According to Salary.com: A licensed clinical social worker (or “mental health clinician”) makes an average salary of $70,423. A family counselor working in Cambridge, MA makes an average salary of $44,880. A substance abuse counselor working in Cambridge, MA makes an average salary of $60,295.
For many, working as a fulltime therapist is financially untenable. Consider this: the average cost of a 1500 square foot home in Cambridge exceeds a million dollars. And while Cambridge can be considered an expensive city, the math isn’t too dissimilar in other cities across the country. For example:
- A 1500 square foot home in Bethesda, MD will run $685,500. The average counselor salary here is $41,817.
- A 1500 square foot home in Denver, CO will run $511,500. The average counselor salary here is $38,329.
- A 1500 square foot home in Austin, TX will run $310,500 (a bargain). The average counselor salary here is $37,343.
It’s no secret that counselors don’t choose this profession for the pay. But is financial struggle our collective fate? I hope not, and I don’t think so. With hard work and good planning, earning an income of $100,000 per year in private practice is an obtainable goal. Now, let’s discuss the financial aspects of running a viable counseling practice:
1. Managing client fees: Client fees vary depending on the location of your practice, and the payer(s) you work with. For example, in Oregon, a masters-level clinician accepting 3rd party insurance payments (for example, a combination of Anthem, United Healthcare, and Cigna) might earn $99 for a diagnostic evaluation (90791). Ongoing appointments for individual or family psychotherapy (90834/90837/90847) might pay around $70. For now, let’s estimate that all your clients pay for services with insurance, and your average fee for a 45-minute session is $75.
2. Taking on a fulltime caseload: The number of sessions that constitutes a fulltime caseload is hotly debated. Some professionals feel that 30 sessions per week is too heavy of a caseload, while others find that they can comfortably serve 40+ clients per week (I say “hotly” debated because providers who opt for fewer clients have been known to accuse those with heavier caseloads of being unethical).
I find 35 sessions per week to be a sustainable number for a full-time clinician. With this number, if you’re providing 45-minute sessions, that’s 26.25 hours of face-to-face work with clients each week. With schedule gaps and practice management duties, you’re looking at a 45-hour workweek. It’s a full-time job to be sure, but not unendurable. In addition, let’s say that you give yourself a modest 4-week vacation each year. This comes out to: 35 sessions per week and 1,680 sessions per year. If each session is $75, that comes to $126,000 a year!3. Small, large, and hidden costs: Now that revenues are calculated, we need to subtract any/all practice expenses. There are large, small, and hidden costs to running a practice: from patient parking, to coffee, to organic tissues, to printer ink. Below is a sample (broad category) expense list.
- Rent (one office): $550 per month=$6,600 per year
- Office supplies=$3,000 per year
- Professional dues, liability insurance=$800 per year
- Advertising and marketing=$6,300 per year
- Accounting and legal fees=$500 per year
- Medical billing=$6,930 per year
- Miscellaneous=$1,000 per year
$126,000 (revenue) - $25,310 = 100,690 (net). And there you have it: a 6-figure private practice!
While the above provides a theoretical outline of private practice financials, no counseling practice will perfectly mirror the example. To help you determine with greater accurately your finances, here’s a list of variables that could potentially detract from, or enhance, your practice’s earnings.
- Low new client volume, or high client attrition, can reduce one’s weekly session count.
- To expedite the building of a caseload, more money could be invested into advertising (or time spent in professional networking, which could detract from your available client hours).
- Client cancellations and/or client no-shows could lower income, depending on how one manages their practice schedule.
- The estimates above do not account for unpaid session fees (subtract up to 4 percent).
- If you accept credit cards, subtract 2-3 percent revenue from whatever percentage of session fees you expect to process with plastic.
- The “net” above doesn’t include the cost of health insurance, retirement planning, or taxes, which are often partially covered by an employer. While not truly a cost of business, these items will detract from your expendable income.
- After building a strong reputation, and establishing active referral sources, you may be able to eliminate advertising and marketing (reclaim up to 5 percent).
- Owning a business might have legitimate tax advantages. For example, your mobile phone might qualify as a business expense (meaning it’s paid for with pre-tax money).
- If you see some (or all) cash-pay clients, you can reduce or eliminate medical billing expenses (reclaim up to 5.5 percent).
- If demand for your services outweighs supply (that’s you), you could raise your cash-pay rates to $99 (add $40,320 revenue).
- If you provide 40 sessions per week on average (that’s 30 face-to-face hours with clients), add $18,000 revenue.
- If you reduce your time off from 4 weeks to 3 weeks per year, add $2,625 revenue (not worth it!).