Establishing Clear Boundaries: Fixed vs. Variable Business Expenses

00:00:02 – Linzy Bonham 

Hello and welcome back to the podcast. Today I’m going to talk about the various jobs that your money has to do in your private practice. The core concept that I want to start with before we get into the specifics of those jobs, is the fact that your money in your private practice and your group practice needs to take care of you. In our professions, we give so much time and energy to the people we take care of to our clients. We’re often also just natural caregivers who might be parenting or taking care of our own aging parents, or giving to our community and our friends in all these other ways. We tend to be very giving, self sacrificing kinds of humans. And when you build a business, when you start seeing clients privately, or whether you’ve been doing that for, you know, two months or 10 years, when you’re seeing clients privately, you have created a machine that is generating money.

00:01:04 – Linzy Bonham 

And part of that machine’s job is to take care of you. You are the beating heart of your practice. Without you, there is no practice. Right? Your practice is based on your gifts, your particular personality that you brought to the show. Your practice is built on who you are as an individual person and the services that you can provide because of that. 

00:01:37 – Linzy Bonham 

There is this distinct combination in your practice of your natural gifts with your values combined with your education and all the skills that you’ve learned combined, combined with your passions and your vision. And all of these things come together to allow you to provide therapy, counseling, physical, manual treatments in a way that literally nobody else can. I want to start by saying that by recognizing just how important and central you as an individual are in your business. If you are not well, your business doesn’t exist and you are offering something in the world in a way that literally nobody else can.

00:02:21 – Linzy Bonham 

Your particular flavor of what you do is going to appeal to certain people and it’s going to land with them and allow them to open up about things they never been able to talk about, or allow them to actually stick to new habits and routines and do the homework that you give them in a way that the person down the street would not be able to motivate them and support them in doing right. 

00:02:41 – Linzy Bonham 

Each of us are offering something very specific and unique and we need to honor that when we are building our businesses, because our businesses need to make sure that we continue to be well so we can keep doing that work in the world also, so that we can just be happy, functional humans. We’re living the lives that our clients think that we are living. Our clients think that we are living incredible lives. They think that we have great relationships and amazing communication and we take care of our bodies and we go on great trips or, you know, whatever stories they have, they think that we are living those lives.

00:03:13 – Linzy Bonham 

Wouldn’t it be so great if we actually were, you know, if we’re showing up in our practices with true authenticity, with practicing what we preach, because we are actually taking care of ourselves. And money is a huge part of that. The money that you are generating in your practice feeds back into your life needs to take care of you so you can keep showing up and doing this incredible work in the way that only you can do it. Okay, now that I’ve given that little love pep talk, let’s move into the different jobs then that your money has to do in your practice to take care of you and have you be well.

00:03:46 – Linzy Bonham 

Because some of those are about you. Some of them are about obligations that you have to uphold so that you don’t end up in hot water because that’s never good for you. So let’s start with the least fun obligation first, which is taxes. The money that we collect from our clients that goes towards taxes. I find it’s very helpful, although not fun, to think about that as not your money. Right. The money that you identify is for taxes. 

00:04:16 – Linzy Bonham 

You know, that’s going to be partially your income tax, which is going to be probably somewhere between 15 to 25% of what is left in the business is going to be income tax for you. That is not your money. You are holding it on behalf of the government until they learn about how much you owe them. And they say, give me that sales tax. For those of us who have to collect, sales tax is a much more obvious one. It’s like we collect the money. A certain amount off the top is identified as like, this is sales taxes. We need to have a clear system to set that aside to make it very clear that is not ours. Right? Because once we start to think about all the money in our business bank account as ours, then paying taxes can become that much more painful. 

00:05:02 – Linzy Bonham 

Because it’s like, but that’s mine. I don’t want to give you that tax money. Especially at tax time, if you haven’t done any quarterly remittances or if you’re not an employee of your business, if you’re not incorporated or an S corp, and if you’re not paying monthly, if you have to hand over at the end of the year as a sole proprietor, you know, possibly even like 15,000, $20,000 in taxes, that hurts a lot if you’ve been thinking about that as your money. 

