Over the past several years, it has become more common for therapists in mental health and counseling disciplines to become independent practitioners and grow successful businesses without affiliations to large agencies or health systems. 

The large majority of therapists choose their career path to help others, yet many don’t believe they are able to build a successful business on their own. 

This how to guide was written for every therapist in mental health considering starting their own therapy or counseling practice and doesn’t know where to start.

The Industry of Mental Healthcare is Evolving

The history of traditional employment as a mental health therapist/counselor is no longer acceptable or sustainable.  The long hours, high caseloads, and often low pay in mental health disciplines have led to a shortage of providers to meet the demand.

This model has pushed clinicians into burnout seeking alternatives.

It has started a movement for professional therapists in mental health to create better work/life balance with sustainable pay and healthy client caseloads.

Therapists are leaving traditional employment behind 

The realization that your own private therapy practice is more accessible than ever is truly a game changer. 

Therapists are leaving agency work and traditional employment behind in large numbers for more sustainable practice models and starting their own therapy practice in mental health.

The COVID pandemic further expanded options for therapists to deliver services via telehealth.  This produced more demand for services and opportunities for therapists to establish new therapy practices to meet client demand for mental health services in the marketplace. 

Not only has demand expanded, but therapists are modernizing the industry by creating innovative healing spaces that support lifestyle alignment and prevent burnout.  All while serving their communities in the process.

Of course, there are pros and cons to every career decision.  Do your research so that you can make an informed decision before taking the leap.  

If you are considering independent practice read on for a step-by-step guide on how to get started.  

I promise it is easier than you think, and there are resources available to coach you along the journey to entrepreneurship.

  What’s in This Guide 

In this step by step guide, I’m sharing five essential steps for starting a private therapy practice in mental health or counseling. 

Please Note: I am not a legal or accounting expert.  Please take caution to consult with appropriate legal and professional resources as it pertains to setting up your business in your state and practicing within the scope of your licensed discipline.  

Before going over the steps you need to take, let’s get the most common questions about starting a mental health practice out of the way…

How fast can I start a therapy practice in mental health?

A therapy practice can be started in as little as one week or you can take as much time as you need to transition into it. 

 Many therapists begin their private therapy practice while they are still employed.  Therapists in this position usually identify an income goal to reach in their new practice at which point they can resign from employment and work in their own business exclusively.  

The time required for start-up typically depends on if you are slowly easing into private practice or completely pivoting all at once. 

Below we will talk about the steps necessary to be an official business, hang your shingle, and start seeing that first client.

What do I need to get started?

First, grab the Private Practice Start-up Checklist to guide you.  This helpful resource helps you quickly see your progress as you complete the steps to launch your new private practice in mental health.  

Next, we are going to break down the essential steps to take as you prepare and launch your therapy practice.

Step 1: Naming your Therapy Practice

What’s in a name?  If you haven’t already thought about what the business name will be for your new practice now is the time.  Here are a few things to consider as you choose a name for your therapy practice.

Question: Are you working solo or planning to grow into group practice?

Consider if you plan to work solo long-term or expand your services to include other clinicians, disciplines, a multiple healing modalities, or employees.  

It may seem crazy to think about this now, but choosing the right name is important to the success of your future practice. 

Solo Considerations

You may want to stick with something simple like your name and develop a personal brand.  Alternatively, if you have a mantra or vision you want to create, brainstorm, and create a list of optional names. 

Seek out feedback on the therapy practice names you are considering and get a feel for how others perceive the name you’ve chosen.

Group Considerations

In this case you may want to go with a more general name or a theme of sorts. Your practice needs to support a variety of clinicians and services. 

Groups require a more general name that represents the culture of the business that isn’t a “personal brand”.  

You also want to check the availability of your name as a web domain and as a legal entity registered for business in your state before making the final selection.

Step 2: Business Structure and Legal Requirements

It is important to follow local laws and regulations regarding business registration and operational requirements. In addition to your license to practice, there are a few other steps to complete at this stage:

• • Apply for a Federal Tax ID
  • Apply for a State Tax ID
  • Determine your business structure (solo-proprietor, LLC, PLLC, S-corporation, etc.)

• Formulate a Business Plan

• Obtain Professional Liability or Malpractice Insurance or update your policy

To obtain a Federal Tax ID, you can visit the IRS website.  Look up your state government website and follow instructions to apply for a State Tax ID.  

Business structures are nuanced, so seek professional assistance if you need more information on what business structure is best for you.  

