How to Start a Therapy Private Practice → PLUS How Much Starting a Business Will Cost
How to Start a Private Practice
Post last Updated february 2024
Welcome, soon-to-be private practice owner! If you are a counselor, psychologist, marriage and family therapist, or social worker ready to leap into private practice, you are in the right place. I'm thrilled to have you here to learn all the basics of what you need to know to get your private therapy practice up and running. In this post, I'll cover the basics you need, share my thoughts on EHRs for therapists, and as a financial therapist, I'll cover how much it costs to start a practice.
There are many reasons to start a private practice, and I’m here to tell you that we need more unique and qualified mental health clinicians in the world! Please note: this is not legal or financial advice.
Starting a Private Practice
There are three basics to consider as you get ready to start your private practice: make sure it's legal, make sure you have a place to practice, and make sure you have the structures in place to support your practice.
Creating a Legal Therapy Business
To ensure your therapy practice is legal and protected, you'll need to file a Limited Liability Company (LLC) or a (PLLC). Which you file depends on your state, your business structure, and tax filing. Essentially, it creates a legal separation between you and your business. Filing an LLC is easy to do and can be done online in mere minutes. Again, I'm not a lawyer, so please consult with an attorney to determine the best steps for creating a company in your area.
You'll also need an "EIN" and an "NPI" number. An EIN is an "employee identification number" that the IRS uses in association with your business. Think of it as a social security number for your business. You'll need an EIN to open a business bank account. Google "your state + EIN" for information on how to obtain one in your area. An NPI number is a "National Provider Identifier," is a 10-digit number assigned to a health care provider. An NPI is associated with insurance claims, coordination of benefits, authorizations, and eligibility information.
Even if you don't plan on running an insurance-based therapy practice, you'll want an NPI so your clients can seek reimbursement through their insurance provider.
If you decide you don’t want to take insurance but want the reimbursement process to be more streamlined for your clients, there are services that can help. With a service like Mentaya, your client pays you directly your full rate, and Mentaya will submit the superbill information on your client’s behalf. Mentaya submits claims after every session. After your client meets their deductible, they’ll receive reimbursement within weeks! This process can help bring the cost of therapy much closer to your client’s insurance copay.
If you are a therapist and are interested in trying out Mentaya to provide an easier out-of-network reimbursement process for your therapy clients, use code mindmoneybalance to get a month of Mentaya's benefits checker widget for free!
Create a Separate Business Bank Account
You need to keep your business and personal finances separate as a private practice and small business owner. To open a business bank account, you'll need an EIN (mentioned above). It's also important to keep your business credit cards separate from your business bank account. I like putting all of my business expenses on a business credit card to keep things separate easily and (because I love safely earning miles and points) using my business purchases to earn points.
Currently, I'm a fan of the American Express Blue Business Plus to earn points or the American Express Simply Cash Plus to earn cashback rewards. Only use a business credit card if you know you'll be able to pay off your expenses in full at the end of each billing cycle.
Track your Business Income and Expenses
Hiring a Bookkeeper or CPA
If you feel like you don’t want to do your own bookkeeping as outlined above, or if you just know that it’s not the best use of your time as a private practice therapist, you can hire a bookkeeper or CPA. The benefits of hiring a specialist to help you with your business's financial needs include planning on setting aside money for taxes, understanding how much profit you’re making (or what needs to change so you can create a profit), what you should be paying yourself, if you can afford to pay for additional services or help, such as investing in website development, attending a continuing education conference, or moving to a bigger office!
While each bookkeeper offers different services, they often can provide monthly reconciliation of your bank and credit card accounts, helping you categorize transactions appropriately and providing monthly and quarterly reports. These monthly and quarterly reports may include a profit and loss statement (P&L), which categorizes a therapist’s monthly income, expenses, and overall profit. Having a bookkeeper can help you understand the financial side of your practice and give you insight into what is or isn’t working in your therapy practice. While bookkeepers aren’t required to carry a license or certification, many of them have either a college degree, work experience and/or bookkeeping professional certification. You can opt to work with a bookkeeper on an ongoing basis, or if you want to hire someone short-term to walk you through how to use a bookkeeping system and get your books caught up, you can do that too!
I fell behind on my books (yes, it happens to the best of us), and hired Dream Joy Consulting to help me get caught up and provide me with monthly and quarterly reconciliations. When I was looking for a bookkeeper, it was important to me that they understood the nuance of mental healthcare, were familiar with the platforms I was using, like Gusto (Get $100 after your first payroll by using my link) and Quickbooks, and had reliable and open communication with me, not just about my business, but about their pricing structure and scope of services. If you are a healthcare provider in the U.S. looking for a bookkeeper, I recommend checking out Dream Joy Consulting!
What is a CPA?
