A 70/30 Split Is Not a Business
What one follow-up actually leaves behind after the cut, the extra fees, and the collaborating physician.
- COLLECTED
- 120
- THEIR 30%
- −36
- EXTRA ADMIN
- −10
- COLLAB
- −15
- YOU KEEP
- 59
Composite. Not your contract. Not legal or tax advice.
Contribution margin
Smaller-firm financeWhat one unit leaves behind after the costs that move with it.
Every business sells the same thing over and over. Mine is a visit. Yours is too.
Take one. It collected $120. Now take out everything that only happened because that one visit happened. The cut, $36. The extra admin, $10. The collaboration fee, spread across the visits it covers, $15. You are left with $59.
That $59 has a name. It is the visit’s contribution. The $36, the $10 and the $15 have a name too. They are variable costs. They move when the visit moves. No visit, no cost.
Rent does not work that way. Rent arrives whether you work or not. So does the software, the insurance, and what you need to live on. Those are fixed costs, and they are paid out of the pile of $59s. They are never paid out of the $120.
Now look at the 30% again. One partner can take 30% and leave you a healthy $59. Another can take 10% and leave you nothing, because everything else was variable too. The percentage is a term. The contribution is the number. They are not the same thing.
One more use, and it settles an argument people have every week. Should I do more of these? If the $59 is positive, yes — each one adds $59 and the rent does not move. If the $59 is negative, more volume is how you go broke faster. Volume does not fix a negative unit. It multiplies it.
Go deeper: three things a school would add
- Variable or fixed is decided by one test: does the cost exist if the unit does not happen? A subscription you pay in a month with no units is fixed. A cut of each sale is variable.
- Contribution margin as a percentage (contribution ÷ price) compares units to each other. Contribution in dollars pays the rent. Use both; confuse neither.
- Break-even is fixed costs ÷ contribution per unit. It is a division, not an opinion — and it is why two businesses with identical revenue can be in completely different trouble.
Work the case
Two decisions. Choose before you read the reasoning. The wrong answer is the one worth understanding.
Offer A keeps 20% of the price. Offer B keeps 35% but absorbs the per-unit fee and the pass-through. Same price, same work.
Choose one — the reasoning opens after you commit.
Contribution per unit is slightly negative. You are offered twice the volume on the same terms.
Choose one — the reasoning opens after you commit.
People argue 70/30 like the 70 is the paycheck. You're doing that with a visit.
Start with the first word on the board: collected. Not billed. Collected, what actually landed.
If your agreement splits billings, that's a different and worse contract; ask which one you have before you argue about the percentage.
Now the lines come off. Their 30% isn't overhead, it's their cut of money that already landed: −36.
Does billing, EHR, or "admin" come out before the 30%, or again after it? Then the 30% is a story. Name the fee: −10.
And the collaborating physician: composite $1,200 a month over eighty visits is −15 a visit.
Put it on a per-visit line, or you're hiding it inside the 70.
What's left is circled in red: you keep 59. That's the business. Not the 70.
The 59. Seventy percent of 120 is 84, so they think they keep 84. Do they?
They keep 59. And the time is worse than the money: a 30-minute visit plus 20 minutes of leftover work is 50 minutes. $59 in 50 minutes.
Schools call this contribution: what one unit leaves behind after the variable cut. You don't need the school to use it.
You need the 59, because stay-versus-leave is a 59 question, not a 70 question.
The same trick runs at month scale. Seventy percent of collections isn't seventy percent of what you billed, and it's not what you take home after the fee in section 8.
The composite month below keeps 55 cents of every billed dollar. The contract still says 70/30. It didn't lie. You asked the wrong question.
So the question that matters is the one under the red circle: what does the 30% buy? Billing, credentialing, space, patients, in dollars.
If you can't say it in dollars, you don't have a deal. You have a vibe.
The question, as it actually gets asked
Composite questions — blended from the operator rooms, never one person's words.Read these for the method, not the answer. The next question you have will not be on this list — the point is that the concept above answers it anyway.
Which concept this really isNeither number is comparable until both are priced down to what one visit leaves you. A percentage and an hourly are different currencies; contribution is the exchange rate.
How you work it outPrice one composite visit under each: collected per visit, minus every cost that moves with the visit, times the visits you'd actually complete in a week. On composite numbers a 70/30 leaving $59 a visit at 55 visits beats a $95 hourly at 30 billable hours, and the same arithmetic flips if the split is on billings rather than collections.
The mental model that makes it hardComparing the headline numbers. The answer that comes back is usually about commute, culture and comfort, real considerations, but not the ones that decide which offer pays more.
The Monday rule, what do you actually run this week?
The business is what one visit leaves behind, the 59, not the 70.
Connected lessons
This is one of eleven lessons, free to read. One arrives by email each week, on composite numbers you can check.