Top 7 Private Practice Salary Mistakes (Based on Survey Results for Therapist Business Owners)
We sent out a survey to our community of private practice therapists in 2023, and we learned a lot about the mistakes therapists are making when setting their private practice salary. We want to share with you what we learned, and what YOU can learn from it.
The Importance of Not Making Salary Mistakes as a Therapist
Salary mistakes impact your LCSW private practice salary, LPC private practice salary, LMFT private practice salary, and psychologist private practice salary. In other words, these mistakes don’t care what your license designation is, how many student loans you do (or don’t) have, or what your insurance reimbursement is. If you’d like to create a sustainable salary while giving clients a great experience of therapy, then read on!
What Are the Top Salary Mistakes Therapists Make?
Salary Mistake #1: Not Calculating Your Private Practice Salary
We’re not taught how to be business owners in grad school, so most therapists don’t know how to calculate an appropriate therapist salary upon graduation. In fact, most of us were taught to work for free — or work for very little money for thousands of hours with a bachelor's and/or post-graduate degree.
Take a breath in and think about that for a moment. In what other fields do you see this so consistently? Probably only in the medical model of medical school, but then, after all that debt and training, their salaries go up exponentially, but do ours? Mental health degrees continue to be the worst-paid master’s degrees in the United States.
In order to compare your private practice salary to your W-2 salary, you need to take your gross income and subtract expenses, vacation pay, sick time pay, benefits, and taxes (including the 15% self-employment taxes) and compare the money that lands in your pocket for living expenses. Do you know how much money you really need to bring home after taxes? Do you know what your salary needs to be in order to start paying down student loans, paying off credit card debt you may have accumulated after years of being underpaid, and more?
Salary Mistake #2: Not Knowing How to Calculate Your Hourly Private Practice Rate
Understanding how much you really need to take home is the first step in being able to determine your salary, but that’s not it. When we teach therapists how to create their business plans in our Business School for Therapists, we start with the number of what they need in their pocket (their take-home pay) and then we work backward from there.
Remember above when we talked about taxes, expenses, vacation, and sick pay? You need to calculate the value of all of those things (and we haven’t even talked about retirement yet) and create a clear plan for what your gross income needs to be. Your gross income is the total amount your business brings in, your net is the profit after expenses and before taxes, and your take-home is after all of that.
If you don’t know your gross income number, how can you possibly set your hourly private practice rate? If you don’t know what % of taxes you need to pay to the government, how can you set a private practice rate? You can’t! Your hourly private practice rate can’t be calculated until you know what your gross income really needs to be. Then, you can start to figure out how many weeks you’ll work per year, and how many clients you can see and still do great work with.
Salary Mistake #3: You Don’t Know How to Calculate Your TAKE-HOME Hourly Private Practice Rate
In our How to Make More Profits and Work Less training, we showed how to calculate the take-home hourly private practice rate, and it was truly shocking for most private practice therapists. Since tax time is upon us, now might be a GREAT time to calculate your take-home hourly private practice rate. Go into your electronic health record or your business account and look at all the income you brought for 2022 from your private practice.
Next, let’s get clear about everything you spent on your business in 2022. This might be in your Quickbooks or accounting software — maybe you just look at all the expenses that came out of your business account in 2022. And yes, let’s include those medical benefits or anything else you paid into.
Now, sit down and be REAL about how many hours you worked IN and ON your business in 2022. Yes, that includes checking emails and returning calls on evenings and weekends. That includes reading blogs like this one, hanging in Facebook groups to learn about business, writing documentation, avoiding documentation, and all the rest of it. That includes researching certifications, reading books on your craft, and going to trainings.
Now, take gross income MINUS expenses MINUS taxes to get your total take-home salary.
Then, take your total take-home salary and divide that number by the total number of hours you worked in the year to get your take-home hourly private practice rate.
(If you just averaged your hours per week, then you could do take-home salary divided by weeks worked divided by hours worked per week to get your take-home hourly private practice rate.)
Understanding how much you’re REALLY making per hour can be hugely motivating to shift the things that aren’t working for you. There are therapists making less than minimum wage right now with a graduate degree. There are therapists right now who could’ve stayed working for that agency and be making more money with less stress, but it doesn’t have to be this way.
Salary Mistake #4: You Accidentally Do Over 5 Weeks of Unpaid Labor with Clients Every Year!
