Aim for a profit margin of about 20%, keep the fully loaded cost of your clinicians at no more than about 40% of revenue, and fix a broken system before you scale it. That is the guidance from Julie Herres, Founder and CEO of GreenOak Accounting, a firm that has worked only with healthcare practice owners for more than 10 years. As she put it on the podcast, "It's very much possible to have a profitable practice in 2026. ... It is no longer accidental."
My world is the revenue side of the equation: everything that determines if, when, and how much a provider gets paid for their time. Julie's world is what happens to that revenue once it comes in. Here are the benchmarks and ideas from our conversation, organized around the questions practice owners ask most.
Key takeaways
- Keep revenue-generating clinician labor, fully loaded, at no more than about 40% of revenue. Above that, a 20% profit margin "evaporates very, very quickly."
- Aim for about a 20% profit margin. That profit funds taxes, debt payments, expansion, and an emergency fund, and it drives what the practice is worth at sale.
- Get close to 20% before expanding. "12% profit margin when you're expanding easily becomes a 3% profit margin."
- Check whether you are actually full before you hire or open a new location. Often, the numbers say you aren't.
- Shared-risk compensation, such as per-visit pay, aligns clinicians with the practice. "The math has to math."
- Start today by looking at your financials on a regular basis and turning your goals into numbers.
What percentage of revenue should labor cost in a PT practice?
No more than about 40% for revenue-generating clinicians, fully loaded, and about 50% for all labor excluding the owner. "Your PTs all in, fully loaded, so wages, payroll tax, benefits, should be no more than about 40% of the revenue generated," Julie said. "That's generally where we need to be, which is challenging, certainly, in this market."
I told her that's a tough number to get to. Her answer explains why she holds the line. "If I say 40, a lot of people are still going to end up at 45%. But if I say 45, then a lot of people are going to end up at 50," she said. "I do know that if you're under 40, I could almost guarantee a 20% profit margin. But as soon as you creep up from that, that 20% profit margin evaporates very, very quickly, because there's just not a lot of wiggle room in any of the other categories."
The other categories are hard to move. "There's only so many internet bills or software contracts that you can negotiate. Negotiating $20 off a contract, it just won't move the needle that much," she said. And "you need a certain amount of space to run a clinic. You just do."
To put simple math on it: at $100 revenue per visit, a $40 all-in clinician cost per visit is "really like $32 probably, plus payroll tax and benefits," as Julie put it. Administrative labor sits in a separate bucket on top of that, because "you have different leverage points for both." Excluding the owner, whose pay can vary by tax entity, all labor together usually lands around 50% of revenue. That guidance is for insurance-based practices; as Julie noted, cash pay might be different.
What profit margin should a PT practice aim for?
About 20%. Julie thinks of revenue in buckets: roughly 50% for all labor, about 20% for overhead, and about 10% for rent and facilities, which leaves about a 20% profit margin. The owner decides the trade-offs. "If you can be very efficient on rent and facilities, great, then you might have more to spend on your clinicians or your admin or something else," she said. "Ultimately, we only have 100% of the revenue coming in that we can spend."
"If we aim for 20 and we end up at 18, I can be happy with that," Julie said. "If we aim any lower than that, it's less likely that we're going to get to a healthy place."
That margin has a lot of work to do. "That's the money you use to pay taxes, pay down any debt, that's what you're using to fund any future expansion, to fund an emergency fund for the business," she said. And the owner has to be okay; the business has to sustain the life they want to live.
It also determines what the business is worth. "The lower that profit margin is, then the lower the dollars that you can expect to get in a sale," Julie said. I tell practice owners that every dollar you collect or don't collect today is worth $6, $7, $8, $10 in the future, depending on your multiple. Every dollar matters.
Timing matters too. "That's the most dangerous time to sell, when you're burnt out and you don't want to go in and fix the things," Julie said of owners who decide to sell out of exhaustion. "Those offers are usually quite disappointing if they get them." Her advice is to get the margin moving in the right direction well before you're ready. "Solid three years of financials, that puts you in a beautiful place to get a really strong offer."
