Episode 143: Your Chief Financial Officer - Mr. Arron Bennett, The Fractional CFO

Inside the episode

The conversation.

Dr. Robert Freeman asks one question: is it really a revenue problem? Arron walks through the 60/15/15 standard, why a P&L that leaves the owner's salary out of cost of goods sold cannot answer it, the three reasons margin sits below 60%, and two tax positions worth checking.

Key ideas

What you will take away.

• 60/15/15: 60% gross margin, 15% general and administrative, 15% sales and marketing.
• The owner's salary belongs in cost of goods sold, or the P&L cannot show what delivery costs.
• Margin below 60% is pricing, packaging, or efficiency.
• Each salaried role should support roughly four times its own salary in revenue.
• Revenue is a lagging indicator — target 3:1 lifetime value to acquisition cost.

Questions answered

Straight answers from this episode.

What is the 60/15/15 framework?

A benchmark for a service business's P&L: about 60% gross margin, about 15% of revenue on general and administrative costs, and about 15% on sales and marketing. Comparing your own numbers against those three shows which bucket is off before you go looking for why.

Should a practice owner's salary be in cost of goods sold?

Yes. Without the owner's salary — and any associate or clinical salaries — in cost of goods sold, the P&L cannot show what it costs to deliver the service. Arron Bennett describes that as a statement built to file a tax return rather than to make decisions.

Why is my gross margin below 60%?

Three usual causes: pricing, packaging, or efficiency. Packaging is the one owners miss — extra service per visit, like keeping a patient on the bed longer or adding a tens unit, lowers profit per person without raising the fee.

What LTV to CAC ratio should a service business target?

Three to one. If it costs $100 to acquire a patient, the relationship should be worth about $300 over its lifetime. It applies to anything you actively pay for, not to referrals.

At what income does an S-corp election make sense?

Arron gives roughly $70,000 of net income a year as the point where it starts to pay, because it removes 15.3% self-employment tax on that income. A general benchmark from a conversation, not advice on your situation.

How does the Augusta rule work?

It lets you rent your home to your business up to 14 times a year and take that rent out untaxed. It only holds for genuine planning days — no patients seen, the day documented on your calendar, the rate benchmarked against comparable local space, and the money actually moving.

Tax positions discussed here are general benchmarks from a conversation, not advice on your circumstances. Eligibility and documentation depend on your entity, state, and facts — check with your own advisor.