Private Practice 101
8 Steps to Opening Your Own Private Practice
What kind of person comes to mind when you think about a therapist or counselor? Now what if you pictured a business person or CEO? Depending on your experience, these personas, in some respects, could not be more different from each other. But just because the roles diverge in some respects, doesn't mean the two can't coexist—especially in a single person. This post will address the steps needed to start your own private practice.
In school, we were taught to be therapists, not business people. Most therapists are inherently bleeding hearts that got into this field to help people--often at the expense of ourselves. Most of us just aren't the cutthroat-type of the business world, and you don't have to be if you're prepared.
The following steps will help you get started with developing the practice of your dreams and set you up for success!
Step One: Develop a business plan
While not essential because most of us know what we'll be doing with our business, it is still good practice to develop a plan so you have a more solid understanding of the mission, goals, values, and purpose of your practice, which allows for grounding when feeling like the storm of life is tossing you every which way.
When you start thinking about starting your practice, ask yourself: What do I and my business stand for? How do I want to make a difference and how can I do that with my business? Why start your own practice as opposed to work at an agency or for a group? All of these questions really start to get at your values will help you understand the why of your business.
This doesn't necessarily have to be formally written down—although it's probably a good idea to keep notes. Bottom line: know why you want to open your business and what you'll do to make it successful.
Another post devoted to business planning is in the works, so be on the lookout if this interests you.
Step Two: Choose a business structure
I'm sure you've heard about them: LLC, PLLC, S-Corp, C-Corp, Sole Proprietor, Non-Profit...OH MY!!! But which do you choose and how do you determine what structure will be right for you?
I won't reinvent the wheel as it has already been written about by those more knowledgable than I am on the topic and I highly recommend checking out this post by Jennie Schotmiller of Simple Profit—she's a CPA and an MFT in Pennsylvania and she knows her stuff!
Figure out your legal structure and how you'll be taxed, which will vary based on your financial situation. It might be worth it to invest in or at least consult a tax professional to determine what is right for you. Most people want to keep costs down where possible, but I believe it is well worth the cost if you want to ensure you're not missing anything!
It's important to remember too that your structure is not set in stone. You can elect a different structure down the line should your circumstances change. For example, say you elect to be a sole proprietor now, but a few years from now you want to take on an intern or other employees. You can always move to an LLC or PLLC in the future to accommodate that growth.
Regardless of what structure you choose, make sure you obtain the proper business licenses--which may be not only state, but county- and city-based too--to ensure you are operating in compliance with the law. Check your state's Secretary of State (SOS) website for guidance.
Finally, this is also a good time to look into malpractice/liability insurance. Check out your professional organization so see who they recommend, most will offer discounts to their favorite carrier.
Step Three: Obtain a federal tax ID (EIN or TIN)
Chances are good you don't want to be giving your social security number out to clients or insurance companies, so it's best to get a federal tax ID number that can be put on business documents. Its easy, free, and almost instant....well worth the extra step! Get yours from the IRS (the only official place to get it) here.
Bear in mind, however, that this is essentially your business's SSN, so ensure you're not letting it hang out in the wind on your website and such lest someone steal your business's identity. There will be times you need to furnish it, but don't publish it and hold onto that letter you receive.
Step Four: Open a business bank account
Once you’ve established your business with the state and received your EIN, it’s best practice to keep your personal and business funds separate. DO NOT deposit business funds directly into your personal account unless it is considered an owner's draw. Should you get sued, all assets can be up for grabs if you are only using your personal account. I strongly encourage you to keep it separate.
Another bonus of having your own account is that you'll likely want some startup capital to make purchase up front, therefore obtaining a business credit card is wise. Use your judgment with spending limit, but ballpark of $10,000 seems reasonable if you are furnishing an office, paying rent, obtaining your license (professional and business), etc. You can also look into other forms of financing that might have a better interest rate—such as business lines of credit—if that is something you need. You don’t actually need to go into debt to set up your own practice, but some start up capital may be helpful depending on your financial situation.
Finally, look for a financial institution that will work for your needs. I previously banked with a large national bank that locked up $1000 just so I wouldn't accrue monthly fees--not ideal for a small business just trying to get by. You can work with a bank or a credit union, and there are other online banks that are up and coming that might be more worth it for you. I started EJP with a Quickbooks Checking account (formerly Quickbooks Cash) because I wasn't yet located where I could open an account with what would become my local credit union (operating in different states has its challenges). It worked until I could get set up with the credit union. Shop around and see what business bank accounts work for you.
Step Five: Decide how to get paid
With that sweet, sweet cash soon coming in, how do you plan to collect it? And how often will you get deposits? Know which forms of payment you'll accept and put it in your informed consent. If you're taking credit cards or doing autopay for clients, make sure they sign a consent form acknowledging as much for your protection.
Are you planning on using your EHR's integrated payment platform, or are you going to use something else. There are many platforms out there including Stripe, Ivy Pay, Square, PayPal, etc. Often people are worried about the fees associated with credit card transactions--which can be substantial—so see what makes sense for your situation. Despite higher transaction fees than some other platforms, I appreciate the ease and integration of the service offered in my EHR and I find it worth it. Regardless what you choose, make sure your clients' data will be secure and that you are not using a system not intended businesses (i.e. non-business Venmo, Zelle).
Step Six: Choose a financial software
Whether you use a fancy bells-and-whistles program like Quickbooks, use the free version of software like Wave, or simply keep track with a spreadsheet, ensure you are keeping track of income and expenses that is beyond your EHR because it doesn't track your expenses. This allows you to figure out profit and loss, among many other financial and tax considerations, and makes everything easy to find come tax season. Finally, you can also track trends in your business—I like to compare revenue from each state in which I practice—to better plan future business needs or make financial decisions. Look into taking a class at your local community college or community ed program if you are unsure how to do this or aren’t totally financially-minded.
Step Seven: Get your documentation in a row
At this point, you’re pretty much ready to open your doors, and now is the time to look into how you plan to keep clinical documentation—EHR or paper charts—as well as sit down and get your intake documentation in order. Many folks write their own, but you can also buy generic documentation from a number of therapist business building organizations or hire a lawyer to do it for you. Regardless of how you get your documentation, make sure you have the information included that is required by state law. Check your state's statutes for your profession to ensure you are in compliance and you might consider running it by a law professional prior to putting it to use. Keep in mind. your informed consent and business policies will likely change as you encounter certain situations, so it can always be revised and updated. Just remember to have it signed again by every client when you update your policies.
Step Eight: Get to marketing!
Once you have the back end set up, now is the time to start developing a website, directory profiles, networking, and coming up with a plan to get the word out about your practice. Think about who you want to attract and interact with—where will your ideal client be able to find you?
I highly suggest you develop a simple strategy and stick to it before expanding. Often new business owners tend to take a wide swing at marketing practices and fall short due to overwhelm. Figure out whether you'll hit networking hard or invest time and energy into your social media presence if that strikes your fancy. Investigate different marketing strategies and choose the one(s) that feel right and most sustainable for you, you can always add more later.
Don't forget that marketing is active while you are building your business. Simply putting up a directory listing and sitting back waiting for clients to find you is not a great strategy, there's simply too much noise! Get out there, pound the pavement, and make connections...that's how they find you.
Ensuring you have all the proper documentation and procedures in order prior to hanging your shingle will impact how smoothly your business runs down the line. But now that you've done it, have fun with it.
Best of luck to you and welcome to business ownership!
Want more awesome content and support on your journey to becoming fully licensed?
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