In this episode, I am honored to have Miranda Palmer, LMFT with me. She helps therapists get great clinical outcomes and build happy, full practices. The subject of today’s talk is financial planning tips for therapists starting a practice, how to pay yourself in a private practice, and what fees you should charge in a private practice.
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Many therapists starting a private practice think the issue is more about getting new clients – and then when they get “full” they realize they created a structure and business plan that wasn’t sustainable financially. Miranda’s going to tell you about how to solve this problem, and more.
- Where does a therapist start when he or she wants to set up a good fee structure?
- How to determine your hourly fee
- Why the fee structure can vary so widely from therapist to therapist
- What if you can’t get on any insurance panels? Is that a blessing in disguise?
- How therapists can determine how to pay yourself in private practice”
How therapists determine their hourly fee
Once you get really clear on who you want to serve, then you can get really clear on what you need to serve this person appropriately and run your business.
- What kind of office do you need?
- What are the things you need in your office?
- What kind of consultation or training might you need?
- How many days off a year might you need, so that you can be fully rested for these clients?
- What are the ancillary services you might need?
- How much feedback do your clients tend to need over the phone?
- Rent, internet access, computer
All of these different pieces are important. Once you understand that, then you understand the full cost. All of those things mentioned are all a cost of doing business. We use these elements to actually calculate what your fee is. We don’t consider what other therapists in the area are charging, what is insurance reimbursing, etc.
How therapists can determine their hourly fee
A therapist looking to figure out how to pay themselves in private practice should follow these steps.
Miranda advises therapists to look at the actual cost of doing business first before they decide their hourly fee. She advises therapists to look at the total expenses for your entire year for your practice as mentioned above. Miranda says that this number is actually a lot bigger than most therapists think.
A therapist who says, “I want to bring home $60k a year,” is often shocked to learn that you need to gross $120k to $140k to have that take home income. That is running a business of this type, though. Generally about a third of what you bring in as a therapist is what you take home.
You divide that big gross number by the number of weeks you can work per year, by the number of clients you can see per week. And that is how you come up with your hourly fee.
Why fees are so different from one therapist to the next
It’s not that simple an answer, and highly individualized. The work that you might do if you are seeing high conflict couples who are going through a divorce, for example, would be quite high. That kind of work is quite different than somebody else who works with people with slight anxiety disorders. The energy is different. Every therapist is totally different in terms of where their sweet spot is and what life looks like for them. The amount of face time you have with clients is different from the amount of time required to run your business.
After school, therapists go through an unpaid practicum. After the practicum therapists have to get a certain amount of work hours and many do that unpaid as well. Many do this as part of a non profit. So when it comes time to own your own business and do this exercise, for many therapists it is an awakening because you are transitioning from being a student to a business owner.
What if you decide not to take insurance?
When Miranda was starting out in private practice, everybody said “you need to get on insurance panels.” She hadn’t been licensed for two years so she couldn’t get on insurance panels. She decided to do private pay for a few years. Because it wasn’t an option for her, that was the route she took. By the time she could have gone into insurance plans, there was absolutely no benefit for her going down that path. For her it was a blessing in disguise.
Ultimately for therapists, they need to sit down and run the numbers first and then explore what that insurance panel actually reimburses, and does that fit? Let’s say you find that your average fee is $100 per hour, and you go and get on an insurance panel and they are only going to reimburse you with $50 per hour. Let’s say half your clients are private pay. What that means is that half of your clients need to pay you $150 and they are actually subsidizing the insurance clients.
Did you enjoy our tips on how to pay yourself in a private practice?
We hope that you enjoyed this article on how therapists can pay themselves in private practice. If so please feel free to watch the full interview video on getting clear on fees with Miranda Palmer.
We are a wealth advisor for people in the Morristown, New Jersey area and beyond. Many of our clients are mental health professionals, therapists in private practice, and mental health group practice owners. We provide financial planning for therapists. To book a “Wealth on the couch” financial planning session, contact us.
Miranda offers support to therapists through various communities they have created, trainings, and consultative support. To learn about her services please visit ZynnyMe.