Greetings readers, it’s been 7 years since I first wrote on this issue, and to date it remains still one of the most asked about topics. This month I present to you a re-visitation, and update!
According to Salary.com, a Licensed Professional Counselor (or ‘Family Counselor’) working in Cambridge, MA makes a median average of $43,144 per year. A Substance Abuse Counselor (or ‘Chemical Dependency Counselor’) makes an average of $57,411.
In a city where the average cost of a 1500 square foot home exceeds a million dollars ($747 per foot, and expected to grow 3.6% this year, according to Zillow), working as a fulltime therapist is financially untenable. And while Cambridge (where I lived when I went into private practice) is expensive, the math isn’t too dissimilar in other cities across the country. For example:
- A 1500 square foot home in Bethesda, MD will run $685,500. Average Counselor Salary: $41,817
- A 1500 square foot home in Denver, CO will run $511,500. Average Counselor Salary: $38,329
- A 1500 square foot home in Austin, TX is a bargain at $310,500. Average Counselor Salary: $37,343
Nobody chooses the profession of counseling for the high pay. But is financial struggle our collective fate? Is the practice of counseling relegated to people who don’t need to make a living, or as a side passion one must pursue separately from a full-time job? I hope not, and I don’t believe so. I’ve found that with hard work and good planning, earning an income of $100,000 per year in private practice is an obtainable goal.
Money in Private Practice
As counselors, we loathe to discuss money–we want to focus on patient care. However, money is a necessary part of keeping the practice doors open. The fact is, you can’t help anyone if you’re out of business, and a counseling practice is precisely that—a business. Hence, in this column we’re going to look at the financial aspects of running a viable counseling business/practice.
Note: the following numbers are estimates for a solo-practitioner in private practice. You’ll need to adjust expenses, client fees, and volumes based on your practice goals and the costs of your area. I’ve tried to be conservative when referencing revenues, and liberal when listing expenses.
Client Fees
Client fees vary depending on the location of your practice, and the payer(s) you work with. For example, in Oregon a masters-level clinician accepting 3rd party insurance payments (for example, a combination of Anthem, United Healthcare, and Cigna) might earn $99 for a diagnostic evaluation (90791). Ongoing appointments for individual or family psychotherapy (90834/90837/90847) might pay around $70.
For now, let’s estimate that all your clients pay for services with insurance, and your average fee for a 45-minute session is $75.
Fulltime Caseload
The number of sessions that constitutes a fulltime caseload is hotly debated. Some professionals feel that 30 sessions per week is too heavy of a caseload, while others find that they can comfortably serve 40+ clients per week (I say ‘hotly’ debated because providers who opt for fewer clients have been known to accuse those with heavier caseloads of being unethical.
Contrarily, providers who manage heavier caseloads have criticized others as being unorganized, or ‘not cutout’ for fulltime private practice). I wish not to contribute to this contentious debate, but instead split the difference!
I find 35 sessions per week to be a sustainable number for a full-time clinician. With this number, if you’re providing 45-minute sessions, that’s 26.25 hours of face-to-face work with clients each week. With schedule gaps and practice management duties, you’re looking at a 45-hour workweek. It’s a full-time job to be sure, but not unendurable. In addition, let’s say that you give yourself a modest 4-week vacation each year.
Calculations:
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 (yearly revenue)
Practice Expenses
Now that revenues are calculated, we need to subtract any/all practice expenses. There are large, small, and hidden costs to running a practice: from patient parking, to coffee, to organic tissues, to printer ink. Below is a sample (broad category) expense list.
- Rent (one office): $550 per month = $6,600 per year
- Office supplies (computer, software, phone, furniture, printer, coffee, etc.) = $3,000 per year
Furniture, if not financed, will be an initial outlay of several thousand dollars.
- Professional dues, CEUs, & liability insurance = $800 per year
This number is often contested as it applies to the costs of professional CEUs. Note that $800 won’t get you to a national conference, but it will cover the basics. There are quality low cost CEU options, one just needs to look.
- Accounting & Legal fees = $500 per year
- Advertising and Marketing = $6300 per year
There’s no ‘correct’ amount to spend on marketing or advertising. In fact, many counselors spend almost nothing. However, for the sake of this exercise, let’s earmark 5 percent of your gross yearly revenue for the marketing and advertising your practice (5% of $126,000 (yearly revenue) = $6,300).
- Medical Billing = $6930 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% of $126,000 (yearly revenue) = $6,930).
