The truth is, whether your private practice develops into something sustainable that can help your community long-term is largely based on math. Every therapist's favorite topic right? If the math doesn't add up, your business can not sustain. Period. Or can it?
Following Other's Examples
A blogger I really like shared an article the other day and recommended looking at Psychology Today fees posted by other therapists to determine what appropriate high, and low fees are for your area. But there is one big problem... actually there are several big problems...
Problem #1: Trusting Other Therapist's Financial Savvy
When you go to Psychology Today to determine the range of your fees, you are trusting that other therapists have done the math. You are trusting that other therapists have a budget, are paying their taxes on a timely basis, and that they are able to pay their bills. Unfortunately, I have talked to too many therapists with full practices who are below the poverty line and at risk for losing their homes, having difficulty paying for groceries, etc. You have NO idea how the other therapist's developed those numbers.
Problem #2: You Have No Idea If Anyone Is Paying that Amount
Before we launched the Business School Bootcamp for Therapists we interviewed HUNDREDS of therapists. We asked every single one: How many clients do you have? What is your fee? What percentage of your clients pay your full fee? It was shocking how many therapists laughed and said "none!" like it was a crazy suggestion. Seeing a bunch of high fees on Psychology Today could cause you to over-inflate how much people in your area are actually paying.
Problem #3: What if You Don't Have a Trust Fund?
Some therapists truly do this work as a hobby. They love the work, and they have the financial security to run a business that breaks even, or even operates at a loss. You may be looking at numbers that are skewed by therapists who have a trust fund, have a partner that makes loads of money, or who live with their parents and have no children. Every situation is incredibly different, and comparing yourself to someone who is operating at a loss can give you incredibly unrealistic expectations.
Problem #4: Are You Trying to Compete with Amazon?
Ever wonder why your local bookstore is never as cheap as Amazon? They truly can't compete. Did you know that Amazon loses almost 2 BILLION dollars on its free shipping offers alone? They are in this for the long-haul and shutting out retailers that can't afford to lose hundreds of thousands, much less billions of dollars. Without looking at your fellow therapists income and expense reports and knowing what their expenses are- it is difficult to get a clear picture as to whether you could offer the same pricing. For example: My first sublet contract when I started my private practice was $75 a month. Let that sink in... $75. A. Month. When I started seeing clients several nights a week, I doubled it to $150 a month... but honestly- the place I was renting from would've happily allowed me to use it on the cheap. Was it the swankiness place? NO! However, it did allow me to keep my expenses extremely low and have decent profits from Day 1.
Problem #5: You Can't Skip Over Budgets, Business Plans, and Taxes
You need a clear picture of your expenses, tax situation, and a clear business plan. You need to write out all the expenses- long-term and short-term of running a business. You need to get savvy about business taxes. Did you know that as a proprietor you pay 13% more in taxes right off the top? Are you prepped for that? One of our Starting a Counseling Stories Shares Her Experience with not being prepared for tax time and working with the IRS. These are all pieces that impact your fee for seeing clients.
Problem #6: Research the Market Beyond Psych Today
One of my favorite pieces of market research is looking at high end spas in a person's area. I often find therapists are charging less than 30% of what spas are charging for facials. Before you determine that your fee is "outrageous" look around. People invest in things that are important to them. It is ok to set a fee that works for you financially.
Problem #7: Assuming Paying Bills is Luxurious
I think the big problem we have, the global problem among therapists is a skewing of what is appropriate. If you complete your business plan and your fee is crazy high- you might need to look again at your budget. But, I see a TON of therapists whose fee is perfectly appropriate. They aren't buying Minola Blanik's every month, taking trips to Europe 3 times a year, etc. They are simply looking at living a comfortable life, the same kind of life they want for their clients. This isn't to say luxuries are a bad thing... but paying your bills off every month, planning for retirement, illness, and a vacation every year is NOT crazy luxury- it is being a grown-up. If you have an appropriate budget and your fees aren't aligning with your colleagues- it is comparing apples and oranges. You do NOT see their bank account, savings account, credit score, etc.
Clearly I am passionate about this topic! The truth is, I don't care how much or how little your charge. I just want to make sure that you are being taken care of so you can sustain the important clinical work that you do! Need some help getting things on track? Check out the free Mini Business School Bootcamp for Therapists today!
Homework: Comment below and share the most important thing you've learned thus far in regards to setting a reasonable fee. OR, take the free how to set fees in private practice training by clicking here.