Early in my career if I shared my dream of starting a private therapy practice, naysayers would often point out that my overhead would be too high. Since I didn’t know any better, this managed to discourage me from making the big switch for years. As someone that had never run a business, the word overhead was mysterious and ominous. I felt overwhelmed; like I would only be able to manage starting my own business if I first became a fully trained and licenced CPA, lawyer, and business tycoon first.

If, by chance, you feel (or have felt) the same way, don’t worry! All we are talking about is the operating costs and expenses of running a business. Overhead is simply the costs a business owner has, regardless of the business’ success or failure — and taking it into account is a lot less overwhelming than I ever thought it would be.

To help demystify the matter, we should start with what my fears actually were. From there, we will set the record straight and outline what your overheads actually will be.

The fears that held me back

Fear number one: Overhead startup costs too high to get going

Honestly, this is was a big one. The idea of even starting a private practice was a barrier because I knew I had to cough up some cash to get the ball rolling. I won’t lie, you will need to have some funds to open a private practice. But I am not talking thousands and thousands of dollars; you will not need a business loan to start your practice. In fact, due to the world of telehealth you can actually get by with starting a practice with little to no money. More on that below.

Fear number two: Overhead costs so high that I would not actually make any money

I didn’t create this fear out of thin air; this was a fear that has been fed to me slowly over the years from employers and other scared coworkers. Employers often have a unique way of keeping you around. If you are a good clinician, they do not want you to leave! If a supervisor is working hard to discourage you from leaving, take it as a compliment; you are an asset to that business and you are not easily replaced.

As I reflect back, supervisors that were really discouraging about private practice and the overhead costs were the supervisors that had never done it themselves. Maybe they were also hearing this bad advice from their bosses? I don’t think I was being fed bad information maliciously; but it seems that this bad information tends to get passed down from employer to supervisor, supervisor to employee.

One of my early supervisors (and arguably my favorite) worked in the community health setting part time, and also had private practice clients on the side. She not only made it work, but also encouraged me to do the same once my license was finalized. She is an example of someone that was ready to start the private practice journey, and wanted to keep her foot in the door of her community clinic job.

Fear number three: Overhead logistics would be overwhelming and time consuming

How would I be able to handle conducting therapy AND remember to pay my office space rent? Managing your own office and business bills is new territory. If you were running a small business with employees, loans, and managing an array of products and services from suppliers— it would be a lot to manage. But as you are working for yourself, have no employees, any only offer one type of service (that is sourced from you) — the logistics of your business overhead is actually quite manageable.

Paying for overhead costs in practicality is the same as paying your household bills. Just like you need to pay your own personal mortgage or rent, you pay for your office space on a regular basis. If you subscribe to Psychology Today, have a new phone and internet bill, or have monthly subscription dues and fees, you pay those as needed. Autopay is a technological advancement that greatly eases these responsibilities.

The actual overhead costs of running a private therapy practice

Practice management software

I will go to my grave with this advice: get practice management software! All of the scary aspects of running your practice are made easy by doing this. Submitting claims, scheduling, paperwork, HIPPA-compliant note taking and video platform, billing and processing card payments, the list goes on and on. This will save you hours of your time, countless headaches, and money.

The Essential plan with Simple Practice is $69 a month. With some add-ons, I end up paying around $80 a month.

Office space and furnishings

There are a few ways to go about this. An average therapist size office can range from $300 to $1000 a month. There are many therapists that rent out their office on days that they are not working, which means you can get an office space for a small amount of money, and you won’t need to worry about furnishing it. I prefer to have my own space; so a friend and I went in on an office together. Monthly we spend $625 in total for a therapy room and a small entryway/waiting room. And if you prefer telehealth therapy, you don’t need to spend anything on office space! See more in this blog post.

Furnishing the space on a budget took about a month. My office partner and I used Facebook BuyNothing groups, thrift stores, gifts from friends, and the occasional run to Target to get the place to our liking. I am guessing we spent $1000 in total.

Internet and phone

I kind of cheat on this one. I use the Xfinity wifi hotspot that is available in most public spaces; which is paid for by my personal household internet subscription. Since Xfinity is a public network, it is not the most secure internet source. This makes having a HIPPA compliant video platform even more important. Getting internet into a business is not the same as a household, and comes at a higher cost. I priced out a plan at $130 a month when I first started and was considering this option.

I don’t know a single millennial therapist that doesn’t use Google Voice or a similar alternate phone number app. Google Voice is free, assigns you a number that is just yours, and the app allows you to call and receive calls just as you do with your own phone. If that sounds too complicated, there are other options. I have known other therapists in the past to purchase a separate phone for their business, and some that have even used their personal phone numbers. This is your purogative.

Malpractice insurance

Malpractice insurance is a requirement for those who contract with health insurance companies, and is all around a very smart idea. If you are a sole proprietor, and not an LLC, then a lawsuit could impact not only your business but also your personal assets. At the bare minimum your coverage needs to be $1 million for each incident, with $3 million in aggregate coverage. This sounds like a lot, but a plan like this will not cost more than $300 a year. Worth it!

Marketing

The most commonly used website by therapists and future clients is Psychology Today. You may not choose to use this service for long, but it is a quick way to build your caseload. Some stick with this website for a few months before creating their own business website. Conveniently, when I signed up for malpractice insurance the insurer offered me a six month listing for free on Psychology Today. I think this is common practice from malpractice insurance companies, because they want to encourage you to choose them over others. If you aren’t given your first listing for free, then Psychology Today will run you about $30 a month.

Disability insurance

This is not a requirement, but I feel it is still important. Disability Insurance is something that your previous employers probably offered, but you may not have needed to take advantage of it. See this blog post for more details about the different types of disability insurance and where to find it. Depending on the coverage you choose your monthly premium may be anywhere between $50 to $100 a month.

Health insurance

Here is the largest new cost for starting your new private therapy practice, depending on your personal situation. Many people do not worry about health insurance because they are covered by a partner or spouse. Count yourself very lucky if this is you! If not, you will need to pay for health insurance out of pocket. Keep in mind, the only reason your previous employer could cover so much of your health insurance is because of the money that you earned for them. You will need to consider your own health insurance needs and shop around for a plan that is right for you, which on average is about $560 for a single person. I go deeper into this subject in this blog post, because this can get very tricky.

Business overhead highs and lows

When you add all of these things together, at the most your startup monthly business overhead will hang around $1500, and at the lowest you can get away with $100 a month. It all really depends on what is important to you as you start your practice. The only real non negotiable is malpractice insurance, which is only $300 per year. For full disclosure, my own personal business overhead is $1100 a month.

TL;DR

A lot of people will discourage you from starting your own therapy business and they will reference overhead as a reason to be fearful. Don’t fear overhead costs! They are very low in comparison to what your new income will be.

Managing your own overhead costs as a sole proprietor, private practice therapist is not complicated.

The only non negotiable overhead cost is malpractice insurance. Everything else is subject to your own preferences and the needs.

Practice management software is a must in my opinion.

How much does it cost to start a private therapy practice?