As chiropractors, we are driven by a passion for helping our patients achieve optimal health and well-being. However, to truly make a lasting impact, we must also ensure the financial viability and growth of our practices.

While effective chiropractic marketing strategies can help attract new patients, the key to long-term success lies in mastering profitability. This is where the groundbreaking book “Profit First” by Mike Michalowicz comes in, offering a transformative approach to financial management that every chiropractor should embrace.

In this comprehensive blog post, we will explore the fundamental principles of “Profit First” and how they can be applied to the unique challenges and opportunities faced by chiropractic practices.

By implementing these strategies, you can take control of your finances, create a more sustainable business model, and ultimately, provide better care for your patients.

Understanding the “Profit First” Paradigm Shift

For decades, the conventional wisdom in business finance has revolved around the accounting formula:

Sales – Expenses = Profit

This approach implies that profit is what remains after all expenses have been accounted for. However, Mike Michalowicz, in his book “Profit First,” argues that this traditional formula is flawed and often leads to businesses struggling with profitability and financial stability.

The problem with the traditional approach is that it treats profit as an afterthought, something that is left over at the end of the day. This mindset can lead to a cycle of perpetual reinvestment in the business, leaving little to no profit for the owners. Additionally, it can create a sense of complacency, as business owners may feel that as long as they are covering their expenses, they are doing well.

Michalowicz proposes a paradigm shift, a revolutionary way of thinking about business finance. He introduces a new formula:

Sales – Profit = Expenses

This approach prioritizes profitability from the outset, ensuring that a predetermined percentage of revenue is allocated to profit before considering any other expenses.

By putting profit first, business owners are forced to think differently about their expenses. Instead of simply spending money and hoping for a profit at the end, they must be intentional and strategic about their expenditures. This mindset shift can lead to more efficient operations, better cost control, and ultimately, higher profitability.

The “Profit First” system is not about cutting expenses to the bone or sacrificing quality. Instead, it’s about creating a sustainable and healthy financial foundation for your business. By consistently allocating a portion of your revenue to profit, you ensure that your business is always generating a positive return, regardless of market conditions or other external factors.

Moreover, by prioritizing profit, you create opportunities for growth and investment. Instead of constantly struggling to keep up with expenses, you can use your profits to reinvest in your business, expand your services, or even take distributions as the owner. This approach creates a virtuous cycle of profitability and growth, allowing your business to thrive in the long run.

Implementing the “Profit First” approach in your chiropractic practice may require a shift in your financial management strategies. It means taking a hard look at your expenses, identifying areas where you can cut costs or improve efficiency, and being disciplined about allocating a portion of your revenue to profit. However, the benefits of this approach are clear: a more stable and profitable practice, a clearer understanding of your financial health, and a stronger foundation for long-term success.

Implementing “Profit First” in Your Chiropractic Practice

Implementing the “Profit First” system in your chiropractic practice requires a systematic approach to financial management. At the heart of this system is the concept of using multiple bank accounts, each serving a specific purpose, to allocate your revenue according to predetermined percentages. This method provides a clear picture of your financial health and enables you to make informed decisions about your practice’s future.

If your current bank doesn’t allow you to setup multiple bank accounts, checkout Mercury. Setting up an account with them is a snap. You can also setup percentage allocation between all of your accounts so that the entire “Profit First” method is completely automated. There’s no excuse now… so get it done!

The first step in implementing “Profit First” is to establish four primary bank accounts:

