Budgeting & Forecasting for ABA Practices

VO 00:00:00 Welcome to the Flychain Reaction, a podcast designed to empower healthcare providers like you to master the business side of running a practice. Each episode sparks a chain reaction where actionable insights on financial management, operational efficiency, and growth strategies build upon each other, creating a powerful ripple effect to help your organization thrive. With Flychain's financial expertise and insights from industry leaders, we'll dive into everything you need to ignite success. Join us and let the Flychain Reactions spark growth in your healthcare business.

Simone 00:00:39 Hello and welcome to our webinar about financial planning for ABA practices, budgeting and forecasting. My name is Simone Deverall, your host for today and I am the head of growth at Flychain. We're joined here today with Erica Belle, an ABA industry expert and CEO of Koi Business Solutions as well as Ethan Schwarzbach, our CEO and co-founder at Flychain. We're here today to bring you an exclusive webinar on financial planning essentials for ABA practices. So before we dive into the discussion, I'd love to turn it over to Ethan and Erica to introduce themselves. Erica, do you want to start?

Erica 00:01:18 So with that, basically a quick snippet of my background. I have been in the field of ABA for over 10 years. And I've worked with various companies throughout the US and was able to get a good understanding of how various companies operate. And I pivoted from the clinical position to more of an operational management and as well as startup, working with a startup company to help them launch. And so, you know, really just looking at, wow, some companies really aren't looking at their financials. They're not really treating their company like a business on their operations side of things.

Erica 00:02:01 And so basically, Koi was founded to help companies be able to operate in a way where they are looking at their company like a business. And the focus isn't only clinical, we're taking that clinical aspect of that data tracking and we're putting it on the business side. So that's kind of my spiel. And again, marketing is a big part of that as well. But for today, we're focusing on the finances and budgeting and some of that operational standpoint.

Simone 00:02:32 Perfect. Thanks, Erica. Ethan, I know it shows up as Simone Deverall on the Zoom. This is Ethan Schwarzbach.

Ethan 00:02:42 Hi, everyone. I'm Ethan Schwarzbach, co-founder and CEO of Flychain. We want to use this as a pitch for our services, but this is really designed to be educational for our customers. But what we've built at Flychain is the financial operating system, or the financial toolkit, if you will, for ABA therapy providers where we really kind of take that entire financial planning, management, accounting, bookkeeping, lending off of your plate. So our backgrounds, unlike Erica, we don't really have a clinical bone in our body, but we know a lot about lending, finance, banking, accounting, specifically as it relates to small businesses and healthcare. And so we're really leaning into our ABA therapy customer base here learning.

Ethan 00:03:27 And also it's how we met Erica. So, you know, part of our expertise at Flychain is a lot of what we'll talk about today, capital planning, accounting, bookkeeping, data. But we get asked all the time by our customers. And some of them are obviously on this meeting for things that are far beyond our purview. And so we think it takes a village to run an ABA therapy provider. And so bringing folks like Erica into our fold where we can learn and kind of educate and learn from one another really to help support our customer base.

Ethan 00:03:59 So that's what we do. We have a software platform. Happy to demo that. But as I mentioned, this is really designed to be educational and providing real tactical examples versus some armchair expert fluff, if you will.

Simone 00:04:14 Perfect.

Erica 00:04:14 Yeah, and it was so great when Simone and Ethan reached out to me because again, I just have seen lots of companies struggle in this area of operations and especially finances and it goes over a lot of people's heads. And as far as going in and really dissecting the data that's available to you, the numbers that are available to you, and what they mean, some people will say, yeah, I use this CPA or QuickBooks system or whatever. And this is what it does, but I don't know what it means. Or maybe all your data is all over the place.

Erica 00:04:50 And so just meeting them and hearing about kind of their expertise and how they help companies. I just felt like, wow, you know, a lot of companies need to learn more about these or how it will be so beneficial if companies just knew more about this financial side of what to look at, what it means and what tools are available.

Simone 00:05:12 Totally. Yeah, perfect. Great, thanks both for the introduction. Let's dive right in, right? Let's focus now on that. What is that strategic financial mindset that we keep talking about? And I think just to start with Ethan, it'd be great. You know, at Flychain, we talk a lot about when it comes to financial management, the best offense is a good defense. So we'd love you to speak a little bit more about that and how can like proactive budgeting and forecasting protect ABA practices from unexpected disruptions.

