Since the pandemic, it’s been easier than ever for therapists to hang their shingle and start their own private practice. At GreenOak Accounting, we work with a lot of therapists in their first year of solo practice, and we want to clear up a few common myths about what that first year might look like.
Myth # 1: You can start a private practice on a shoestring
Therapy is a relatively low-cost business to start compared to industries like restaurants or retail, but you’ll still need some money to get things off the ground. You’ll have to invest in basics like a website, some software, and probably some legal and tax advice. if you’re not quite ready to drop some cash on these essentials, it might be a good idea to save up first.
While starting a practice may not require a ton of money, it’s definitely going to cost you in terms of time and effort. Besides the initial investment, you’ll need to put in work—researching, marketing, networking, and fine-tuning all the details to make your practice run smoothly.
Myth # 2: You’ll get to keep your full fee
It can feel like going into private practice is all about cutting out the middleman. I can see how easily you could think that a group practice is just taking a cut of “your” money (see Myth # 1!). Yes, a group practice is keeping a portion of the revenue you generate, that’s how business works. After all, a restaurant keeps most of the money you pay for your dinner, even though your server is collecting the payment.
In exchange for the cut kept by the group practice, they will provide important services like scheduling, marketing, billing, and admin support. All that is on top of providing software, supplies and an office where the therapy magic can happen.
In solo practice, you are the middleman. Not literally, but you’ll be handling everything from client inquiries to paperwork and billing. Sure, you’ll probably take home more money at the end of the month, but you’ll also be putting in a lot of unpaid hours. It’s a fair trade-off, but still a trade-off.
Myth # 3: You’ll bring all your clients with you and won’t have a dip in income
If you’re expecting to rake in the cash right away, think again. Even if your current clients follow you to your new practice, that’s only going to keep you going for so long. You’ll need to create marketing systems to bring in new clients, because when your existing clients finish their treatment, you’ll be staring at an empty calendar.
If you can’t afford even a small dip in income, consider starting your private practice on the side while keeping your full-time job (check your contract to make sure it’s allowed). You might feel like you’re burning the candle at both ends, but remember—it’s only temporary.
Let’s do some basic math: You start your private practice with 18 clients, for a total of 9-10 sessions per week. You take insurance, and your reimbursement rate is $118/session 10 sessions x $118 = $1,180 income each week Your overhead is roughly 30% because you’re just starting out*. 30% x $1,180 = $354. What’s normal at each stage of private practice? Check out our KPI tool. That leaves you with $826. You’ll want to save 30% of that for taxes ($248) so you have $578 remaining. This is the money you’ll use to pay yourself and keep growing your business. |
While private practice doesn’t always bring instant financial success, the good news is that it can become a thriving, sustainable business with the right tools and knowledge. Many of our solo clients initially struggled but were able to turn things around once they got the financial side of their business organized. With some guidance, you can get clear on your finances and set your practice up for success.
We’re here to help you make that happen, and we’re excited to see you thrive in private practice. With the right steps, you can build a practice that supports both your professional goals and personal life.
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Ready to take the leap? Check out our Money for Therapists: Practice Startup course. It will walk you through all of the must-know information and choices for new private therapy practice owners.
In the course you’ll learn about:
How money will flow into your business (e.g. insurance vs. private pay, session rate, and how many sessions you’ll need each week)
What to expect in the startup phase of your practice, when it comes to expenses, deductions and more
How to make important decisions about tax entities, bank accounts and credit cards
How to pay yourself as a business owner and how to correctly save for taxes (without incurring penalties!)
Forecasting your practice revenue and take-home pay, and planning for benefits and retirement
Building your dream team of advisors — as well as setting things up so you can take vacations and meaningful time off
*As your caseload fills up your expenses won’t go up significantly, so they will represent a smaller percentage of your income. $354 in overhead is 30% of $1,180, but only 15% of $2,360.
This article is designed to provide information only and should not be considered legal or tax advice. Because of the complexity of the law and the variables in your own personal tax situation, you can’t rely on our advice specifically related to your unique circumstances. In order to get the best tax savings and legal advice available to you, you should consult with your own accountant, attorney or advisor regarding your particular facts and circumstances. GreenOak Accounting is an accounting firm that specializes in working with counselors and therapists in private practice. We provide monthly accounting & bookkeeping services, 1-time services and online courses. For more information on our specialized services for therapists please visit www.greenoakaccounting.com
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