NEIL’S MARKETING CORNER
The Difference Between Investments and Expenses in a PT Clinic
“Can I afford this expense?” Every practice owner will likely ask themselves this question at some point. No business is immune to financial pain and sometimes tightening the belt is very wise. But how do you know where to spend and not spend? As a practice owner, this is where it becomes VITAL to understand the difference between investments and expenses. A growth-minded practice owner avoids the temptation to view everything as an expense. A few of the biggest items in the investment category are People, Training, Physical Location, and Marketing. That said, each one of those can be expenses if not done correctly. When it’s time to make a decision, consider these key differences between investments and expenses: This one sounds straight-forward. After all, we talk about investments in terms of ROI, but ask about expenses “can I afford this?” But understandably, it can be easier said than done when it’s time to make the investment. This is where planning comes into place. Planning takes away a lot worry and gives you time to make carefully researched decisions. Investments Provide A Return, Expenses Drain Resources.
budget for companies with less than $5 Million revenue.)
knowing the results of the spend. Make a plan, set a goal, allocate an investment, but remember that keeping track of the results helps you plan even better next year. Investments ALWAYS have a statistic. Whether it’s new patients, total income, cancellation percentage, or anything else you can measure. The result of an expense is either harder to find or is strictly a matter of opinion. An example would be repainting the outside of your practice. One staff member could say “Oh this will attract more people because it looks so nice!” while another doesn’t like the color at all. Without a way to measure potential patients’ opinion of the building and if that lead to more consults, this categorizes as an expense. Investments Improve A Business, Expenses Just Keep It Going. Some expenses are necessary to keep your practice running. The electric bill, cleaning, equipment repairs, these are necessary but don’t improve your income. Investments do improve your income – but there’s one catch. Underspending on something that should be an investment can turn that thing into an expense that just keeps the business going without improvement. If you want to grow you need to INVEST in marketing – spending enough to improve your patient flow and income. Investing too little turns marketing into an expense – costing you money instead of making it back. (The U.S. Small Business Administration recommends: 7-8% of the
Investments Are Typically Consistent, Expenses Are Usually One-Time Spends. Just like a 401K, good investments are often made up of smaller, consistent investments with a big, long-term goal. To use the marketing example, practices that rely on an event here and there, or an “occasional” mailer rarely see a return from those efforts. Because of that, they qualify more as an expense than an investment. Now, don’t get me wrong. Events and one-time campaigns can work well as a supplement to a monthly or annual marketing plan, but if you want a consistent return, you have to start with a consistent set of systems and processes. You didn’t start a practice to struggle. You did it because you’re a growth-minded PT with a passion! Physical therapy is an industry built to help people live better – and that should include you. And if a marketing investment could radically improve your practice and your life, let’s get started right now.
Investments Can Be Measured Statistically, Expenses Are Often Measured by Opinion.
One major difference between spending money and investing in your business is
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