It would be nice if there was a flat number of how much it would cost to open a private counseling practice. It would make it much easier for counselors to know what they’re getting into financially, and if this endeavor is the right decision for their future. Unfortunately, that’s not the case. There isn’t a one size fits all budget for opening your own therapy practice.
The most honest answer to how much does it cost to open a private counseling practice is it depends. Your unique situation determines how much it will cost you both upfront and ongoing. That’s why it’s essential to consider everything you’ll need to pay for, compare this to your local area and situation, and then create a budget and plan to make it happen.
In this post, we estimate some common startup expenses to give you an idea of how much it costs to open a private counseling practice.
Average Private Practice Startup Costs
It can cost $40,000 to $100,000 in the first year to start a small business. How much it will cost to start your private counseling practice depends somewhat on your unique situation, including whether you rent a full space or just an office and even where you’re located. It can cost anywhere from a few thousand to $50,000 or more to get started, then there are the monthly costs you’ll need to pay to keep your practice in business.
Some people choose to start their practice part-time, to pay less in the beginning. A part-time therapy practice is likely to cost less than half that of a full-time practice, helping you build your client roster while saving to move full-time.
Initial Private Practice Setup Fees
You’ll need to pay various one-time fees to start your counseling business. While these fees only happen once, they can be considerable. That means you’ll want to plan for them.
Business Registration
The first step to operating on your own it to create a legal business entity that separates you from your business and best position you for managing taxes. There are a variety of business entities to chose from with the Limited Liability Company, Professional Limited Liability Company, C Corporation, S Corporation, and Professional Corporation being the most popular options for therapists and counselors. We cover this topic a great deal in an earlier article on selecting the right business entity for your private practice.
Business Licenses or Fees
The foundational price of doing business legally depends on where you are. Your location determines which licenses you need to form your business.
You’ll likely need government and operational licenses to run your business legally. But some cities don’t require any licenses at all.
Check local regulations to determine which licenses apply in your state and city. The average business license costs $100 or less. You must renew it every year or within a certain number of years, depending on the requirements in your location.
Website Creation
Many people find a therapist by searching online. To that end, you’ll need a website. Setting up a website doesn’t have to be too pricey. There are various ways to go about it, including hiring a web developer or using an all-in-one website platform.
You can build your own therapy website on WordPress if you have some tech know-how. While WordPress is the most popular software for creating small business websites, alternative website software solutions exist with the most popular options being Squarespace, Wix, and Weebly.
Alternatively, you can pay someone to design a website from scratch. This option is more costly but may also mean the website is more customized. It’ll cost between $2,500 and $10,000 to have someone build a site for you, which keeps you from having to do the development work. They key here is to make sure you are in control of your website and that you have the power to make edits once the website is live.
Some additional upfront costs that exist will include registering a domain name and paying for the initial hosting of your website. Registering a domain name should be relatively cheap, around $20 for the first year. Hosting can run $25 to $100 or more a month or you can pay in advance for the entire year and grab some savings.
Popular options for registering domain names are GoDaddy, Namecheap, and Domain.com. Popular options for WordPress website hosting include WP Engine, Pressable, and Siteground.
Office Decor and Setup
Unless you sublet a space in an existing office that comes furnished, you’ll need things like a desk, seating, and comfortable furniture options for the waiting area. Even some subletting situations may not provide everything, depending on your arrangement.
Of course, how much you spend on office decor and setup is somewhat up to you. Experts estimate that office furnishing and equipment costs about $20 to $30 a square foot, so a smaller space will need and cost less than a larger one.
You can cut costs here by getting second-hand furniture, but remember you still want it to be good quality. The furniture and decor your clients see when they arrive at your practice may impact their perspective of you as a therapist.
You may also want to purchase things like artwork and plants to make the office more appealing and comfortable for your clients. These are optional add-ons, but they can help to create the right ambiance.
Ongoing Private Practice Costs
Once you pay the bulk of the expense to get your practice up and running, you’re not done. Keeping your business up and running requires paying some ongoing costs. These are typically recurring monthly payments, but some may be annual. They can vary widely, depending on what options you choose.
