While starting a private practice for mental health can be exciting, for many it is also a daunting process. At reflect, we work with many new private practice therapists. Some common feedback that we receive is that while schools are great at equipping you with the tools you need to practice therapy, they are sometimes lacking in teaching you about the business elements of a private practice. Not to worry, we got you covered! In this article, we will help explain everything you need to know about starting your own private practice so that you can feel confident moving forward.
What is a private practice in therapy?
The most important thing to know is that running a private practice means you are both a therapist and a business owner. As a therapist, you are responsible for the health of your business. Similarly, as a business owner, you are responsible for the health of your business.
A private practice often involves the following 5 components:
Getting clients referrals
Scheduling clients
Seeing clients for therapy sessions
Documentation
Fees, billing & accounting
What are the pros and cons of starting a private practice?
The advantages of a private practice
Higher income potential
More autonomy over your client base
No insurance hassle (unless you choose to take insurance)
Opportunity to develop new skills (e.g. social media, marketing, website creation)
The disadvantages of a private practice
Can be more isolated
Less financial predictability
Having to find your own clients
More admin and paperwork
Potential legal liability for seeing high risk clients
Who should start a private practice
Do you like the idea of having control over your schedule and client base, potentially earning more, and in general being your own boss? Are you willing to put in the effort needed to adopt new business skills, do paperwork and are you ready to take responsibility for your own success or failure? If so, then a private practice could be a great move for you! In addition, if you are looking to specialize or help a niche client base or solve specific mental health issues, that can be hard when working for an employer. A private practice also allows you to build your own medium or large group practice.
Where to start?
By now, you should have a better sense of whether a private practice is the right fit for you. If you have decided on starting your own private practice, here are some questions that you should answer first to best set you up for success in starting your own private practice.
What is my focus/niche?
As a therapist, being able to dictate which types of client you want to work with can be extremely fulfilling. From a marketing perspective, having a clear focus or niche can help you differentiate yourself and define your value proposition. Perhaps you want to help a certain group of minorities, or practice a specific therapy orientation. Or you might want to focus on couples, or specialize in dealing with specific mental health issues. Whatever you feel inclined towards, it is important to also consider the demand for your focus or niche. We find that the most successful private practices are able to balance between their wants and the mental health market's needs.
Rest assured, you do not have to figure this all out from the start. As a business owner, you can always widen, narrow or even change your value proposition. Many therapists start by taking a wider approach to who they help, and narrow it down once they have a better understanding of their ideal client or who needs their help. The most important thing is to start, and that can be as simple as listing what is out of scope for you, or who you do not feel comfortable working with.
How do I want to see clients?
With the recent pandemic and an increase in tele-therapy in mental health, there are even more ways to see clients than before. It is important to consider how you want to see your clients. Do you want to see them in-person or online? If in-person, do you want to rent an office or do you want your own office space? When do you want to see clients? All of these depend on your preference as well as what makes the most business sense to you.
What are my business goals?
This is probably one of the most important questions. We encourage every therapist to create a business plan to create some structure around navigating the otherwise intimidating process of starting their own therapy private practice. A business plan would include your mission, values and goals for your private practice. When considering goals, don't be afraid to crunch some numbers to figure out what your income goals are and how much you would need to charge (initially and eventually) or how many clients you would need to get there.
How will I find clients?
This is where marketing comes into play. As the owner of your business, it is important to know how you are going to get your clients. This is also why knowing your focus or niche is important, as it will help you to figure out who to market to or what your marketing message should be. Here are the most common ways that therapists find new clients:
Their own website
Word of mouth referrals
Social Media presence
Psychology Today
Online referral platforms
Practice platforms (like reflect)
Insurance panels
How will I manage my practice?
Practice management is the logistics part of owning a business. Many therapists neglect this, and end up spending 30-50% of their time on paperwork and administrative tasks like scheduling. From a financial perspective, that means if for example, you charge $200 an hour for sessions, but spend an additional hour on paperwork, you are actually only making $100 an hour. That is before you factor in expenses, such as practice management software. This is why it is important to be efficient in your practice management.
When thinking about practice management, think about how you want keep in contact with your clients (e.g. email/voicemail/text), how you want to track clients and keep progress notes as well as how you will handle the billing, clinical forms and accounting. Remember, the goal is to be efficient as possible.
reflect can help as well! On top of marketing and helping you get new clients, we take care of communicating with clients, scheduling and billing. We also provide you with a platform that has integrated tele-therapy and progress notes. All of this so that you can spend less time on logistics, and more time helping your clients.
Choosing a business entity
Once you have everything else figured out, the last step is to decide on the business entity that you would want to be. Here are the three most common business entities:
Sole proprietorship
In layman terms, this means that you are your business. From a legal standpoint, there will be no difference between business and owner. As a sole proprietor, you do not need to set up a company and paperwork for taxes is a little more straightforward.
Professional corporation
This requires that you set up a new company and requires a little bit of upfront costs. However, the benefits of a corporation are that you will have some personal liability protection and you can set health benefits for yourself and your family. It also allows you to future proof for growth and add therapists to your practice, even in multi-state situations.
Limited Liability Corporation (LLC)
Not all states will allow you to set up an LLC as a therapist. In California, healthcare professionals need to either set up a sole proprietorship or professional corporation. LLCs offer the same benefits as corporations but have greater flexibility and more tax options.
How do I decide which Business entity to use?
Because different business entities will have different tax implications, we strongly advise you to employ the services of a tax professional. However, we can tell you that it will mostly depend on your personal tax situation, the effort you are willing to take, your end goal for your private practice and desire for liability protection. Keep in mind too that incorporating would also have costs attached.
We hope that this helped you clarify some of the mystery around starting your own private practice and wish you all the best with your own journey as a new business owner!