How much profit margin do you need before opening a second location?
Close to 20%, so you can start funding the expansion before you take it on. Below that, debt gets dangerous. "Debt is essentially spending tomorrow's profit today," Julie said. "Eventually there comes a reckoning where that debt is due and that monthly payment is due, and the profit may or may not have actually caught up to where it needs to be."
When margins are tight, her recommendation is direct: "It's better to fix a broken system before you scale it, because scaling it will just make it a bigger problem, but it's still the same problem." Expansion also splits the owner's attention across the margin issue, the debt, the new location, and the hiring. "That's a corner that a lot of people cut, because it feels like more fun to go open a new location," she said. "But 12% profit margin when you're expanding easily becomes a 3% profit margin, easy."
I'm a big believer in stability before scalability. Slow and steady, as Julie put it, still wins the race. "The biggest risk still today for small business, certainly in healthcare as well, is just running out of cash, growing faster than the cash that you have available, and then getting into this spiral of debt. That's still the most common way that healthcare businesses fail."
How do you know if your PT practice is actually full?
Compare your expected capacity to your actual visits, using EMR data and financial data together. Julie's team does this through a practice performance tracker that measures how many visits the practice expects each week and each month against where it actually falls.
"One of the most common things we see is we've got this PT and they're great and they're doing a good job and we're completely full," she said. "A lot of times that's simply not true. ... If we look at the numbers, the numbers will tell us what's actually going on and where the opportunities are."
Using current space efficiently can push back the need to open a new location. And if you do expand while the first location still has room, you'll be growing two locations at once. For an owner opening a second location for the first time, "that's an important consideration to know. Are you actually going to still be growing both at the same time, and do you have the capacity to do that?"
There's no one-size-fits-all cost per square foot. A pediatric practice, a sports therapy practice, and a cash-pay practice spending one hour one-on-one with clients all have different space needs, and PTA use and geography factor in. The test for any new space is the same: "Can we make the amount of money in this space that we need for all the other financial pieces to work? ... Sometimes the space just is never going to make sense financially."
What is a new patient actually worth to your practice?
This is where the revenue side and the cost side meet. We use a metric called the net value of a new patient. It combines revenue per visit, cost per visit, and plan of care length into the financial value of each new patient. When I ask practice owners their cost per visit, I usually get a blank stare. A lot of them don't even know their revenue per visit.
On reimbursement, Julie was clear that there is a lot of variation. "Can you find a payer at 65? Yes, you can, absolutely. Can you find payers in certain markets that are higher than that? Yes." For cash pay, she said, "that number's out the window." In my experience, PT is probably closer to $100 a visit on average nationally, with a range of $50 to $150, and geography sets your ceiling.
The variable Julie pointed to is retention. "If the plan of care is eight visits but they only come to six, you're still not going to make that money," she said. It's also one of the levers the owner influences most. "You've already marketed to that client, you've already brought that client through the door ... so let's maximize the revenue that is possible for that client, which also is in service to the client. There's a much higher likelihood that they will get better and be well, and then refer their neighbor, if they actually complete their plan of care."
Payer averages tell a story too. "If your average is, for example, 107 per visit, but then we know that one of your payers is at 85, let's look at that payer. Does it still make sense to even have them? Can you renegotiate? Can you ask for a rate increase?"
Her reasoning is one every owner should sit with. "In healthcare, what you're selling is time. You can't take that time and put it back on the shelf and sell it later like a widget." Owners are squeezed on both sides: rates aren't keeping pace, and team members' personal expenses have gone up. "You might ask for a rate increase every year. That doesn't mean you're necessarily going to get it. So then in an insurance practice, the only thing that you have control over is the expenses."
