How much do private practice psychologists make

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.

Possible Detractors:

1. Low new client volume, or high client attrition, can reduce one’s weekly session count.
2. 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).
3. Client cancellations and/or client no-shows could lower income, depending on how one manages their practice schedule.
4. The estimates above do not account for unpaid session fees (subtract up to 4 percent).
5. If you accept credit cards, subtract 2-3 percent revenue from whatever percentage of session fees you expect to process with plastic.
6. 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.

Possible Enhancements:

1. After building a strong reputation, and establishing active referral sources, you may be able to eliminate advertising and marketing (reclaim up to 5 percent).
2. 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).
3. If you see some (or all) cash-pay clients, you can reduce or eliminate medical billing expenses (reclaim up to 5.5 percent).
4. If demand for your services outweighs supply (that’s you), you could raise your cash-pay rates to $99 (add $40,320 revenue).
5. If you provide 40 sessions per week on average (that’s 30 face-to-face hours with clients), add $18,000 revenue.
6. If you reduce your time off from 4 weeks to 3 weeks per year, add $2,625 revenue (not worth it!).

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