00:05:25 – Linzy Bonham 

So the first job that we need to think about our money doing is to pay taxes. And that’s its job. Once we have identified an earmarked that that money is for taxes, it is not ours. It belongs to the government. We’re holding on behalf of the government sometimes. I’ve seen it actually help therapists who I’ve worked with in money skills for therapists to pay taxes more regularly. So it gets out of their bank account so they don’t form that kind of emotional attachment with it, that ownership of the money. So they do remittances even before the government asks them to just to get it out of their account, just put it towards their tax account with either the IRS or the CRA depending on where you’re located. 

00:06:03 – Linzy Bonham 

Just to make it really clear that’s not yours. That is an obligation you’re fulfilling. You’re paying taxes to the government and. And by fulfilling that obligation you’re keeping your life nice and clear and simple and you are also paying for roads and schools and lots of good things that happen. I know that we’re also in a political time right now where taxes might be even more fraught based on what certain governments are choosing to do with our taxes. Also though tax money belongs to whatever government is in power at the time. You know, when we go into times where we have governments that are making decisions that you agree with, they’re using all the tax money that’s collected to make what you think are great things happen. Right. When you’re in times when the government is doing things you don’t agree with, still some of that money is going to be going towards things that you do agree with. Right. And so finding a way to make your peace with it philosophically really helps to remove some of that pain and resistance and resentfulness that can come with taxes.  

00:07:01 – Linzy Bonham 

So being clear about this, making this more systemized, having a separate bank account for taxes, you know, kind of a profit first style system, even if you don’t do the rest of profit first, even if you just set aside a tax amount that is going to really help you be clear on this is for taxes. 

00:07:17 – Linzy Bonham 

This other money here is for other things in the business. So now let’s talk about those other things in the business are next I’m going to talk about business expenses because that can also be a type of obligation. Right? We’re kind of taking care of like the obligations first here before we talk about the things that are A bit more, more generative and life giving in your practice. So your business expenses, some of them are going to be variable. They’re things that you can choose what to spend on. You can choose to take a certain training because it’s exciting to you. You can choose to buy cute flowers for your office. Those are things of your choice. But other things are going to be fixed. Expenses that you’ve committed to, things like rent, subscriptions for your software, you know, your EHR software. Any kind of advertising that you are doing, regular, what are they called? Any kind of regular advertising that you’re doing, like Psychology Today kind of profiles, those are set expenses that come out every month. 

00:08:20 – Linzy Bonham 

And being clear on what those are, kind of like your monthly baseline of those expenses is important to make sure that also you’re keeping those expenses at a place that is sustainable for your business. So the money in your business has to pay for those ongoing obligations, the things that keep the lights on, your annual license, things like that.  

00:08:38 – Linzy Bonham 

And if you do have large annual expenses that come out, it’s helpful for you to take time to sit down and look at how do those expenses spread out over time and make sure when you’re thinking about your monthly expenses, you’re including, you know, $50 a month that’s going to go towards that large annual expense. Sometimes I’ve seen folks make a separate bank account for those large annual expenses or when they start using a budgeting system, they’re accounting for those large annual expenses in their budgeting.  

00:09:02 – Linzy Bonham 

So it’s not a huge painful surprise. For me, it used to be December. In December it was like my college renewal was up, my insurance was up and I’d have these two really big bills come out at the same time. Expecting those by being clear about what your business expenses are and leaving a little bit of money aside for those so that you’re building up a nice buffer. Takes a lot of the paint out of it with business expenses. Something else we have to be mindful of is to not overspend in our business. 

00:09:29 – Linzy Bonham 

It can be really tempting to overspend in our businesses because for multiple reasons, it is way easier to spend money in our businesses than it is at home. At least I find this for myself, right? Something in my business that I look at that’s, you know, $2,000. I’m like, oh, that’s a no brainer. That’s going to help my, you know, me and my team fix this problem that we have or help us make more sales in the future.  

