How Do I Start a Private Practice in 12 Questions
Why do you want to start a private practice?
Regardless of the undertaking, knowing why you want to do it is the critical first step. It will shape the rest of your decision making. In Acceptance and Commitment Therapy (ACT) and other therapies, this is called values clarification.
Values are what we choose to be important to us. They differ from goals in that they are not outcomes that can be completed. Rather they guide our direction, i.e., they tell us where to go and the things we accomplish along that path might be goals.
Here is an example. If I value learning, for it’s own sake, I will choose to read a lot of books, and I might even set a goal to graduate from college. On graduation day, I will have completed college and will have accomplished that goal. But I will not have finished learning. It is not a box to be checked. It does allow me to know what goal might be really satisfying to work toward next. Values act as a compass, but they are never finished.
What values are most important to you when you think about having a private practice? It could be that you value helping, compassion, contributing, learning, healing, connecting, flexibility, financial security.
Make a list of all of the possible values that could be related to having a private practice and then see if you can prioritize them. Starting a private practice is likely going to be influenced by more than one. Do your best to become aware of the top three values that you believe starting a private practice will serve. This will help you answer the next questions as well as help you navigate many decision points as you grow your private practice and your clinical skills in this work.
What type of private practice do you want to have, what services do you want to offer, and how do you want to spend your time?
Now that you have become clear about why you are starting your private practice, you can decide what kind of a practice it is going to be. There are many options from which to choose.
What type of Private practice do you want to have:
Solo private practice
Group private practice within your profession
Group private practice that is interdisciplinary
What services do I want to offer:
Individual Therapy
Couples Therapy
Family Therapy
Educational Assessments
Forensic Assessments
Pre-surgical/Bariatric Evaluations
Custody Evaluations
Coaching
Educational Consultations
Supervisory Consultations
Business/Organizational Consultations
How do you want to spend your time in private practice and how many hours should you work?
Direct client care
Bookkeeping
Marketing efforts
Professional collaboration
Clinical Supervision
Peer consultation
Managing Staff
All of these numbered items are options for you. In fact, one of the biggest greatest advantages of starting a private practice is that there are so many options. You are able to design your dream job. Now whether you will get laid off at any point from your dream job will be determined by how successful the business part is. But there is no doubt that private practice allows you a lot of flexibility and there are good reasons to believe if you are clear about your values, plan how to serve them, and work diligently, private practice could be a good choice for you.
Take a look at the numbered items above, quickly strike through any you know don’t appeal to you and add any (there are many) possibilities that aren’t listed. Now beside each of what is on your list, write out the prioritized values pertinent to each one.
Here is a quick example:
Private practice type:
Solo private practice – autonomy, helping, financial security
Group private practice within your profession
Group private practice that is interdisciplinary – helping, collaboration, learning
What services do I want to offer:
Individual Therapy – compassion, helping, learning
Couples Therapy – compassion, helping, learning
Family Therapy
Educational Assessments
Forensic Assessments
Pre-surgical/Bariatric Evaluations
Custody Evaluations
Coaching - – flexibility, helping, learning
Educational Consultations
Supervisory Consultations
Business/Organizational Consultations
How do you want to spend your time in private practice and how many hours should you work?
Direct client care – compassion, helping
Bookkeeping
Marketing efforts – growth, learning
You want to be sure that your choices in each of these areas are determined by your values. Now you can determine what kind of practice you want, the services you want to offer, and how you want to spend your time. These choices will then determine what kind of legal entity you will have, i.e., PLLC, Partnership, etc.; the services you will offer clients and market, as well as who you will hire or outsource certain responsibilities to or let software take over. For example, if you love marketing, you may take that on yourself and the same with bookkeeping. Or you might hire a marketer or utilize great software to do your bookkeeping or hire a bookkeeper.
How do you build a successful private practice?
In order to build a successful private practice, first you have to define it. What is a successful private practice based on your values? If financial security is a top value, you can define a successful practice by your profit and loss statement, more simply put by how much you can may yourself. Bookkeeping, or even a good electronic health record can let you know what this is. But be specific. Decide in advance what you would want to make by a specific date.