  1. Profit Account: The Profit Account is where you allocate a predetermined percentage of your revenue, typically 5-15%, depending on your practice’s size and financial goals. This account serves as a reserve, ensuring that your practice consistently generates a profit, regardless of market fluctuations or unexpected expenses. By prioritizing profit and setting it aside from the outset, you create a buffer that can help you weather financial challenges and invest in growth opportunities.
  2. Owner’s Pay Account: As the owner of your chiropractic practice, it’s crucial to pay yourself a fair salary. The Owner’s Pay Account is designed to help you separate your personal income from your business’s finances. By allocating a portion of your revenue to this account, you ensure that you are compensated for your work and expertise, while also maintaining a clear distinction between your personal and business finances. This separation is essential for accurate financial reporting, tax purposes, and overall financial health.
  3. Tax Account: One of the most significant financial obligations for any business is taxes. The Tax Account is designed to help you set aside a portion of your revenue for tax payments, ensuring that you are prepared for this expense and avoiding any surprises come tax season. By allocating a predetermined percentage of your revenue to this account, you can meet your tax obligations without disrupting your cash flow or dipping into your profits.
  4. Operating Expenses Account: The Operating Expenses Account is where you allocate funds for the day-to-day expenses of running your chiropractic practice. This includes expenses such as rent, utilities, supplies, staff salaries, and other necessary costs. By separating your operating expenses from your profit and other financial obligations, you gain a clearer picture of your practice’s financial health and can make informed decisions about where to allocate resources.

To determine the appropriate allocation percentages for each account, it’s essential to analyze your practice’s financial history and goals. A typical allocation might look like this: 5% to Profit, 50% to Owner’s Pay, 15% to Tax, and 30% to Operating Expenses. However, these percentages may vary depending on your unique circumstances and financial objectives.

Once you have established your accounts and determined your allocation percentages, the next step is to implement a system for regularly distributing your revenue among these accounts. This typically involves setting up automatic transfers from your primary revenue account to each of the designated accounts, based on the predetermined percentages. By automating this process, you ensure that your financial management remains consistent and disciplined, even during busy or stressful periods.

Regularly monitoring and adjusting your allocation percentages is also crucial to the success of the “Profit First” system. As your practice grows and evolves, your financial needs and goals may change. By reviewing your financial performance on a quarterly or semi-annual basis, you can identify areas for improvement, adjust your allocation percentages as needed, and ensure that your financial management strategy remains aligned with your overall business objectives.

Implementing the “Profit First” system in your chiropractic practice may require some initial effort and adjustment, but the long-term benefits are significant. By prioritizing profitability, separating your financial obligations, and maintaining a clear picture of your practice’s financial health, you can create a more sustainable and successful business. With the “Profit First” approach, you can focus on providing exceptional patient care while also ensuring the financial viability and growth of your practice.

The Benefits of “Profit First” for Chiropractors

Implementing the “Profit First” system in your chiropractic practice can yield numerous benefits that extend beyond just financial management. By adopting this approach, you can create a more stable, profitable, and patient-focused practice that is well-equipped to navigate the challenges of the modern healthcare landscape.

  1. Financial Clarity and Control: One of the primary benefits of the “Profit First” system is the financial clarity and control it provides. By allocating your revenue to specific accounts, each with a designated purpose, you gain a clear understanding of your practice’s financial health. This clarity enables you to make data-driven decisions about your business, such as identifying areas for cost reduction, investing in growth opportunities, or adjusting your pricing strategy. With a clear picture of your financial situation, you can take proactive steps to optimize your practice’s performance and achieve your long-term goals.
  2. Improved Cash Flow Management: Cash flow is the lifeblood of any business, and chiropractic practices are no exception. The “Profit First” system helps you improve your cash flow management by ensuring that you have sufficient funds allocated to cover your operating expenses, taxes, and profit distributions. By maintaining a dedicated account for operating expenses, you can avoid the common pitfall of using profits to cover day-to-day costs, which can lead to financial instability and hinder your ability to invest in growth. With improved cash flow management, you can maintain a more stable and predictable financial position, even during periods of economic uncertainty.
  3. Increased Profitability: At its core, the “Profit First” system is designed to help businesses prioritize profitability. By allocating a predetermined percentage of your revenue to profit before considering other expenses, you ensure that your practice consistently generates a profit, even during challenging times. This approach helps you avoid the trap of simply breaking even or operating at a loss, which can limit your ability to invest in your practice’s future. By prioritizing profitability, you create a financial buffer that can help you weather economic downturns, invest in new technologies or services, and ultimately, build a more valuable and sustainable practice.
  4. Sustainable Growth: Growth is essential for any business, but it must be achieved in a sustainable and financially responsible manner. The “Profit First” system provides a solid financial foundation that enables you to invest in the growth of your practice without compromising your financial stability. By consistently generating a profit and maintaining a clear picture of your financial health, you can make informed decisions about how to allocate your resources to support growth. Whether it’s acquiring new equipment, expanding your services, hiring additional staff, or investing in marketing and patient education, the “Profit First” approach ensures that you have the financial means to pursue growth opportunities that align with your practice’s goals and values.
  5. Peace of Mind: Perhaps one of the most significant benefits of the “Profit First” system is the peace of mind it provides. As a chiropractor and business owner, financial stress can take a significant toll on your mental and emotional well-being. By implementing a clear and effective financial management strategy, you can reduce the anxiety and uncertainty associated with running a practice. Knowing that your practice is generating a consistent profit, that you have a clear plan for managing your finances, and that you are prepared for unexpected challenges can provide a sense of security and stability that is invaluable in today’s fast-paced and ever-changing healthcare environment.