Ethan 00:05:46 Yeah, absolutely. And I'll start off by saying, you know, we've been in business for about three years and at this stage, we've seen not everything, but we've seen a lot of it. And what I mean by a lot of it, a lot of things that go wrong. And I promise you, no matter where you are in your journey, whether you're three months in, three years in, like you will have problems. There's going to be disruption. Some of the best well-run customers of ours have problems left and right.

Ethan 00:06:13 And just to give some examples of problems that we've seen in the last six to 12 months. Audits, obviously, you know, this whole notion of a good offense is a good defense is audits, right? Preparing for audits. It's gonna happen at some point in time. Usually when that happens, you don't get paid from your insurance provider for a period of time. Let's then think about others. Natural disasters, hurricanes. You shut down our providers for weeks at a time. That means no revenues coming into the business. COVID hits your office. Maybe you have an ABA therapy center and you have to shut that down.

Ethan 00:06:49 Little known change healthcare cyber attack occurred, which froze one third of all healthcare payments in our country. And taking that example, we see micro versions of change healthcare, not necessarily cyber attacks, but insurance providers just holding onto your money, whether that's an issue in the billing going in or just the insurance providers playing games and wanting to hold onto your money, the long and short, and I guess what we're trying to articulate is, there are so many things that could can go wrong and they will go wrong.

Ethan 00:07:18 And part of what we're trying to do here is prepare for those negative outcomes, cash flow issues that are going to happen. So how do we do that? We kind of have this thing, it's sort of like the rule of three. And the rule of three, as we've seen it now for the three years we've been in business is our customers can kind of like get by with one issue. One, you know, COVID hits, hurricane, they shut down, they're going to have lower cash for a period, but they can get over it.

Ethan 00:07:44 Two, that's going to put them in a really, really cast-strain position, might have to borrow money, try and get out of that. Maybe they get a really predatory loan. And then three is like, there might be a nail in the coffin. And what I mean by that is sometimes these issues can snowball, and you can't push that snowball up the hill.

Ethan 00:08:03 Now, some of the things I'm about to say to combat against that are luxuries for some and not for others. And what I mean by that is trying to have, you kind of need three payrolls in your bank account. We always recommend three payrolls, and that's going to insulate you from some of these issues that do occur. Now, I say it's a luxury. Not everyone has that money. So this is where that planning comes into play. So okay, you're a business owner. You're running smoothly right now. What happens when insurance, for some reason, takes an extra month to pay?

Ethan 00:08:37 Well, what we like to say is have that cash balance if you can. Try not to tap into that. And then also what we love doing at Flychain, and there are other options, but set yourself up with access to a resting line of credit. And oftentimes what we see, a problem occurs, our customers then scramble, I need to make a payroll. They go out to the market and get a really predatory merchant cash advance with a super, super predatory interest rate. And then they're kind of bleeding money. It's like a mandate over a gunshot wound for that really near term cashflow problem.

Ethan 00:09:09 But then you're now paying insane interest and could perhaps go out of business just by doing that. And so this is one of those things, set yourself up when you don't need the money with access to capital because you're going to get the best terms at that point in time when your business is not necessarily running into issues. And we love to do that at Flychain. So when those blemishes or speed bumps, you know, you hit those, we're able to lend into that without charging insane interest origination fees.

Ethan 00:09:35 So that's just one example in terms of planning and combating that rule of three. So I think it's capital, as the capital both from the debt standpoint, as well as kind of creating as best you possibly can, that cash buffer. And it's sometimes like hurts to hear, but creating that cash buffer while sacrificing growth is actually the prudent way to grow your business. And what I mean by that is we see our customers get over their skis, reduce that cash balance, hire a bunch of people, they view this is gonna be great, we're gonna make so much more money and then a hurricane hits, COVID hits, change healthcare, and now they are completely out of options.

Ethan 00:10:14 And so it's a delicate balance of growth with your current cash balance tapping into very fairly priced credit, but just know that there are options for you and we can obviously hold your hand through that process. But a lot of this is like education, understanding what you're getting into, knowing that they're gonna be pretty material issues that will inevitably arise and planning for those rainy days is kind of your best defense meaning being proactive and having a good offense.

Erica 00:10:42 Ethan, what would you say would like having capital versus having your own reserve of just savings? What are some of those differences there or, or benefits of one or the other?