You want to be realistic. But you want to be clear. You also want to be flexible, recognizing there may be unforeseen costs, difficulties obtaining new clients, keeping clients, or determining the rates you can charge in your geographic area. It will take time to establish a reputation, connect with professional referral sources, learn how to market, and build up your clientele. You can always make your goal more ambitious later.
Once you have set the goal and the deadline, be objective about whether you reached your goal by the date.
But then be sure to practice self-acceptance regardless. Beating up on yourself won’t help you increase your revenue.
Do be thorough in your post-mortem analysis of why you didn’t reach the goal. Was the goal unrealistic overall. Were there particular missteps, e.g., the marketer I chose failed to deliver on what he said he could, I set my rate so high, which resulted in many potential customers who called not to book an intake, etc.
Revise your plan, making changes and trying new things and
Set a new goal with a date to evaluate your progress
Repeat
How do you acquire therapy clients?
This is the 64 million dollar question, or more accurately based on the national average, the $125,000 per year question.
First, if you have decided to take insurance, immediately start applying for insurance panels. You may be fortunate and be in an area where there are many who have openings and will welcome you. But many densely populated areas like New York City are saturated and it may take a lot of time and iterations for you to be accepted to a or many insurance panels. And since the companies reimburse differently, the higher reimbursing companies are even more competitive- start now. If you do get on insurance panels, you will likely have plenty of referrals coming your way. The plans are a big referral source and clients are very happy to have co-pays instead of being totally financially responsible. Again though, be sure this choice is congruent with your values. For example, it may take more direct client hours to make more the same amount of money as private pay (unless you set that rate low, which could be a great choice depending on your values). If financial stability is very important, having in-network clients is a way to be more confident your slots are full. Private pay clients are much harder to get and the revenue stream may be much more volatile.
If you are hoping to forego taking insurance, how do you get private pay clients? The guidance here can also be applied to in-network clients, but it will be vital to get private paying clients. This undertaking will take time and there really are not any shortcuts, despite what many people will want you to believe to buy their book, course, or consulting services.
The most important thing you can do to get private paying therapy clients is to provide the best therapeutic experience to your clients. This is best practice if helping people fulfills a top value for you, and it is also the best long-term strategy for building a private paying clientele. Word of mouth referrals take time, but they are the most trusted form of referrals. Colleagues, friends, and family members of former clients can be a consistent and evergreen referral source. Other professionals in your field and in other areas will hear from their patients about your clinical skills and begin to refer to you if you are providing exceptional care.
Develop a niche or specialty. You have likely heard the saying, “Jack of all trades and master of none.” If you specialize, you can be more effective at dealing with those particular issues. This can give you a level of confidence in this area of expertise. It will also give professional referral sources and potential clients confidence too. And it can help your marketing efforts as media outlets and community organizations view you as an expert. You may be interviewed for local news programs, newspapers, or be invited to panels at community centers, or to give workshops in schools, businesses, or faith based organizations.
Build a website that reflects your values and is clear about what clients can expect from working with you. This doesn’t have to be a costly endeavor, but if you want to spend the money, there are plenty of professional designers and website developers who can create a website for you. Be sure to pay attention to the basics. Can potential clients get a sense of your style, understand your approach, your credentials, training, and experience, as well as the specific services you offer.
Determine how much you want to spend and how much you want to be involved with your advertising and marketing efforts. You can outsource these efforts almost completely. Given your professional expertise unless the marketer is incredibly experienced with mental health marketing you will still likely need to write a lot of the copy or at least edit and approve whatever they write. You will also want to establish the budget and clearly communicate to them the number of referrals you are expecting or hoping to get based on the budget. But in terms of identifying markets, strategy, platforms, etc. a professional marketer can likely do all of that. At the same time, if you value learning, this may be an exciting endeavor for you if you have the time. Like anything else, setting goals and being sure to regularly monitor what it costs (time and money) and how many referrals are coming from the efforts is critical to ensuring improvement and increasing the probability of success- to see if it is worth it or if something needs to be changed. You may want to calculate your customer acquisition cost (how much does it cost me in advertising/marketing to get one new customer, i.e., total costs divided by new referrals?).
