Does it feel like you’re making less money even though you know revenues are increasing? We’ve seen the cost of everything go up over the past year or so and overhead costs can easily sneak up on you. If you’ve seen your profitability drop, you might be looking for some areas you can improve upon and managing overhead costs is a good place to start. 

A solid financial plan is the foundation for effective cost management. The best way to manage overhead costs is to create a budget or even better, a rolling forecast that you compare to your actual numbers every month. This will help you create a roadmap for your business vs. winging it and hoping things turn out okay.

If you were building a house, you wouldn’t start throwing walls up without plans from an architect. The same goes for building a business. 

Lay out all of your numbers so that you know the plan for your business is structurally sound.

As you’re outlining all of your anticipated expenses, you can start looking for cost saving opportunities. 

There are three areas of overhead costs that tend to be most commonly problematic for wellness businesses.

The first is front office compensation. Balancing how much front office staff you need can be challenging. It’s really important to regularly assess patient flow, peak hours, and seasonal variations to optimize your employee costs. You might have two or three customer service reps, but you don’t necessarily need them working all the time. It’s also important to streamline administrative processes to keep this cost down. Clients should be able to schedule, fill out paperwork, and pay online.

The second area that can get out of hand is facility costs. It’s important to maximize the space that you’re in. The last thing you want is empty treatment rooms. Making sure that you have enough providers and their books filled is crucial to maximizing your space. A good target for rent expense is around 5% of gross revenues. If you’ve just moved to a larger location, you might not be there yet, but that’s the goal. You should be working toward maximizing the amount of revenues that you can bring in for the size of the facility.

The third area to keep an eye on is marketing. This one is the most challenging to manage. Marketing is essential for attracting new clients, but you need to make sure that you’re getting a return on your investment. You must use analytics to measure the results of your marketing campaigns and adjust your strategies to what gets you the most return on your investment. It also makes sense to throw your marketing dollars toward the services that get you the greatest profit margin. These are likely going to be your recurring monthly services.

Working on these three areas is a great start to effectively managing overhead costs. In addition to budgeting, comparing your numbers to industry benchmarks can also be really helpful.

If you’d like help with budgeting, forecasting, or benchmarking, we’ve got you covered. Schedule a discovery call here.

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