We sent a survey to our community of private practice therapists, and we learned a lot about the mistakes therapists make when they set their own pay. We want to share what we found, show you how to calculate what you really take home, and point out the seven places that number tends to leak.
Why take-home pay is the number that matters
Gross revenue is the number people post about. Take-home pay is the number you live on, and the two can be surprisingly far apart. We've written before about why a six-figure practice doesn't mean much on its own, and about the awkward money conversations every therapist dreads. This post is the practical companion to both.
The mistakes below don't care what your license is, how many student loans you do (or don't) have, or what your insurance reimbursement is. If you'd like a sustainable income while giving clients a great experience of therapy, read on.
The 7 mistakes that shrink your take-home pay
Mistake #1: You haven't calculated what you need to take home
Grad school doesn't teach us to be business owners, so most therapists graduate without knowing how to calculate an appropriate salary for themselves. In fact, most of us were taught to work for free, or for very little money, for thousands of hours with a bachelor's or graduate degree already in hand.
Take a breath and think about that for a moment. In what other fields do you see this so consistently? Medicine comes closest, but after all that debt and training, physician pay goes up dramatically. Ours often doesn't. Mental health degrees are consistently among the lowest-paid master's degrees in the United States.
To compare your private practice pay to a W-2 salary, start with your gross income and subtract expenses, vacation pay, sick time, benefits, and taxes (including roughly 15% in self-employment tax). What's left is the money that lands in your pocket for living expenses. Do you know how much you need to bring home after taxes? Do you know what your pay needs to be before you can start paying down student loans, or the credit card debt that may have built up over years of being underpaid?
Mistake #2: You set your fee before you know your gross income number
Knowing how much you need to take home is the first step, but it isn't the last one. When we teach therapists how to create their business plans in Business School for Therapists, we start with the number they need in their pocket and work backward from there.
Remember the taxes, expenses, vacation, and sick pay from Mistake #1? You need to put a value on each of those (and we haven't even talked about retirement yet) so that you have a clear plan for what your gross income needs to be. Your gross income is the total your business brings in. Your net is the profit after expenses and before taxes. Your take-home is what remains after all of it.
If you don't know your gross income number, or what percentage you owe in taxes, you can't set an hourly rate that works. Once you do know it, you can figure out how many weeks you'll work each year and how many clients you can see while still doing great work.
Mistake #3: You've never calculated your take-home hourly rate
In our How to Make More Profits and Work Less training, we showed how to calculate a take-home hourly rate, and the result was truly shocking for most of the therapists who did it. Here is how to run it for yourself.
Find your gross income. Go into your electronic health record or your business account and total everything your practice brought in last year.
Total your expenses. Pull this from Quickbooks or your accounting software, or add up everything that left your business account. Include medical benefits and anything else you paid into.
Be real about your hours. Count every hour you worked in and on your business. That includes checking email and returning calls on evenings and weekends, reading blogs like this one, learning about business in Facebook groups, writing documentation, avoiding documentation, researching certifications, reading books on your craft, and going to trainings.
Calculate your take-home pay. Gross income minus expenses minus taxes.
Divide by your hours. Take-home pay divided by total hours worked is your take-home hourly rate. If you averaged your hours per week, divide take-home pay by weeks worked, and then by hours per week.
Here is an example with round, made-up numbers. A practice brings in $120,000 and spends $24,000 on expenses, which leaves $96,000. After setting aside $26,000 for taxes, the therapist takes home $70,000. If they worked 40 hours a week for 48 weeks (1,920 hours), their take-home hourly rate is about $36.
Understanding how much you're really making per hour can be hugely motivating when it comes to shifting what isn't working. There are therapists with graduate degrees making less than minimum wage right now. There are therapists who could have stayed at that agency job and made more money with less stress. It doesn't have to be this way.
Mistake #4: You accidentally do more than 5 weeks of unpaid clinical work every year
If we emailed you today and asked whether you'd work an extra five weeks this year without pay, you would probably ignore us or be livid that we asked. You might be doing exactly that without realizing it.