Be sure to connect with other mental health professionals and other health providers, or other trusted members of your community. You can do this by being sure to be active in professional organizations like your state psychological association. You can regularly attend or host clinical trainings, join business associations or groups like the BBB, Rotary association, or become involved with your own religious/philosophical community organization. You can also reach out independently to physicians, physical therapists, faith leaders, personal trainers, and others who are in contact with the kinds of people you serve. These professionals my be thrilled to learn about the services you offer and of course, if you have established a niche/expertise it will be an opportunity for them to help the people they know by referring to you. Likewise as you learn about their services, your clients may benefit from you being able to cross refer. Everyone benefits by you taking the time regularly to ask these people to coffee, tea, lunch, or just grab them for a conversation while attending a training. If you want to be methodical about this you can even employ a Customer Relationship Management (CRM) system or just regularly schedule a call on your calendar, or create an excel spreadsheet to plan and track your contact. While they aren’t customers, a CRM could just help you be sure that you are maintaining the relationship. And of course it is a good idea to ask how new clients found you. You want to be able to determine who are your biggest referral sources, so you can nurture and thank them.
What Electronic Health Record (EHR) is best for private practice?
What is the best Electronic Health Record (EHR)? Once again, this really depends on your values and how those values determined the type of practice (solo, only mental health practitioners in your practice, admin staff, etc.). Before looking at the various options, there are too many to count, ask yourself a few questions.
Who will be using the Electronic Health Record (EHR)? Will it just be me, a partner who is also a mental health professional, or does it need to also serve the acupuncturist in my group practice? Do I have a bookkeeper who needs access to the billing information or a scheduling service that needs to be able to see my calendar, but is prevented from access to the clinical charts?
What features are vital, important, less important, but I would like them if they aren’t too costly? Think about if you want HIPAA encrypted messaging, do I want my clients to receive automated appointment reminders, a clinical community built around the software for networking, clinically focused software that aids in treatment or provides training resources, etc.
What am I willing to spend on the software? Starting a private practice will get you very in touch with your risk tolerance and your relationship with spending and making money. Know yourself. If you know you can’t stomach a big price tag, be honest with yourself. But also pay careful attention to the EHR’s pricing model. Some will have a basic monthly or annual cost that may not involve a feature you really want. At the same time, if they are charging extra for features you don’t need, you may be able to find one that has a more reasonable subscription cost.
What other practical things do I need to do to start a private practice?
There are many less exciting and necessary decisions you will need to make at the very beginning of this process. Many of these will require finding and hiring a professional like an attorney or accountant. While many of us in mental health are price sensitive, especially when starting out, you want to be sure that you utilize professionals when it matters.
a) Once you have determined the kind of practice you want, i.e., solo practice, partnership, etc. you will want to speak to an accountant (you will need one) or a tax attorney to determine the structure of the business. You will be advised of the advantages and disadvantages of an LLC (or PLLC), Partnership, S-Corporation, etc. Once you determine which you are going to have, you can decide if you want to file the articles of organization yourself or hire a service or law firm to do it for you. You can certainly do this yourself, or you can find out how much it costs to have someone do it for you and decide if you prefer that. It frequently requires filling out some paperwork, sending that it to a state government office and then running two classified advertisements to make it public that you are starting a business.
b) Where do I want to see clients? First decide how stressful and costly it would be for you to move after your practice has grown. Typically moving is stressful for people and with a business will also impact your existing clients and new clientele (especially if your referral sources are close by), as well as require you changing all of your marketing materials (business cards, stationary, etc.), and notifying all of the professionals in your network. You want to keep this in mind when thinking about where you want to start your business.
You can certainly sublet a few hours or days from a mental health professional. This has the advantage that the space itself in terms of size, comfort, and style may suit the needs of you and your therapy clients. Depending on how established your new landlord is, it could also lead to referrals, especially if you have complementary areas of expertise.
The disadvantage, of course, is that there may not be room for growth, and it may require a move after you have more therapy clients. When considering renting a traditional space, be sure to decide whether the flexibility of a month to month lease, annual lease, or a long-term lease (often five years or more) suits your personality. Do a pros and cons list for each of these. It is worth your time. For mental health practitioners, this is typically the biggest budget item and in fact could determine for some time whether or not your private practice is profitable, i.e., will you get paid!
