Investing in your practice
Last week I talked a bit about Return on Investment (check it out here) and this week I am going to break down the investment of starting a private practice a little further for you. There are certain things you will have to spend money on in building your practice. And there are other things you can spend money on – either for your own sanity or to increase revenue. AND sometimes investing in things that improve your sanity also can improve revenue which is a double win!
I am going to break down a few of the areas where you’ll want to consider investing in your practice. Some of this is for the newbies out there, but some of the other pieces I will touch on are for those a little further into the process. Read this for where you are.
Starting out, you do not necessarily need to have the perfect office with the most beautiful, high-end leather couch you have ever seen. You don’t even need your own office necessarily. Or your own furniture. Once you get a steady flow of clients, it may make sense to move into your own space and buy furniture, but starting out, it is not a requirement. That said, if you have a big vision and the guts to jump in with both feet, it may make sense to rent the perfect office – but make sure you are choosing it for the right reason (convenience for your ideal clients is tops). This expense will clearly vary widely depending on where you are and what option you go with, but generally speaking, I try to keep rent to less than 5-10% of my gross. That said, it was well over that when I started out (try 30% or more of my gross back when I first got my office). Shoot for no more than 20% of your targeted gross and know that it may end up being a bigger piece of the pie when you are starting out and will decrease as your business thrives.
Getting the word out takes many forms … many of which are actually free. But you will want to budget for a website, business cards, and a few other ways to get the word out and keep referrals in the loop. Here again, you can spend a lot on this or not so much. If you are fairly tech savvy, you can build your own site, especially given the programs out there to help you with the tech end (I am hearing good reviews from therapists using squarespace.com for example). However, I have to say, when I first built my own website, I had no idea what I was really doing in private practice and so what I created, though it was pretty and informative, was not especially useful in generating new clients. So make sure you are clear on that before you invest hours and days into building something even if you are doing it yourself on the cheap and especially if you are hiring someone else to build it for you.
This is an expense that newbies may not be ready to invest in and those a little further into their practice might be scratching their heads about. First off, many therapists invest in having someone do their insurance billing for them or other financial paperwork. This is the sort of expense that can improve your bottom line AND your quality of life. I think it is safe to say none of us got into this to haggle with insurance companies who reject claims for reasons that are not legitimate only to still have to resubmit the exact-same-claim we sent in the first place so they can read it again and see that it DID have a fifth digit signifier on the diagnosis code you submitted the first time. I will also talk more about how to use an assistant wisely to balance the administrative tasks as well as other tools in next week’s blog, so stay tuned on this point.
One of the most painful things (actually, it may have been the only painful thing) for me in leaving the agency I worked at was the generous $2000/year continuing education allowance. One area where you may feel pulled to skimp and save money once you are in private practice is in continuing education. THE BEST way to have a successful practice is to be really good at what you do. (That said, you already know that I think being a great therapist isn’t the only thing you need to build an awesome practice.) You might already be really good at something, and I expect you are, but continuing to hone that skill is a forever kind of thing in my opinion. And it is worth continuing to invest in your education as you build your practice.
This is a piece of the puzzle that didn’t occur to me to invest in until I floundered in my practice for about a year and a friend in another field mentioned it. Turns out, people in other fields of business use coaches all the time. It’s not all that surprising given none of us became therapists without any coaching (all that time in grad school and in supervision!). And many of us continue supervision and consultation to keep our clinical skills honed even after we get our license. But most therapists (myself included) expect to be able to run a business without any training. So unless you happen to have run businesses before and have a pretty firm grip on how to run this one (or maybe even if that is you), you probably need to consider finding someone to guide you through the process so you don’t spend the next 5-10 years figuring it out on your own.
There are a whole host of other expenses to factor into your budget, to name a few, keep in mind your Liability Insurance premium, phone service, electronic medical record program, internet service, and taxes. Overall, keeping your expenses under 40% of your gross is a reasonable goal.
From here, I recommend you create a spreadsheet with all your expected (or real) expenses and then add the fun column: what you would like to pay yourself. Now you have a pretty good idea of what you’ll need to generate with your practice. Let me know how it goes. Are you surprised by how little/how much you’ll need to bring in? Wondering how to get there? Let me know what comes up.
Talk to you soon!
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