Managing A Private Practice of Therapy as a Business

When I first began teaching in Graduate Counseling Programs, the focus of Counselor Training was on making good, skillful therapists. Prior to retiring, I taught over twenty-five years in the Counselor Education programs of two different universities. The goal was to educate our students about the nuts and bolts of what happens in the therapy session. I felt it was important to teach, and for students to learn, the essential skill sets expected of a good therapist.

As a therapist, how does one learn to meet a stranger coming into their office? How does the therapist make them feel as safe as possible, as welcome as possible, and eventually, as understood as possible? What are the things you can do to facilitate this process? What questions do you ask? What are you looking to see? How do you interpret what the client is saying? Additionally, what they are not saying so that you can really “see” them, and understand what is going on with them? It is critical that you develop the ability to recognize the conflicts that are causing them pain. Very often it is not what the client says that it is. You constantly evaluate whether or not you are helping them to be safe, to explore their conflicts and facilitate the opportunity for change in their lives.

It is impossible to know everything about a client, or everything about the issues that may walk into your office to be discussed. At the University we would offer classes focused on particular skill sets, such as class focused on facilitating group therapy. This is often done in the real world with groups of individuals dealing with the same problem, such as a divorce recovery group. Or it may be a group of people who fit certain parameters, such as a group of people who are all dealing with someone who has Alzheimer’s. We also offered classes to focus on particular skill sets, like interviewing skills or assessment and testing skills. Over the years, the class work and the subjects of the courses became standardized. Every counselor who became eligible for a license, an LPC (Licensed Professional Counselor), a credential offered in all fifty states, took the same basic courses and had to pass the same national licensing exam in order to be able to practice. It is my opinion that, as this standardization happened, the focus became less about training and developing skills, and more about portability of licensure and standardization of the knowledge base of facts therapists possessed. There are many benefits that come from this approach. I am not opposed to the requirement that if someone is an LPC, it can be presumed they have studied and mastered certain sets of data. My concern is how does one take all this data that was studied in school and convert it into useful skills in the service of clients?

I believe that the structure of most University Counseling programs is now focused on taking the Master’s level Counselor and preparing the student for becoming a PhD candidate. Increasingly, the focus seems to be how to make these people competent to enter a pool of candidates for college professorships, and NOT to teach them to be independent practitioners who earn their living serving the populations that come to them for counseling. This saddens me. I strongly believe that the need exists for qualified practitioners who can serve large segments of the population in an affordable and professional way. I don’t think there are enough college professorships out there for all the students in these programs, and I fear that they are being poorly served by having that goal become the focus of their professional training.

Since formally retiring, one of the opportunities in which I still participate is to supervise clinicians. My credentials as a therapist with over thirty years of clinical experience, my years as a counselor educator, trainer and supervisor, have positioned me to be someone whom other therapists seek out for support and mentoring. I find that the discussions I have with other practitioners is pretty evenly balanced between discussing clinical issues (diagnostic and behavioral details of clients along with consideration of how best to develop treatment plans and interventions) and the mechanics of operating a private practice.

Most of my associates feel that they obtained good training at their Universities in the subject matter and skill sets of being a therapist. However, they feel that they were not well served in the training that they received on the business side of running a therapy practice. There are many reasons why this may be so, among them the idea that most people who become qualified therapist will not ever be private practitioners. Most of them will go to work at social work agencies of one kind or another, or work at a Doctors’ office, under the supervision of the physician or psychologist. Of course many physicians and psychologists claim that that is the proper role for Master’s Level licensed therapists. Under this set of expectations, the therapist will be an employee of a hospital, an insurance company, a public clinic, etc. They will be salaried and have benefits of some kind. Their job will be to provide therapy to designated and provided clients and they will not run the business, nor be concerned with the “business” of the operation.

But for those who do imagine that they want to work for themselves, as professionals, serving the general public in the way they have been trained, operating an independent therapy practice is a trial and error, haphazard experience. There are no classes and few discussions about the day-to-day management of an independent business that does therapy as its raison d’être.

I find my supervisees to be fascinated and hungry to have conversations about how to make decisions of a business nature. It is outside their paradigm to think about therapy as a business. They have been trained to think of it as a service. The business parts were not thought about, talked about nor trained for. The following is a typical exchange:

Question: “What are you worth an hour?” Answer: “I don’t know”.
Question: “How many clients should you see a week?” Answer: “I don’t know”
Question: “How many sessions a week does it take to cover the nut of your basic expenses of operation?” Answer: “I don’t know.”
Question: “Will or should you take insurance reimbursement directly from the companies, or will you require your client to pay you directly and give them the paper work to pursue their own reimbursement?” Answer: “Huh?”
Question: “What do you do if a client does not keep nor cancel their appointment?”
Answer: “It depends!” (Happily feeling they got that right)
Question: “How much money do you want to make a year?” Answer: “It depends on the number of clients I see?” (Buzzer sounds! Wrong answer)
Question: “How do you avoid being destroyed by the cash flow cycle?” Answer: “What cash flow cycle?”

Usually after asking these questions, we get to the point that we talk about how the therapist wants to set up their practice from a business standpoint. We have evolved from talking about treating the client effectively and different clinical aspects of therapy to talking about; advertising, marketing, renting, equipment and supplies, support help, record keeping, taxes, license fees, liability insurance for both therapeutic negligence and clients who trip and fall in the parking lot. These are not the things taught or studied in school. But, they should be!!

