How to Set Your Fee in Private Practice (and a FREE fee-calculating tool!)
Today we are talking everyone’s favorite subject, money! Just kidding, it’s definitely not everyone’s favorite subject, at all. Not even a little bit. However, for the purpose of this post, let’s lovingly set our emotions aside (don’t worry, we’ll talk about them plenty in another post) and for now, just talk straight-up business. And let’s remember this as we walk through this together:
Your fee is ultimately a business decision.
Your fee does not have to do with your value or worth. It does not have to do with what you presume others can afford. As therapists we can lose sight of that in ways that other professions do not.
OK, and now that we have the mindset down, we’re going to get a little bit “math-y”. Math might not be your favorite (it’s not mine) but I’ll do my best to make it manageable and fun, and take you through it step-by-step. Let’s go!
Step 1: Determine Your Budget and Expenses
First, grab yourself a pen, paper, and calculator and kick it old school, or if you’d like, click here to download my FREE spreadsheet, which already has all of the steps pre-loaded. You just have to enter in your own numbers.
Here is a list of things you may want to factor into your budget. There are 4 Categories (Business, Personal, Savings and Self-Care). Some may not apply, and you may have other categories you’d like to add that are unique to you:
Annual Office Rent (Monthly Office Rent x12)
Other physical office expenses (supplies, office cleaning, water delivery, etc.)
Business Consultant or Coach
Listing services such as Psychology Today
Any other paid advertising you do (or plan to do)
Social media planning tools (Hootsuite, Meet Edgar, etc.)
Malpractice and Liability Insurance
Accountant and/or Accounting Software
Home Rent or Mortgage
Car (any payments and insurance)
Transportation costs (gas, public transportation)
Basic Personal Care (clothing, personal hygiene and grooming-I’m not considering this “self-care” this is just like, the shampoo, the new socks, the haircuts, etc.)
College fund for kids
Money towards “emergency fund” (6 months of income)
That car you always wanted
All the spa treatments
Fancy cycling classes
Note: For the Self-care expenses, really go big. Think about the life you’d want to have that would allow you to really and truly do your best work, and not feel a shred of resentment when your clients are getting those promotions, getting weekly massages, and going on expensive trips!
You might be surprised at how do-able some of these things are if you actually just factor them in. If you’re feeling scared about adding in some of these bigger ticket items, just remind yourself you can always revise this, but just allow yourself to see the actual numbers if you just include your wildest wishes.
Now, add all of these items up, and this is going to be your annual budget.
Step 2: Factor in Taxes
In general, you are going to want to factor in a 30% tax rate (that’s federal and state combined) when you think about your income. So if you make $100,000, it’s actually $70,000 after taxes. If we are thinking about what you need to make to run your business AND have the life you want we have to factor in that 30%.
So, take the final total from Step 1, and multiply it by 1.4
The new number you get is how much you need to make in a year-your annual income goal.
Step 3: Figure Out What You Want Your Work Week/Year To Be
A) How many client hours do you want to do in a week? And remember, this is not “how many do you do currently?” It’s really “how many do you want?” So think about in a perfect world, the number of clients you would see that would allow you time to do things like clinical supervision and training, marketing, doing your notes as well as pursuing those other things in life that make you happy.
B) How many weeks a year do you want to work? Factor in weeks of vacation, long weekends, sick time, personal days, holidays, etc. Remember, you are your own boss, so you don’t get paid for these things unless you factor them in.
Take the number from A and multiply it by the number from B. That is your total billable hours for the year.
Step 4: Calculate Your Fee
Take the number from Step 2 (budget after adding on 30% tax) and divide it by the number from Step 3 (total billable hours) and VOILÀ there you have your fee!
So now let’s talk about the feelings for a second
How do you feel about that number? Is it surprising? What shows up for you when you see it? Do you have the urge to tweak the numbers to bring down the fee? Or maybe it’s lower than you thought? Either way, you are probably going to feel some things. And these would be fruitful to talk about in your own therapy. But don’t work through these feelings with your fee. Remember:
Your fee is ultimately a business decision.
This fee might not happen right away, but now you know what your goal is
You might have clients who came in at a lower rate, and that’s OK. You can have conversations with those clients, if you’d like, about your new fee and whether they can increase what they are paying you, and meanwhile, you can start charging the new rate to new clients as they come in.
You can also factor some things into your budget, like working community clinic hours or seeing low-fee or sliding scale clients, if that is important to you. I usually have 2 slots for sliding scale, but by no means do you have to do this.
The nice thing about getting paid well for your work is that it actually helps fee up more financial and emotional flexibility to do other important work that matters to you.
Additionally, this spreadsheet is based upon you setting your own fee. The picture will look different if you are taking insurance because you are beholden to their reimbursement rates.
If you want to learn more
If you want some more resources on fee-setting, I have a couple of recommendations:
This podcast features Tiffany McLain of HeyTiffany.com, who is maybe the number one source out there when it comes to helping therapists work through their mindsets about money in private practice. She’s really dynamic and amazing at what she does. In this podcast, you’ll get to hear her do mini-consulting sessions with actual therapists, as they talk very personally about what gets in their way when it comes to money, and how they dealt with it and are thriving in their businesses. It’s fascinating, and super helpful. You will hear yourself in at least one of the episodes, if not all.
This is the first book I ever read when I was starting private practice , and it still totally holds up years later. It’s full of useful and practical tips about starting a practice, and also it addresses head-on many of the common things therapists struggle with (aka guilt, guilt, and guilt) while setting their fee.
I’d love to hear what you came up with for your fee and how you felt about it, or if you have any questions! Email me or contact me on social and let me know!