– Hey there my friends, its Steve “The Hurricane” and on today’s episode of A Drink With “The Hurricane”. We’re gonna talk about your profit and loss statement.
All right, so I hope you’re doing well. And I’m so excited because this episode is officially airing on the first day of my ninth year in business, as the owner of Hurricane Marketing Enterprises. And for this episode, I’m actually wearing a throwback Hurricane Marketing Enterprises logoed shirt. Because if you remember back in the day when I did the videos, that’d be like, blow away the competition, and it says, blow away the competition on the back. So this is a very nostalgic episode for me as I’m filming this for you live.
But I wanted to take this moment and just talk about our profit and loss statement for a moment. And this is something that I don’t talk too often about because I try to focus on sales and marketing, but over the years, the last eight years now, as we’re beginning our ninth year of business, we have been helping so many home care business owners on things above and beyond sales and marketing, including managing their money. And so I wanted to take a moment and talk to you about your PnL’s because I get involved with a lot of this with our clients. And there’s something that I’ve noticed, and just yesterday, I received my copy of the Home Care Pulse, all right, this is the 11th time they’ve ever done the Home Care Pulse, and I have an electronic copy, I just printed that paper out to show you that I have the Home Care Pulse, So I have gone through it.
And so I wanna take a look at something that they posted up in there. If you do not have the Home Care Pulse report yet, and you want the Home Care Pulse, you can save 20% off by going to Homecarepulse.com entering discount code Hurricane20, and then I’ll give you 20% off, as just my gift to you if you want it go ahead and pick it up.
All right, and so now you should all be able to see the screen right here in front of us. And there’s some interesting takeaways as you look at this, because this is a standard PnL statement, and the way that they have it broken down in this one here, they’re showing you based on geography. I use this one for a reason because the average or the median company surveyed in each of those regions had the total median revenue that you see here. So obviously if you’re in the Pacific or the Northeast, your business is gonna do better just by the median number of all the people surveyed, than the people in the middle of the country. But that’s also where you have the higher expenses, it costs more for labor, it costs more to do business, there’s more regulations, there’s more density population and all these other things that factor into it. So don’t get caught up on the median numbers, just know wherever you fall in the United States, this is what the median person surveyed PnL statement look like.
But the line that I really want you to focus on and the line that I focused on with my clients the most is the cost of care, direct cost. And so, as you see right here as you’re looking at this, you’ll see the total direct care expenses are meaning what we pay our caregivers and all of the expenses associated with paying our caregivers comes out to between, we’ll see, on the low side 58% to the high side 65%. So somewhere around 60% as the margin. And it goes back to this line right here. And I’m gonna just go out here and say that the line at the top, caregiver wages, that is the healthiest in the United States by this number survey are the people in the central.
When I talk to my clients, I recommend that your direct costs, meaning what I pay the caregivers, nothing else on the caregiver wages, just what I pay the caregivers should be maximum 50% of what I’m charging for services. If you’re over that number, not to say that, I mean, if you look at this, it’s not too high for some areas, but still 56% that is too high, 54% is too high, 51% I can live with that, but 50% is where you need to be. Now, it does not mean that we need to pay our caregivers less, no, no, no, no, no, no, no, no. What it means is that we need to be charging double whatever we’re paying our caregivers. So whenever I see one of my clients, who’s taking care of patients and they come to me and I see that they’re paying their caregivers just for easy math, $11 an hour, but they’re charging $20 an hour.
Well that’s 55% of what they’re collecting is going directly to the caregiver, I would recommend that person raises their rates to $22 an hour, so that now it’s 50% of what they’re collecting, goes directly to the caregiver. They’re not reducing what they’re paying the caregiver, but they’re increasing their profitability to allow the business to grow. The reason why this is so important is you can’t think about today when it comes to collecting the revenue, you’re collecting the revenue, some people spend their money, I own a business, a multimillion-dollar business, I don’t spend all of the money I have coming in. I like to plan for the future.
Maybe I want to buy my own office building and become a landlord someday, well if I have a healthy margin, I can do that. Maybe I have staff members or in my business coaches who I’d do a raise. If there, if the margins are below 50, I’m sorry, over 50% of what I give to the caregiver and what’s left over is less than 50%, then I’m not gonna have the cushion that I need to be able to extend those compensation increases, expand, and maybe open up a second location, all these other things. You have to take a look at your business and realize that yes, we are in the business of providing care for people, no doubt. So I don’t want you to rake people over the coals, but you have to understand that the business success and the longevity of the business is based on the profitability of the business.
If the business is not profitable, and we know the things that happen, you have overtime that affects these numbers. You have continuing support, you have labor law changes that affect these numbers. If you’re not raising your rate to match the cost of doing the business and you’re eating that that, that means that you are potentially setting yourself up for failure in the future. So when it, and some people say to me, you know, well, Steve I have a hard time getting customers to buy at the higher rate. That is not a problem with the operation, that is a problem on the sales side of it. I mean, one of the things that we teach our clients is the art of closing and how to close, regardless of your rate, based on what you’re providing. And so if you have a hard time closing, that is something to consider investing in, and getting more help on the sales side of it, to have better systems that will allow me to close at the higher rate that I need to have that 50% margin.
And so that I love this right here, this is the most current data you haven’t even seen this yet, unless you have the Home Care Pulse report, I had to share this with you as I look at it. So, again, this is day one when this is going to be aired, day one in my ninth year in business. And so I want to end this episode by saying thank you for all of you who have been watching my videos, who have been supportive of me from the very beginning, the personal growth that I have gone through the thousands of comments and messages and interaction and the speaking at events and the things that you have said to me have totally kept me going for all of these last eight full years.
And I just look forward as we continue to usher in 2020, a new decade, yeah there’s a lot of uncertainty happening right now, but I assure you, we’re gonna get through this together, check your profit and loss statement, check your margins, make sure you’re operating at a 50% or greater margin after what you pay your caregivers. And you’re going to be healthy and be around for a very long time. So that’s our tip for the week. Have a good one my friends, take care and I’ll talk to you soon.
