Counseling Private Practice Business Plan – Have you thought about starting a private consulting firm? I don’t know if this is true for you or not, but in graduate school, there is usually little to no training or coursework on going into private practice as a therapist. In fact, I learned everything I know now about being a private practice therapist outside of graduate school and through experience.
When starting or building a consulting practice, you need to wear not only a “therapy hat” but also a “business hat.” Because in reality, a private practice is a business! Even if it is a non-profit organization, you need to know something about business models and have a basic understanding of business to be successful.
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Counseling Private Practice Business Plan
In this article I want to outline some basic “business models” for running a private therapy practice (not business plans; I hope to cover that later). First, what is a business model and how is it different from a business plan? One definition of a business model is simply the plan or scheme for money. It’s how you identify where the money is coming from and how it flows into your private business. It also defines who runs the business and provides the service. A business plan is different in that it is more specific. It sets out specific financial goals and how you will achieve them.
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To put all of this in counseling or therapy jargon: business model = treatment approach / model business plan = treatment plan
Let’s look at some examples of business models for private practice as a therapist. What I will focus on is how the money “flows” or comes from the examples that ultimately determine your salary as a therapist.
This is actually the simplest model and what most people tend to think of when they go into personal training as a consultant. In this model, you are responsible for generating your own referrals, maintaining records, and paying out of your own trading account. Clients contact you and simply pay you directly for your time. You are also responsible for paying your expenses or the cost of doing business (rent, electricity, telephone, advertising and other office expenses, etc.) Your net profit (take home pay) is the money you have left after paying The Bills As as already mentioned, this is the simplest way to trade.
Another subset of this model would be if you decide to take third party payments or insurance. This adds another layer of cost in that you would have to file insurance claims or hire someone to do it for you. There are some pros and cons to accepting third-party payments. Advantages would be that it tends to increase the number of referrals you get. It can also be more convenient for customers who want to use their health insurance benefits. The downsides are that you have to accept what the insurance companies say they will pay you (lower interest rates) and the extra layer of costs I mentioned.
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In this business model, you effectively operate as a sole proprietor but with the benefit of sharing costs with a partner or other therapist. Each person involved in a sole proprietorship works independently. You would still be responsible for generating your own referrals, keeping records and paying yourself. The difference, however, is being able to split or share the cost of running the office with someone else who is a therapist.
Many times, people in partnerships like this will also take the step of forming an LLC or other legal partnership, such as a corporation, to protect themselves legally and have a way to deal with the accounting and tax implications. It requires you to create a legal entity which is easy to do with services like Swyft Filings* or other legal services. Also check with an accountant about the potential tax implications of forming an LLC or other business entity. It’s an extra step and a cost. But seek expert advice on this (lawyer, CPA, etc.).
*In the spirit of full disclosure, this is an affiliate link which simply means we receive a commission at no extra cost if you use this link to make a purchase. Thank you in advance for using this link! Contract consulting models
With this type of business model, there are two sides to the equation to consider. One side of this would be the sole proprietor who is “hiring” a contract counselor to provide treatment services for the salon. The other side of this would be from the perspective of the contracted therapist. Typically with this model, the fee agreement consultant is either on a fixed fee per case basis or as a “split fee”. With a “switching commission,” the private practice owner would give the contract consultant a percentage of the total fee charged for the practice. Typical splits are 60/40 or 70/30. For example, with a 60/40 split, the therapist giving the session keeps 60% of the total fee charged and the practice keeps 40%. A flat fee is simply a set fee per session that the physician would pay the therapist to see the client in their practice, regardless of what the client is charged.
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In this business model, the private practice still operates as a sole proprietor or operator, but is essentially “freelance,” or offers to provide its services as a therapist to other established practices. It may or may not be a group exercise. This is often referred to as “PRN” or “as needed” work or. An established practice may have a waiting list and they need to get clients to see a counselor before the clients decide to go elsewhere. The practice would contract with therapists to see the clients for a set fee or split fee. Another example would be if a private therapist goes on vacation and needs another therapist to be on call or see clients for them while they are away.
With private practice contract counseling models, the therapists you have “hired” are not employees and they will need to charge you for their services to keep the IRS happy. At the end of the year, you need to fill out a 1099 form with the IRS showing what you paid them during the year. If a person works as a contract therapist, they are responsible for paying withholding tax and income tax. If you work as a Contract Therapist, it may be to your advantage to pay quarterly prepaid taxes. Again, consult a professional on this!
Group four business models can be very different. Typically, they use one of the previously mentioned joint practices or contract consulting models or a combination of them with the consultants working in the group.
In this sub-model of group practice, each individual who is part of the group is considered to be in private practice on their own, but is simply using the group’s “brand” to promote their own individual practice. The group may handle all advertising and referrals as part of what they offer in lieu of a fee. Any number of tariffs can be made as part of this type of business arrangement. Usually with a group exercise like this there are one or two “owners” of the station and it is usually set up as a legal entity. Essentially, all members of the group are contracted to provide services. Some or all group members can own part of the exercise.
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Another thing a group practice can do is simply hire a therapist for a set salary or hourly rate. If it’s a large practice, hiring therapists as employees has some disadvantages. Number one is that, as an employer, you must provide benefits such as disability insurance and health care for the people who work in the establishment. All of this adds to the cost and only to your warranty. You must also follow state labor laws and pay for workers’ compensation insurance. You must track and pay withholding taxes for employees. Needless to say, as the owner of this type of private practice, you will manage employees and be responsible for a lot more paperwork. This of course affects your bottom line. Of course, for a therapist who works in a private practice that has them working, you are not technically in their own private practice. They are employees of a private practice.
There is no one private consulting business model that is necessarily better than another. It all depends on your needs and financial goals. For most private practice therapists, they start as a sole proprietor and build from there. And there are some who simply start out as a contract consultant for an already established practice. Regardless of how you start or grow your private practice as a consultant, get educated and just do it!
Gordon is the one
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