New Financial Year, New Goals: What's Your Profit Margin Telling You?
- Dr Olivia Campbell
- 4 days ago
- 3 min read
A new financial year is the perfect excuse to pause, look back, and ask one simple but powerful question: how is my practice really doing? There are plenty of numbers you could chase, but if you only check one this July, make it your profit margin.
What is a profit margin? (And why it matters more than revenue)
Revenue tells you how much money came in. Profit margin tells you how much of that money you actually get to keep.
Specifically, it's a percentage, not a dollar figure. It measures how much of your income you're retaining after you've covered all your operating expenses (room rent, admin, practice management software, insurance, professional development, and so on).
Two practitioners could both bring in $150,000 a year and end up in completely different positions depending on their margin. Revenue doesn't tell you much. Profit margin is the number that actually reflects the health and sustainability of your practice.
How to find your profit margin
The good news: if you're using Xero, this takes about 30 seconds.
Head to Reporting
Open Business Snapshot
Your profit margin will be sitting right there
(Just make sure your Xero is up to date)
What's a good profit margin?
This is where it gets tricky. Solid benchmarks for solo private practice psychologists are surprisingly hard to come by. Most available data lumps together everything from solo practitioners to large-scale practices, and includes all allied health and medical specialists. So treat the below as a rough guide, not gospel.
0% or less You're breaking even. Honestly, that's a great place to be when you're first starting out in private practice. It means the model works. Long term though, this isn't sustainable; it leaves both you and your clients exposed if anything unexpected comes up.
1–15% You're profitable - nice work! But your buffer is thin. An unexpected expense, a quiet month, or a shift in the economy could put real pressure on things. If this is where you're sitting, a great goal for the year ahead is working toward 20%. Rather than looking at where to cut, look at where to grow: is it time to review your fee structure, or invest a bit more energy into building referral relationships?
15–40% This is the sweet spot, and where most solo practitioners working from a coworking space can expect to land. You've got breathing room: a buffer for the slower periods, room to invest in your own CPD, and the ability to ride out a tough patch without panic. If you're here, well done. The goal now is protecting and gradually building on it, 1% at a time.
40%+ You're a superstar. Seriously, well done. You're not just covering your costs, you're building real reserves, paying yourself properly, and giving yourself genuine freedom: to scale back when you need to, to plan ahead, to say yes to opportunities. This is what sustainable private practice looks like.
Setting Your Goal for FY27
Wherever you land, the most useful thing you can do with this number isn't judge yourself by it, but use it as a starting point for growth.
Rather than thinking about where to trim, think about where to build:
Strengthen your referral pathways. Are there GPs, allied health colleagues, or community organisations you could be nurturing relationships with?
Revisit your fees. When did you last review them against the value and experience you provide?
Invest in your visibility. A stronger reputation and steady referral flow do more for your margin long-term than cost-cutting ever will.
Lean into your community. One of the advantages of working from a coworking space is the people around you. Cross-referrals, shared knowledge, and support are real growth levers.
A new financial year is a clean slate. Take five minutes, check your number, and set one growth-focused goal for the year ahead. Future-you will thank you.
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