Ben Lynch: G'day, good people. Welcome to the Grow Your Clinic podcast by Clinic Mastery. Here's what's coming up inside of this episode. This episode will be right up your Allie if you're looking to be more profitable. We're diving into how your budget is your profitability plan. And trust me, you want to hear Jack's take on how to make the budgeting process easy and useful in your clinic. Plus stick around for when we discuss how to get better at budgeting each month with the Variance Review. Any clinic owner that has had an opinion on the Australian government budget but does not have a budget of their own should zip it. Anyway, let's continue on.

Jack O'Brien: Do I need to spend on recruitment? Do I need to spend on new clients? Do I need to spend on training my team?

Bec Clare: And so I think we need to be careful of this invisible investment creep that happens as we grow.

Jack O'Brien: What was our forecast and what actually happened and how close do they marry up?

Ben Lynch: And just because they're a big clinic doesn't mean they've got their budgeting sorted. In fact, maybe success breeds inefficiency, as you say Jack O'Brien.

Jack O'Brien: And if you need an extra 10 new clients at $100 each, show me your $1,000 additional marketing spend.

Ben Lynch: Before we dive in, today's episode is brought to you by AllieClinics.com. If you're the kind of clinic owner who loves to feel organized and stay ahead of the chaos, you'll love Allie. Think of it as your digital clone. It's the single source of truth for all your clinic's policies, systems, and training. Test it for free at AllieClinics.com. And in other news, applications are now open to work with us one-on-one at Clinic Mastery. If you want support to grow your clinic and bring your vision to life, just email hello@clinicmastery.com with the subject line podcast, and we'll line up a time to chat. Let's get into the episode. Well, we're going to get into perhaps something that is the answer to every clinic owner's financial worries, stresses. It answers all their questions and gives them the clarity that they think opening their bank account app will, but doesn't. We're going to get to that in just a moment, but J.O.B., do you want to tease up with some news or announcements across the desk?

Jack O'Brien: A couple of things coming down the pipes. We have a workshop with Ava, Ava AI, a phone system at live digital workshop webinar, if you will. So that is coming down the pipes. Regos will open soon. Tickets will be limited. That will be about late June, I'll say. Give or take the 23rd of June. Don't hold me to that, TBC. So that's in June and also in June is a great time to think about getting your clinic valued. I've partnered up with Andy Wang and the team at Clarico Accounting. Some clinics do this every year. It's a great time to do it, particularly if you've got team members who are looking at buy-ins. but also in light of the Labour government's proposed federal budget, it will become necessary to start valuing the assets that you have in light of capital gains tax adjustments proposed. So, if you are thinking about getting a clinic valuation, send me an email, jack@clinicmastery.com. I'll connect you with Andy and the team. They value clinics all the time and they have a strong methodology for doing such. We'll make sure we take care of you. and liaise with your accountant in the process. So, jack@clinicmastery.com for clinic valuations.

Ben Lynch: No AI in this inbox. Come on, man.

Jack O'Brien: You're forgetting the tagline. No AI in this inbox. No AU in this email address. Yes, stitched up.

Bec Clare: That's a great tagline, Jack.

Ben Lynch: Yes, stitched up a few times this week. Not receiving emails. Jack's like, hey, Ben, You're going to reply to that email. And I look at it on the thread after he forwarded it, and it's got .au. That stitched us up. We're going to have to figure something out there. But anyway, let's talk about… a common pain point. A lot of clinic are going to say, I want to be more profitable. And we say, great, what do you want to earn? What does that look like over the next one to three years? Let's get some clarity. And then let's look at constructing your business in such a way that you achieve that outcome or you have a higher degree chance of achieving that outcome. But then, if you ask every clinic owner, do you have a budget or talk me through your budgeting process, I reckon we'd be lucky if 1 in 10 actually have a budget in place or routinely use their budget, look at it, use it to make decisions, so on and so forth. And so we want to talk through the process for budgeting and it can be varying degrees of sophistication or detail. And we work with clinics right from the moment they open their doors and they're generating zero dollars in revenue. all the way up to clinics doing $15 to $20 million a year of revenue and everything in between. And just because they're a big clinic doesn't mean they've got their budgeting sorted. In fact, it's quite interesting to see some of those big clinics who, you know, maybe success breeds inefficiency, as you say, Jack O'Brien. Things have just been going okay and they haven't got this document, this key asset. for how their decisions are shaping up to achieve some financial outcomes. But first, I thought it'd be a good opportunity to start by talking through your journey and your observation of why clinic owners don't set it up, why they don't have a budget, what are some of the barriers so that we can talk to how we overcome those in the process. If I just start with perhaps my own journey, I perhaps didn't see the value of a budget. It was something that the accountant said was a good idea or a financial planner said, you know, you should have a budget. And you're like, yeah, yeah, yeah, I know I should. But what for? Like, what's it going to help? Like, you know, I'm not going to be able to get the numbers absolutely accurate. And so in reflecting on today's conversation, I thought about what were some of the reasons that ultimately led me to actually following through on a budget, and I'm interested in yours, Bec and Jack. So Bec, let's go to you first. What were some of the elements, a part of your story and something that you see in clinic owners that ultimately leads them to getting their button to action and having a budget?

