So, what does this mean? Remember, the Golden Rule is to spend no more than 20% of your hourly collections on your office space.
For Mary, she’s spending a bit more than ideal, but with so few hours per week, it may be hard to find something for less money. Subleases can be beneficial for the tenants because they reduce the monthly exposure. For the subtenants, however, it means taking space only when the other providers do not need it, working out of space that has been personalized to fit another’s practice, and a lack of security that the space will be available in the future.
Jan is spending way too much on real estate. As she only works two days per week, she should consider subletting her space other days of the week or finding a part time solution for herself. Subleasing can be difficult – you must find someone you trust, collect payments monthly, chase down late payments, and worry about having your PROPERTY damaged. I often ask people what business they are in – helping clients feel better or real estate. Unless Jan wants to be a real estate professional, she would be better off finding part time space at about half her current costs.
Finally, Bill is doing great. He benefits from much higher reimbursement rates as a psychiatrist. He also works fulltime, which lowers the average cost of real estate per hour of client sessions.
I hope the 20% rule helps you answer the question “Am I spending too much on my behavioral health office space?”
To help make it easier to see how your practice compares to the Golden 20% Rule, I’ve built an easy-to-use calculator which is linked to below. This should make it simpler to see how your practice compares to this target benchmark.
If you have other questions on how to calculate the rule for your practice, I’m happy to help and have included my contact info below.
If you have other questions on how to benchmark the health of your practice, I’m here to help.
Good luck and thanks for the amazing work you do for your clients.