Today I am sitting at a coffee kiosk at the Reading Terminal Market in Philadelphia, PA. I’m here because this week Thriveworks is opening its third (our second clinical) company-owned location, right here in Philly. As a small company, any endeavor that includes the words “new location” is a serious risk and investment.
I don’t like risk, and the risks of opening a new practice and adding therapists to our growing team are many. We need the right location, the right staff, the right operations, the right credentialing, and even the right marketing. The failure of any one of these key areas will cripple the project. While risk abounds, I try not to fear it, and over the years I’ve improved (perhaps only slightly) in my ability to access and manage it. I focus on the good that could come from the investment. In this column, I’ll write what I know about risk as it relates to business in the counseling profession.
Being an Employee is Risky Too
Some claim that being an employee is just as risky as starting a business. I disagree. However, there are risks of employment. An employee can end up on the wrong side of office politics and get passed over for advancement, or lose one’s job entirely. In the health professions and jobs, it’s not uncommon for organizations to change directions based on funding.
A mental health clinic once catering to college students might transition into psychotherapy treatment for the homeless. In this scenario, some therapists might get to keep their jobs, but the work that was once loved is replaced with an entirely different set of duties, jobs, and expectations. As one counselor said to me, “I’m still employed, but I’m making less money and spending half my time on case management I never wanted to do.”
Still, employees can’t lose money. Startup costs are zero (to the employee, the employer has costs), and if things don’t work out an employee can simply walk away and find another place that employs therapists. If you’re looking to minimize risk, don’t start a practice. Instead, read the previous column, “4 Reasons to NOT Start a Counseling Practice; and 9 Ways to Become a High Paid Agency Employee.”
Failure is Part of Success…but Doesn’t Guarantee It
Thomas Edison, in an over-quoted anecdote, was once asked about his many failed attempts at inventing the light bulb. He replied “I didn’t fail, I found 2000 ways how not to make a light bulb.” He is also credited with saying “Many of life’s failures are people who did not realize how close they were to success when they gave up.”
Is it really darkest before the dawn? Ask Frank Nelson Cole. In 1903, Cole gave a presentation at an American Mathematical Society conference where he proved that a very famous prime number, 267-1, was not actually prime. During Cole’s “lecture,” he approached the chalkboard and (in complete silence) wrote out longhand the number 267-1, which is 147,573,952,589,676,412,927. Cole then moved to the other side of the board and wrote 193,707,721 × 761,838,257,287. He multiplied the numbers by hand, showing that the result equaled 267-1! The attendees erupted with applause. Cole later said that finding the factors of 267-1 had taken him “three years of Sundays.”
While the stories of Edison and Cole show the value of persistence, not all persistence is bears fruit. According to Seth Godin, entrepreneurs need to tell the difference between a “dip” and a “cul-de-sac.” If you’re in a dip, you can push yourself out. If you’re in a cul-de-sac, it doesn’t matter how much you push. Godin states that being told to never quit is “Bad advice. Winners quit all the time. They just quit the right stuff at the right time.” As you begin (or grow) your practice, some areas of your business might be cul-de-sacs: specific target populations, groups, psycho-educational programs, online services, specific marketing endeavors, specific counseling methods, etc. Learning to differentiate cul-de-sacs from dips will help you to focus on the areas of your business that can grow, and jettison areas that are wasting your time and effort.
Betting the Ranch Versus Taking a Punt
Betting the Ranch: The act of wagering a large portion of your assets. Failure places you into serious financial trouble.
Taking a Punt: The act of wagering a small portion of your assets. Failure doesn’t place you into serious financial trouble.
There is a big difference between betting the ranch, and taking a punt. On one end, if you bet the ranch enough times, you will eventually lose the ranch. On the other end, if you’re so cautious that you never take a punt, you’ll never get anywhere.
Counselors are more often on the cautious end of the spectrum. I’ve known many to be too conservative to take a $400 punt that could build their practice (this could be for a better office, a website, a print ad, a booth at a conference, etc.). While for some clinicians $400 is betting the ranch, for many it’s a manageable risk.
How much can you take a punt with? $40? $400? $4000? The amount of cash you have on hand is not nearly as important as how you interact with the money you have. Ask yourself, “How is my risk tolerance? Am I betting the ranch? Am I afraid to take a punt?”
Risk Versus Reward
Would you buy a car for $10,000, with the potential to resell it for $10,250? No! What if the clutch goes out? Or you overestimated the car’s value? The reward is too small relative to the risk. However, would you buy a car for $250, if it has a blue book value of $10,000? Of course! Even if the car doesn’t run, you can sell it for parts, or scrap. The potential reward heavily outweighs the risk.
So what are the risks and rewards of starting a counseling practice, perhaps one rooted in psychotherapy? Service businesses, such as counseling, tend to have low start up costs. There’s no manufacturing, no patents, no inventory. However, counselors today struggle to build caseloads, and they struggle to get paid for services rendered. Therefore, in some aspects starting a counseling practice is low risk, and in others it’s high risk. If you’re considering starting a private practice, invest time before you invest your money. Learn the costs of doing business in your area, and learn the potential rewards (consider reading the previous article “Building a Six Figure Private Practice” which itemizes some of the costs). Finally, while risk abounds, try not to fear it. Take a punt. In time you’ll improve in your ability to access and manage risk.
In this lesson, Dr. Anthony talks about risk–how to measure it, minimize it, and use it effectively for the growth (and stability) of your practice. You’ll learn why people who “bet the farm” usually lose the farm, but how some risk is a necessary pain of entrepreneurship. To watch full video, click here: https://thriveworks.com/private-practice/