By Hayley Robins, Senior Accountant at Hive Business

It’s becoming clear to us that a 45% associate deal is too high for normal practice running costs. It’s going to have to drop to 40%. So there are thousands of difficult conversations ahead for owners.

There is no sense in entering these conversations with your back up, as if it’s a zero-sum game. The onus is on you to explain the maths behind it. You can’t expect someone to welcome a pay cut, but that’s not what this is if you are helping them get their volume up. You’re going to have to explain a lot more about your business fundamentals to get this across.

Some owners resent their associates for expecting too much, but you can’t blame an associate for expecting 45%, even as your business fails, if that’s what they’ve always been paid. Similarly, you can’t expect a new associate to come in and deliver the same patient journey as you off the bat (although many owners do).

Just like they need to see how you work, they need to see how the numbers work. As Ross wrote, graduates can expect the earth. They can have it — once they hit your targets. If they want to earn 45%, or 50% even, they will need to work above a certain volume, otherwise it’s not affordable to the business. Does a sliding scale sound reasonable?

By having this conversation you are encouraging your associate to take on responsibility for themselves and the practice. Conversations about pay tend to be adversarial, but this isn’t. It’s cooperative. You’re getting their buy-in. You’re saying there’s more to their work than their paycheck, there’s your paycheck too. That’s a nice way of saying they matter to the business, but also, “I respect you enough to have this conversation, please respect me”.

Strangely, there’s very little sharing of information by owners to associates to facilitate this kind of conversation. Sometimes, admittedly, that’s because owners don’t possess the information. Accurate information really is key here — you need to at least have the daily cost of opening each surgery.

Many owners won’t realise they’re paying the wrong percentage because they are subsidising the practice, so even though they are paying their associates too much, the business still seems to be making money.

They might be subsidising the practice by underpaying themselves. For instance, a number of principals that we work with themselves have associate percentages less than 30%. Not many associates would expect their boss to be on a worse deal than them, so you can see how useful this information could be in the difficult conversations ahead.

Sometimes, from an owner’s perspective, it’s hard to take a step back and think “how can I communicate with this person in a better way?” Explaining the bottom line is always going to be the best way. Do they realise, for example, that if you pay them a lower percentage there is more money to invest in marketing, and that 40% of £200k is better than 45% of £150k?

This kind of conversation has another effect: it makes the associate realise that they are expected to make money for the business. It might seem too obvious to mention, but people need reminding of business fundamentals. Of course, if they get it but are still unable to generate a reasonable yield then they may not belong in your business after all.

If you have a conversation about percentages coming up and feel  worried about it get in touch on  01872 300232 or email us at hello@hivebusiness.co.uk.