Bec Clare: And I think this came fairly late in the journey for us, actually. We were so, um, you know, fixated on revenue as our target. And I, in preparing for today, I was thinking about some of the quotes and, and things that really stuck with me that changed us in terms of actually looking at a budget. And it was one quote, which was revenue is vanity. Profitability is sanity. And I was like, we so often are budgeting for revenue. If we get our practitioners to this level of utilization, if we increase our fees to this, we'll get this amount through the door. But we haven't factored in or haven't really thought about, well, what's actually needing to leave the bank account and then how much is left over. And I guess probably what sparked it early in our journey, we didn't necessarily follow on to it, but was a book called Profit First. And so actually budgeting for that profit to be there in the first case, it took us a while to actually get to a point where we budgeted properly. And we're probably fitting into that basket that you talk about, Ben. We were just concentrating on revenue because we thought as long as our revenue keeps increasing, surely there is money left in the bank account. But we were wrong. And so I came down to really needing to budget.

Ben Lynch: Well, it comes back to that point of if you ask every clinic owner, do you want your clinic to be profitable, sustainably profitable and by how much? I think you'd get an overwhelming yes, absolutely. Show me how. So it's so interesting that they don't have this set up, but J.O.B., you know, we so often laugh that you were doing spreadsheets as a three-year-old, but talk us through, you know, why is there this barrier, this key asset that doesn't exist for clinics?

Jack O'Brien: It's interesting that point back around profitability versus cash in bank and there's just fundamentals that we aren't taught but for instance, interest is something that often isn't considered on a profit and loss or finance repayments. They don't sit on your profit and loss. They sit on your balance sheet and so maybe your P&L says you made $100,000 profit but if you had $60,000 worth of loan repayments, you're not going to have $100,000 in the bank. You'll have $40,000 in the bank in a simplified example. So, I think Ben, to answer your question, what are the barriers? The obvious answer is the technical shortfall. Oh, I'm not familiar with Xero or QuickBooks or Myable, whatever you use. And so, that's the easy excuse that I don't know how to use the software. I'm not technically proficient in the tools. My observation is it's less about that technical proficiency and more about the mindset and the identity and the emotion and the ego behind it of, I'm ashamed of my numbers. I just want to put my head in the sand. I want to avoid the harsh, sometimes harsh realities. If I don't know what I don't know, then that's safer than confronting the real realities of what's happening in the finances. I think that's more the case that there's this psychological avoidance, get in the sand, get distracted, procrastinate because I don't want to be confronted with what might be true.

Ben Lynch: Once you've gone through the process though, I think it's with anything, whether this is your first time seeing a certain patient in your therapy career, you get exposure to it, you get it the next time, you get it the next time, and slowly you start to build some competence because you're aware of how to treat it, how to look at it. So many people, when we do open up Xero, they're like, I'm not sure where to go.

Jack O'Brien: Well, this is the other part, right? We are by definition as health professionals, we are high achievers, we are high performers, we are perfectionists, we are good at our craft, we are used to getting high marks at school and at uni and for many of us, finance isn't our background and so to be lackluster in your finances is quite a hit to our identity and so again, I think part of it is well, I only do things that I'm good at. That is a behavioural trait of many health professionals. I am good at certain things and I do those certain things and I avoid what I'm not good at.

Ben Lynch: There were two forcing functions for me in my journey of becoming more competent and more confident with budgets. And I think they helped with the regularity of visiting it, uh, improving it, understanding it. The first is, and we use this terminology and framework internally, Joby, is a monthly business review. And we have a certain format and structure to it. But I think if there's no anchor in the diary actually to look at the budget again and go, how did we go? We budgeted X amount and we got Y. And understanding what were the differences there in my ability to forecast and can I improve on that next month or next quarter? I think that helps. Maybe you do a budget for the year. Maybe you look at it quarterly, but it probably happens at the end of the year. So I think that frequency helps. And secondly, it was like a smack between the eyes when a mentor said to me years ago, when we're making some hiring decisions and then looking at how it had impacted some of the profitability of the business, well, what's your process? for actually looking at the impact, the financial impact of some of your decisions. And really that is strategy, how you allocate the funds, how you back up and document some of your decisions in your budget. For instance, for many clinic owners, they're probably gonna try and recruit toward the end of the year when the new graduates come out. Is that reflected in the budget adding that wage and then the ramp up of the revenue back that you spoke to? So there are two elements that really helped me reuse it and revisit it rather than it be a one-off activity. Bec, how have you kept it front and center because so many clinic owners, if they do do it, it is a bit of a one-off activity. So how have you kept it part of your rhythm as a business owner so that you're making better decisions?