Most therapists choose to form an LLC, PLLC, or S-corporation as these structures provide more legal protections in the event of a business failure or lawsuit.

Step 3: Service Delivery and Space Requirements

Consider how you plan to meet with your clients?  Modern therapists have many potential modalities available.  Some clinicians choose to offer in-person services.  Others choose virtual or telehealth services only, and some clinicians have a mix of both.

What to consider as it relates to physical space

Office space is one of the largest expenses a private practice therapist will encounter if they choose to offer services in person or rent a dedicated space to work.  

If you are short on funds to rent a space, don’t fret. There are MANY unique ways of doing this on a budget when you are just getting started.

Also consider how you personally thrive when working and your preferred method of serving clients because designing your business strategy around services that feel sustainable and enjoyable for YOU will help prevent burnout and set you up for success!

Virtual Therapy

If you decide to conduct your therapy services only via virtual meetings, you have ultimate location flexibility.  The world is your office assuming you have confidential space, a device, and a strong internet connection to meet with clients.

Traditional Offices

If having a physical space is at the top of your list because you prefer working this way or want a more traditional therapy office, there are affordable options!  

Consider co-working spaces that often have private areas for rent.  Sublet a space a few days per week or consider sharing a lease with another business when you are not in the office. 

Home Based or Nature Based

Conducting therapy at the client’s home is also an option to consider depending on your client population.  If you have enough space and local laws permit, it might also be possible to see clients at your own home office.

Some therapists also do nature-based therapy or walking therapy which takes place in outdoor locations. This can be very cost effective when first starting out.

There are enough options that every therapist can find a suitable mode for delivering their services on a budget when they are first starting out!

Step 4: Branding and Mission Statement

Before you build out a marketing strategy and start attracting clients to work with you, it is important to get clear on your brand and mission. This is what ultimately sells your services to clients.  

Define your ideal client first

When you share clear information about your practice brand the right clients can find you.  This also leads to the clients you enjoy working with coming to your practice for therapy organically.

This description of your perfect customer is often referred to as an Ideal Client Avatar in the world of marketing.  Grab your copy of the Ideal Client Avatar worksheet below to get clear on yours.  

  Brand your practice quickly and easily

Before you design a website, online directory listing, or order a business card get clear on that marketing and create a plan to promote your new therapy practice.

A brand includes a cohesive marketing message, logo, color scheme and font styles.  You’ll incorporate these elements in all your marketing materials.  Below are some steps to help you create a cohesive brand image.

Create a brand kit

• Design a logo in Canva or hire a freelancer to create it on Fiverr
• Choose a color scheme and fonts that are complimentary
• Use your logo, colors, and fonts in all your marketing channels and communication materials

Pro Tip: Canva Pro makes it easy for you to create and save your brand kit.  It is only one of a million reasons why I use it regularly.  Canva is a graphic design platform you can use for FREE, but there are paid options if you want more features.

 Design your website and directory listings

It is very important for the modern therapist to have a great website and online presence. Check out this post for the scoop on what is needed to design webpages and directory listings for your therapy practice.

Remember that Rome wasn’t built in a day.  Thus, you likely won’t have or need the perfect website or directory listing the very first day you open your therapy practice and start seeing clients.

Don’t forget, there are professionals you can hire to help if you struggle with getting the online marketing or web design done for your therapy practice.  Don’t let this stop you! 

 There are a variety of done for you and al-carte business services out there no matter your budget.

Get the word out!

Send out announcements, post on local Facebook Groups, and let other aligned healthcare providers in the area know that you’ve started a private therapy practice. Reach out with a flyer, send an email with some helpful information to share, etc.

Marketing is an essential step in making sure your therapy practice grows and maintains a steady stream of referrals.

Create consent forms and templates

Every therapy practice needs to manage client records.  There are always those essential housekeeping items to cover and get a signature from our clients to demonstrate understanding and consent. 

Below is a list of common forms that you should consider when creating your forms and templates:

• Informed Consent for Therapy
• Cancellation and Rescheduling Policy
• Good Faith Estimate
• Financial Agreement for Services
• Communication and Social Media Policy
• Release of Information
• Telehealth Consent
• Any documents specific to a client population (minors, couples, groups, etc.)

This list is not exhaustive of all the forms you may want or need, but it’s a great starting point.  Oftentimes, many EHR services provide form templates you can customize as part of your subscription to their platform.

