How much can you pay yourself from a DPC practice?

You can safely pay yourself what's left after your bills, a reserve deposit, the money your CPA tells you to hold for taxes, and a small cushion, based on your weakest recent month, not your best one.

Start with the bank, not the P&L

Owner pay is a cash question. Your P&L, the report of income minus expenses, tells you if the practice is profitable. Your bank account tells you what you can take out without coming up short on rent next month. Those two can be far apart, especially if you collect annual memberships up front or bought equipment this quarter.

So I'd look at the last three months of deposits and the last three months of bills. Run the order below on the weakest of the three months and use that as your floor. Paying yourself off your best month is how owners end up moving money back in.

The order I'd use to find your number

Here's the order money comes out before any of it is yours to take:

• Your regular bills: rent, staff pay, software, supplies, labs and insurance.
• A reserve deposit, until the reserve is as big as you want it.
• Money set aside for taxes, in the amount your CPA gives you.
• A cushion for lumpy costs, like a broken piece of equipment or an annual renewal.
• What's left is your pay.

An example with made-up numbers

Here's an example. These numbers are made up. Say your weakest of the three months had 400 members at $75. That's $30,000 coming in. Your regular bills that month were $19,000, which leaves $11,000.

Out of that $11,000, you put $2,000 toward your reserve. Your CPA tells you to hold back $2,500 a month for taxes. You keep $1,000 as a cushion. That leaves $5,500 you can pay yourself this month without touching next month's rent.

If $5,500 feels low, that's useful information. It tells you the practice needs more members, a higher price or lower costs before it can pay you what you want. Wishing won't move the math.

How big should the reserve be?

There's no single right answer. Here's what I'd do. I'd want enough in a separate savings account to cover two to three months of regular bills. In the example, that's $38,000 to $57,000. That sounds like a lot. You build it a little at a time, and it's what lets you sleep when an employer contract ends or enrollment slows for a few months.

Once the reserve is full, that monthly reserve deposit can become owner pay. If you want to see how many months your cash would last today, try our cash runway calculator.

What I'd do this week

Pull your last three bank statements. Add up deposits and bills for each month. Run the order above on the weakest month. That's your floor. If you've been taking more than that and your reserve is shrinking, the pay is coming out of your cushion.

Then set a fixed owner pay amount on a schedule. Same amount, same day, every month. Irregular draws make it hard to see whether the practice is carrying you or you're carrying it.

Whether you pay yourself through payroll or as an owner draw, and how that's taxed, is your CPA's call. Ask them before you change anything. If you do run payroll, we offer it as an add-on.

Common questions

Should I pay myself the same amount every month?
I would. A fixed amount on a set day makes your books easier to read and keeps you from draining the account in a good month. Revisit the number each quarter.

Can I take a bonus at the end of the year?
If the reserve is full and cash is still sitting there after bills and the tax set-aside, that's a fine time. Ask your CPA how to pay it before you move the money.

What if the practice can't pay me anything yet?
That's normal in the early months while the panel grows. Figure out what panel size covers the pay you need, so you have a target instead of a guess.