Ethan 00:10:56 Yeah. So I like to think about it. Let's say you have three payrolls in your bank account and you want to go hire someone, don't tap into that cash, borrow from us. It's super fair. And so then you're able to use that money, hire one more person, cover their payroll before that revenue starts getting generated and your cash balance is then untouched. And so it retains that cash balance. So then if things go south, you still have that and you're not dipping into your own cash to then go in and make that hiring example. So it's just a, it's a delicate balance.

Ethan 00:11:30 And I wanna be clear, like debt can be a very wrong decision at times. And that's what we're talking about with these predatory lenders, but there are really, really good fair lenders, ourselves included, that will set you up so you're not having to dip into your equity without being paid upon from the debt standpoint, if that makes sense.

Simone 00:11:47 Yeah. And I think a good follow up there, Ethan, is actually what does a predatory merchant loan look like? What are some signs that an ABA provider should look out for that is like a red flag? Don't pursue this.

Ethan 00:12:05 Yeah. Fantastic question. Yeah. Anytime someone wants to get money, it always sounds nice, right? And I would say the first is if they say fast cash, 24 hours, like that's usually a pretty good sign and that they're going to rip you off. Also look at the contract. So the nice thing is most of these, you know, non-bank lenders and that's who we're talking about here, our ABA universe just really has a difficult time getting bank financing, lack of assets on your balance sheet. Don't need to go down this entire spiel, but the whole things to look out for, origination fees and broker fees.

Ethan 00:12:38 So every single MCI I've ever encountered generally has a like three to 5% origination fee on that dollar amount. There's usually like a broker fee somewhere in there. And then the other big thing to look out for is prepayment penalties. So one thing just to clarify that we love doing at Flychain is we'll notify our customers when you're about to have a payroll shortfall. Hey, you have 50 grand in your bank account, it's Tuesday, your payroll on Friday, 72 grand, you're not making \$22,000. Here's your money.

Ethan 00:13:07 Where without Flychain or without those options, you go to the market and they'll fund you in 24 hours, but now you cover your payroll, you have a sigh of relief, but then for the next six months, you're going to be paying an interest of, you know, 30, 40, 50, 100%. And so those are the things to look out for origination fees, fast funding. And then, if you ultimately do get that offer, make sure you really look at the prepayment penalties because what we like to do is maybe those claims come in, you can pay us back in one week and forego the other 5.75 months of interest.

Ethan 00:13:40 Whereas those folks, if you wanna prepay them to forego the interest, they hit you with a really hefty penalty that almost equals the interest anyway. So I'd say those kind of three things, origination, fees, broker fees, prepayment penalties, and the quick nature of how they wanna give you the money.

Erica 00:13:54 Yeah. Right. And that's really just what's payroll alone. I mean, we haven't even got into the other expenses. You know, I think it's so important to look at those areas, like, not just, of course, payroll is the number one, you know, then different reserves for your rent. If you have a clinic, if you're wanting to grow and expand, you know, that's always great to look into any type of administrative office, expensive, of course, vendor expenses. So, maybe those are your therapy tools or some of your assessments.

Erica 00:14:29 Those could always come up and be a couple thousand dollars that, you know, might add a couple thousand here and there in all these different areas. Now all of a sudden you're 10, 15, 20K. There's a discrepancy there that maybe one month that wasn't in the other month. But now it's in this month. And how did it show up? It kind of just came from an accumulation of all these other areas.

Simone 00:14:55 Yeah. No, this is great. And I think now talking, you know, moving a little bit from this, you know, best offense is a good defense. What we want to talk about now is what does that defense look like? Like, what are those budgeting fundamentals for ABA practices? And here, I'd love to pass it on to Erica to talk a little bit about, like, what are the steps you would recommend ABA practices take to structure their budget, you know, incorporating maybe marketing, payroll, vendor costs and how they should balance those out.

Erica 00:15:26 Yeah, I think really getting it organized in a place and a lot of places don't have access to that or they do, they might not be asking for it. So say for example, you use QuickBooks or you use the practice management or something like that. A lot of the times there are reports available and that might be built into the system, but you might not know how to access it or maybe you have to ask your CPA to give you certain data points or different information that they're not readily giving you.

