Building a Six-Figure Counseling Practice:
According to Salary.com, a Licensed Professional Counselor working in Cambridge, MA makes a median average of $40,798 per year. In a city where rent for a small apartment runs north of 2K a month, that’s beyond bleak.
While nobody chooses counseling as a profession because of the high pay, is dismal compensation our fate? Financially speaking, are counselors better off giving advice while tending bar? I don’t think so.
With good planning and hard work, earning over $100,000 profit in year two of private practice is for many an obtainable goal.
Money in Private Practice
As counselors, we loathe to discuss money–we want to focus on patient care. However, it’s a necessary part of keeping the doors open. Truth is, you can’t help anyone if you’re out of business, and a counseling practice is precisely that—a business. Hence, we’re going to look at the financial aspects of running a viable business/practice.
Note: the following numbers are only estimates for a solo-practitioner in private practice. You might need to adjust expenses, client fees, and volumes based on your own goals and the costs of your area. I’ve tried to be conservative when referencing revenues, and liberal when referencing expenses.
Don’t go it alone: Open your own Thriveworks Counseling Practice!
Client fees vary depending on location and payer. For example, in Virginia a masters-level clinician accepting 3rd party insurance payments might earn $99 for a diagnostic evaluation (90791). Ongoing appointments for individual or family psychotherapy (90834/90837/90847) might pay around $70. Let’s estimate your average session fee to be a moderate $75 per session.
The number of sessions that constitutes a fulltime caseload is often debated amongst clinicians. Some persons feel that 30 sessions per week is a heavy caseload, while others find that they can serve 40+ clients per week. I find 35 clients per week to be a reasonable number. If you’re providing 45-minute sessions, that’s 26.25 hours of face-to-face work with clients each week. Add in schedule gaps and practice management duties, and you’re looking at a 40 to 45-hour workweek. It’s a full time job, but sustainable.
In addition, let’s say that you give yourself a modest 4 weeks of vacation every year.
35 (sessions per week) x 48 (weeks per year) = 1,680 (sessions per year)
* * *
1,680 (sessions per year) x $75 (fee per session) = $126,000 (gross yearly revenue)
Normal Practice Expenses
Office and Operational Expenses
There are numerous small and seemingly hidden costs to running a private practice: from patient parking, to coffee, to organic tissues, to printer ink. Here are some ballpark numbers for the solo private practice.
- Rent (one office): $550 per month = $6,600 per year
- Office supplies (computer, software, phone, furniture, printer, coffee, etc.) = $3,000 per year Note: furniture, unless financed, will be an initial outlay of several thousand dollars.
- Professional dues, continuing education, & liability insurance = $800 per year
($800 won’t get you to a national conference, but it will cover the basics. There are many options for low cost CEs–one just needs to look).
- Accounting & Legal fees = $500 per year
- Other Miscellaneous = $1000 per year
Total Office and Operational Expenses: $11,900 per year
In addition, two potentially larger expense categories are in the realm of marketing and billing.
Advertising and Marketing
Looking for a Turn-Key Counseling Practice? Thriveworks is Franchising!
There’s no “correct” amount to spend on marketing and advertising. In fact, many counselors get by with spending very little. However, for the sake of this exercise, let’s say that you’ll take 5 percent of your gross yearly revenue and invest it into marketing and advertising your practice.
5 percent (marketing and advertising) of $126,000 (yearly revenue) = $6,300 (marketing per year).
While some counselors prefer to do their own medical billing, you may wish to hire a company to handle it for you. A customary cost is 8 percent of what the billing company collects, which comes out to around 5.5 percent of your gross revenue (note that it’s 5.5 percent because medical billing companies don’t customarily take a share of client deductibles, or co-pays).
5.5 percent (billing company) of $126,000 (yearly revenue) = $6,930 (billing company fee)
$126,000 (gross revenue)-$11,900 (office & ops expenses) –$6,300 (marketing per year) –$6,930 (billing company fee)
= $100,870 (final net revenue)
And there we have it: a 6-figure private practice. A far cry from $40,798!
While the above provides an outline of private practice financials, no counseling practice will perfectly mirror the example. To help you determine more accurately your practice’s finances, here is a list of financial variables for your consideration:
1. The “final net revenue” above does not include the cost of health insurance, retirement planning, accounting services, or taxes, which are often partially covered by an employer. These items will detract from your expendable income.
2. Owning a business might have tax advantages that one doesn’t receive as an employee. For example, if you purchase a new laptop it might qualify as a business expense (meaning it’s paid for with pre-tax money).
3. The estimates above assume that one will be able to maintain a client roster of 35 client sessions a week (by year two). Low new client volume, or high client attrition, can reduce your weekly session count.
4. Client cancellations and/or client no-shows could lower (or raise) your income, depending on how you manage your practice schedule.
5. To expedite the building of a caseload in year one, more money could be invested into advertising (or time spent in professional networking).
6. After building a strong reputation and establishing active referral sources, you may be able to eliminate advertising and marketing (reclaim up to 5 percent).
7. If you see some (or all) cash-pay clients, you can reduce or eliminate medical billing expenses (reclaim up to 5.5 percent).
8. If demand for your services outweighs supply (that’s you), you can raise your cash-pay rates to $99 (add $40,320 revenue!). Note: you can also add a second clinician, but that starts a whole new level of mathematical complexity.
9. The estimates above do not account for unpaid session fees (subtract up to 4 percent).
10. If you accept credit cards, subtract roughly 2 percent revenue from whatever percentage of session fees you expect to process with plastic.
11. If you decide to work 40, 45-minute sessions per week (30 face-to-face hours with clients), add $18,000 revenue.
12. If you reduce your time off from 4 weeks to 3 weeks, add $2,625 revenue (not worth it!).
As a rule, counselors aren’t motivated or excited by numbers (who enjoyed psych-stats? Not me!). So, thanks for hanging in there. I look forward to your comments, questions, and thoughts on Twitter @anthonycentore.