A CPA is a Certified Public Accountant and is most commonly associated with filing taxes and offering tax-related guidance. Most CPAs do not offer bookkeeping services, though some agencies may have a bookkeeper in-house. It may be time to hire an accountant if you need help estimating your quarterly taxes and filing your annual tax returns, are hiring employees or contractors, or creating financial projections for you (a fancy way of saying making an estimated guess about how much money your practice may make in an upcoming quarter or year). I personally have a CPA available to help me with my annual tax filing, but I don’t use one monthly.
How to Know If You Need a Bookkeeper or CPA
If you are comfortable with your private practice expenses but don’t want to deal with the hassle of bookkeeping each month, a bookkeeper could be a good investment. Another time where it’d be helpful to hire a bookkeeper is if you fell behind on your bookkeeping and need help getting caught up. If your therapy practice recently went or is about to undergo major changes (think: hiring and onboarding new therapists, adding additional office space, or providing a new service), you may want to consider an accountant to ensure that you are doing everything in a way that keeps your private practice financially sound.
Find An Office for Private Practice
Unless you want to run an online-only therapy practice, you'll need to find office space for your private practice. There are lots of factors to consider. Here are a few questions to ask yourself before you sign a lease for a new office:
Is the office conveniently located?
Is it available on the days and times you want to practice?
Is the office physically accessible? E.g. is parking easy? Is it located near public transit? If it's not on the first floor, is there an elevator available?
Is the office private? You'll need to make sure that the office has adequate soundproofing to protect your clients' privacy for a private therapy practice.
Are furnishings included? What about amenities such as WiFi or access to communal spaces like a restroom and kitchen?
Start an Online Therapy Practice
Looking to start an online therapy practice? You aren't alone. During the pandemic, lots of therapists realized the benefit of having an online therapy practice. For certain client populations or clinicians, an online therapy practice may be an even better fit than an in-person setting. Examples of clients who may benefit from 100% online therapy:
Neurodiverse clients
Clients with limiting physical disabilities.
Clients in rural areas or areas that are underserved by therapists
Clients who are concerned about the stigma of seeing a therapist in person
What about private practice therapists? Some private practice therapists who thrive in an online-only environment are ones who:
Need to work non-traditional hours
Are neurodiverse
Have physical disabilities or chronic health conditions
Starting an online therapy practice is almost identical to beginning a physical practice, minus having to find an office space. You'll still need a private and quiet place to practice and make sure you have a speedy WiFi connection. Also, as most therapists don't want to list their home address, you may want a P.O. box or join a co-working space that accepts mail.
Websites for Private Practice Therapists
Gone are the days of the therapist handing out business cards; these days, a huge component of starting and maintaining a therapy practice is having a beautiful, responsive, and hardworking website. I'm a fan of website templates that a clinician can customize. My friend Monica at Hold Space Creative has beautiful therapist website templates, and I purchased one of her therapy website templates (yup! You are scrolling on her "Andrea" template!). Check out all of her beautiful and hardworking templates, workbooks, and logo suites here.
Don't get too overwhelmed when you start your website: you basically need a homepage (where people land when they get to your website), a services page that outlines what you offer, and an about page highlighting who you are and why you do what you do. Your about page is also where you can house your credentials and training. There are lots of website options; I'm a fan of Squarespace as it’s a bit easier for newbies, though you can also use Wix or WordPress as a low-cost website option.
Writing Copy for Your Website
When you write the words on your website, known as “copy,” make sure you use plain, non-jargon words and terms. Having copy (words on your website) that speaks directly to your ideal client, without all the cliched “welcome,” “I’m so glad you’re here” or “[your favorite quote]” I strongly recommend going through a website copy workbook, like the ones from Hold Space Creative, that guides you through gentle prompts that help you attract the right clients, and repel (yup) the ones who aren’t.
Write as though you are talking to a client in your first session, not like you are talking to a colleague enrolled in an EMDR class. For example, if you are working with trauma clients, instead of using a term like “hypervigilance,” use something like, “the feeling of always looking over your shoulder for something bad to happen.” Or if you are working with families on reunification, say, “helping families reconnect after divorce or separation.” Not only will most potential clients not know what the therapy jargon is, but it’s also a huge turnoff to see a list of terms. When a therapy seeker looks for a therapist, they want to know how you can help them, specifically.
If you are struggling and your pages are getting overly wordy, try this exercise: “I help [clients] with [problem or stressor] to [outcome].” As in, “I help young professionals with job worries to feel confident and empowered in the workplace.” Another version of this is: “I help [clients] with [problem or stressor] using [non-jargony technique].” This might sound like, “I help women of color with physical pain using a combination of soothing breathing and mind-body techniques.