Erica 00:15:57 So, you know, those things are really important to monitor, you know, what areas of your expenses are there, like I mentioned, or like Simone mentioned, you know, there's your rent and overhead, what are that? What are your recurring expenses? What are your non recurring? What are maybe you're doing professional development, or maybe you're wanting to reserve funds for clients to spend? You know, let's spend\... what's a good budget for that? So really honing in on your budgets and your spend areas and trying to aim for that and having it in a place where you could project out too.

Erica 00:16:29 I think that's really important is for one, just bringing it all in one place that you can look at it frequently, track it stringently of month by month or even I don't know what your best practice is as far as tracking financials of week by week is a little too much, maybe not, but at least minimum month by month to look at everything and look at it in detail, almost like scrutinizing detail of what exactly were these specific expenses that weren't from the prior month or as far as even payroll, maybe that payroll's fluctuating and look for patterns.

Erica 00:17:12 Are we seeing any types of patterns that are occurring? Or is it all over the place? And if it is, why? So I think the big thing is setting up your system in a way, whether that whatever system you decide, pulling those reports and deciding what numbers are meaningful for you. So Ethan, what would you say are meaningful numbers companies should be looking at? Or meaningful areas, I guess, like profit margin, I know gross profit margin. What else are some areas that you feel like that is really beneficial for companies to look at.

Ethan 00:17:45 Yeah, yeah. So I think like just your broad-based profitability metrics, like how profitable was I this month versus last month, and just having some metric tracking to see, are you doing better or worse than your historical performance. In terms of some of the other things, you hit the nail on the head, just tracking your expenses and making sure things don't balloon. Like we built a version of Rocket Money for your business, if you're familiar with that consumer app, to really combat exactly that. Where are these new expenses coming from? Why is it twice as high?

Ethan 00:18:18 So having that corralled and keeping it honest, if you will, that's just like table stakes. The other things to track, and Erica, this is definitely like we're working on this kind of behind the scenes, is your marketing spend. So are you attributing the marketing dollar? What does this \$10,000 marketing spend equal from a either patient acquisition or maybe you're marketing to acquire more BCBAs or what have you, what is the ROI for every marketing dollar spent and how are you tracking that? I think that's another really important one because that's gonna be a huge lever in your business.

Ethan 00:18:55 The other things, so instead of just thinking about profitability as month over month at a whole, let's take a granular view and look at, you know, maybe you have five different payers that you work with, or maybe you're in multiple states. So what we wanna do is, let's do a granular breakdown of what is my profitability per each location? Or what is my profitability per insurance payer? Like, we've actually uncovered a few times where we look and say, hey, you're submitting to Blue Cross and you're submitting to Aetna, you had to have been looking at it from the sort of parent level entity the entire time and you're profitable, great.

Ethan 00:19:32 Well, we take a granular look and break it down by each individual pair. That individual is losing money every time they saw this Aetna patient. And they're making a lot of money every time they saw Blue Cross. And so they just didn't know that. So I'd say it's as granular as you can get it. And you know, pulling the data and orchestrating that data in a way that's surfaceable is kind of what we do. I'd also then take it even a step further. So tracking like utilization of employees. I think that's incredibly important, making sure that they're, you know, they're not overwhelmed, but also, you know, aren't aren't just have idle hands. I'd also say profitability per care instance.

Ethan 00:20:11 So how much do you make for each individual like this CPT code? Let's look at that. You make X amount of money, pays you in 45 days. Great. Who was the employee that provided that? How long did that take? What is their hourly salary? And doing that on a granular level now really surfaces opportunities to earn more money, save money, reduce frivolous spending, et cetera.

Ethan 00:20:36 And so once again, the reason why it's really hard to do is this data is fragmented. It's in a bunch of different systems. It's never really standardized and that's part of our job, but our mission here is like really pay attention because the one cool thing about like a business as we think about it from our lens is it's different than your house. Like your house has a valuation and you can't really improve the valuation of your house unless you put a pool in or something.

Ethan 00:21:03 You can actually be proactive and improve your valuation of your business by looking at things and making decisions. And so those are the metrics that I think we really, really tout around tracking because they tend to be those North Star metrics. And you can set, I want my profitability, our margin to be 15%. That's like a really good line in the sand for when, if you ever wanted to sell and retire, like that's when it becomes really exciting. So you're at 8% now. Let's figure out how to get you to 15. And I think those North Star metrics and you don't know what to track towards unless you have data to track. And so I think it's, it's kind of going back to that best offense, good defense, get your data in the right place. But those are, I think the probably like the five or six biggest variables and there's definitely more, but those tend to be the, the big tent pole metrics.