00:09:51 – Linzy Bonham 

You know, spend money to make money. It’s so easy to spend that $2,000 in the business where at home. I would never spend, you know, maybe that that amount on a comparable thing at home. So businesses can be, you know, money eating machines. That’s, you know, something like that is the phrase that Mike Michalowicz uses in his book Profit First. 

00:10:12 – Linzy Bonham 

You know, our businesses can kind of eat all of our money because it’s very easy to spend on business expenses. So a big part of business expenses is getting clear on yourself of what is actually your budget for business expenses. What is that monthly baseline and then how much are you going to spend on those other fun things. The thing that I see people overspending on the most is professional development. 

00:10:35 – Linzy Bonham 

I think that as helpers and healers, or maybe it’s just the helpers and healers that I hang out with, folks like you, we tend to over invest in our professional development because we always want to be better at what we’re doing. There can be so many reasons for that. It can come from like a not good enough place. It can come from may maybe a bit of FOMO wanting to like get up on the latest training because your colleagues are doing that training. Sometimes it can come from a place of just unbridled enthusiasm of what we’re doing. We just love what we do and it’s so interesting. So you know, a 500 TR$500 training pops up here. We go to that, some cool speakers coming to town to do a workshop. We sign up to that and before you know it, we’re spending thousands and thousands and thousands of dollars a year on our professional development that we might not actually really have. So that’s somewhere that I find can be helpful for folks to stop, slow down, you know, think about your own professional development right now. Do you have clarity yet on what is actually your professional development like budget for the year? Do you have clarity on how many trainings you can take a year without actually just kind of over saturating yourself and not absorbing it anyways? Having clarity, some sort of money rule at least about trainings of like I do, you know, two trainings a year and those trainings are, you know, $2,000 or less, something like that. 

00:11:58 – Linzy Bonham 

That allows you to slow down and notice and make an informed decision about trainings, not overspend. Also having separate bank accounts where you actually have your business expenses or opex operating expenses amount so you can see what you have that can help you slow down and stop from overspending on professional development because it really is, I find one of our Achilles heels as helper healer types. 

00:12:26 – Linzy Bonham 

So that’s the other thing that your money has to do. We first talked about taxes. Second one, business expenses. Your money has to take care of the business itself. It has to take care of the business itself. It has to pay for those regular expenses. It has to help you have tools and systems to run the business smoothly. Often tools that help you to automate a process.  

00:12:47 – Linzy Bonham 

Sometimes it can feel, oh, to like, swallow that, like, I don’t know, 20 bucks a month that you’re paying for a certain tool. But if it saves you lots of time and it helps you retain clients, the return on investment on that can often be great. So business expenses is the second thing. The general guideline for business expenses from, you know, a profit first perspective is 30% or less of what’s coming in the door. I’ve seen huge variability with that with therapists over the years, especially with online business folks working from home. I see that, you know, it can be as low as 15%, but that’s kind of the range. You’re looking at like 15 to 30.  

00:13:20 – Linzy Bonham 

The next one is, I’m going to say, the most important one, although without the other two, this third one can’t exist. And this is your paycheck or salary. Your business needs to be paying you regular, reliable paychecks that your family can depend on. You need to know how much is going to be coming home each month so that you can. You need to know how much is coming home each month so that you can plan how much you’re going to be spending on groceries and know that your rent is covered and be able to put money aside for enjoyable things for yourself or your family. I am so passionate about helping therapists create a regular paycheck system that allows them to have regular paychecks even if they’re sick or away.  

00:14:32 – Linzy Bonham 

Something that we do so often as therapists is we will be going away. So we see a bunch of clients before we go away to try to cram in the client hours before our vacation. And then after we come back, we cram in extra client sessions and we end up actually just undoing the benefit of the vacation or we work when we’re sick because otherwise we’re not gonna be able to get paid. Right. You can build a paycheck system in your business that allows you to have a regular paycheck every month. All it takes is zooming out on your numbers and understanding what your numbers look like and finding that number that makes sense. For you, that covers off the time that you’re going to want to take for vacation, but also just the time you’re going to be sick because you’re a human.  

