Predicting Trends and Financial Forecasting

Managing Demand and Pricing in Your Therapy Business

Over time, you may notice that demand for your therapy services follows seasonal or cyclical patterns. Think of how ice cream sales spike in the summer—most ice cream truck drivers probably find different work during the winter months! Is there a similar trend for your services? If so, how will you manage during periods of lower demand?

Pricing Strategies

Here are some methods for determining the right price for your services:

Cost-Plus Pricing
This involves adding a profit margin on top of your break-even costs.

Market Comparison Pricing
You set your price based on what competitors are charging. Be cautious with this approach, as your expenses might be higher or your service offering might differ from others. For example, a haircut could range from £5 to £60. If your services are at the premium end of the spectrum, your prices should reflect that. Just as a Mini isn’t a competitor to a Rolls-Royce, a lower-priced competitor might not offer the same level of service. Remember, pricing also sends a message to your clients—setting your price too low might undervalue your expertise.

It's worth noting that many people aren’t overly sensitive to price when it comes to therapies, especially when they’re in urgent need. For instance, clients will often pay full price if they need immediate help with an issue like toothache or a physiotherapy session.

Flexible Pricing Options
You might also consider offering a range of prices. Similar to gyms that have peak and off-peak rates, you could introduce special, lower-cost days for times when you tend to have fewer clients. These could be aimed at specific groups like the unemployed or retirees.

Alternatively, you could set both a target price and a walkaway price. Your target price is the ideal amount you want to charge, while the walkaway price is the lowest you’re willing to accept. This allows you to create special offers without compromising too much on your earnings.

Financial Forecasting

Accurately predicting sales when you first start your business can be tricky, but it becomes easier over time as you identify patterns and set measurable goals.

Here’s a basic guide to help you plan:

Year One
Work on monthly sales projections, aiming to improve each month by 20-25%. For example, if you aim to secure 10 clients in the first month, you’d aim for 12 in the second month and 15 by the third. By the end of the year, you could have a fully booked schedule.

Year Two
Shift to quarterly estimates, tracking your progress over three-month periods.

Year Three
Focus on annual income and expenditure projections.

Rolling Forecasts
After your first year, adopt a rolling forecast approach. Plan for a full year ahead, but update your projections quarterly. For example, by the end of March, you should forecast for the following January through March. This method keeps your business moving forward and helps you concentrate on steady improvements.

Financial Management

Every month, review your profit and loss (P&L) statements to assess how well your business is performing and make any necessary adjustments. Delaying these reviews can lead to financial stress or even serious problems if left unchecked.

While hiring an accountant for regular bookkeeping isn’t essential for a small business, it can be helpful when you're starting out. An accountant can guide you in setting up your bookkeeping system—whether through a spreadsheet or software—and help you understand how to calculate your profit and loss.

Hiring an accountant for your end-of-year accounts is especially useful, as they can provide advice on reducing your tax liability.

Additionally, review your cash flow forecast monthly to ensure your business remains cash-positive and able to continue trading.

Bank Reconciliation
Another important task is reconciling your bank accounts. This involves matching your bookkeeping records with your bank statements to ensure that all income and expenses are accurately recorded. It helps catch issues like bounced client cheques or large payments that haven’t yet cleared.

By staying disciplined with your monthly accounts, you’ll maintain tight control over your business finances and avoid any unpleasant surprises at the end of the financial year.

Good luck!

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