The revenue cycle side of this math: every dollar you gain in revenue per visit drops 100% to the bottom line. We find a lot of money left on the table through poor revenue cycle performance, which is why our model is outcome based. As revenue per visit goes up, our fee goes down. As efficiency improves and avoidable complexity comes out of the process, our fee goes down too.
Should physical therapists be paid salary or per visit?
Julie favors shared-risk models that flex with volume. "I think today salary is still very popular, but I think it carries the most risk," she said. "A salary means that you are required by law to pay the salary no matter what happens, no matter how many cancellations."
Paying by the visit, by the hour, a percentage commission, or fee for service creates shared risk "where we're all rowing in the same direction and everyone is incentivized for the same thing." A per-visit clinician can do the math in their head and see the direct connection between their schedule and their paycheck.
My son is a DPT who owns a practice in the town where we live, and his therapists are all paid a percentage of a per-visit pay amount. They care about cancellations, because if a patient doesn't come in, they don't get paid for that visit. It has a profound effect on retention and attendance. Structure drives behavior.
"We want PTs to be incentivized to do the thing that generates revenue," Julie said. "The reality of a practice is the math has to math. You can't have a salary that is barely being covered by the visits being seen by the PT. That just is not sustainable. It will eventually fail."
Should owners focus on cutting costs or growing revenue?
Both matter, but the owner's own hours are often best spent on revenue. "An hour spent by an owner reducing the internet bill, to go back to my example, I think that hour is less valuable than an hour spent building a community relationship for referrals," Julie said. That might mean referral relationships, community relationships, or honing the marketing.
Costs still need managing. The owner will be involved in compensation, raises, and bonuses. "But that doesn't mean that you need to be the one poring through the credit card expenses, canceling things," she said. "Someone should do it on the team, and it just might not need to be the owner."
What do financially successful practices have in common?
They are intentional, they run the business on math, and they don't try to do everything themselves.
Five or six years ago, Julie said, an owner might have a $2 million practice making $400K and not know how it happened. "That is much more rare today. ... You do have to be very intentional with all of the decisions." That includes hard calls: "This is what we can afford, and that might mean a provider is going to leave. ... We cannot make a decision that is great for one person at the detriment of the entire practice."
I pointed out that the P&L is a trailing indicator and asked what has to be managed day in and day out. Julie's answer: "I think all of this is math, and everything can go back to the math." Start with an accurate average fee per visit and back into it. Hold the clinician bucket around 40%. Manage the administrative bucket. Use space efficiently. Then set the operating metrics: visits per week the space needs, intakes to reach that, conversion from callers or outreach into clients, and marketing dollars to get there.
"We know we need 50 outreach per week, just throwing out a number, and that is going to become 20 new clients per week," she said. "Too often it's just this very generic, 'Oh, well, we want to be full.' What does full even mean? Does your team know what that is? And if the answer is no, then how can they possibly be working towards that?"
And they surround themselves with experts. "The most financially successful practices that we see right now, they are actually not trying to DIY everything. They have their trusted team of experts around them," Julie said. Those owners are "more of the director of traffic than the handler of all things."
Why year-round financial advice beats tax-time accounting
If you only talk to your accountant between January and April, you're reaching them in their busiest stretch and only looking at your numbers after the fact. "You're usually missing out on a lot of opportunities to either course correct if things aren't doing well, to tax plan, to legally reduce your tax liability, to start planning based on your capacity for another location," Julie said.
A specialized advisor also brings industry data. Julie's team tracks KPIs that show when a practice will likely need a layer of leadership or a site supervisor, what that costs, and how to leave room in an employee offer for benefits, payroll taxes, raises, and bonuses that may come later. A generalist accountant "means well, but just doesn't have the information."
The context matters as much as the data. "It can be very, very lonely to make these very important, sometimes expensive decisions," she said. She described a client who was considering a new space in a location they really wanted, while their kid was heading to a private university and paying cash for school was their stated priority. "Sometimes the real-life priority has to come before the business opportunity. ... The business should also support your life."