Another option that some practitioners choose is to practice from a home office. Once again, carefully evaluate the pros and cons. Think about the patient population you treat in terms of risk and also think about any challenges to boundaries that could come about form them seeing where, how, and potentially who lives with you. A newer option that has many potential advantages are shared communal healthcare spaces.
While these vary by company, many offer lower costs for fewer hours, allow you to pay more as you grow, provide community with other colleagues practicing in the same space, and often provide services like reception, coffee, etc. Of course, the flexibility and additional services could mean they are more costly than a sublet, but room for growth could be worth it.
c) What kinds of insurance do I need? Make sure you speak to someone knowledgeable about what insurances you might need. Once again consulting with an attorney is a good idea. Depending on the type of space you rent, your landlord may require you to have liability insurance. If they don’t, it is still something you may want to consider. The last thing you want is for someone to slip and fall and sue you without any kind of coverage. You will also need to have malpractice insurance. Unless you have a second job or receive it because of your spouse, you may also need to purchase your own health insurance. If you need this, look into this early, since you don’t want any gaps in your coverage. As a business owner there are certainly other kinds of insurance you could get if you’re concerned that you could be injured or become sick and not be able to work. You can speak to an insurance broker or a financial planner about different ways to protect yourself in the future from unforeseen issues like that.
d) What kind of bank account do I need? You will need to set up a business checking account as soon as you can. You’ll need one eventually and better to have everything start from the same account. These typically do not earn you any interest, so it is a good idea to pay yourself from the account regularly to get your money into an interesting bearing personal account.
e) What kind of Credit Card? You will also need to obtain a business credit card. One option is to use your business bank card for vendors that utilize VISA or Mastercard, since many bank cards have that feature. Then you can apply for an American Express Business card. Their customer service is great and there are many benefits of these cards that could offset the annual fees. Be sure to determine if or what the fee is in advance, but also ask what benefits are offered, since you may use services already that American Express would then cover, that could be of more value than the annual fee.
Where should I establish my private practice? Location, location, location. Yes, but in relation to what? This is where you want to be sure you have self-awareness and also do market research. For some practitioners, it is important to live very close to decreases their commute time. For others, they want some time to decompress and separate from the work and want to be sure they minimize the likelihood of seeing clients in public areas near their home or have shared schools, organizations, businesses, etc.
The other consideration is access for your clients. Is being close to mass transit something important for the population you serve? Is the area located to residential areas with a large enough population to support your practice? How many similar practitioners are in the area? And does that indicate there is a need and/or mean you would have colleagues that could collaborate? Or does it mean there is an oversaturation of providers making it difficult to keep your practice full? It is worth spending some time doing research so you can answer these questions before jumping in and starting your practice, only to discover your skills are great, your few clients are really benefitting, and are paying a fair rate, but that there are so many therapists you can’t get enough clients to pay your rent. And of course, the location will also influence the rent. Again this is typically the biggest single expense for therapists, so think carefully about how to budget.
What other professionals do I need to consult? As mentioned earlier, it is a good idea to have an accountant and attorney(s) that you trust and can help make sure you are not forgetting anything and to whom you can direct any questions as they come up. In addition, you may want to have a financial advisor or bookkeeper.
What kind of technology or software do I need? While you don’t have to have any, as a business you will need to do some bookkeeping if you don’t pay to have a bookkeeper. But even then, you’ll need to find some method for getting the bookkeeper your information, and relying on pen and paper is likely very time consuming and frowned upon by many bookkeepers.
There are a few other options, you can use basic spreadsheet software like Microsoft Excel, Apple’s Numbers, or Google Sheets as long as you are sure you aren’t revealing any identifying information. If you only put in the financial transactions (of course you would want to run this past an attorney) it would likely not identify any particular client and you could provide this information to your bookkeeper.
Another option would be to use bookkeeping software on your own. You could use Quickbooks or Xero, or something comparable. These do require some degree of understanding of accounting/bookkeeping and may not be worth it unless you really like the idea of learning a lot about bookkeeping and like their features.