On average, the therapists we surveyed went more than 7 minutes over in each session. They saw 18 clients a week on average, 48 weeks a year. That comes to more than 6,000 minutes a year, which is about 100 hours and more than five weeks of clinical work.
Oof. You know how you struggle to refill your water, get to the bathroom, find energy for documentation, and return phone calls? How many minutes are you going over per session? A relatively simple change here could be the difference between feeling balanced and well paid and feeling underpaid. It may also be one of the things holding down the take-home hourly rate you just calculated.
Mistake #5: You don't set and honor your clinical boundaries in a sustainable way
How many of us were trained in agencies and nonprofit placements to allow unlimited no-shows and late cancellations? Even at the free nonprofit counseling centers where we worked, missed appointments had a real cost, because they affected grant funding. Those agencies had to have boundaries and systems to keep services going.
Your business is more like an infant care center than a restaurant. You can only care for so many people in your space, and when someone cancels or doesn't show, your expenses stay the same. If you aren't charging for no-shows, that can lead to one or more of the following:
Overscheduling, which reduces your clinical effectiveness
Avoiding important clinical conversations
Missed clinical continuity for your clients
Raising overall fees, so the people who attend subsidize the sessions others miss
Burnout and resentment
Financial stress and panic
In our survey, therapists were charging nothing or a reduced rate for an average of four sessions in every week they worked. At 48 weeks a year, that's 192 sessions. Most people surveyed were charging about $155 a session, so those sessions add up to almost $30,000 a year. In most cases the expenses are largely the same either way, which means that could easily translate to $20,000 in pure profit, even after taxes and credit card fees.
Mistake #6: You haven't made peace with numbers and money
Are you noticing a theme? We need to make peace with numbers and money, y'all. Your money and your time aren't connected to your value as a therapist or as a person, or to the value of therapy. You and the work you do are priceless.
Time and money are there to support the process and to make sure you and your family are taken care of while you take care of others. You deserve the same things you want for your clients.
We know it can be frustrating. We live inside a broken system, and we're all trying to fix it. You can't keep doing good work if you aren't cared for.
Mistake #7: You see your work as a calling and ignore your privilege, or lack of it
A while back we saw a Facebook ad from a private practice coach offering to help therapists raise their fees. Most of the comments argued that raising fees in a time of need exploits clients and harms the mental health system. Some people talked about private practice as if it were somehow lesser.
What we know from twenty years in this field is that those statements come from a place of privilege. Not everyone can afford to treat their career as a calling. Not everyone has two incomes. Not everyone has the same expenses or the same number of people to take care of.
Story time: Miranda, one of the co-founders and business coaches here at zynnyme, was once in that place of privilege. She worked at an amazing nonprofit called Haven, which served victims of domestic and sexual violence. It happened to be the same place where her mother had received counseling years before.
As a counselor with a master's degree, working 32 clinical hours a week and supervising the program, she made $16 an hour. She was married with a second income, and she had decided by then that kids weren't in her future. She hadn't done her own work yet, and she had gone straight from grad school into working two or three jobs at a time. She worked for the county on nights and weekends and 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 hard choices to make, and the privilege of keeping an underpaid position was gone.
Later, when she unexpectedly had a child, she had to decide again how she wanted to raise him. When she went through a divorce, she had to decide again. This is just one story. What about you? What's your story?
If you have the privilege of working for a low wage, that's lovely. If you don't, there is no judgment from us. We'll support you in creating whatever works for your life, your health, your family, and your community.
If you tell us everything is working just fine while you also have many symptoms of burnout and you're struggling financially, though, we might lovingly have a few questions, some hugs, and a few options for you.
What to do with your number
If you ran the calculation in Mistake #3 and didn't love the result, you're in good company, and you have options. Our free training, How Therapists Can Increase Profits by $10K or More and Work Less This Year, walks through where to start.