Erica 00:21:50 Yeah, it's almost like this cause and effect where that bigger growth percentage or profit margin is the effect, but you're not looking at the cause of what does this number even mean? Where does this gross profit, where does that come from? And then you have to go work backwards essentially and dissect it in that way of, okay, all this does relate to off-utilization. I drill off-utilization so much.I feel like a broken record of how important it is. Productivity, how important that is and why, and what does that even mean?

Ethan 00:22:24 And just to jump in, the one metric that we always see our customers tell us, and we say, don't care, it's irrelevant, is your billing volume. Like, you can be billing a million dollars, we don't care what you're billing out, it's what are you getting paid, and what is the delta, that difference between what you're billing and getting paid, and so almost having to reframe the thinking on your business is, you could be building a million dollars, but you could be losing money because you're upside down from a cost basis. And so these are the kind of things I'm almost paying attention to the right metrics that are the guiding principles on how you're going to be performing as a business owner.

Simone 00:23:04 Yeah. And a question actually, Erica, for you more regarding the marketing. This is more like how much effort, let's say you're a net new business and now you want to go into marketing because you got to get your first client or you got to get your first employee, how much emphasis like in terms of budgeting should you place on marketing versus, you know, payroll? Like would you say payroll? You know, if you're a BCBA owner, actually just you, you should start doing it first. You shouldn't hire anyone yet. You do it. You put all your spend into marketing versus, hey, let's start balancing payroll and marketing. Just if you're like a net new day one business.

Erica 00:23:44 Right. I would say as far as payroll, I would reserve a lot more funds for payroll, but I definitely would give marketing a good, I don't know, five or 10% of just budgeting in that way if we were to put a percentage on it. But that really does because as Ethan kind of touched on it, it really\... when you think of it as an ROI, it's what does this marketing dollar mean? So when, when you're thinking of marketing, it really, and that could be to. Even bring on new employees, you know, sometimes you have to market your company in that way.

Erica 00:24:25 And once you bring on this BCBA, yeah, they're going to be a big spend in regards to payroll. But this BCBA is going to bring you this much money because if this BCBA works 25 hours or however many hours and then you break down your 5-5 or 5-6 codes and buy those 25 hours, multiply that by the insurance reimbursement rate for those. And if you're utilizing those hours, you could really get a good picture of how much that BCBA will bring you in, you know, and that difference there.

Erica 00:25:02 Okay. I'm paying the BCBA this much, but we should be bringing in this much. So there's, you know, one part of the marketing in regards to that piece then of, of just bringing on employees, then of course, bringing on clients, client acquisition, again, thinking about it from, and that's, I think about this with anything, even if it's a software, you know, what, how many sales do I have to make or how many clients do I have to serve to have this pay for itself? So if your one client has however many hours, 15 hours a week, 20 hours a week, and how much does that bring you in? How much is on the table at that point? And then if your marketing is 10% of that, what does that cost?

Erica 00:25:50 I think just breaking it down in that way, which I don't hear people talk about, so I don't think people think of it that way, is I really just need this goal, this one or however many to pay for itself. And then is that worth it to you? Is that benefit worth it to you to spend this much on to get this outcome? And I think everyone could kind of break that down on their own and think, this is how much one client brings into our company.

Erica 00:26:23 And again, I think people mostly look at it from hours, things like that, but not really putting that dollar amount as well. And I think it's just hard for this industry to do that because we're so focused on serving the clients and doing the right thing, which is great. And that's why I love working with small businesses. But like I said, I started Koi because I worked with larger companies as well and saw that they still had the heart for their clients, but they were very focused on these business this bad business acumen in a way of just, of monitoring these numbers, because if you don't, your company suffers. And if your company suffers, then you can't continue to help your families and support your community.

Erica 00:27:10 So it's good to look at it in that way of why these areas are so important to track and monitor even though it seems like they conflict in a way, like you don't want to think what we're doing, is it just a service like a product? We're not just selling, you know, toothpaste. It's hard for us to see our clients as our moneymakers, but that's kind of how it is. That's what we're doing. That's how the company functions, right? So I think, yeah, that mindset there is just an important thing to kind of know.

