*Last updated 9/3/19
6 Figures in Private Practice. How much can you really make in private practice? What’s a therapist’s salary like when they own their own business?
6 figures sounds appealing.
In the marketing world it can mean success, a thriving business, or at the very least it conveys the sense of stability.
When I ask people joining bootcamp about their financial goals, I often hear "I want to make six figures."
My response is: Where did that number come from?
“I’ve made $200k in my practice this year,” sounds really great but does that mean revenue, that they brought in that much in collecting fees for services or does that mean after all is said and done, they netted $200k?
So I wanted to break down how to make 6 figures and why it’s important to understand where that number comes from, then we will talk about the variables that impact what you bring home as well as how to make multiple 6 figures, not just in revenue in your practice.
Let’s do private practice math!
Before we get started, I am not an accountant or an attorney. This is merely meant to spark some thought for you as you plan your business growth. Heck, this is rough math we are about to do here….
Let’s say you have 20 sessions a week and charge $150 an hour and you work 45 weeks per year, accounting for sick time, vacation time and if your clients are out sick.
Your gross income (money before taxes) will be $135,000.
Congratulations - you’ve made 6 figures…sort of. When I think about what I want to make, I think about what money I want to bring home for us to use in our personal lives. Don’t you? The money I use to pay the bills, mortgage, groceries, retirement fund, saving, and vacation fund, that’s what I am looking at. What do I need to make from my business to sustain the life I want/have/need?
Let’s say your expenses including rent, utilities, licensure costs (renewals, CEs, travel to trainings), marketing cost (social media tools, website, directories, networking) add up to about $40,500 a year.
Yikes?! No way you say? You may think those expenses are super high. Which I totally get. I really, really do. But from my own personal experience, and coaching a lot of private practice owners, I understand the expenses of running a business, even a lean one. I also have to pay for my own healthcare, I have my business match my retirement contributions (talk to your financial planner about the tax advantages for this) and I have other savings for technology in my business. That is 30% of your gross income going to expenses. That is what I usually estimate roughly for businesses - a rule of 30/30/30 - 30% to expenses, 30% to taxes and 30% profit in your pocket. (We will talk more about factors that contribute to what you bring home.)
Well, after expenses we have made $94,500. YAY! That’s pretty close to the 6-figure mark. But now, we have to pay the government taxes. You have a self employment tax and maybe state taxes (Go California!). Depending on your tax status, filing single, jointly etc you could pay upwards of 30% in taxes. Let’s roughly estimate the 30% to $28,350. - This is really rough math if you are in the US because we have all sorts of new tax laws depending on the entity of business you run. But this is just to make a point.
Now you are left with $66,150, net income in your pocket for you to live off of.
I am not saying that $66k isn’t enough to live off of, but that amount will get you farther in some places than others.
So what if you want to bring home 6-figures, to live off of. We have a massive calculator in our bootcamp that will tell you what to charge based on all of these factors, but for simple math….
You saw 25 clients at $175 and worked 45 weeks a year. You would gross $196,875. Because you only changed your fee, let’s assume your expenses don’t change a whole lot. We will leave it around $35,000, leaving you with $161,875. Then we take the 30% tax off of that you have $113,312.50 in your pocket. You’ve profited 6 figures!
BUT WHY do you need a 6 -figure practice?
This is a judgement free zone. At the end of the day, every person has different needs and a different lifestyle. Some of you are single, some of you support a huge household and others of you are part of a dual income relationship. Many of you have debt, school loans and other financial factors that play into your cost for living.
You need to make money to keep the doors open. It is truly necessary to be able to run a business. But how much you need, is entirely up to you. This is about being focused and truly looking at what you want to create out of your business. Pick your financial goal based upon your vision.
How do you scale to multiple 6 figures in private practice?
If you want to make more income in private practice you can
See more clients
Work more weeks per year
Reduce your expenses as much as possible
Offer higher end services - retreats, intensives, group work that have a higher price point and help more people in a shorter amount of time.
These are all factors that play into how much money you take home at the end of the day. However, to scale into multiple 6 figures in a private practice setting, this usually does mean adding clinicians to your practice. I have seen people make low multiple 6 figures solo with adding specialized services and charging higher rates. Even if you become a Brene Brown - you are going to have to hire a team to support you. So hiring is your next step.
With that said, your expenses will go up, sometimes beyond (We work closely with our clients to keep this number as low as possible though) the 30% depending on your group practice model, but other expenses will not change.
But if you want to grow to multiple six figures well, please hear me on this…
Pay people well. Be a person of influence and change the fact that we are the worst paid masters degree. Trust me. I’m not asking you to sacrifice and not make money at all ( though I have seen this happen, in fact I have seen it cost with having the additional clinicians). I am simply asking that you consider the power you have in your growth to make a difference not only in your community, the clients, your own bank account but in the lives of other clinicians.
With that said, we have seen, coached others to implement and believe that you can grow a practice to multi-6 figures paying well, having multiple clinicians and being creative with your therapy model - adding in group therapy, retreats or whatever you find to be transformative to the clients. Having a solid financial picture in place is key.
Another math lesson
If you have 10 clinicians who see 20 clients and charge $150 per hour (keeping my math simple here) that puts you at $1,350,000 in revenue. Your expenses are going to be much higher. Paying your clinicians $60 an hour (again, simple math not saying to pay this amount - $540,000), plus payroll expenses, rent, utilities, marketing, software, and all the other expenses - even at 50% expenses (a rough estimate) you would net $675,000. Then taking off taxes (again? yay?) at about 30% (could be higher), you would net $472,500. That is a multi-figure practice with my sad math skills.
Do you need a money mindset shift?
Does this conversation make you uncomfortable? If you want to make money, you have to relate to it in a healthy way. It's time to change our mindset about the 6 figures by getting more specific and redefining success in private practice.
However if might make you uncomfortable because the thought of having that many clinicians and that large of a practice makes you want to run for the hills! That’s ok. I never wanted a group practice. I had managed groups prior and I liked it just being me. So here is what you need to do…
Explore holistically, where are you wanting to be physically, spiritually, relationally, emotionally, and financially in your life.
For me, success is being able to provide for my family while still maintaining my overall wellness. No amount of money is worth a relapse in my autoimmune disorder. Success is the ability to do things like taking trips with family, being creative, finding some "me" time, and build relationships. To be able to do these things, means I have a happy, successful business that has allowed for this not only by financial means, but also because of my work I have the freedom with my time and energy because my successful business hasn't created a vortex of energy suckage. Success means because I have more peace in my life, I am a better coach and my clients benefit. I have time for training and improving my craft.
6 figures leads to what in your life? Speak to that. Speak to the change you want to see in the lives of others and in your own. Making money is private practice is doable. Making multiple 6 figures is even doable. Maybe making 6 figures isn’t important for you anymore. Regardless, have your financial goals so you know what to create in your business and how it will impact your life.