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MT
Coach
Sustainable
Business: Percentage Splits
Dear Don: I’m being
offered at 65/35 split at a massage clinic. Is this fair?
Signed: Fellow
Associate Interested in Recovering a Significant Part of Legitimate
Investment in Therapy a.k.a."Fair Split"
Dear Fair
Split:
Thank you for your question.
Percentage agreements are very subjective to the situation, so you
need to ask other questions to determine your best action.
Questions such as:
- “How much money do I need to
live on?”
- “Is the clinic rent
comparable to expenses and risk I would bear practicing somewhere
else / opening my own clinic?”
- “How much value do I bring
to the table?”
Let’s explore some answers to
each of these questions in detail.
First, let’s do the
math. Your income must cover all your business expenses (BE)
and your living expenses, otherwise known as owner’s draw (OD), or
your work won’t sustain you. Meticulously track all your expenses
for at least three months.
We’ll look at business
expenses in a moment, but consider categorizing personal expenses
into the following:
- self (savings, tithing to
charities, investment towards retirement, personal care,
entertainment)
- home (mortgage/rent,
utilities, home improvements/repairs)
- transportation (transit
pass, car payments, fuel, repairs, auto insurance)
- food (for home and dining
out)
- child (childcare,
medical/dental, recreation or cultural programs)
- taxes.
For an individual, these
could be $2000 or more/month; for a family considerably
more.
Let’s say you’re an
individual with personal expenses of about $2500/month. Therefore,
if you consistently earn $3850 (65% take-home is about $2500), then
you can make the 65/35 split work for you. If you can’t
consistently earn this amount, you will need to find a way to
generate more income. You can do the later by subletting your space
(you’re not occupying the space for 12 hours/day, seven days/week);
adding hydro and electro-therapies to increase your work capacity;
raise your fees and / or sell products to make up extra
income.
What if you don’t feel the
agreement is fair?
If you feel the agreement
isn’t fair, you’ve got some research to do. Typical business
expenses include rent, utilities, equipment, linen and
lubricants/lotions, reception staff or on-line booking system,
office supplies and equipment (ie computer, printer, internet),
marketing materials (website, brochures, business cards, signage,
advertising), professional development, regulatory body and
professional association dues, taxes – revenue, GST, PST (if
selling goods), and more.
If you’re being offered 65%,
I’m assuming you are simply renting space and have to supply all
equipment, supplies and marketing. In a clinic or spa where all
necessities are supplied, percentages range from 40-70% to the
business. You can check the cost of office space in the area you
wish to practice in to determine fair cost/square footage. You then
need to factor in the high costs of establishing your location and
reputation.
Don’t underestimate the costs
of starting a business and getting established! A well-established
clinic brings existing business systems, established reputation and
location, and steady traffic…something that a start-up may take
years to create. Four out of five businesses fail within five
years, mainly because of inadequate cash flow and inadequate
experience in running a business.
You may be able to negotiate
a better deal if you bring more to the “table”. For example, a
potential associate that brings an existing patient/client base,
skills in attracting and retaining that base, specialized skills
(such as spa therapy, neuromuscular therapy or manual lymphatic
drainage) weighs in at a much higher value to the clinic manager
than an associate who is less skilled or experienced, and has not
yet developed a practice database.
The more you require of the
clinic in attracting and retaining business, the more you will pay
in rent. If you have poor leverage in the agreement because you
lack skills, experience and establishment, you still may decide to
take the high rent and learn as much as you can. You’ve paid for
your education in massage therapy; now pay for your necessary
education in business! Work on your business abilities as well as
your bodywork skills, then when the next contract negotiations come
around, you’ll be in a position to make a better deal.
Donald Quinn Dillon, RMT is
author of Better Business Agreements: A Guide for Massage
Therapists. Contact him at www.MTCoach.com
For
more information about Don and his services click on his web site
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