Bec Clare: Yeah, it was conversations exactly like this, where it needed to be cemented in our rhythm. So, it's a monthly rhythm now, where Grant and I, yes, we're husband and wife, but we sit down and we have a physio-esque finance session. Grant absolutely hates it, it boils him to tears. He's not the details person in our relationship, I am, and so I quite like it. But we sit there and he's like, why do we need to look at this budget again? That expense hasn't changed. Yes, but there's so often now those expenses are changing. We are seeing it a little bit more fluid in the market that things that we'd taken for granted as being fixed are no longer that way. So, we have it carved out. It's once a month. It's typically around sort of the fifth day into the new month. I check it at the halfway point. So I've gotten also into a rhythm where the payment of our, um, supplies happens twice a month. So I can see what's happening in the P&L with those larger payments going out. Um, so I check it halfway through the month and just make sure we're on track and then we sit down together. So there's also accountability and camaraderie together looking at these numbers. So it's not a surprise when Grant logs into the bank account and it either looks really good or it's not looking so great that he's got the awareness of what's happening.

Jack O'Brien: Can you say more back about camaraderie and accountability? Forget the fact that you're married, but like, what does that look like in a business team context?

Bec Clare: Yeah. So the accountability, firstly, it makes sure that I'm looking after accounts. It's so often than not, you get along to a meeting, has that thing been done yet? Oh no, I didn't quite get to it. Whereas if we've got an anchor in the diary, I know that my tasks have to be up to date financially. So the accountability is there, but the camaraderie is, It can be quite lonely as a business owner to be looking at these numbers and feeling like… You have to go it alone. And so you might have a business partner, you might have a team leader who you can talk to these, otherwise you're a coach. And this is the role that I play as a coach or consultant with the members that I'm working with in Clinic Mastery is we, on our coaching calls once a month, we draw up the P&L and we have a look at it. So that you've got someone in your corner who's looking at it with you and you don't feel like you're the underachiever. You don't feel like you're alone and you're continuing to learn and get exposed to it. I think that's what's so important.

Jack O'Brien: Right. I think it's really important too because for most healthy, successful businesses, you're doing more right than you are wrong. Sure, there might be the proverbial kick up the backside required on a couple of accountability things, But often, you're nailing it. There's not many people we can give high fives to or give us high fives as business owners. It might be your business partner, life partner, team member, or your coach. That comradery is going, hey, good job. We set an ambitious target and you've nailed it. Or we mapped out maybe a base case, conservative case, and you've managed to nail the base case. Kudos. High five. This is good teamwork.

Bec Clare: I was on a call only last week with a member going through their Xero file. They hadn't really opened Xero much before, so we're looking at their P&L. We're starting to rearrange a few things so we could get this budgeting in place, and within the space between consulting calls or coaching calls, that absolutely nails the profit and loss sort of rearranging and getting budgeting done. And they were second-guessing themselves so much and it was really nice. We logged in, they showed me their work, it was like bring your homework to your session, they showed me their work and it was just brilliant. They'd leant into it even though they were really unsure and now their ability to look at their numbers is just second to none. the confidence now about what they can afford to invest in before the end of financial year and where has that money gone has just provided so much clarity. In less than a month, it doesn't need to take that long. And that's what I think people get really worried about is, oh gosh, this is going to take me forever to learn. not if you can get the actions done.

Ben Lynch: And part of that is, as we're discussing, is what are the reasons that you eventually start using a budget and realize, okay, I've heard enough about it, people have advised me to do it, but I'm actually doing it. And then what are the catalysts for you redoing it and reusing it in your rhythm, as you pointed out, Bec, to actually have a review mechanism, a finance meeting in your case, a monthly business review in our case, in terms of the language and the structure, but there's something in the diary to review it and understand how well did we go, how far off were we, and to improve on it. J.O.B, when it gets down to the brass tacks of actually crafting a budget for the new financial year, here in Australia we're about to wrap up the financial year. It's slightly different based on different countries around the world, but in Australia we're about to wrap up. So what that also means is reviewing the past year and then setting in motion a budget for the new financial year. There's a number of different ways you could go about doing this. Just talk us through some of the principles and practices that you found useful and that you commonly advise clinic owners to do at this time of year.

Jack O'Brien: Yeah, I think there's two ways to think about budgeting. We can take a historically informed perspective and that looks like as you just described. We look at what happened last year and we see what small iterations can we make moving forward. How can we, as Pete Flynn's shirts often say, how can we be 1% better? each budget rather than every day. And that's a really healthy way and I think most clinic owners find that really relatable because like what was and how do we just course correct one degree here and there. That's one way to think about it. Another way to think about it is really from first principles. And to go, right, if I had a blank canvas, how would I design my budget? How would I design my profit and loss? And sometimes this is just a good thought experiment and other times it's a really healthy practice to account for maybe some of our biases or past behaviours that we've just learned to accept. So, thinking about it, at the end of the day, we're going to get to the same destination, but we can kind of choose where we start from. Do we start from historically informed or do we start from a blank canvas? Maybe we use some, I'll say, industry benchmarks or best practice benchmarks is a better way to think about it, so that we account for some of the bloat or drift that has happened.

