How to Set Fees in a Therapy Private Practice
How To Set Fees In Private Practice
Before we get into how to set therapy fees in private practice, lets talk about what NOT to do. Nothing gets under my skin quite like people pricing their therapy services based on what someone else thinks they should charge. As a therapist in private practice and as a coach for private practice therapists, there are three common ways I see therapists pricing their services. The problem with all of these fee-setting methods? They don't take into account a person's unique needs, circumstances, or values.
3 Mistakes Therapists Make When Setting Fees
Mistake Number One
"Market rate" aka googling what others charge and picking a price in the middle. This method is the one I chose when I first started out as a therapist in private practice. I spent a weekend googling other therapists' rates (most likey arbitrary) in the Ann Arbor, Michigan area and compiled a list of how much they charged, how long they'd been in practice, and what their credentials were to try and find some pattern in how they came up with a fee. After that fee research, I picked a fee about 10% lower than the median number (I am a spreadsheet nerd, after all). I priced my therapy services this way as a way to say, "I'm not the most expensive, but I'm not the cheapest, either."
Mistake Number Two
Based on what insurance providers reimburse. This mistake therapists make when setting fees makes me bonkers because—along with a laundry list of why folks go into private practice—one of the big ones I hear is "getting away from insurance panels." So then why in the h*ll are you going to set your fees according to what someone else pays? Nonetheless, I see this happening all the time. "Oh, Anthem pays $87 for a 90834? Cool, I'll set my fee for that service at $90."
Mistake Number Three
Raising your rates slowly and over time. This fee-setting method is the one I see most private practice therapy coaches teaching. No shade to them, it's obviously filling up their coaching rosters, but let's think about this from a client standpoint. The way I've seen this taught is "tell your clients you are offering an initial low rate, and that your fee will go up to your full rate in six months." I don't know about you, but I'm not turning to Groupon to find a therapist, so I don't understand why we are marketing ourselves as "bargain" therapists. I'm certainly not going to a bargain dentist or nurse practitioner. The other way I've seen this method taught is to have a "rolling" fee raise. What does this fee-setting method mean? It means that to get to your full fee in a year, you raise your prices quarterly for new clients but grandfather in old clients at their current rate. Let's say your full fee is $200. So in January, you charge $100 for new clients, in March $125 for new clients, in June $150 for new clients, in September $175 for new clients, and then finally in December $200 for new clients. Confused? Just imagine being a therapy client on the receiving end of that!
The problem with all three of these methods is that it is an external, strategy-based approach with no individualized approach to creating a fee. As a therapist, I doubt you would tell a client to do any old strategy without taking into consideration their unique needs, so why are we doing this to ourselves with our businesses?
How To Set Private Practice Fees
How to set private practice fees as a social worker, therapist, psychologist, or counselor means looking at what you need to earn to thrive. I teach my clients to look at what is sustainable, aligned, and values-based for them. That means making sure your private practice fee can cover the following things. Ask yourself, does my fee allow me to . . .
Take time off?
Pay my bills?
Afford my quarterly taxes?
Get health insurance?
Work the schedule I desire?
Consider how much money you need to be making annually to account for the above questions, then reverse-engineer your way there. (Take a deep diaphragmatic breath and exhale, therapy friend. I’m still a therapist first, failed college algebra, these numbers are easy to do on a phone calculator).
Private Practice Fee-Setting Example
Let's say you figure out you need to be bringing in $150,000 annually to afford to take vacations, pay for your child's daycare, make student loan payments, and all the other expenses of living a life. Let's say you want to work Monday through Friday, seeing five clients each day. And, you want to give yourself six weeks off to account for vacations, holidays, and sick time. That means you'll be accounting for 46 weeks of work, seeing 25 clients per week (52 weeks in a year, minus six weeks off), or 1,150 appointments.
Now take $150,000 divided by those 1,150 appointments, and you'll get $130/session you need to charge.
Let's make it more realistic, though. Let's say your clients show up about 80% of the time between their work, vacation, and illness schedules. So instead of accounting for 1,150 appointments, we are accounting for 80% of that, or 920. The new number becomes $163/session ($150,000 divided by 920).
Neat, right?!
The Better Way to Set Your Hourly Therapy Fee
There you have it, therapist friend! A better way to set your hourly counseling or therapist fee in private practice, based on what you need to thrive financially and emotionally.
Want Tailored Help With Your Fee?
If you want help with setting your fee with intention and sustainability, consider joining me in my group coaching program for private practice therapists called "Grow a Profitable Practice From the Inside Out."
In addition to helping with fee-setting you'll get:
💃🏾 Live sessions on money mindset, fee-setting, marketing your practice and carving out your niche
💃🏾 Evidence-Based exercises and practices to help you rewrite your old, outdated money stories and price your services in a way that works for you
💃🏾 Private Practice Fee Templates to use with your own clients
💃🏾 Interactive Fee-setting worksheet: set your fee to be profitable and sustain your practice and lifestyle
💃🏾 Access to a private online community where you can connect and support one-another in-between sessions (No, it’s not another Facebook group)
💃🏾 A beautiful and hardworking Squarespace website from Hold Space Creative