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How to Set Your Fees as a Private Practice Therapist

Woman looking at her phone and card to make a payment

As a private practice therapist, setting your fee can feel overwhelming. When I started my first therapy practice in 2016, I was terrified of picking the “wrong” one. Many of us struggle with setting session fees and confidently addressing our fees with clients.

However, after helping over 2,700 therapists launch and fill their private practices, I now know that setting a sustainable fee requires you to be clear about your values, your financial needs, and the number of hours you want to spend working per week.

Pro Tip: Clients might ask for a sliding scale fee lower than your standard rate. These requests might tug at your compassionate instincts and your genuine desire to help your clients. However, it’s crucial to recognize that you can only support your therapy clients effectively when your time is valued and you feel financially secure. This is why it is essential to determine a fee that works and allows you to earn an income sufficient to lead a comfortable life while supporting your clients. Only then can you determine how many sliding scale clients your practice can support?

In this article, I’ll review important topics when setting a fee. At the end of the article, I’ll lay out the exact formula I use to determine my own fee.

Your Value: Assessing Your Services and Expertise

As a therapist, the first step in setting your fees is understanding and appreciating the value of your work. Clients willing to pay your out-of-pocket fee want to know that you are uniquely equipped to help them with their specific pain points or diagnoses. This requires you, as the therapist, to understand who you serve and how you help them. Then you need to clearly communicate this niche in your marketing materials. If you haven’t gotten clear on your niche yet, check out my niche workbook here.

When I first started my private practice, I wasn’t clear yet on the value I provided my clients and often found myself slicing $10-$20 off the top of my fee. This led to resentment and confusion for me and ultimately didn’t benefit my business or clinical work.

Market Analysis: Researching Therapy Fees in Your Area

Before setting your fees, exploring the fees of other therapists in your geographic area and your specific niche is essential. This often gives you a ballpark estimate of what clients might be willing to pay for therapy in your market. Now, many therapists will stop here and pick a fee in the middle of the pack. Simply selecting your fee based on the other therapists in your city is a mistake. It’s also essential to take into consideration your personal financial goals, as well as business expenses.

Cost Considerations: Factoring in Your Expenses

Running a private practice involves various costs and expenses. Each element plays a role in determining your monthly and yearly operating costs, from the rent of your office space to the essential tools needed for therapy sessions. Take the time to decide on your monthly overhead and yearly expenses before picking a fee for your counseling practice.

Client Demographics: Aligning Fees with Your Target Audience

The demographic of your ideal therapy clients plays a crucial role in setting fees. It’s essential to consider their financial capabilities and how they align with your therapy services. For example, many clients are willing to pay higher costs for couples therapy.

Additionally, the geographic location of your office can also play a significant role in your client’s willingness to pay a premium fee. However, I want to be clear I’m not suggesting you simply pick a low cost because you are worried clients won’t pay your rate. Instead, I recommend using the formula below to determine your ideal fee and make SLIGHT adjustments based on your clientele and geographic location.

The Formula for Determining Your Therapy Rates

Therapist and woman talking in a comfortable office

Once you’ve considered all the above, use this formula for choosing your exact therapy fee.

  • Step One: Determine your financial goal for the year and how much you want to earn. This should be the amount that you want in your pocket.
  • Step Two: Add your financial goal number to your estimated yearly overhead. This will equal how much you need to earn net of taxes. The taxes you pay will be in addition to this amount. (If you are just starting out, please check out my free download on calculating start up costs here.)
  • Step Three: Multiply the number from step one by 1.3, which will account for payments of 30% more in taxes. This tax calculation is based on your net fee which is the amount you will earn minus your expenses. Please note this is a ballpark figure and you should consult your CPA to see if you’re in a higher or lower tax bracket. This amount is what you need to earn to meet your goal while accounting for taxes.
  • Step Four: You will need to add your net earnings plus taxes (What you calculated in Step 3) to your expenses. This is the amount you will need to earn in a year to cover your personal payments, overhead, and taxes.
  • Step Five: Divide the figure from Step Four by the number of appointments per year. Keep in mind that you will want to factor in some vacation as well as possible sick days so if you are expecting to have 20 appointments per week you should multiply this times the number of weeks you will work which should not be all 52 weeks. Make sure your schedule is sustainable over time- you’ll need to maintain your stamina and also be able to pay your own bills on time.

This will be your ideal fee!

Communicating Your Fees: Strategies for Transparency and Trust

Open and transparent communication about your fees is critical to building client trust. This involves being upfront about your fee structure, including any sliding scale options you may offer.

Adjusting Fees Over Time: When and How to Increase Rates

Adjusting fees over time is a normal part of private practice. It’s important to periodically reassess your rates to align with the evolving market, your experience, and the costs of running your practice. Make sure to check out my free guide to raising your private practice fee here.

Insurance and Billing: Out-of-Network Challenges and Solutions

Working as an out-of-network therapist comes with its own set of billing challenges. It is crucial to educate clients on insurance reimbursements and assist them with insurance claims. I use Mentaya to help my clients get reimbursement for my services. You can check them out here.

Mastering the Art of Fee Setting in Private Practice

Fee setting in private practice therapy is a dynamic process. Staying adaptable, well-informed, and client-focused is essential for your practice’s financial health and ethical integrity.

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