Why Your Therapy Practice Needs a Business Plan

Last updated 11/08/22

Private Practice Business Plan

You’ve either been contemplating starting a private practice or you’ve built one and are continuing to watch it grow. You’ve got ideas, and you have stuff you do every day to make your business run, but you’ve never really put a plan together. In fact, a private practice business plan is one of the last things you want to deal with.

You envision a stack of papers and reports, full of business-y, legal information that doesn’t seem to do anything but collect dust on top of a file cabinet. Is this really what a business plan is? Yes and no. We go over the details below and why it’s so important to have a business plan as a private practice owner.

What Should Be Included in a Private Practice Business Plan?

Your business plan looks at why your business exists, its mission and values, who you serve, what services you provide, how you generate revenue, the expenses of the business, your marketing plan, and your projections for your income. It even covers points of analysis, looking at your market, demand for services, understanding what makes you different from others, and looking at the competition. It outlines this for the next 3 to 5 years and shows the rate of projected growth over that period of time.

When someone goes through our Business School, the are effectively making sure they have covered all aspects of their business plan. At the end of Business School, we provide a template for Business Schoolers to organize all their hard work into a single document. We thought it might be helpful for you to see the actual categories of a formal business plan so you can check to make sure you have what you need in your own business.

Therapist Business Plan Checklist

Mission Statement

Why are you doing this business? What is its purpose?

General Business Description

Covers the type of business, and its history, and discusses who owns the business and includes a swot analysis.

Products and Services

Discuss all of the types of services and products you offer and their pricing as well as the advantage you have in offering these services and products.

Market Research

Shares your research showing the need for your services as well as discuss what other services exist that are in your same market.

Marketing Plan

Discusses who your clients are, your niche, and your marketing strategies along with a budget.

Operational Plan

Lists the processes you have to keep your business running, your hours, building, and safety information. Also, identifies the key roles of your team members.

Legal Plan

Keeps together all of the legal documents you need to run your business from licenses to insurance policies and contracts.

Management and Organization

Discusses the leadership structure in your business and how leadership and communication are organized.

Professional Support

Identifies the other outside key support members who help your business function such as your accountant or attorney.

Financial Plan

Puts together documents showing your past financial statements and also creates projections for the future based on that information and estimated growth.

This list may seem long, and it is a summary of the information you need in detail. We just want you to go through these general concepts and ask yourself if you have everything you need so you can grow and be in your business long-term.

Why Don't Most Therapists Have Business Plans? 

We were not taught how to develop business plans. When we ask colleagues how to start private practices, many of them stumbled through the process- so we replicate what they did. Many therapists just focus on one aspect of the plan and then hope they will figure out the rest later. The most popular go-to of the plan is marketing. Unfortunately, just because someone is "busy" or "full" doesn't mean they have a profitable private practice. You can have a busy, full practice that is barely scraping by, or that isn't making any profit at all! 

Seeing the list above can be overwhelming. We also think this is why people don’t do business plans. They feel incapable of finding all the information they need and sometimes, ignorance just feels easier than tackling the learning curve. We can also imagine that if you think your business plan doesn’t do anything for your business, there is going to be little to no motivation to get it done.

Why You Need A Business Plan

If you have a household of any kind, you know it takes a little planning to make sure the bills are paid, food is on the table and everyone is cared for. Your business plan is how you do that for your business. It organizes you so you can be successful in private practice and keep your doors open as long as you desire.

Your business plan is a living document that outlines all aspects of your business. We say it is living because this is a document you review annually and update. The information you have informs the actions you take, every day in your business.

Your Clients Want You To Be Around

The decision to open up your private practice doesn’t come lightly - we know this. It’s a big decision for your future. While many of your clients may only work with you for a few months, some of your clients are signing on for intense work that may take years. They are trusting that, if it is within your power, you will be around to complete it with them. They are also trusting that down the road when they refer to you, you will be there, doors open and ready to help.

Helps You Plan for Change in Your Practice

We don’t expect your business to stay open forever or for your business to look the same as it did 5 years ago. You want a plan that can adjust as life happens. Some people end up moving, selling, or closing their practice. Some people choose to keep their practice boutique small while others expand to multiple locations.

The business plan helps them respond to their needs when life happens. All too often those without plans end up closing their doors because they can’t stay afloat. If you are going to close your doors or make a big change let it be out of what is best for you, not because you didn’t know how to run a business.

We believe in building with the end in mind. Do you want to close the doors one day or sell the practice? Your business plan is going to help you with that plan.

What if You Don’t Need to Make a Lot of Money in Your Therapy Practice?

We talk to therapists who are relying on their spouse's income and insurance benefits. Their spouse is, in many cases, actually supplementing therapy services for the community. Which would be fine if you were starting a non-profit.

Regardless if you need money or not, if you are starting a private psychotherapy practice, it is considered a for-profit venture. And, if you don't make a profit after a few years- the IRS can determine that your work is actually a "hobby" and disallow any write-offs. 

In today's world, it makes sense to have a backup plan. Just because you don't have to make money in your business doesn't mean you shouldn't. It doesn't mean you should devalue your work, training, expertise, and profession by charging a rate that doesn't match the expenses of the business or the expertise of the provider. 

The work we do is hard. The cost of going to inspiring trainings, getting ongoing supervision or consultation (even after getting licensed), and taking time off is high. Whether you decide to save your profits, give them to charity, or buy a beautiful handbag is your business.

Do You Need More Help with Your Therapist’s Business Plan?

Do you want something that is more therapy specific? Consider finding out a bit more about our upcoming Business School Bootcamp. We dig into business planning and help you start the process to reduce the overwhelm!