Paying Yourself in Your Private Health Practice

As a health practitioner, you may not always think of yourself as a business owner first. But when you own your practice, you’re absolutely in charge of generating revenue in your business.

One of the biggest benefits of having your own practice is that you can have nearly unlimited upside potential.

When you’re an employee in a group practice, you typically receive a set salary. But as a business owner, you can set your own salary — and even pay yourself bonuses when your practice earns more revenue.

Another great benefit is that you can choose to grow and scale your practice as you see fit. If you want to add incremental, recurring revenue, you can offer products or prescribe supplements to your patients.

You can decide to set your practice up as private pay and not take insurance. Or you could create a concierge model — so your patients pay you a set monthly fee for your services.

Note that this article is not meant to be legal advice, and you should always consult with a certified accountant and/or business attorney when setting up your business. Yet these are some things you may want to consider when setting up your practice.

Consider Your Costs

Depending on how many patients you see and how busy your practice is from the beginning, you may be able to pay yourself a six-figure salary. And in quarters or years when your practice makes more than your projected revenue forecast, you might pay yourself a bonus.

You will first need to consider all of your practice costs before deciding what you will earn. If you have staff, you must be sure that you can pay them. If you have an in-person practice, you may have regular overhead costs such as an office lease and utilities. You may also have medical equipment you need to keep up to date.

Once you have all of your expenses covered, you can think about how and when you want to be paid. The more you can plan ahead for various scenarios, the easier it will be for you to know how much you should pay yourself. You can start with a salary that is in line with most practitioners in your industry.

Depending on the structure you use to set up your practice, you may also be able to save more of your income for retirement and protect your personal assets.

Of course, you should consult with your accounting professional to figure out what works best for you and your practice.

Have a Salary Plan

If you’ve been in practice for a couple of years, your accountant can estimate your budget based on past revenue. Your accountant can also look at the expenses that your practice will have for the coming year. If you know that expenses will be higher or lower than previous years, your accountant can adjust for those expenses.

If your practice makes more money than expected, you may be able to give yourself a bonus during the year. Or if there are quarters where your practice makes less than expected, you might have to skip a paycheck. But you know that all of your payroll and expenses will be covered.

Taking An Owner’s Draw

As the business owner, you might take an owner’s draw instead of a traditional salary. The owner’s draw is typically the revenue that is left after the practice expenses are calculated.

If you have other health practitioners as partners in your business, your owner’s draw would be divided by the number of owners. For example, you would get a third of the owner’s draw if there were 3 owners in your health practice. Your draw might be set up as a bi-weekly, monthly, or quarterly draw — it all depends on what makes the most sense for your situation.

Depending on which business entity you use for your practice, you might be able to keep the owner’s share in the practice until the end of the year. Again, you will have to consult your accountant and attorney to know which structure works best for you.

Plan for Rainy Days

If your practice accepts patient insurance, you might have to wait for insurance reimbursements. Sometimes they take longer than you expect and cashflow becomes tight in your practice. So it’s good to earmark a set amount each month in the practice to cover any unexpected expenses or to meet payroll and other monthly expenses.

And at the end of the year, if there haven’t been any unexpected expenses, you can take distribution from the emergency fund as part of your owner’s draw.

As a healthcare practice owner, you have a lot of potential for earning great money in your business. The more you can plan ahead and anticipate expenses, the more financially stable your practice will be.

***This blog post does not constitute legal or financial advice and is intended for educational purposes only. You should consult a licensed professional in your region that specialize in healthcare businesses.***