00:15:15 – Linzy Bonham 

This is an incredibly important job that your money has to do in your business is to give you this regular, reliable paycheck. Because if you are financially stressed, if you are worried about making your own bills, then you are not going to be your best self. Clinically, you just can’t, you just can’t do both of those things. You cannot be stressed at home, you cannot be staying up at night thinking about money, and you cannot be also feeling resentful. 

 00:15:42 – Linzy Bonham 

If clients cancel or stop treatment because you know that it’s going to deeply impact your household finances, those things cannot be happening and also have you be doing your best work. I hate to say that it always feels really harsh to highlight that because I know as therapists, we so pride ourselves on the values, we so pride ourselves on the value of the service we’re providing and wanting to do the best work that we can. But if you are not okay financially, your work is being impacted. So that’s a really important thing that your business has to start doing is paying you regularly, giving you the support and stability so that you can be well. And that is the third job that your business has to do, which again, is the most important job from a big picture perspective. 

00:16:30 – Linzy Bonham 

Because again, you are the beating heart of your business. If you are not well, if you are not taken care of, your business actually can’t exist. The services that you are providing in this container, that is your business will not continue if you are not well and able to show up as your best self and give great service and make great choices. The final job that your money can do, which I see as optional, is this idea of profit systems. The system Profit first, which I have been personally using for probably nine or 10 years now, has a profit account. 

00:17:07 – Linzy Bonham 

And the idea of profit is that you have some extra money in the business to reward yourself. What I find is for some therapists who are more reward oriented, this is like a really exciting thing to like, let their business build up some money and then be able to take, you know, a couple thousand dollars once a quarter or maybe, maybe less, maybe $900 once a quarter to do something fun. 

00:17:29 – Linzy Bonham 

For folks who are more rewards oriented, this can be really motivating. And this is something you can build out using a profit first style system, which I teach in Money Skills for therapists. For other folks, I find that this profit concept is not as resonant because they’d rather have the stability of just having a better regular paycheck. So part of this, too, is identifying for yourself what really motivates you, what feels good, what is a great way that your business can reward you. Would you rather have a bit of a higher paycheck on a regular basis and have this higher level of comfort in your stable income? Or would it be really motivating for you to set up a system where you set some money aside and then once a quarter you’re like, yes, I’m going to go to the spa, right? Or I’m going to buy that nice chair for my living room that I’ve been looking at online for, like, months. That is going to be really up to you. And this is part of really building a good relationship with money, is getting clear on what feels good to you, what is motivating, what is meaningful for you, and building systems that support that. The final piece of what your money has to do for you in the business actually spreads across all these other categories. And these are buffers. I use the phrase in my course Money skills for therapists. Buffers, buffers everywhere. We want buffers all over the place. Saying buffers, buffers everywhere assumes that you do set up eventually a multiple bank account system. 

00:18:53 – Linzy Bonham 

So it’s like in your taxes account, there’s a bunch of money there for taxes. In your business expenses, there’s extra money there so that if you can’t see clients for a few weeks because there’s a family emergency and you can’t work, your rent is still paid next month, you don’t have to worry about the fact that you didn’t see clients for a couple weeks. Same with paycheck and salary. Building up a paycheck buffer. Buffers create the stability to allow you weather Buffers create the stability to allow you to weather storms. 

00:19:21 – Linzy Bonham 

I will say right now, with the what is happening in the therapist space, we have seen more of a dip recently in therapy. We kind of had this heyday with COVID Everybody stayed home and realized that, you know, for folks who were looking for mental health counseling, that they did actually need to, you know, get support and work on these things. Covid brought about, you know, a mental health crisis, but I think also created a space where it was easy for folks to access therapy through online therapy. 

00:19:49 – Linzy Bonham 

And a bunch of people who never would have accessed therapy before started doing therapy. And for our profession, for our businesses, that was a good time. In other ways, obviously, it was not a good time, but now that that kind of boom has subsided and there’s much more political instability and uncertainty, we are not in much of a boom time right now in therapy. 

