Developing multiple income streams, or revenue from sources other than direct client hours, is a great way to create greater income stability as a private practice therapist. I’m often asked, “Where do I start when developing additional income streams?” In response to that question I’ve put together five key questions to help inspire you and guide you in developing additional sources of income.
I’ve noticed that private practice therapist tend to hire additional therapists as 1099 contract employees. Reasons frequently cited for choosing to hire therapists as 1099 employees is that they don’t have to pay the therapists taxes. While it may be more “affordable” to hire therapists as contractors, in my experience, there are also “costs.” (For an summary of the difference between W-2 and 1099 employees read part 1 in this series. To hear about my employment tax audit adventure read part 2.)
According to the IRS website, the general rule for classifying 1099 independent contractor is “if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done” (italics added). It also states that an employee is not a contract employee if the services “can be controlled by an employer (what will be done and how it will be done)” and if “the employer has the legal right to control the details of how the services are performed.”
If your private practice is thriving and you are considering hiring additional therapists, one of the major questions is how to structure the employment relationship. Should you hire additional therapists as a 1099 contractor or W-2 employee?
In my private practice consulting experience and based on recent discussions in my Private Practice Toolbox Group it seems that most private practice therapists favor hiring therapists as 1099 contractors. When I ask why I often hear something like, “I hire 1099′s because then I’m not responsible to pay the therapists employment taxes and it provides some cushion against legal responsibility for the acts of therapists providing contract services.” While these statements are true, there is a lot more to consider when structuring the employment relationship and misclassification can be a costly mistake.
Guest post by Edita Atteck
I believe I know who you are. You are here to be of service to others and you want to create a thriving business. You want to get client referrals, retain existing clients, and you don’t want to live from paycheck to paycheck. You want to have a good reputation and earn client’s trust.
I know first hand how starting a business is a challenge. I’ve been there and I fully respect your feelings. I left my corporate career to pursue my passion and committed to turning it into a business helping one person at a time. And I am here today to share with you six steps I believe can help guide you to building a practice that will help you and your business to thrive.
What’s the big deal about giving a few extra minutes to your clients? After all, we are in this field to help others and we are generous souls by nature, right? Yes, we are. However, an on-going pattern of giving away a few minutes each session adds up over a year’s time.
Let’s say you see 10 clients for 50 minute sessions per week= 500 minutes. If you go over 10 minutes with each client you’re doing 600 minutes of therapy and only being paid for 500 minutes. That means you’re giving away 100 minutes of therapy every week. After one year of giving away 100 minutes every week you are giving away 5200 minutes of free therapy. 5200 minutes is the equivalent of 104 free 50 minute sessions every year. If you charge $115 per session your practice is giving away $11, 960 of free therapy a year!
One of the most common questions that private practice therapists ask me is “How do I get off of insurance panels?” This question just came up today in my Private Practice Toolbox Facebook Group so I thought it would be a great topic for a blog post.
The thought of letting go of the comfort of being on insurance panels can create a lot of anxiety for private practice therapists. After all, if we don’t have clients, we don’t get paid. Find comfort in knowing this equation. You only need about half the number of clients in a self-pay practice to make the same income (or more) than you made in an insurance based practice. Once I realized this fact, I felt a lot more comfortable resigning from insurance panels. Let’s do the math…
Are you unsure about how much to charge for psychotherapy in private practice? I’ve blogged recently about signs it’s time to raise your fees and how to talk to your clients about raising your fees, but what about setting your fees in the first place?
One thing to consider in setting your psychotherapy rates is what other therapists with equal experience and training are charging. While average fees vary greatly depending on your location, your degree, level of experience, and many other factors, I thought it would be fun to poll who read this blog so you can see where you fall on the continuum to give you a general sense of what other therapists are charging.
Last week I blogged about 5 signs that it’s time to raise your fees. Once you’ve decided to raise your fees, the next steps are notifying your clients about this change, explaining your rationale and preparing to manage your client’s varied responses. During my 10 years in private practice I’ve raised my fees three times. I’ve also consulted and coached many therapists on how to handle fee raises.
Here are a few tips to help you feel more confident talking to clients about increasing your psychotherapy rates.
I’ve found that it’s easier to tell clients about a fee increase around natural milestones such as the beginning of a new year, the beginning of summer, or the beginning of a new school year. Professional milestones such as a new degree or certification are a also a great time to raise fees.
It’s common for therapists in private practice to have anxiety around money issues like how much to charge per session, how to ask clients for payment, and when to raise your fees. Getting comfortable talking about fees with clients is crucial to private practice success.
After all, you own a business. In general, I think therapists charge too little for their services.
Several years ago, I resigned from managed care and I raised my psychotherapy fees at the same time. Fortunately, my practice didn’t suffer financially from those decisions. What surprised me most about raising my per session fee was that the perceived value of my services went up. “You don’t take insurance and charge a lot? You must be really good,” was a sentiment that I heard frequently from potential clients.
Interestingly, I’ve found that clients tend to invest more in the therapy process because they are investing more money out of their own pocket for treatment.
A common private practice question is whether a therapist should join a group practice or venture out on their own as a solo practitioner. The answer is different for everyone depending on your strengths, goals, personality, financial needs, and many other factors.
There are also other options in between solo and group practice, like sharing an office space with other practitioners while maintaining your own practice. “There are numerous ways of forming a group practice including cost/office sharing, partnership, and employment as associates under a licensed provider,” according to Kansas Psychologist Wes Crenshaw PhD, ABPP of Family Psychological Services, LLC.
To help make your decision easier, here are some of the benefits and drawbacks of joining a private practice group.