Ben Lynch: And with that, how do you balance the goals or intentions of the clinic owner? Let's say we've talked in previous episodes, how much do you want to earn as the owner of the business? You know, if that's cut up between a wage that you take as well as some of the distributions, dividends as the business owner and what the mix or total of that is. And then factoring that into the budget over the next one year, maybe it's two or three years, depending on how ambitious those goals are. How do you factor that into the historical reference point and what you're effectively calling like zero-based budgeting, starting from a blank canvas?

Jack O'Brien: Yeah, that would be the technical term. Look, this is the art of budgeting and financial management is really we're trying to make square pegs fit in round holes. We're trying to cross reference and kind of look at things from multiple different perspectives to get to the same outcome. But sometimes, a good way to think about budgeting is having your cake and eating it too. And sometimes it doesn't always work that way. And so what decisions do we want to make in the allocation of resource to achieve the outcome? And maybe we can't achieve all of the outcomes. So what is the primary outcome that we're looking to achieve? and we allocate resources accordingly. But it's a delicate dance because it's all finite, right? And so if we shift one thing, it moves somewhere else. Everything has to remain in harmony or in balance. And so it is a really delicate dance.

Ben Lynch: Well, you bring up a good point. I'm interested, Bec, how you balance that out, as Jack, you're saying. And if I'm reading between the lines of, we can say we want to recruit someone and bring them onto the team, and that's going to grow revenue. It also grows the cost base in a number of different ways. Some of the obvious ones are around the wages, the super that you pay them. There's a bunch of other associated costs around recruitment or office equipment, et cetera. So often when it comes to budgeting, we might look at, oh yeah, we'll change that number. We think we can increase by 3, 5, 10%. But what's not considered is what are also the other areas that are linked to that. So how do you manage this and how do you guide clinic owners through thinking reasonably holistically about how all these pieces influence one another?

Bec Clare: That's such a good question. I guess from my mind, I'm relatively clear. Firstly, we use our rolling breakeven tool to know what it is that is just baseline going to cover that practitioner. And then having a fairly good handle on, okay, so if this team member comes on board, what are our additional sort of costs that we're going to need or investment that we're going to need to cover? And having a good handle on what your subscriptions cost you? Is it per head? Is it per group? Like, just factoring in all of those and I, I sort of have it quite clearly in my mind what that number is outside of wages per month that that team member, I need to factor in that we're going to need to cover that as part of our break-even. Um, so just really having a clear understanding of that. But I'd also be, anytime we're looking to bring on a new team member, I'm probably looking at it through the lens of a couple of different things. Firstly, Is this the right time to be bringing on a new team member? In that, are our other practitioners as fully utilized as they can be? There's a whole set of another wages, another investment, but it's also your time potentially in mentoring this other person. So that's an additional investment that's kind of invisible on the profit and loss, but it's there.

SPEAKER_02: Yes.

Bec Clare: And so I think we need to be careful of this invisible expense or invisible investment creep that happens as we grow. So, first I'd be looking, are the team fully utilised? Is this the right season to be bringing someone on? You know, we often see that we're recruiting towards the end of the year. Does our clinic happen to fall into a little bit of a lull early New Year where we've got a new team member on board that perhaps doesn't have any clients to see yet and a quiet team? So, what sort of seasonal shifts should we be also making? And that's really where having your Xero budgeting tool you can actually see where the ebbs and flows happen in your business and when might be the right time to have a team member come on board to help you with that surge. We know that May is typically a really healthy month, so for me I'd be looking to bring a team member on early to mid-April to help us with that surge.

Jack O'Brien: That's interesting, Bec, because if I push back or gently challenged, April has a lot of public holidays, maybe school holidays, so it's an interesting dance, right? Maybe clinic owners would think, I can't bring someone on in April because revenue is down. Perhaps really that's quite short-sighted, right?

Bec Clare: It is, because what you need to make sure is, in my mind it is, many ways to be right. I'm looking at, if I want a new team member to help us really surge through what is a great month, like May, they're going to need to be embedded, onboarded, part of the real fabric of our clinic, and I'm going to need, for us, that's three to four weeks, typically. For an experienced clinician, it could be longer for an early career therapist. So I'm wanting to make sure that we've got that time and space. Yeah, it's a financial squeeze, but we already know that month is a financial squeeze, so we go hard. We make sure that we're conscious of other areas that we're investing in in that month.

Jack O'Brien: And this is where the meetings really matter, whether it's with your business partner or your coach or accountant or whoever it is, to be able to talk through the narrative behind the numbers, to be able to talk through the story of what's going on, but also to justify our case because every investment decision, every budget decision is an investment decision. When we make a decision, we are choosing one action over another. It's really important that we are able to rationalize why we are choosing option A and why we are not choosing option B. That level and intensity of critical thinking becomes even more so. Look, it is significant when you're a large clinic but arguably even more significant in the early days because the resources are that much more finite. When you're bigger, a couple of dollars here and there, you can ignore it maybe to your own downfall. But when you're small, it's like, right, there's pennies laying around. We've got to make sure every penny is put to work.