Should a practice have open books?
Julie's answer: it depends on who has the context. "I personally don't love open books," she said. Clinicians benefit from knowing what revenue they're expected to generate, but they don't have the context for taxes, emergency funding, or who fronts payroll when payers don't pay. Leaders responsible for a location "should have full financial transparency so they can manage that location well," and expectations should always be fully transparent.
I'm a believer in full information where accountability and control lie. You can't hold someone accountable for something they have no control over, which is exactly where billers live. Most billers get blamed for everything, even though 94% of all the things that determine outcome are out of the control of the biller.
How will AI change practice finances?
On the accounting side, Julie sees bookkeeping becoming automated. "Just clicking the thing and doing the repetitive tasks, that's not where a human is adding a lot of value," she said. With the industry about 400,000 accountants short by her count, and roughly 70% of CPAs at retirement age, she sees that as a good thing. The value that remains is advisory: "I don't know that the AI can help you have the full context of your entire life and your business and all the tax knowledge and say, 'This is probably the best decision for you.'"
On the revenue cycle side, the day is coming when the term autonomous revenue cycle is going to be a lot closer to real than it is today, and that day is probably 12 to 18 months off. The pain I see coming is the number of point solutions practices will struggle to orchestrate and integrate.
What's one step you can take today?
Look at your financials on a regular basis. "If you are not even looking, I would start there. That's a tremendous amount of opportunity," Julie said. "Look at it by month, look at it compared to last year. ... Take some time to think through what is the difference? What happened? What can be done better?"
Then translate your goals into numbers. "How can we do the math on that to have very simple, actionable steps that we can all be working towards?"
Both sides of the equation
"I love that we can look at money from both sides of the equation," Julie said, "where our fields are very, very adjacent, and yet there's not a whole lot of overlap there." Revenue cycle determines how much of your providers' time converts to cash. Financial management determines how much of that cash becomes profit, stability, and business value. A practice needs both sides working.
Listen to the full conversation: How Successful Healthcare Practices Protect Their Profit Margins with Julie Herres
Connect with Julie Herres and GreenOak Accounting:
- Julie on LinkedIn
- GreenOak Accounting
- Therapy for Your Money podcast, where Julie and I also talked about revenue cycle management
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Frequently asked questions
What is a healthy profit margin for a physical therapy practice?
Julie Herres of GreenOak Accounting aims her clients at about a 20% profit margin. That profit has to cover taxes, debt payments, future expansion, and an emergency fund, and a healthy, protected margin is what makes a practice more sellable.
What percentage of revenue should labor cost in a PT practice?
GreenOak's general recommendation for insurance-based PT, OT, and speech practices is that the fully loaded cost of revenue-generating clinicians (wages, payroll tax, and benefits) stay at no more than about 40% of revenue. Excluding the owner, all labor together typically lands around 50%, with roughly 20% for overhead and 10% for rent and facilities.
How do I know if it's time to hire another PT or open a new location?
Compare expected capacity to actual visits using EMR and financial data together. Julie says one of the most common things her team sees is a practice that believes it is completely full when the numbers show it isn't.
Should physical therapists be paid salary or per visit?
Julie sees salary as the model that carries the most risk for the practice, because it must be paid regardless of cancellations. She favors shared-risk models such as per-visit, hourly, or fee-for-service pay that flex with volume and align clinicians with the practice's goals.
How much profit margin do you need before expanding?
Julie recommends being close to a 20% margin before expanding, so the practice can fund expansion. When margins are tight, she advises fixing the broken system first, because scaling it only makes it a bigger problem, and a 12% margin can easily become 3% during expansion.
What is the net value of a new patient?
It is a metric RCS uses that combines revenue per visit, cost per visit, and plan of care length to show the financial value of each new patient. Retention matters too: if a plan of care is eight visits and the patient attends six, the practice doesn't earn the revenue from the last two.