entire net revenue for that visit to the bottom line. Armed with a break-even visit number, it is clear, that patients #201, #202 and beyond, deliver almost 100% profit to your clinic’s bottom line. Alternatively, if your total monthly visit count falls short of 200, you know that you are not covering your operating costs that month.
If you have a management company that generates your financial statements, they can calculate your clinic’s break-even. They can:
Note that a clinic’s cost structure is comprised of both fixed costs (e.g. Rent, Salaries and Payroll Taxes) and variable costs (e.g. certain Hourly Payroll, Professional Fees, and Bank Charges). Fixed costs tend to repeat month to month at an amount certain. On the other hand, variable costs can vary in both timing and amount from month to month. So, as these costs might change, so will your clinic’s break-even point.
Furthermore, your management company can develop “stretch goals” for you as well, by calculating how many visits you would need monthly to reach a goal of 20%, 30% or even 40% net income before taxes on net revenues.
Knowing your clinic’s break-even point can be a huge incentive to your referral marketing efforts, your negotiated fee structure, your cost elements, and more. The break-even point helps you to set goals as a clinic owner. It keeps your finger on the pulse of your clinic’s financial performance.
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