- Other Miscellaneous = $1000 per year
Calculations:
$126,000 (revenue) – $25,310 (expenses) = $100,870 (net)
And there you have it! A 6-figure private practice.
Variables
While the above provides a theoretical outline of private practice financials, no counseling practice will perfectly mirror the example. To help you determine with greater accurately your finances, here’s a list of variables that could potentially detract from, or enhance, your practice’s earnings.
Possible Detractors:
- The estimates above assume that one will be able to maintain a caseload of 35 client sessions per week. Low new client volume, or high client attrition, can reduce one’s weekly session count.
- To expedite the building of a caseload, more money could be invested into advertising (or time spent in professional networking, which could detract from your available client hours).
- Client cancellations and/or client no-shows could lower income, depending on how one manages their practice schedule.
- The estimates above do not account for unpaid session fees (subtract up to 4 percent).
- If you accept credit cards, subtract 2-3 percent revenue from whatever percentage of session fees you expect to process with plastic.
- The “net” above doesn’t include the cost of health insurance, retirement planning, or taxes, which are often partially covered by an employer. While not truly a cost of business, these items will detract from your expendable income.
Possible Enhancements:
- After building a strong reputation, and establishing active referral sources, you may be able to eliminate advertising and marketing (reclaim up to 5 percent).
- Owning a business might have legitimate tax advantages. For example, your mobile phone might qualify as a business expense (meaning it’s paid for with pre-tax money).
- If you see some (or all) cash-pay clients, you can reduce or eliminate medical billing expenses (reclaim up to 5.5 percent).
- If demand for your services outweighs supply (that’s you), you could raise your cash-pay rates to $99 (add $40,320 revenue).
- If you provide 40 sessions per week on average (that’s 30 face-to-face hours with clients), add $18,000 revenue.
- If you reduce your time off from 4 weeks to 3 weeks per year, add $2,625 revenue (not worth it!).
As a rule, counselors aren’t motivated by money, or excited by numbers (who enjoyed psych-stats?), but understanding the financial aspects of your practice can help you to have a successful career doing what you love, and helping others. As always, I welcome your questions, and comments @anthonycentore.
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Anthony Centore
Hi, Gang:
Please permit me my 2 cents…
I am an LCSW and just applied for my “R” number. I live in New York and have worked as a clinician for 13 years; 8 as a clinical supervisor for an agency (Chem. Dep Day Rehab). The “R” in NY means I am eligible to get on insurance panels. Once achieved, I am free to leave agency work.
Agency work looks a little like this: I do between 300-400 units a month; caseload of 25 with 7 groups ranging from 8-15 clients and 3-5 intakes per week. My show rate is about 80%. Further, I am responsible for hours upon of hours of paperwork to comply with state, agency, medicaid and JCAHO regulatory requirements. As a supervisor I’m my team’s leader and field any issues they have, do QI, resolve patient complaints, run staff meetings, and provide clinical supervision, etc. We have chronic staffing shortages because of high attrition rate among staff. This means at any time demands can increase, because units can’t decrease. In my clinic, there is no opportunity for advancement, no regular supervision or support ( I had to find my own supervisor from another part of the system I work in, and have to take a 1/2 day off to get to her.)
My compensation for this effort is $27 per hour. After I pay tax, health insurance and 401 contribution, I net $600 a week. I’m toast but administration doesn’t seem interested in helping us front-liners since we consistently hit our numbers.
That said I agree with the commentator who suggested working in an agency for a bit to get experience and perspective. I feel I’m at the top of my game clinically because I have logged so many client contact hours in a challenging environment. Without the clinical background an agency gave me I feel it would have been malpractice for me to hang a shingle out fresh from grad school. I’m grateful for the experience, but I’m tired of being taken advantage of.
35 individuals a week with none of the agency demands seems like a walk in the park to me. Even if I got a reimbursement rate of $40 per hour, seeing 35 clients a week (totally part time for me!) figures out to $1400 a week. (Yeah, i know..401, taxes..insurance, etc…).
I see a therapist in a private practice for some loss issues (mom is dying from cancer) and, based on my bill, my insurance has paid about $80 per session. With a 50/50 spilt for my practitioner and her group looks like 40/hr is a reasonable expectation…than she gets my $20/hr co-pay. Not a bad deal. She writes a one page note…in session…no other paper work that I can see. She told me she wouldn’t do the work I do because it’s too hard….private practice, even with overhead, seems like a dream come true.
