You can’t manage what you can’t measure, this has been one of our key messages ever since we launched Business Health in 2000. And while a lot has happened since then, this message hasn’t changed – it simply makes good business sense in our view to know your key metrics, track them over time and to know how you compare in the marketplace.

So, in an effort to contribute we thought we’d share with you our latest analysis of the key financial data provided by 300+ Australian practices – in a series of communications over the next couple of months. Hopefully, these will help you to paint a picture of your business – pretty or not. And, armed with this knowledge, we hope you’ll gain some insight and a few pointers towards a stronger, more sustainable practice. (<<Click here to receive a consolidated pdf copy of all communications – to be issued in December>>)

The following are marketplace averages. Factors such as the practice’s business model, development phase, size and location will impact your practice’s numbers.


Practice Management by the Numbers 3: Salaries as a % of total revenue

Marketplace average: 44.2%

While your people are undoubtedly one of your firm’s greatest assets, they are also its biggest expense. And this situation is unlikely to change much in the foreseeable future as the race to hire, retain and develop staff heats up. Good people are simply – hard to find.

To determine your %: ‘salaries’ includes not only direct salary and incentive payments but also the indirect costs such as superannuation, leave entitlements and development. For comparative purposes, we have assumed $100K ‘notional’ salary for each working owner.

If your % is higher
If your total salary spend is higher than the marketplace average, it could be a factor of your local market conditions or the specific skill set you need to implement your client offer. In a competitive marketplace, where the race for talent is definitely underway, this is not unusual.

But if this isn’t the case, then you’ll need to consider:

  • If you are actually overpaying your staff. It’s best practice to regularly check in with the market to make sure your remuneration package is fair, reasonable and competitive. PDMs, HR firms and colleagues should all have a sense of the latest trends.
  • Can you move some fixed salary components to ‘at risk’?
  • Could it simply be that you’re now overstaffed for your current business model? Has technology, for example, provided the opportunity for cost savings, which you perhaps haven’t yet fully leveraged?
  • Is there a productivity or capability issue with some of your people, so much so that you need to cover this deficiency through additional resources? Have you developed training and ongoing development programs for your key people?
  • Have you set and agreed performance objectives for every staff member?

If your % is lower
This could suggest that you have efficient systems and processes in place, so much so that you don’t need as many people on your payroll. On the other hand, if could mean that you’re remunerating below market rates and/or you’re understaffed. Hopefully not both!
In either case, it’s more than likely that your staff are feeling overworked or, at worst, unappreciated. This could result in some functions being overlooked or at best, being implemented less than optimally.

  • When did you last review staff salaries?
  • Have you checked recently as to the competitiveness of your salaries to the market?
  • How would you rate the morale of your firm? How would your staff rate it?
  • Have you recently surveyed your staff as to their satisfaction levels (confidential and independent is best)?
  • Does your practice have a ‘get it done’ or ‘it can wait’ culture?

The bottom line
The biggest (and most important) business investment you will ever make is ensuring that you have the right people, doing the right job, at the right time. Up to date, clearly defined job descriptions and goals, regular team communication supported through a competitive remuneration will all help.

If you’d like to discuss in a little more detail and discover how your own business stacks up (and what you can perhaps do as a result), let us know <<click here>>.

Yours in best practice,

The team at Business Health.

Please note: ‘revenue’ includes licensee fee, excludes all grandfathered and/or volume related payments.