In addition to these core benefits, the “Profit First” system can also help you create a more patient-focused practice. By reducing financial stress and creating a more stable and profitable business, you can focus your energy and attention on providing exceptional patient care. With a clear financial plan in place, you can invest in the tools, technologies, and training necessary to deliver the highest quality of care to your patients, without worrying about the financial implications.

Moreover, by prioritizing profitability and financial stability, you create opportunities to give back to your community and support causes that align with your values. Whether it’s providing pro bono services to underserved populations, supporting local charities or health initiatives, or investing in research and education, the “Profit First” approach enables you to make a positive impact beyond the walls of your practice.

Ultimately, the benefits of implementing the “Profit First” system in your chiropractic practice are far-reaching and transformative. By taking control of your finances, prioritizing profitability, and creating a more sustainable and patient-focused business, you can achieve long-term success and make a meaningful difference in the lives of your patients and your community.

Overcoming Challenges and Embracing Success

Implementing the “Profit First” approach in your chiropractic practice may present some initial challenges, as it requires a significant shift in mindset and financial management processes. However, by understanding these challenges and developing strategies to overcome them, you can successfully adopt this system and reap the long-term benefits for your practice and your patients.

One of the primary challenges of implementing “Profit First” is resistance to change. As a chiropractor and business owner, you may be accustomed to managing your finances in a certain way, and the idea of allocating revenue to multiple accounts and prioritizing profit may feel counterintuitive at first. It’s essential to recognize that this resistance is normal and that embracing change is necessary for growth and success. To overcome this challenge, focus on the long-term benefits of the “Profit First” system, such as increased profitability, financial stability, and the ability to invest in your practice’s future.

Another challenge you may face is the initial setup and management of the “Profit First” system. Establishing multiple bank accounts, determining allocation percentages, and automating transfers can seem daunting, especially if you are not familiar with financial management concepts. To overcome this challenge, it’s crucial to educate yourself on the principles and strategies involved in the “Profit First” approach. I highly recommend reading “Profit First” by Mike Michalowicz, as it provides a comprehensive and accessible guide to implementing this system in your business. Additionally, seeking the guidance of a financial advisor or accountant who is familiar with the “Profit First” methodology can help you navigate the initial setup process and ensure that your allocation percentages and financial goals are aligned.

As you begin to implement the “Profit First” system, you may also encounter challenges related to cash flow management and expense reduction. Allocating a portion of your revenue to profit and taxes may initially feel like a constraint on your operating budget, and you may need to make some difficult decisions about where to cut expenses or optimize your spending. To overcome this challenge, it’s essential to approach expense reduction as an opportunity for growth and efficiency, rather than a limitation. By carefully analyzing your expenses and identifying areas where you can cut costs without compromising the quality of your services, you can create a leaner and more profitable practice that is better equipped to weather economic challenges and invest in growth opportunities.

Another key challenge in implementing the “Profit First” approach is maintaining discipline and consistency over time. It can be tempting to deviate from your allocation percentages or dip into your profit account when faced with unexpected expenses or short-term financial pressures. However, the success of the “Profit First” system relies on your ability to stay committed to the principles and maintain a long-term perspective on your practice’s financial health. To overcome this challenge, it’s important to establish regular financial review processes, such as quarterly or semi-annual check-ins, to assess your progress and make any necessary adjustments to your allocation percentages or financial goals. By holding yourself accountable and staying focused on the long-term benefits of the “Profit First” approach, you can create a more resilient and successful practice that can weather any storm.