If I emailed you today and asked you if you’d be willing to work an extra 5 weeks in 2023 without getting paid for that time, what would you say? Probably not even respond or be LIVID that I would even think of asking that. But you might be doing this and not even realizing it!
On average, therapists surveyed reported going over 7 minutes on each session. The therapists surveyed see 18 clients a week on average, 48 weeks a year, which translates to over 5,000 minutes per year and nearly 5 weeks of clinical work!
Oof! You know how you struggle to refill your water, go to the bathroom, have energy for documentation, return phone calls, and all the rest of it? How many minutes are you going over per session? A relatively simple change could be the difference between you feeling balanced and well-paid, versus you being underpaid. Remember earlier when we were calculating your actual take-home hourly rate? This could be one of the factors keeping that rate low!
Salary Mistake #5: You Don’t Set and Honor Your Clinical Boundaries in a Sustainable Way.
How many of us were taught to allow unlimited no-shows and late cancellations in our agencies and non-profit placements? Even for us at non-profit free counseling centers, any missed appointments had a tangible cost to the agency to the impact of grant funding. We had to have boundaries and create systems to keep service provision up.
Your business is more like an infant care center than a restaurant. You can only have so many people you can care for in your space. If someone cancels or no-show, your expenses are the same. You can only schedule so many people. If you aren’t charging for no-shows, that can lead to one or more of the following:
Overscheduling and reducing your clinical effectiveness
Avoiding important clinical conversations
Missed clinical continuity for your clients
Raising overall fees so people who attend subsidize missed sessions from those who don’t
Burnout and resentment
Financial stress and panic
What we found from the survey is that therapists were charging nothing or a reduced rate for an average of four sessions per week worked. At 48 weeks worked per year on average, that’s 192 sessions a year. Since most people surveyed were charging about $155 a session, that translates into almost $30,000 a year! Remember: In most cases, the expenses are largely the same. That could translate easily to $20,000 in pure profit for therapists even after taxes and credit card fees!
Salary Mistake #6: You Aren’t Making Peace with Numbers and Money.
Are you noticing a theme? We need to make peace with numbers and money y’all. Your money and time aren’t connected to your value as a therapist, a person, or the value of therapy. You and the work you do are priceless.
Time and money are just there to support the process and ensure you and your family are taken care of while you take care of others. You deserve the same things that you want for your clients.
We know it can be frustrating. We live within a system that’s broken, and we’re all trying to fix it. But you can’t keep doing good work if you aren’t cared for.
Salary Mistake #7: You See Your Work as a Calling and Ignore Your Privilege or Lack Thereof.
Earlier this week, we saw a Facebook ad from a private practice coach talking about helping therapists learn how to raise their fees, and we saw lots of comments on there. The comments were mostly focused on how raising fees in a time of need was exploitative of clients and bad for the mental health system. There were people talking about private practice as if it was somehow less than even.
What we know from coaching therapists for over 25 years is that these statements are made from a place of privilege. Not everyone has the privilege to treat their career as a calling. Not everyone has the privilege of two incomes. Not everyone has the same expenses or number of people to take care of.
Story time: Miranda (one of the business coaches here at zynnyme and a co-founder) was once in that place of privilege. She worked at an amazing nonprofit: Haven. It served victims of domestic and sexual violence. It just happened to be the same one that her mother had received counseling services from years before.
As a counselor working 32 hours a week clinically AND supervising the program with a master’s degree, she made $16/hr. She was married with a second income AND she had decided at this point that kids weren’t in her future. She hadn’t done her own work and went straight from grad school to working 2-3 jobs. She worked at the county on nights and weekends AND she started teaching online and in-person. It was all working just fine and she couldn’t imagine ever leaving until her husband was fired. Suddenly, she had to make some hard choices, and that privilege of keeping an underpaid position was removed.
Later, when she had a child unexpectedly, she had to make some decisions again about how she wanted to raise him. And, when she went through a divorce, she had to make a decision again. This is just one story. What about you? What’s your story?
If you have the privilege of making a low wage, that’s lovely. But if you don’t, there’s NO judgment from us here. We’ll support you in creating whatever dynamic works for your life, your health, your family, your community, etc.
However, if you come to us saying everything is working just fine and you don’t need change while you also have many symptoms of burnout AND you’re struggling financially, we might lovingly have a few questions, hugs, and some loving options for you.