I recommend to my supervisees that they anticipate and project goals for their practice. On average, how many clients a week will you see? What will you charge? What percentage of them will actually pay that? What is your collection and retention rate going to be? I ask them to project that amount over the course of a year. Then based on that level of gross income, I have them subtract their annualized costs for rent, insurance, advertising, phones, etc. After subtracting their costs, I have them subtract their taxes (I usually recommend estimating 28%) Next, we talk about funding retirement. After all this, they are left with their net income for the year.

I ask them how often they want to receive a paycheck? Divide the above total by that number of paychecks per year. Pay themselves ONLY that amount each paycheck. This will allow them to ride the cash flow waves of bad weather cancellations, flu epidemics, vacations, etc. in order to have a regular, predictable income. If they are seeing more clients than they anticipated, they can make quarterly adjustments. If they are see fewer on any given week it won’t result in a crisis. If they maintain the average over the course of the year, they should be OK.

With a well thought out business plan, they should be able to run their practice, plan for their retirement, pay their taxes, and live a “salaried” life as independent entrepreneurs. The challenges are they must maintain their client population, collect the money, and actually discipline themselves to live within their budgets. These are all “healthy” skills that will enable them to survive and prosper as independent entrepreneurs who operate a successful business, as well as being a successful therapist. If my supervisee balks at this discussion, I point out to them that in order to be a healthy role model and to demonstrate the values of discipline, intelligent planning and good choice making, they have to be able to: “Walk the walk, as well as to talk the talk!!”

This entry was posted in Uncategorized and tagged , , . Bookmark the permalink.

6 Responses to Managing A Private Practice of Therapy as a Business

  1. Kiara says:

    I would like to get my masters in psychology counseling and become a LPC and practice independently. Is having 30 clients a week and charging them $70 a session, that is 45 min. long, good?

    • Brett Newcomb says:

      Recognizing that you have to think like a businessperson and calculate your income vs. your costs is important. You have to walk a line between being a “helper” and earning a living. Private practice is so different from agency work because you must consider who pays, how often, and how much. But one of the factors that you must consider prior to deciding how many clients and how much to charge is what are your own costs and how can you keep them down. What do you pay in rent and insurance? How much is your marketing cost for promoting your self and attracting clients? How substantial and reliable is your referral system so that you can get 30 clients? These, too are questions you must answer in order to make a good decision. Not all therapists are cut out to be in private practice, the anxieties devour them. If I may, let me suggest that you do not practice alone. Be part of a group where there are opportunities for split costs and co-supervision. Good Luck.

  2. Martha says:

    I have been talking with 3 other women about starting a private practice together. I am a little hesitant about the number of us, and that I really can only say that I know one of them well, the other two by reference only. I am concerned that 4 people trying to make all the decisions that go into a start up will be too might. Any thoughts or advice? Thanks in advance for any suggestions!

    • Brett Newcomb says:

      You need to decide who is going to sign the lease and be responsible for the furniture and desks, computers etc. Do not sign as a group of individual people, have one of you make the deal and open the practice and then sign a separate agreement with each of them for cost sharing. You need to have some meetings to talk anbout cross referrals, handling sickness and vacations in terms of covering each others clients, who gets access to which office space and when, making sure you all know that each other have liability insurance, whether or not you will use one name and billing process or have everyone do their own separately. Many people use their cell phones and something like a square one account to take credit card payments, I would suggest that each of you do your own. Go to a printer and have a standard receipt form printed that will show your license number, the diagnosis, the date of the visit and your contact information. I always liked the 3M ones that have tear off copies.

      You should also talk about the space you are renting if you are in an office building that is not a medical office building what is your responsibility for supervising your clientele when they are in the hallways and restrooms (especially if any of you see children). What about evening and Saturday access? Safety? Parking? You can do this and it can be a very efficient and economic way to go, but it does require some forethought and decision making. Good luck. Brett

  3. Megan says:

    I recently started a private therapy practice as a LICSW. My academic program did not have any classes on the business side of therapy. I grew up having my parents own a business and working with them from a young child, so I am business minded. In preparation for starting my practice I met with many of my peers to talk about their practices- what has worked and what they would have done differently. I find that I have more business knowledge than they do, and they have practiced for longer. And I still feel that there is so much more for me to learn. Have you written any books on this topic? Can you recommend a well written, comprehensive book on this topic? Thank you, Megan

    • Brett Newcomb says:

      Hello Megan, I am sorry to say that I have not written and do not know of a book that clearly identifies the concerns and steps of opening a successful practice. I was in several practices, and ran my own for a number of years. What I learned, I learned from experience. I tried to teach my students at the University in the Professional Orientation class what it would be like if they wanted to open a practice. There are so many variables: how to market, selecting the right location and equipment, advertising, record keeping, tax issues, being an independent consultant vs being an employee or owner, liability questions etc.

      In addition, the entire issue of taking third party reimbursement and the record keeping that requires, and whether or not you can stand the anxiety of having the responsibility for making it work instead of just going to work can cause major stress. Not everyone is cut out to be in private practice, even if they are good therapists. Good luck to you and your friends. Brett

Leave a Reply