Bec Clare: my own perspective, but also what I'm seeing clinic owners do is I'm seeing those clinic owners that are on the smaller side actually be wiser with their expenditure than the larger ones. And I think we've even fallen into that trap in probably the last 12 months where we've gone, Oh, we're, we're doing pretty well. We're fairly healthy. Let's invest in these things. Let's increase our tech stack. Let's do this. And only to go, Oh, when we then have a lean month, that's actually pretty scary.

Ben Lynch: Right.

Bec Clare: Like we've now almost got – we've almost exposed ourselves more because a dollar here or there doesn't make too much difference but when you add each of those decisions up, they're pretty significant.

Jack O'Brien: Benny, can you speak more to that business case for decision A or decision B and having rigor around deliberately allocating budget?

Ben Lynch: There's a couple of things that come to mind and I've seen this, I remember a really challenging story of a member who had committed to all this annual leave. They didn't have a good annual leave policy and this is how it all links and shows up. And so they went about approving all this leave, right? Which was like everyone was basically going on a European holiday, which is, you know, during Australian winter, right? which is a typically slower period as well for their type of business. And so there was quite a bit of lead time on this, but they had joined us right when that leave was all about to happen and they were stressed and strapped because they're like, I'm still paying these people. None of the revenue's coming in. And part of that budgeting is being able to go, like, I have approved a bunch of leave, or there are these team changes, so I'm still paying these people, but the revenue's going to drop by 20, 25%, whatever it was for that clinic owner. It was substantial, and it put them in a real bind. It's made worse, as you said, Bec, when you feel like you're a little bit flushed with cash. after a good month or two, and that's like, let's spend. And then you're not aware, oh, the next one to two months, for whatever reason, maybe you're able to foresee it, maybe not. If you got good budgeting, hopefully you are able to see that you're going to be in a tighter position and so actually the timing of that spend as you were alluding to before, Bec, is perhaps better done at a different time. In a real test, I often think of like budgeting, Jack, you put it as every decision is an investment decision. And essentially, the budget is capturing our decisions, our investment decisions in pure numbers. It's like sort of the numbers don't lie. So you're looking at it and you're saying, I'm going to spend or invest x amount in this function of the business, marketing, or admin, as we've often talked about, or occupancy, where we rent, where we get a lease, etc. And the assumption is that if that's an investment, there should be a return on that investment. So what is the return that we want or expect and over what time period as well? Because some things are going to bring more fruit earlier than others. An example being, I recruit this new grad, all of a sudden I've got their wage and super expense and sort of the associated expenses, office equipment, et cetera. But I don't expect them to have the 80% utilization maybe for eight to 12 weeks. And so, we need to factor that into our budgeting in an ideal world as to what that's going to look like. So, I think maybe that's what you're touching on, Jay. I don't know if there's some other areas to uncover there, but we're essentially looking at, okay, if we make this investment here, what's the return that we want? And I think if you're getting really strategic, you're saying, if we were to really grow this business over the next 12 months, What are the areas that we're under-investing in? If I doubled the budget – and we often talk about this, Jack, of constraint-based thinking or just doing the mental exercise of some extreme thinking. If we doubled the spend in this area of the business, this category that you mentioned, Bec, Do you think we would see the double the output or sort of double the result? It's an interesting place to play around. I think that's the value of budgeting is you're stress testing your investment decisions. If we change this here, would we likely see a change in another area?

Jack O'Brien: And knowing the timelines of those returns is critical too. For instance, if you're like, I need to grow, I need to, we want to grow our revenue, right? We're going to invest in ads, say Google ads. And so that might look like in month one, I need to budget some ad spend and some implementation spends to get some qualified agency to do that for you. Side note, we can do that for you. At Clinic Mastery, we can help you with your Google Ads. But you need to factor that ad spend and implementation spend in month one, and it's likely that we won't see the full return on that until two to three months later. And if we're talking about a meta ads campaign, potentially even longer. So knowing your timelines matter. from when we're going to invest to when we're going to see a return. You can also reverse engineer that, right? If you need to hit a particular revenue number for whatever reason, you're probably going to need to think about what investments do I need to make and how much earlier do I need to make them. Do I need to spend on recruitment? Do I need to spend on new clients? Do I need to spend on training my team so that we can improve our PVA by focusing on cancellations, management plans, rebooking? Do I need to invest in some AI and tech to be able to handle phones or payment gateways? Health comes to mind. Do we need to get onto health now so that we can manage some of our out-of-control admin spend? The answer is probably yes. Do we need Ava or do we need some other AI? Clinic apps? whatever it might be. When do we need to spend that in order to see the returns at the right time?