Hold Space Creative (HSC) has my favorite copywriting templates. HSC uses a combination of insightful questions and mad lib fill-in-the-blanks to help you write in a way that sounds like you and speaks to your ideal client. The Copywriting templates range from how to write the words on your homepage, to what to say about yourself on the “about” page, and more! Check them out here.
Which EHR for Private Practice Should I Use?
You need an electronic health record (EHR) or electronic medical record (EMR) is a type of practice management system that is HIPAA compliant, secure, offers scheduling and billing. When determining the best EHR EMR for private practice, find one that has things you most value. For example, if you are a fan of talking directly to customer service on the phone, find an EHR/EMR provider with this feature. If you need an EHR that can help with insurance billing, make sure your EHR offers that feature.
I'm a fan of--and use--Simple Practice (psst—if you use the link I share here, you’ll get two months free–higher than the $100 or 1 month free shared elsewhere. I love that I can embed a booking button right onto my website, their helpful video tutorials (I'm a visual learner), and automating billing and appointment reminders. They also include templates for office policies and HIPAA paperwork, making it a cinch to have intake documents ready when I started my private practice. I also love Simple Practice because they have Simple Practice Learning, a platform of both CE and non-CE video trainings, and Pollen, a blog for entrepreneurial health and wellness providers.
How to Get Referrals For Private Practice
Getting referrals to your private practice is critical in keeping your practice full and profitable! Your website, when built properly, should act as a 24/7 advertisement and receptionist for your business. This means making sure you speak to clients you are uniquely qualified to serve, having helpful information on your website they can use right away, and a quick and easy way for them to book a session with you.
Other referral sources are through word of mouth. Think about people in allied professions who might be a good mutual referral source. Professions that come to mind are primary care providers, school counselors, massage therapists, or professional organizations where your ideal clients might be. While social media gets a lot of hype and can absolutely be helpful, it takes sustained effort and knowledge to maintain.
I did an experiment in May of 2021 where I took a month off of Instagram where I had over 9k followers (I’ve got almost 15k now) and was thrilled to see that my website continued to bring in traffic and clients even while I was away! If you want to use social media to get referrals to your private practice, consider which platforms you use most often, and start there!
How to Get More Private Pay Clients
A therapy niche and strong referral sources are the most important factors in getting clients. But, if you are interested in building a private pay therapy practice, you must make it easy for insurance clients to get reimbursed for therapy.
With a reimbursement service, such as Mentaya, your clients pay you directly your full therapy rate, and Mentaya will submit the superbill information on your client’s behalf. Mentaya submits claims after every session. After your client meets their deductible, they’ll receive reimbursement within weeks!
This can help build your caseload of fee-for-service clients by helping clients use their insurance benefits even though you are an out of network provider. It's a win-win with Mentaya: Collect the full fee you deserve while significantly lowering client costs.
If you want to try out Mentaya to provide an easier out-of-network reimbursement process for your therapy clients, use code mindmoneybalance to get a month of the Mentaya free!
How Many Clients Should a Therapist See Each Week?
An average client caseload or the average number of clients a therapist should see each week is arbitrary. That number was created for agency and hospital use, but doesn’t apply as neatly to private practice therapists. Why? Because as a private practice therapist, you set the number of clients you see each week based on your energy, schedule, and amount of revenue you need to generate. I break down the average client caseload in a comprehensive blog post here.
How Much Does it Cost to Start a Private Practice?
Lots of therapists are worried about the overhead and start-up costs of private practice. With online therapy becoming more normalized, the start-up costs are fairly low, especially when you consider that most small businesses have to invest several thousand dollars; starting a therapy business has a relatively low entry barrier. Cost varies in terms of how much it costs to start a private practice. That said, I did find some general numbers to help you think through the cost of starting your practice. Here are sample costs that were covered in this post:
LLC paperwork one-time expense of $100
EIN and NPI numbers $0
EMR Software $39-59/month
Website Hosting $18-40/month
Office space varies wildly, anywhere from $200-1,000/month depending on your location, if you are signing an annual lease for full occupancy, renting furnished or not, or subletting a couple of days.
Website Template (optional but strongly recommended) One-time investment $400-1,500
Get Started On Your Private Practice!
Starting a private practice is an exciting milestone, and I'm here to cheer you on! Whether you are starting your business because you were sick of agency life bureaucracy, ready to have your income reflect your hard work, or you are ready to see fully aligned clients, your private practice is needed. If you need more help starting and growing your private practice, I have a suite of mini courses that can help you right here:
Other posts you might like:
How to Set Fees In Private Practice
Tax Deductions for Mental Health Therapists
Average Caseload for Private Practice Owners
This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult their own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Some links included in this article are affiliate links, meaning I may earn a commission at no additional cost to you. Using affiliate links is a way to support my work and this content, so thank you!