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Business Matters: Why Payroll Is Not an Expense


By P. Daniel Ward, MD, MS, FACS

Practice-owners, if you were asked to write out your monthly expenses, what would you list? I suspect everyone would cite payroll as one of their biggest monthly expenses. However, despite the fact that proper accounting practice lists payroll as an expense, conceptually, I would argue that it should be in a different category. Your payroll represents the monthly payments that are required to pay your team members. Instead of viewing this as an expense, I encourage business owners to think of payroll as an investment. 

Think about that for a minute. Think about how much differently you view your monthly deduction to your retirement account versus how you feel when you write that huge check to, say, Allergan or Galderma. It’s a different feeling, isn’t it? 

Your Greatest Investment

The older and wiser I get, the more I realize that an investment in your team is an investment that pays off. However, just as one would never invest money in an investment that is likely to fail, we, as business owners, should not invest our funds in team members who are likely to fail. 

The big difference, of course, is that we have control over our team members in a way that we don’t have over our investments. We are responsible for selecting the team members, training them, and providing an environment where they can thrive. This sounds so easy, doesn’t it? Unfortunately, it’s much easier said than done.

Hiring is one of the biggest challenges that business owners face. Although there are thousands of resources on the topic, I’ve found two books to be particularly helpful: The Ideal Team Player by Patrick Lencioni and Who by Geoff Smart and Randy Street. I encourage you to read both of them.

Training your team is also a challenge. It’s not the actual training that’s so difficult but, like so many other businessaspects, the discipline required to solve the problem. To help overcome this issue, this year I tasked my management team with devoting a minimum of 10% of each employee’s work week to training and personal development. As you can imagine, this is a somewhat expensive endeavor. Setting aside four hours a week for 55 employees is costly. However, it’s an investment that has paid off handsomely.

Team Culture Is Key

Finally, creating an environment where your team members can thrive is key. I believe this process starts with selecting the right team members. It continues with maintaining a healthy team, which unfortunately means that you,as the business owner, must be prepared to terminate any employee who harms the team culture. Remember: Of all things that can affect the team, the culture-killer bad apple is the very worst.

Terminating a team member is never easy, but it must be done. In his book, EntreLeadership, Dave Ramsey explains firing as the process of letting somebody go so they can find a job where they can thrive. Just as you don’t want a team member who harms your business, each team member is entitled to work in an environment where they can thrive. If a team member is struggling, it means that they have not quite found the right fit for them. Release them so they can find a position that will bring them the fulfillment that they deserve.

I hope you find these tips helpful. Please reach out to me with any thoughts or concerns. I would love to hear from you. You can reach me on social media at @WardMD or via email at doctor@wardmd.com.

P. Daniel Ward, MD, MS, FACS, is a double-board-certified facial plastic surgeon, AAFPRS fellowship director, and the founder of Form Derm Spas and FormRx Skin Care.



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