Bec Clare: You touch on a really great point there, Jack. We often say as business owners, this month is going to be a little bit more lean or a bit more challenging with maybe it's public holidays or school holidays, but to actually see it month by month play out in your P&L or in your budgeting tool, depending on the style of your clinic as well, you may actually not see it play out in zero at the time that you're feeling it, right? So, like if you've got a bit of a lag time on when that cash flow starts coming in, it could be six weeks later that you're actually starting to feel that in the bank account or on your profit and loss statement. So, I actually think it's really helpful to see that play out and know when to hit the button on whether it be your meta ads or your recruitment. And also just to challenge some of the norms. Like, just because we see that, you know, April might be a lean month for some clinics, it's not for every clinic. And I think it's really important that we actually challenge our own, you know, confirmation bias, if you like, to be like, oh, April's a terrible month, let's just write that off. You can still invest really well and have a really solid month.

Jack O'Brien: Totally. And upset that. It's interesting, right? Because this is where the mindset and the discipline of a business owner kicks in. We can't just run things by thoughts and feelings, right? We can't make investment decisions based on what's in the bank account today because as you described, Bec, there's often a time gap between what we feel and what is actually happening and so it takes discipline to invest maybe through December or January if you're a clinic that wrestles with school holiday periods or public holidays or the European winter escape comes and visits you every year. It takes discipline to continue to invest now to see the lag on returns but good business owners commit to the investment at budget time and here's why, because they have a high degree of confidence and certainty in the plan and this is where the rigor of budgeting for business owners gives you confidence in the plan and when it comes time to execute, it's more simple to execute because you've been rigorous with the planning.

Ben Lynch: I reckon any clinic owner that has had an opinion on the Australian government budget but does not have a budget of their own should zip it. Anyway, let's continue on. That's pretty valid, but say more. Take care of your rent. I mean, this is like, make your own bed, you know, or what does Jordan Peterson say?

Jack O'Brien: Jordan Peterson would love it. Yes, tidy your room.

Ben Lynch: Clean your own bedroom before you go and try and fix the world. It's like, if you want to get carried away with all these other things that you're worried about and you don't have a budget, I'm sorry, fix your own house first and then you can worry about this other stuff. This is such a critical skill because this is literally putting your money where your mouth is. Because if you are saying, this is our vision for the business, this is our strategic direction, this is where we want to go, then show it to me in your budget because that's ultimately where you're investing and that should be as coherent and connected as possible. And I'm not perfect, but we're always trying to get better at it, right? And say, okay, this is where we think we're going, where we want to go. Do we have that backed up with where we're allocating the budget moving forward? Because ultimately that, as you put it, Joby, it's the allocation of resources to achieve the outcome.

Bec Clare: This stuff is directly in your control as a business owner. In the end, you're the one who has access to the bank account and is sending money out. Yeah. It's control the controllables, really.

Jack O'Brien: And it's cognitive dissonance to say you want growth, but you don't plan for it. I can say I want a veggie garden, but if I don't put the seeds in the soil… And you don't need the veggies. Yeah, that's right. You've got to put veggies in the scrolls for the kids. And so when we say we want growth, let's be very specific. How much Do you want to allocate to the acquisition cost of a new client? What is your CAC to LTV ratio? If you need an extra 10 new clients at $100 each, show me your $1,000 additional marketing spend. We spoke to it earlier on this episode or a previous episode. If you want to be earning $300,000 in profit from your clinic, notwithstanding your salary, show me the path to get your business to $1.4 million of revenue at a 20% margin. Show me. If you don't have that, you actually don't want what you say you want enough.

Bec Clare: Jack, what happens if a business owner doesn't know? Like they go, I want 300k profit after wages, but I don't know the pathway to that.

Jack O'Brien: Jack at clinicmastery.com/podcast/podcast/podcast.

Ben Lynch: No, it's so true.

Jack O'Brien: Like actually, you need some help to figure that out and it's super normal to not have that figured out because you don't know what you don't know. Let us help you.

Ben Lynch: J.O.B, I sit here humbled and resonating with your point where I just thought years ago I've got a plan, literally in the form of a document, like a Google Doc. Here's all the cool projects we're going to work on. Here's all the things we're going to do. And no budget. And it was the disconnect between, okay, well, your budget is your plan manifested in the investment spend you're going to make to make it happen. You know, the tools, the tech.

Jack O'Brien: We had a budget. It just wasn't pretty enough for you. I had a budget.

Ben Lynch: In our process, how much have we refined in terms of the inputs and the outputs and the specificity of all the different formulas you might use, say, for a therapist in an example of how many service hours, perhaps, how much revenue, and how much am I paying them, and changing those things actually are all interlinked, say, through formulas in a spreadsheet that outputs a budget. I want to go to three things. One is budget variance. Two, business cases. So your base case, you're conservative, you're optimistic. And then three, Often clinic owners say, well, I don't know how much I can afford to pay this team member, whether they're looking for a pay progression or they're shifting pay and sort of the budget links all of these. Let's go to variants first, J-O-B. To the point of like, okay, I've got the budget. Maybe I'll review it, but we all have varying degrees of competence. How do I know I'm getting better? Do you want to just talk to where specifically the variance report fits in and how that might help people get better?