Simone 00:27:44 Yeah, I really like that. Like even seeing you like talk it through, this is the kind of thought process that should be going through their minds, right? But typically, I mean, these are clinicians and they're focused on providing the best quality care possible, right? So introducing this new mindset, these are the kind of thoughts that should be going through your head before you make a big decision like getting, paying for marketing or even getting additional BCBA or, that's super useful for us to like just hear out loud.

Simone 00:28:21 Perfect. I think we have one final discussion item here, which is regarding revenue and expense forecasting for growth. And Erica, I just wanted to also pick your brains a little bit here about how should ABA practices approach forecasting revenue and expenses with a focus on more sustainable growth. And I think we've touched on it a bit already. But if you have anything more to say there, that'd be great. And then we have some questions that have been sent to us. So I think we can also dedicate some time to go through those as well.

Erica 00:28:56 As far as the forecasting, I would just say it's so important to, again, have\... I thought this was\... To have a place where you're tracking it and you actually are doing forecasting. A lot of companies, they would say, either, what is that? Or no. Hard no, we're not doing forecasting. So when you're thinking about growth, and if you plan to grow or want to grow, for one, it's step one of just start month by month. Once you get that, then you take that information and begin to project out. And so what's good about this is again, planning for those what ifs.

Erica 00:29:39 So plan for if you know, every November through January it's going to be really slow because there's holidays, there's flu season, there's, you know, people are sick, all this stuff. So plan ahead in that way and kind of give yourself a cushion so whether that means to maybe plan some makeup hour, you know, makeup hours or maybe rent load some of those hours if you're able to, if the insurance allows a full off utilization versus a month by month utilization.

Erica 00:30:13 If you kind of, if you can account for some of those missed hours, I think that could be something that really helps that projection as you're projecting out just like you would plan all of this that we're talking about falls under operations and planning ahead. So, you know, just looking at that information and planning ahead in that way is so important of just thinking of all of those scenarios. And what are solutions and how can we set ourselves up for success?

Erica 00:30:43 So for one, you got to look at it. And for two, structure it out in a way where you have the upper hand on it. You're fully aware. You see it coming before you're in the middle of it going, we have all these call-outs. This, you know, you kind of have set yourself up to prepare for that and just have a good idea of what your bottom number is, what number do you need to bring in, and looking at all of your basics. And when you were able to project that out, then you could see how your payroll is going to increase. Like if you're growing, all of these areas will be increasing, your payroll will be increasing. And if that's happening, your funds that you're bringing in should be increasing too. So really putting those numbers, and again, it's difficult.

Erica 00:31:34 That's why these systems are in place or these tools are available that help you to be able to get that information and project out that growth in a sizable way or a digestible way. But essentially looking for that and just planning for those different fluctuations that can occur.

Ethan 00:31:57 Yeah. Just to like add on there too, and we've seen this in like a lot of real world examples where customers are looking to expand and I'll use one example, like one customer opened up a brand new ABA therapy center, did not put a forecast for this. And you know, like, okay, you now have a huge rent expense, they hired three people to, you know, start filling that, put in a jungle gym that costs quite a bit of money. And there wasn't a plan. Right?

Ethan 00:32:25 And so now the cash balance came down and we're like, where are you going to find your patients? Like, was there a model to dictate where your referral sources? What pay like what insurance is going to be compensating you for this? And there just wasn't that. And, you know, got them through this rough patch eventually. But taking things in stride planning for and I would also say scenario planning is huge. So we kind of talked about that rule of three. Don't plan as if everything is going to be smooth for six months.

Ethan 00:32:53 It's not going to be like it's always going to be negative or worse than you probably plan so plan for that and then if things do go a little bit better you're in a great position and so i think you hit on the head it's just actually doing the planning and the work and understanding. What are all of the expenses that go into this when do those expenses hit and when will i start generating revenue. How will i generate revenue. How will i find the patients, you know, what is the onboarding process on ramp there.

Ethan 00:33:22 Is there going to be two months where I don't generate a single dollar but have expenses? These are all things that need to be decided and planned for prior to signing that lease, hiring people and putting in a jungle gym. So, just once again, the fact that you can do planning and we have the data now, you shouldn't ever really find yourself in that position if you put the work in. And once again, I say it and it sounds crazy, but sometimes sacrificing a little bit of growth for prudent business growth will benefit you so much more down the line. Because you then have levers to pull in scale versus constantly trying to rob Peter to pay Paul, as we say.

