Private Practice Recruitment Checklist: Step 2. Assess the Readiness

Private Practice Recruitment Checklist: Step 2. Assess the Readiness

This is Step 2 of the “Private Practice Recruitment Checklist” series. See all articles in the series here.

Step 2. Assess the readiness of your practice

Once you’ve identified the gaps in your practice, you need to evaluate the readiness of your practice to hire and support a new practitioner. Just because you need one, doesn’t always mean you can! Depending on the current situation of your practice, now may not always the best time to hire.

Find out below how you can assess the readiness of your practice to recruit a new practitioner.

 

Do you have enough money to hire a new practitioner?

In the initial stages, the practitioner may not have a full diary. This doesn’t matter as much for contractors but for employees it is essential that you have enough cash flow to pay their wages. For contractors, you may also lose them if their diary isn’t quickly filled, restarting the whole recruitment cycle again.

 

Do you have enough time to train and manage a new practitioner?

In the first 1-2 months, you will have to conduct induction, train the new practitioner on your practice-specific policies and procedures, and supervise them. You will also need to spend more time with them compared to your other contractors to make sure they understand their role and are satisfied.

As a general rule, make sure you can manage to take out 1-3 hours each day for the first few weeks to work with your new team member.

 

What are the immediate impacts of a new practitioner on your cash flow?

Assess the immediate impact of having a new practitioner. You should expect to lose productivity during the first few weeks, even if you put in place strategies to overcome them. This is because you will be less available to do your tasks as you’re training the new practitioner.

Over time, you may be able to get your practice to the point of equal productivity even during recruitment, as you automate as many tasks as possible and recruitment becomes second nature to you.

However, it’s always good practice to overestimate your expenses and underestimate your revenue. Keep this in mind, and before hiring a new member, ensure that your practice can survive for a few weeks on 80-90% of its average revenue.

 

What is their expected impact on your long-term cash flow?

What is the range of wages or hourly rates you can afford to pay? Is this reasonable?

Conduct a cash flow forecast to measure the new practitioner’s expected contribution to your revenue, expenses and profits. Again, underestimate the revenue and overestimate the expenses!

When doing the cash flow exercise, base your estimates against a range of pay rates and different pay structures.

  • How much can you pay as a flat fee per session?
  • Or what kind of split can you offer – 50:50, 60:40 or even 70:30?

Consider various appointment types and session rates in your calculations as well. For example, when considering the costs to acquire a new client, you could even end up losing money on a low-fee, first appointment.

Below are some examples to demonstrate how different pay rates and structures can impact the profit of a psychology practice.

 

Formula:

Session Fee – Acquisition Cost – Contractor Pay = Profit (before other expenses)

 

Assumptions:

Average client acquisition cost = $20

Average number of sessions per client = 5

 

Example 1:

Session fee = $84.80 (Bulk billed psychology session)

Contractor pay = $80

1st appointment profit: $84.80 – $20 – $80 = $-15.20

2nd – 5th appointments profit: ($84.80 – $80 = $4.80) x 4 sessions = $19.20

Profit after 5 bulk-billed sessions = $-15.20 + $19.20 = $4

Contractor pay = $80 x 5 sessions = $400

 

Example 2:

Session fee = $84.80 (Bulk billed psychology session)

Contractor pay = 60%

1st appointment profit: $84.80 – $20 – ($84.80 x 60%) = $13.92

2nd – 5th appointments profit: ($84.80 – ($84.80 x 60%) = $33.92) x 4 sessions = $135.68

Profit after 5 bulk-billed sessions = $13.92 + $135.68 = $149.60

Contractor pay = ($84.80 x 60%) x 5 sessions = $254.40

 

Example 3:

Session fee = $180 (Full fee psychology session)

Contractor pay = $80

1st appointment profit: $180 – $20 – $80 = $80

2nd – 5th appointments profit: ($180 – $80 = $100) x 4 sessions = $400

Profit after 5 full-fee sessions = $80 + $400 = $480

Contractor pay = $80 x 5 sessions = $400

 

Example 4:

Session fee = $180 (Full fee psychology session)

Contractor pay = 60%

1st appointment profit: $180 – $20 – ($180 x 60%) = $52

2nd – 5th appointments profit: ($180 – ($180 x 60%) = $72) x 4 sessions = $288

Profit after 5 full-fee sessions = $52 + $288 = $340

Contractor pay = ($180 x 60%) x 5 sessions = $540

 

As you can see in the examples above, pay structures and session rates can make a huge difference to both your practitioner’s take-home pay and the net profit of your practice.

Try several types of structures based on different session rates, and find one that works for your practice.

Go forward with your recruitment process if your forecast shows that:

  1. You can afford a new practitioner,
  2. The impact on cash flow is (significantly) positive, and
  3. The amount you can afford to pay is attractive to the practitioner.

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