Jack O'Brien: Well, a budget is a forward-looking document. And a profit and loss is a backward-looking document. And so in Xero, it's called the Budget Variance Report. In other softwares, it might be called Actuals versus Budget or whatever the case may be. And the point is we compare what was our forecast and what actually happened and how close do they marry up. If the Bureau of Meteorology were to do this, their forecasts never match up with reality. Hopefully, as clinic owners, our forecasts are fairly close to reality. What we want to do in that process is not just look for the green up arrows or the red down arrows or the percentage difference, but there's a couple of principles that we want to consider. We want to consider what variance is acceptable So, in some cases, it might be 1% or 2%, maybe up to 5% depending on the size and scale of the numbers. So, what is kind of just normal acceptable variation kind of happens? And then we also want to think if there is an error or even if we've hit like budget matches actual, was this because of good projection? Was this because of good performance or both? If there's a serious miss, maybe we missed by 10 or 12% on something. It's like, okay, was it just that our budget was 10 or 12% out or was our performance lackluster? because that then informs how we budget next time and how we execute and perform next time. So that'd be the keys to consider is performance versus projection.

Ben Lynch: Love it. I think that's been a great measure to know that I'm getting better as an example or worse. And there's, like you said, it's rarely going to match up 100%. There's always a variant. So it's like, okay, how can we get better at being closer, more proximal to the actual results? And that's partly budgeting, as you're calling out, and partly performance, and then trying to discern, you know, to what degree each has played a factor in what actually played out is really the fun and the joy of that finance review that you do, Bec, or the monthly business review. Right.

Bec Clare: Then to that point, as we were sort of finding our feet with the budget variance tool in Xero, is one thing I learned was to actually go super granular on our charts of account. So, I started to break out each of the investment lines almost so as every expense had its own chart so that I could actually see what was going out every month versus them all sort of being clumped into one where they could fluctuate quite a lot. I actually found that that levelled out that variance in terms of investment considerably. It was then our performance that was the one that needed the most attention, but I could accurately say our investment stuff doesn't fluctuate a whole lot now.

Ben Lynch: That's a really great distinction of getting into the details, Bec, and then getting better at it from that granular level. J.O.B, let's go to business cases that you've sort of alluded to, but I think it's just a useful framework to help think about what we set as the budget moving forward. Do you want to just add a little bit of colour to those three cases?

Jack O'Brien: for anyone who's tried to budget before, it's not far into the process where you get to saying, well, it could be X or it could be 3X. I don't know. How is this going to play out? What we want to think about is, okay, what's base? What's kind of normal baseline? What is perhaps much more conservative and maybe what is more optimistic? A really interesting example around this was the recent How do we describe it? Maybe fuel crisis, fuel non-crisis? I don't know. Whatever we call it. When we think back to that March-April period of 2026 and there was so much uncertainty around Iran and fuel availability, etc. It could have been, you know, it could have been DEF CON 5, right? It could have been really disastrous financially. And so it was probably reasonable for clinics to be thinking, what happened in COVID? And maybe I need to like really think about what a layoffs look like and what a closures look like and what a cancellations look like. That would be a very conservative case. And then on the other side, you could have also considered, well, what's really optimistic case? What if health is again considered an essential service and we all have access to unlimited cheap fuel because we're health professionals? And so, whenever you're thinking about quite a wide range. It's helpful and look, depending on your level of sophistication, you may well have three budgets in zero. A base budget, on the lower end, a conservative budget and on the upper end, an optimistic budget to give yourself a range because again, this is as much art as it is science.

Ben Lynch: Bec, in terms of coming up with some of those cases and talking through it with Grant, how have you sort of navigated it so often comes up in the context of therapist performance, you know, maybe some of the operating expenses, you know, sort of hover around the same mark, maybe they fluctuate a little bit, but so often it comes back to, well, how much revenue do we think the team is going to bring in? How productive, how utilized do we think they're going to be? You know, with annual leave or public holidays considered and natural fluctuations. How do you go about trying to be as accurate as you possibly can in the budgeting side, considering cases?

Bec Clare: That's such a good point and we were only talking about this the other day because only a few weeks ago we got hit by the most incredible flu through the clinic and it just wiped pretty well everyone out. So we're going, oh yep, May's going to be a really terrific month. First week in, basically everyone out sick. What we do is we essentially factor in a team member being away for six at all. More conservatively, actually, more recently, we factored a team member to be out of action for seven weeks of the year. So that's four weeks of annual leave, two weeks of them taking their entire entitlement of sick leave and scattering in a few public holidays. So we are on the fairly conservative side now where we go, let's just essentially take everyone offline for seven weeks. Or as we look at it, what if we closed entirely for seven weeks and generated absolutely nothing? And so now when a team member calls in sick, on the basis it's not everybody, we sort of go, hey, well, we're actually ahead this week because we could have actually been closed this week. So it's a mindset sort of mental game that we're playing with ourselves there, but we try and be fairly conservative of ruling them out for seven weeks.