Step 5: Determine your Fee Structure and Practice Expenses

Are you going to be a private cash-pay practice or accept health insurance?  There are some unique advantages and disadvantages to each option.  Here are just a few for each…

Cash Pay/Private Practice

• More freedom with documentation standards
• Payment is rendered at time of service
• More flexibility in setting your fees and payment policies
• Clients paying out of pocket often attend therapy for shorter terms due to higher financial investment
• Private pay requires more marketing strategies and an elevator pitch to sell services consistently
• You must be comfortable doing consultations and marketing yourself

Insurance Based Practice

• Start the credentialing and contracting process early and understand the steps involved
• Be selective with the insurance panels you join so that you don’t end up stuck with low rates
• Insurance companies require more documentation for medical necessity and a diagnosis
• Chart reviews and audits can result in claw backs if you don’t have all documentation required
• Payments can take longer to receive because you must file claims and await reimbursement
• Clients tend to stay in treatment longer due to lower out of pocket costs
• It is generally easier to get referrals and convert them to clients with cost barriers being lower

Other Options

• New programs like Alma or Headway are popping up and offering therapists the ability to accept insurance without the hassle of contracting individually with each company. 

P.S. I have not tried any of these services as my practice already had established insurance contracts in place before these solutions became an option for therapists in private practice.  However, I have heard many positive reviews from satisfied colleagues!

• Online therapy platforms like BetterHelp or Talkspace are also an option but are often lowest paid.  Barrier to entry is low, but these companies have recently been under scrutiny for using client session data for marketing purpose.  This has posed ethical challenges for therapists on the platform because these companies make agreements with therapists as “Independent Contractors” rather than employ them.

How much should a therapist charge?

That depends on your service, specialty, and location.  Therapists who have a unique specialty often charge higher rates than those who do not. 

When setting your rates, do some local research first and see what the average rate is for a professional with credentials and experience like your own.  That is your starting point. 

From there, you need to make sure the income you receive supports your financial goals.  You can do that by forecasting your income using the concept of average session fee.

Average Session Fee

To arrive at your average session fee (ASF), you need to start by outlining your reimbursement rates for all the services you provide and how often you provide them.  The amount you bring in for all services rendered is your revenue.  

You may have separate reimbursement rates for different service types or insurance contracts.  If this is the case, you need to know how many of each service is provided to reach an average. But for the purposes of simplicity this is how your ASF is calculated for a single rate:

Total Revenue/# of Sessions=Average Session Fee

Real Life Example

Jenny has a private pay practice and charges $175 per session.  She conducts 20 sessions per week.

$175×20=$3,500 from client sessions

In this example, Jenny makes $3,500 per week before taxes and other expenses. Jenny plans to work 48 weeks per year, with projected annual revenue of $168K.  

With this information, Jenny can determine how changes to her workload impact her practice revenue. 

This allows Jenny to make better financial decisions for herself and the practice. 

Plan for Overhead Expenses

Utilize a budget to plan for practice expenses on a monthly/quarterly/yearly basis.  Here are some of the most common expenses to plan for when first getting started:

• Office Space (if needed)
• Internet Services
• Software and Services (EHR, phone/email/fax, G-suite, etc.)
• Accountant Fees and Tax Preparation
• Legal Registration (LLC fees or incorporation paperwork)
• Administrative Services (billing company, admin assistant, etc.)

It is possible to keep expenses relatively low if you choose to deliver services virtually and start small with the software or services you utilize in your practice.  

There are a variety of tools and options available at different price points.  You can always expand as your therapy practice grows!

If you are in the market for an EHR and want to give Simple Practice a try, you can get $100 account credit after your 30 day free trial with my referral link.  Many of the form templates you need are included as well as almost everything else you need to run your new therapy practice.

Keep good financial records

Set up a separate bank account where all revenue from your practice is kept and keep your receipts.  Personally, I love to use Novo Bank, for quick and easy online business banking.  No matter where you bank, keeping your money separate makes tax time much less of a hassle.  I also use WaveApps for tracking expenses and reciepts.   It is totally FREE to use!

Determine the method you plan on paying yourself.  If needed, sign up with a payroll service (likely only necessary if you are an s-corp employee or have employees in your private practice besides yourself).  I use Gusto and it has been a great low-cost service done right! You can use my referral code to get $100 gift card after your first paid month.

Wrapping up

In this guide, I’ve shared five steps needed to start your own therapy practice in mental health counseling.  Hopefully, with this guide, you feel more confident taking the steps needed to start your own private practice in mental health therapy.

Stuck and need more help or direction?

Check out the many ways Savvy Therapist can help you start and build your private therapy practice in mental health.