Simone 00:34:02 Yeah. And Ethan, I think you make a good point. And actually, it does link to one of the questions that we had. You talk a lot about the expenses that will be incurred in the first six months of a new business, new ABA therapy practice. What are then the financing options that can support an ABA practice from day one and how would that you know open up and what how would the options open up as the practice grows.

Ethan 00:34:32 Yeah, yeah. And it's a fantastic question and I wish I had like a really happy answer here. When you're just getting started, your capital options and when we say capital options we're really referring to like that like get a loan or some version of that, they don't lend to businesses. Banks do not lend to startups generally. So I would say after one year in business is when you can really start tapping into some of the credit markets, Flychain being one of those.

Ethan 00:35:04 In very, very near term, I would say bank and corporate cards give you at least a little bit of flexibility on payment terms. So you're not having to pay real time. Maybe it's a 60-day payment, so gives you a little bit of latitude, but that's why we always say when you're first kind of getting started off, you have to plan and make sure if you can have enough cash, enough equity. And so I think like one of the big misconceptions might be is, you know, you can kind of just cash flow your way to success. And yes and no, you can. But once again, it's then like what happens if one thing goes wrong and you're running on such a slim margin, you miss one payroll, your staff leaves, and then you're upside down.

Ethan 00:35:49 That said, after one year, that's when things start really opening up. And, you know, Flychain soups, like definitely lends into that. That's when I would say like the SBA becomes interesting. So one to two years in business, the Small Business Administration has great programs for small businesses that we facilitate all day, every day. And I would say the private investment universe. That is not a straightforward application process, but we often see good actors in this space wanting to help out maybe a startup or struggling ABA therapy provider where a little bit of equity, you give up 10, 20% of your business, but you never need to worry about money again and you're not giving up any control of your business.

Ethan 00:36:38 It's not that scary private equity negative outcome of quality. It's really just like the friendly folks that have a good heart, much like all of our owners. So those are kind of the options. Banks, oof, banks just don't lend these days as far as we're concerned to this space due to the lack of assets. But every now and then, if you're kind of over, I'd say a million dollars in revenue, that's when a bank might start paying attention to you. So it's dire, it's dire capital straight.

Erica 00:37:05 What was that last one you mentioned, Ethan, that last lender, you said that gets 20% or something.

Ethan 00:37:12 Yeah. So these would just be what we call private investors. And these are firms, individuals, family offices, people that love this space, want to invest. And the way that that typically works is, let's say you're doing, I don't know, 200 grand in revenue and want to grow. What we'll do is, or what these private investors will do is write you a check for, I don't know, \$100,000, clear out any debt you might have. And then they'll also lend you \$400,000. So all in, you kind of have \$500,000 to work with, you use the revenue generating from the business to pay down that loan.

Ethan 00:37:48 And then at the end of the day, the investor has taken 10, 20% of the company, but has kind of graduated you the next level so you don't have to worry about payroll, don't have to worry about paying yourselves, making rent payments. So it's just something that we're always trying to find all capital options that are friendly and good for our customers because different than consumer credit like with a credit card, like each business is a bit of a snowflake, as we like to say. So they're they're unique and there's a capital kind of lid for every pot. It's just our job to find the right ones. If that's not us, more often than not, it is. But, you know, making sure that they're well-financed and healthy without predatory rates or predatory buyers.

Simone 00:38:31 Yeah. And we had a comment just now, Kristen asked what's the name of Flychain. And I think we've done a poor effort at explaining what Flychain is, but also happy to get in touch afterwards to explain a bit more about what we do. But yeah, that is Flychain.

Simone 00:38:53 Perfect. So another question that we got was, what tools or software are best suited for ABA therapy providers for financial planning and monitoring? And I think this is more in the execution part of it.

Ethan 00:39:07 Yeah, Erica, I'm happy to just like spend a minute on this. We think about obviously like Flychain and some of the people know what we do, some don't. We'll make sure that that is very well explained, but you can think of it as we replace QuickBooks, we can do lending, valuations, savings, about where the bookkeeper accounting buttoning up on finances. So we sit in this universe and then you've got your payroll, PEO, and then you generally have like your EMR practice management, revenue cycle management. If you're using a third party biller now, there's a lot of vendors in this space.