Thanks for listening. D
I first read this blog years ago when I was still building my practice here in the remote mountain community where I live. It was most helpful then. Now that I have an overly full practice I sought it out again and was lucky enough to find it. Since it was so long ago I hope you are still reading comments on it because I want to let you know how helpful it has been once again.
The first time I read the blog I got a laugh out of the idea of 4 vacations a year. My reaction was “That will never happen,” As my practice is now leaving me with only a rare day off/week I can see why your advice is so important. Last year I took two vacations and wasn’t certain I could make it to the second one – Christmas break. I was burning out. So this year I will be taking 3. If Health Care Reform is still in effect next year I will take 4 if I can do it financially. Insurance companies by contract do not pay me the rates you used in calculating income. They pay far less. Also because this is a poor area at least 50% of my practice is composed of Medicare and MediCal patients who in the latter case finally have a way now to obtain counseling. Normally I’m paid between $35 and $65/session. (That is not what I bill at of course.) Patients with insurance through unions pay much better, sometimes $85-$100 like you quote. This year it appears the MediCal and Medicare rates are going up, which will help,
I’ve been seeing 40-45 clients a week, but I realize after a recent illness that I cannot maintain that level. So seeing that you used 35 as the norm is encouraging because I have been resisting cutting back when there is so much need. Although I have a billing service, I find there is at least one full day of admin and/or prep and sometimes more of each week, plus an hour a day before clients start coming. This is all unpaid of course. With this in mind I am considering seeing clients four instead of five days a week from 10:30 to 6:30. That is a nine hour day with no breaks. So 32 is about the number I can realistically handle and still provide the kind of service I seek to offer my patients. Although that is only 32 hours a week not 35, re-reading your blog makes me feel more assured and confident that it’s OK for me to make this much needed change.
Thank you.
Hi Sarah,
I was hoping you could fill me in on how much schooling you went through before you private practice?
As an LPC…. I want to do groups..
and charge for each session. targeting ages 10-14
I think it is critical to learn theories…
My experience with Social work counselors..
They were marginal… very concerning…
I recently completed my first year of grad school. I will soon start my internship and have been told by the director of the clinical mental health program (CACREP) I am taking that internship hours can be used towards the hours I need to accrue for my license. The school I attend offers the license exam twice each year AND one can apply to take the exam after they have completed 6 of the required courses and currently enrolled in 3 other required courses. I was wondering IF I am able to complete all of my hours while doing my internship and I have my license at the time I graduate or shortly thereafter, can I start my own private practice without first obtaining more experience? I have made my mind up that I would rather take the risks of building a successful practice straight out of school (IF I have my license then) when I will have over $80,000 I owe in loans for my education. One of the mental health facilities where I did my bachelors intern work only paid their licensed therapist between 38 to 40,000 dollars a year. AND I just can’t see paying off that amount of money when barely making over what many would consider the poverty line. Your numbers add up well BUT what bothers me the most is the question: Are people progressively seeking counseling in this era and does the average person see counseling as being beneficial enough for them to seek counseling on a weekly basis , enough so that I can attract 30 to 35 clients per week? It appears to me that the younger generation may value counseling. Most of the young adults I attend school with talk openly about having a therapist and even go as far to tell you WHY they are seeking treatment BUT they are all in graduate counseling programs as well. I feel like that may due to this generation being labeled from everything between ADHD, to at risk for suicide when they were growing up through their junior high and high school years. Do you know of any credible studies that have been aimed at addressing these questions? I haven’t been able to find any. I have ran a successful business before AND I am also retired from the local city fire department on the coast where I live. So, I can get by without making much money until my practice gets built up AND I am extremely motivated to begin the process of building my own practice. What I see as possibly being the most challenging aspect in building a successful practice will likely be in attracting enough clients. BUT I must say that your article offers me great hope! Also, will you please send me some info on your franchise offer?
Thanks a lot for the article!
Mark
I would be curious to know what state you are completing your degree in and what degree specifically it is. I obtained my MSW in NY and in no way could my internship hours be counted as licensing hours toward my C. You cannot even be approved for supervision until you have obtained your LMSW following graduation. This is at least so in NY.
Additionally, even if your state allows you to do this with your specific degree program, I would advise against opening up shop immediately after graduation. Give yourself at least 3-5 years (minimum) to gain some real world, (paid not internship), experience.
Same here. Must be in supervision and have paid employment to count towards licensing.