Whether you're just starting your solo practice or leading a growing group, understanding how to allocate revenue is essential to your long-term success. In this episode of the Sit and Stay Podcast, RipsyTech CEO Dr. Tom Tarshis breaks down how to think about revenue distribution in a mental health practice—and why this topic is often overlooked until it becomes a problem.

Let’s dive into the key takeaways.

Why Revenue Allocation Matters

Every dollar in a mental health practice is earned through clinical services. That means revenue isn’t passive—it’s generated by the time and expertise of clinicians. Being intentional about how that money is allocated helps ensure your business is financially sustainable, whether you’re the only provider or managing a team.

A thoughtful approach allows you to:

Understand your true operational costs
Set consistent, predictable pay
Prepare for time off or lean seasons
Invest in future growth
Avoid burnout by not overextending yourself

Ultimately, it’s about treating your practice like a business—so it can support your clinical work instead of holding it back.

The Risks of Not Having a Revenue Allocation Plan

When practice owners don’t have a clear allocation strategy, they often just pay the bills and pocket whatever’s left. That approach might work short-term, but over time it can lead to:

Inconsistent personal income
Lack of preparedness for emergencies
No clear growth or hiring plan
Staff dissatisfaction or turnover
Missed tax or retirement planning opportunities

Without structure, your business becomes reactive—leaving you vulnerable to burnout and financial instability.

A Proven Revenue Model for Group Practices

We recommend a simple but effective framework for dividing revenue:

70% to Clinician Pay: This includes both salary and benefits. For W2 employees, that might look like 50% in salary and 20% in PTO, retirement contributions, and other perks. For 1099 contractors, the flat rate might be closer to 60–65%, but they receive no benefits and pay additional self-employment taxes.
20% to Operational Costs: This covers everything that supports the practice—admin staff, billing, software, rent, and more. Efficiency here matters: reducing operational bloat frees up resources for compensation or savings.
10% to Business Savings: This is your cushion. It can fund bonuses, new hires, unexpected costs, or future investments. Without it, your business may lack flexibility in times of need.

How Group Practice Owners Should Think About Compensation

If you’re a group practice owner, here’s how to think about compensation:

Clinicians: Pay should fall in the 60–70% range of what they generate, adjusted for benefits and role expectations.
Admin Staff: Their compensation comes out of the operational cost budget. These team members don’t generate revenue directly, but their support is vital.
Yourself as the Owner: If you see patients, you should be paid from the clinician pay bucket. For leadership and administrative work, use the operational budget. Profit distributions typically come from the savings portion, once all other obligations are met.

Clear, fair pay structures build trust, prevent resentment, and make your business more resilient.

Applying the Same Framework to Solo Practice

Even if you’re a solo practitioner, it’s still helpful to think in terms of:

Clinician Pay (Your Salary): Set a consistent paycheck based on your personal budget. It creates stability and alerts you to problems early if your revenue can’t support it.
Operational Costs: You may not write a check to anyone, but the hours you spend doing admin work are time you could have spent seeing patients. Account for that cost, even if it’s hidden.
Business Savings: Aim to set aside 10% of your revenue. This gives you breathing room and the freedom to grow, rest, or reinvest when needed.

What to Do When Your Income Is Inconsistent

Early on, income is inconsistent—which makes these percentages feel more aspirational than practical. But Tom recommends starting with this mindset anyway:

Know your needs: What’s the minimum monthly income you need to live?
Ramp up slowly: It often takes 6–12 months to build a full caseload.
Supplement as needed: Many clinicians start by working part-time at a larger group while they build their private practice.
Give yourself a paycheck: Even a small, fixed monthly amount creates accountability and helps you identify whether your model is sustainable.

You don’t need to be perfect right away. The goal is to build habits that lead to long-term stability.

In this week’s mental health business moment…

Tom reflects on the challenges of stepping back from a leadership role as an organization grows. Even with years of experience running businesses, it can be difficult to resist the urge to intervene—especially when you see something you might handle differently. But in this case, the commitment was to stay in an operational role and allow new leadership to guide the organization.

The takeaway? Growth often requires letting go, trusting others to lead, and staying true to the boundaries of your role—even when it’s uncomfortable.

Final Thoughts

Revenue allocation isn’t just about spreadsheets. It’s about creating a business that can support your goals, your team, and your patients. Whether you're running a solo practice or managing a group, thinking intentionally about where every dollar goes is a powerful step toward building something sustainable.

If this episode got you thinking about how you manage your income, be sure to stay tuned for our next episode on creating a mental health practice budget—where we’ll take these concepts even further.

Have a question or topic you’d like us to explore? Contact us at sitandstay@ripsytech.com.

And don’t forget to subscribe to the Sit and Stay Podcast for more insights on running a thriving mental health practice.

Looking for a health record solution that simplifies your workflows and supports your practice’s business needs?

RipsyTech has your back. Schedule a demo with us today.

How to Allocate Revenue in Your Mental Health Practice: A Guide for Solo and Group Providers