Ethan 00:39:44 And without explicitly naming folks that we think are good or whatever. There are questions that you want to ask because we actually really believe, this is our company, we're a tech company, that with the right vendor stack, you can do so much more with less. And so questions to ask, like on if you're thinking about revenue cycle management and billing. First, can you handle this internally yourselves or is this something that you think you are willing to pay to outsource? And then there's like an ROI, but things around that are, you know, what is your average like collecting rate, you know, acceptance rate when you're submitting to insurance?

Ethan 00:40:22 What is the average duration? What percentage times are claims rejected? Like really interrogate every single one of these vendors because if they don't give you perfectly buttoned up answers to this, that means they're probably not doing it correctly. On the payroll side, that's something that we as Flychain doing books, like we see problems all the time there. So when you're talking to your potential payroll provider thinking about that, like they're gonna be relatively closely working with the practice management because they're like doing hours and things.

Ethan 00:40:51 Ask them questions around what happens when 60% of our staff leaves every year? What is the onboarding and offboarding process because you're always replacing people? What is the level of customer support? And that's a huge question I would ask to every single vendor. Will someone know my name when I call and have an issue because for payroll, for EMR, for RCM, those are real-time solutions that your problems that you need answers to. By the way, we're like doing your books and stuff, we'll always answer in real time, but these are important. Like if you don't get that answer, you might not get paid and that might put your payroll in jeopardy or you're not getting support on your payroll side and they weren't appropriately paying payroll taxes and now the IRS is gonna audit you.

Ethan 00:41:33 So these are all of these questions that I think if you get the right, ask the right questions and get the right answers can make you really piece together a really elegant vendor stack when you're not going to have to run into issues and miss payroll or not get paid by your biller at some point in time. And the last thing on the EMR front, not to keep talking, is have your employees give an opinion on that EMR. Whatever your employees are going to be using on a day-to-day basis, your employees are your asset.

Ethan 00:42:08 And so you want to keep your assets happy. And forcing something down their throat that doesn't work that they hate is going to be a negative outcome for everybody, including your patients. And so have them also buy into the decision that you kind of made, do your work. I know that was a diatribe, but we're very, we have very strong opinions about this, because if it's bad, then we don't get repaid. The data for your books is really difficult for us to do. So picking the right vendor stack is, in our opinion, just one of the most important decisions you can make day one to set you up for success.

Erica 00:42:43 And just a couple other questions added to that, which I think you pretty much alluded to, Ethan, is asking what reports are available and are those reports customizable? And do they track trends? And so those just what does the reporting look like is a really important question to ask. Does it integrate with other systems as you need to? Will it integrate with the systems that you're using? That's really important because if they don't talk to each other, which I think a lot of them do nowadays, but you know, some of them still don't. But that, what good is that going to do? That's going to be the whole point of getting these different tech tools are to streamline everything.

Erica 00:43:24 And if it's not streamlined and you're needing to now go back and do some manual work, which again, I'll always say, even if something's the best functioning, well-oiled machine, always have a human eye, your eye as the business owner because no one's going to look at your business the way that you do. No one's going to care about it the way you do. So always have your own eye on it. Even if something's grooving along, whatever system you're using, whatever outsource you're using, I would say always at least monthly, take a look yourself and make sure that everything looks as it should, that everything makes sense, and that you have all that data, access to all that data.

Simone 00:44:04 Perfect. And with that, I think we're at time. We had a few other questions that came to us, but we're also happy to reply over email, and we'll definitely be doing more of these webinars. So this is not the first and the last one. We have much more to come. But with that, thank you to everyone for joining. We'll be in touch after. Again, I think we did a poor job at explaining what Flychain did. I think we dived right into the discussion, but we will follow up with some material as well to help explain that better. But yeah, Erica and Ethan, thank you so much.

Ethan 00:44:46 Yeah. And thank you so much for joining. Yeah, and if anything was interesting or you wanna peel the onion with Erica and I on any topics, like what, let us know we can do a joint conversation and really dig in. And we tried to be as tactical and prescriptive as possible, but when talking to a group, you can't always get as personal and understand the specific issues. So we'd love to chat if you have any additional questions or comments. So I appreciate everyone's time.

Erica 00:45:12 Perfect. Absolutely.

Simone 00:45:13 Thank you.

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