00:20:10 – Linzy Bonham 

I will say too, in my business, as like an educator, I’m definitely seeing a huge impact on what’s happening right now in terms of the politics, on just, you know, people’s comfort, comfort with investing in themselves. And a lot of folks are in a freeze response right now, which in a lot of ways is the exact opposite of what we need to do when there is this kind of instability. What we actually need is, like, support and connection. But what many of us tend to do when we’re stressed is we isolate, right? We don’t get the support that we need, and that is impacting the therapy field as well as other industries. So having those buffers in your business when things get quieter, that is really the difference between weathering a quiet time and hitting a really desperate situation. In my own business, I’ve had huge buffers that I’ve built in boom times. And then in times like now when things have been weird and people are in a freeze place, those buffers have helped us weather through.  

00:21:06 – Linzy Bonham 

Right? They have allowed the business to keep going and for me to keep being creative and finding new ways to show up and serve you while we’ve had to, like, shift, right? And the buffers will do the exact same thing for you and your business. Building buffers in especially your business expenses and paycheck taxes. Really, you just need to be saving taxes based on the money you’ve made. Having extra tax money, not that helpful. But having your business expenses one to two months of business expense buffer and also a paycheck buffer of maybe. 

00:21:36 – Linzy Bonham 

I see folks generally do like somewhere between two weeks and like a month, month and a half, something like that. Imagine the stability and certainty that you would feel seeing that money there in your bank account all the time and knowing that if a few of your clients need to take a break or if you’re sick, that you are still going to get paid the same amount. Your business will be okay. You will have time to find ways to attract new clients, right? To do some more networking, to reach back to old clients. 

00:22:07 – Linzy Bonham 

You will have time to help your business get back on track because you’ll have the stability of the money built in through these buffers. So, huge fan of buffers. I’m a big advocate of buffers. I encourage you to think about where in your own business you could improve your buffers, where you could see a bit more padding and buffers don’t have to be thousands and thousands and thousands of dollars. We don’t want you to veer into the kind of like, hoarding space of just building up a ton of money in the business that has no purpose. Buffers need to have a purpose. And we really want to see kind of one to two months of business expenses, probably like, let’s say one month of your paychecks on average. 

00:22:45 – Linzy Bonham 

And that is going to give you huge stability that will allow you to have peace of mind when there’s things going on around us that we can’t control. What you can control is what you are doing with your money. Right. We need to focus on what is in our control. And right now, in this period of history, what we do with our money is in our control. How we show up in our lives is in our control. 

00:23:06 – Linzy Bonham 

How we take care of the people that we love is in our control. And money is a tool that can allow you to have the stability and groundedness and resources to live your values and your life while other things are happening that we cannot directly impact in, in the same way. So those are the jobs that your money has to do. I had so many side thoughts in there. Each. Each of these things could have been its own episode. I have lots to say on this subject, but just to recap the different jobs that your money has to do, there’s those obligation, the obligation piece of taxes. Make sure you don’t think about that money as your money. There’s business expenses, taking care of those recurrent base expenses, and also being mindful about your variable expenses. There’s your paycheck and salary work to find some stability in that paycheck. Work to get yourself a regular paycheck. This is something that I teach you how to do in money skills for therapists. This is one of the most exciting parts for me when I see therapists go from that place of kind of stealing money from their business because they need to pay the mortgage.

00:24:06 – Linzy Bonham 

So they grab, you know, $2,000 from the business because the mortgage is coming out tomorrow. Seeing people go from that place of, like, tightness and scarcity into a place of regularity with a regular paycheck is a beautiful thing. It’s a huge, important change that you can make. So working towards that regular, reliable paycheck profit, if that appeals to you, is something that you can play within your business. And then buffers, buffers, buffers everywhere.  

Thank you so much for joining me today. I’m Linzy Bonham, therapist turned money coach and the creator of Money Skills for Therapists. If you are ready to go from money confusion and fear to starting to feel clear and empowered in your finances. If you want my help building buffers and those kinds of things, then my free, On-Demand Masterclass is the best place to start. You’re going to learn my four-step framework to get your private practice finances working for you. 

00:24:55 – Linzy Bonham 

Register today using the link in the show notes or go to moneynutsandbolts.com under masterclass. I look forward to supporting you.