The third option is to use an Electronic Health Record (EHR) that has integrated a solid bookkeeping component. An EHR like this solves at least two problems you have, which is how to keep your clinical records and keep track of all of your bookkeeping. The real advantage is you won’t have to duplicate any work if the EHR is built for efficiency. It will allow you to know your clients’ balance, allow you to take payments, provide them with receipts/invoices, and easily export your financial transactions for your bookkeeper and/or accountant. Most won’t have the number of reports available in bookkeeping software, but some may have more reports than you want. So it may be worth looking to make sure the EHR you are condsidering has the features above and that you see if it has enough reports for you. If it doesn’t you can either use the EHR just for your clinical record keeping and then use bookkeeping software, or you can rely on paper notes and use bookkeeping software.
What else should I know? Private practice can be incredibly emotionally, psychologically, and financially rewarding. It frequently offers a great deal of flexibility and provides not only the opportunity to work with and help interesting and wonderful clients, but also allows you to collaborate with other professionals offering different services to your client. You can also be very creative in the kinds of services you can offer depending on your values, interests, and lifestyle. You may be interested in public speaking and helping children, in which case you can speak to teachers, parents, or even children by connecting with schools and local PTAs. You likely have a lot to offer in many different ways and by having flexibility and autonomy since you work for yourself, there is no limit on the number and kinds of services you can provide to people and organizations.
A private practice can also take a lot of tie to grow. It might require patience. And while there are many consultants and courses that claim they can have you making six or seven figures in 12 months, many of these are likely ineffective. Obviously there are some people out there who know what they are doing and hiring them as consultants, taking their course, or reading their book could help. Be skeptical and do your research, but also be open to the possibility that there could be a good return on your investment (ROI), i.e., the money you spend will end up making you a lot more money. By doing so it not only solves the financial piece, but if it happens fast, it could also prevent you from experiencing a lot of stress and anxiety.
And there can be more stress and anxiety in private practice than some people realize. One advantage of working for a university, training institute, hospital, agency, clinic, or school is they typically provide a regular paycheck. While those checks aren’t always as big as what one could make in a thriving private practice they are reliable. Some of us really appreciate stability. Private practices often have cash flows that are somewhat volatile. Seasonal changes, depending on the population you see most and your geography can greatly affect your revenue. Holidays, vacation times, and other factors can make one month dramatically different from the last.
This is why good software with good reporting is so helpful. It can give us objective information about our numbers, so we can calmly evaluate if our business is working and not jump to emotional reasoning when cash flows plummet. Aside from seasonal variables, remember even if you’re pretty full with 20 clients, two client terminations (which we want- we want people to get better), could mean a 10% drop in your revenue until you get new clients to take their spots.
And while it may be counterintuitive, since being a therapist means working with people face to face, private practice can be isolating. There is a difference between professional clinical interactions with clients and shooting the breeze four or five times a day by the water cooler with coworkers. So again, self-awareness is important. If you know you crave connection like that, a co-working space may be a good option, planning regular lunches with colleagues could be a good idea, or scheduling big enough breaks for you to get out of the office and see friends regularly, or even go to the gym.
And while it may not differ that much from clinical work elsewhere, if private practice is more clinical work than you have done in the past, again take a self-inventory to recognize the emotional and psychological toll it might take on you. Depending on the kinds of people and issues you address during your day, you may really feel like you need to talk to someone at the end of the day, or just need some time to yourself to recharge- not wanting to talk or listen to anyone for a little while after work. Self-care is really important in order to do good clinical work as well as to be a good business person, and building a successful private practice requires both. Be self-aware of what you need and then be proactive in self-care, seeing it as an investment in your private practice’s core asset- you. If you aren’t functioning optimally, how can you best care for your clients?
Finally, private practice isn’t for everyone and every private practice will not be successful. Based on your values, establish your goals before you start- how many clients do you want to have, how much money do you need to make, how much stress are you willing to tolerate? Whatever your goals, figure out a way to measure them, then set timelines to reach them and be sure to monitor them regularly.
See private practice as an exciting opportunity to grow something that can help people and satisfy you, building a practice congruent with your values. Be open and optimistic that it can be wonderful and fulfill your dreams. Also though, be open to the possibility that if it doesn’t, or if your dreams or values, change stopping it isn’t a failure, rather a good decision because your satisfaction and the people you contact are better served by you when you’re living according to your values. When your private practices serves your values you have that and when it doesn’t as a therapist there are many other ways for you to help people and live your values. Be open to all of them.
If you have questions about values based practice or how MBP mission to help clinicians help people through better practice, please post your questions or comments.