Ben Lynch: What I like about this, Bec, is I think part of the… call to action here is, how clear are you on that rationale, that context for why you've landed at setting your budget in a certain way? Because it may change into the future. You may become more conservative or more optimistic. But if I was to ask you, how did you arrive at some of these numbers, you'd be able to say, here's the context for why we put it the way we've put it. And I think if you've documented that for yourself, because we all kind of lose, I can't actually remember why we put it like that. So I have a strong sort of request for you to document things. Just on a Google Doc, here's the reasons why we've landed on this scenario.

Bec Clare: And we came to that then based on doing the practitioner year in review. So we actually looked at how much leave did every practitioner take? How much sick leave did they actually take and how much effect did it have? And what we've seen when we've done that each year, what we've actually seen post-COVID is that team members are taking more of their annual leave and they are taking more of their sick leave. than they have in previous years. So we can see it play out, and that's how we landed it, seven weeks. So we've got some sort of data behind it.

Ben Lynch: Yes, interesting. Finally, we often have a clinic owner saying, I'm not sure if I can afford to pay this team member what they're wanting, or I want to give them a pay progression, but I'm not sure if I can afford it, or what can I afford? It comes in various forms and sizes. And we're going to talk more about this as an extension of the work that we do with Sara and the People plugin, if you need any HR support from contracts through to navigating curly situations, reach out to Jack at ClinicMastery.com and you can connect them with Sara. But when it comes to answering that question, J-O-B, can't help but think that the budget has to play a role in helping you see how that impacts all of the other numbers. So how do you help a clinic owner translate the conversation about team member pay and pay rises, pay progressions into budgeting? How do you think they should go about it?

Jack O'Brien: So much of it is around scenario building and playing around with if this then that and the rolling break even tool is helpful or if you've got a great budgeting spreadsheet that can formularize how that's all calculated. Ultimately, we've got to do it in light of the big picture, right? It's one thing to think, okay, what did they generate and what's their expense or what are their salaries and on costs is another one that we need to consider. Again, to Bec's point earlier, subscriptions here and equipment there and so being able to consider all of that in light of, to Bec's point, if we're using seven weeks of non-billable paid time per year, that's close enough to 15% of their year that they are paid for that they are not billing and that has a direct implication on utilization. What that means is if you think they're 50% utilized, it's actually 15% of that less. It's more like 35%. Sorry, it's more like 7.5% less, so 42.5% instead of 50% for the maths geeks out there. We need to consider these in light of the big picture. That's the key here is having a budget or a rolling rake even or a financial model that shows us that when we pull this lever, what are the six or seven consequences?

Ben Lynch: And part of that I think that's often overlooked is, is there a change in expectations? I think that's what you're alluding to as well, Jack, of like, if we pull this lever, what changes in some other areas? Slash, what do we want to change? Is it that they're having a pay progression and you're going to a tiered pricing model where they can also bill more for their time? Is that part of it? Have you got to think change also included?

Jack O'Brien: I think this comes back a lot to the consideration and the rationale and the reasoning behind your decisions. A really simple example is maybe in your clinic, you could consider an annual CPI increase to your salaries. What the reality is that most team members say these days expect that but they don't value it because at the end of the day, it's an extra give or take $20 a week in their pocket after taxes, etc. Again, if the desired outcome is impact on your team and therefore gratitude, instead of doing what's called a 4% per year adjustment, what if you did 8% every two years? And all of a sudden, a team member ends up with, you know, 50, 60, 80 bucks a week in their pocket. That's meaningful. It's net no difference over the course. So, what is the impact that we're trying to make and how do we start to think creatively? Again, square peg, round hole. Another consideration for clinics is, particularly as it pertains to utilization these days, maybe you need to think about adjusting your appointment structures. Now, this is a sacred cow for most clinics but if you're on 60s and 30s, maybe there's room to consider how do we flex. Maybe Murphy's Law can play a part here. How do we continue to deliver phenomenal client experiences and clinical outcomes in a way that is sustainable for the clinic and has upside for our team as well. We've got to think creatively.

Ben Lynch: So many shoots off of this conversation from pay and performance through to client experiences through to actually designing projects and plans that you can work on to ultimately do the work to grow the clinic. Jack, thank you. Bec, thank you for your insights. For folks who've tuned in this far, thank you for listening. You can head over to clinicmastery.com/podcast for the show notes and some previous episodes where we've actually screen shared how to go through your profit and loss. We've actually talked through more of the budgeting process with Shane Bennett on episode 283. There's plenty to go back on, and for members, abundantly more inside the Learning Portal. Go check that out. All right. We'll see you all on another episode very soon. Bye-bye. Bye-bye.