Ultimately, overcoming the challenges of implementing the “Profit First” system requires a combination of education, discipline, and a willingness to embrace change. By investing time and resources into understanding the principles and strategies involved, seeking the guidance of financial professionals, and maintaining a long-term perspective on your practice’s success, you can successfully adopt this approach and create a more profitable, sustainable, and patient-focused chiropractic practice.

As you embark on this journey, remember that mastering profitability is an ongoing process that requires regular review, adjustment, and recommitment. By staying focused on your goals, embracing the challenges as opportunities for growth, and maintaining a steadfast commitment to the “Profit First” principles, you can achieve long-term success and make a meaningful difference in the lives of your patients and your community. With the right mindset and tools, you can transform your chiropractic practice into a thriving and profitable business that supports your personal and professional goals for years to come.

Final Thoughts on Profit First for Chiropractors

As we conclude our in-depth exploration of the “Profit First” approach and its transformative potential for chiropractic practices, it’s essential to emphasize the critical role that profitability plays in the long-term success and sustainability of your business. In today’s rapidly evolving healthcare landscape, chiropractors face unprecedented challenges, from increasing competition and regulatory pressures to the ever-changing needs and expectations of patients. To navigate these challenges and build a thriving practice that can weather any storm, it’s crucial to prioritize profitability and adopt a strategic approach to financial management.

The “Profit First” system, as outlined in Mike Michalowicz’s groundbreaking book, offers a proven and practical framework for achieving financial success in your chiropractic practice. By challenging traditional accounting paradigms and prioritizing profit allocation, this approach empowers you to take control of your finances, create a more stable and predictable income stream, and invest in the growth and development of your practice. By implementing the key principles of “Profit First,” such as setting up multiple bank accounts, determining appropriate allocation percentages, and maintaining discipline and consistency in your financial management practices, you can create a more resilient and profitable business that can support your personal and professional goals for years to come.

Beyond the financial benefits, adopting the “Profit First” approach can also have a profound impact on the quality of care you provide to your patients. When you’re no longer consumed by financial stress and uncertainty, you can focus your energy and attention on what truly matters: delivering exceptional chiropractic services and building lasting relationships with your patients. With a stable and profitable practice, you can invest in the latest technologies, pursue ongoing education and training, and create a warm and welcoming environment that promotes healing and wellness. By prioritizing profitability, you not only secure your own financial future but also create opportunities to make a meaningful difference in the lives of your patients and your community.

If you’re ready to take the next step in your journey towards building a thriving and profitable chiropractic practice, I highly recommend tuning in to Episode 28 of the Chiropractic Marketing Podcast, titled “Boosting Chiropractic Profitability: Insights from the book ‘Profit First’. In this informative and engaging episode, you’ll gain valuable insights and practical strategies for implementing the “Profit First” approach in your own practice. From understanding the key principles and benefits of this system to overcoming common challenges and obstacles, this podcast episode offers a wealth of knowledge and inspiration for chiropractors looking to take their practices to the next level.

As you embark on this transformative journey, remember that building a profitable and sustainable chiropractic practice is not a one-time event but an ongoing process that requires commitment, discipline, and a willingness to adapt and evolve. By staying focused on your goals, surrounding yourself with supportive colleagues and mentors, and maintaining a patient-centered approach to care, you can achieve long-term success and make a lasting impact in your community.

So don’t let financial stress and uncertainty hold you back any longer. Embrace the “Profit First” approach, tune in to the Chiropractic Marketing Podcast, and start building the thriving and profitable practice of your dreams today. Your patients, your staff, and your future self will thank you for taking this critical step towards financial success and professional fulfillment.

About the author 

Dr. Patrick MacNamara

I help chiropractors convert leads into new patients in 14 days or less without tech overwhelm or spending a lot on advertising. If you're not getting the number of leads you'd like from your current chiropractic website, enter your name and email address in the field below to learn how I can help.

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