Office Rent
You’ll have to pay monthly for your space. This space may look like renting an office in an existing practice or an entire clinic of your own.
If you choose to rent a small clinic of your own, it will cost an average of $500 to $2,500 a month just to rent the space.
Many counselors start out subletting an office. Typically, you rent this space for the days when you see clients. It’ll usually cost a few hundred dollars a month.
Renting a full space for your practice will cost considerably more, but it will be all yours. You also can earn money toward those expenses by subletting offices in your building to other mental health professionals.
Utilities
Some subletting contracts may include utilities, but if you’re renting an entire office unit, you’ll be responsible for things like electricity, internet, trash, and water bills. You may opt for a higher rent that includes utilities for the convenience of not having to pay them separately.
Utilities will cost about $400 a month if you have to pay them all. They should cost less if you’re renting part of a space. Regardless of your office situation, you’ll want to know what you must pay so you can have a complete budget for your new business.
Staff
You’ll likely need to consider hiring staff when opening up your own private practice. Having staff members means you can offload some tasks and free up your time to focus on providing excellent treatment to your clients. The staff you may consider hiring include a receptionist or office manager. The average salary for an office manager is about $44,000 a year, but the expected salary depends a lot on tasks, experience, and location.
If you sublet a space, it may come with a front office manager, but your monthly rent will likely reflect the price of using that person’s services.
Hardware Costs
Hardware encompasses the physical machines or equipment you may use daily such as a telephone, computer, and printer.
First, you’ll need a telephone so people can contact you to book appointments. Often, people will use the internet and book electronically, but you still need a direct way for people to contact your office. This phone doesn’t have to be a landline, but most people prefer at least having a dedicated cell phone for client calls. That means buying the phone, then paying about $40 a month for service.
Then, you’ll need a computer to carry out your business. Again, people typically prefer having a specific work computer. This approach helps prevent you from taking work home with you but also means that you’ll be HIPAA compliant, as none of the work-related data will be able to be accessed by anyone without a legitimate cause. Computers cost anywhere from $300 to $3,500, depending on your needs. A printer will cost $100 to $500.
Software
You may need specific programs to run your counseling practice. Common software packages needed would include things for patient scheduling, a client portal, client notes and medical histories, billing and accounts receivable software, teletherapy software, and software to run payroll and account for payroll taxes.
Popular software options include SimplePractice, TherapyNotes, ClinicSource, Remedly, Kareo Billing, Valent EHR Suite, Exym, Osmind, DrChrono, Noteable, TimeTap, Owl Practice, Luminello, Therasoft Online, and CentralReach.
Depending on your situation, these programs may be available to all the counselors in the unit, or you could be the one expected to provide them. Some software programs may be available for a one-time purchase, but many will require payment in monthly or annual fees. Most behavioral health software programs cost $100 to $150 a month, but the exact price will depend on your specific needs.
Just make sure that any software you choose is HIPAA compliant. This compliance may mean paying out a little more, but it’s the only way to ensure you’re protected. Antivirus software is another thing you should look into. It protects your systems from outside attacks and is another way to keep client data safe and prevent data breaches.
IT Support and Maintenance Costs
If your technology or systems go down, it could leave you unable to see clients or do your job effectively. That’s why you want access to someone who can keep your tech working soundly and help in an emergency.
Unless you are also a whizz with computers, you’ll probably want someone to come and maintain your systems. Whether routine maintenance to keep things running smoothly or someone fixing everything if it all goes a bit wrong, this is a cost you don’t want to scrimp on. IT support costs anywhere from $150 to $250 an hour.
You also may want to arrange for HIPAA-compliant backups of any data to ensure you’ll still have access to client documents in case of the unexpected.
Marketing
Effective marketing strategies can help your private practice attract and retain clients, build a positive reputation, and ultimately grow your business. These efforts are necessary to grow your practice, but each will cost you money.
Some marketing tactics you may employ include:
- Attending networking events
- Creating leaflets, business cards, or print and online advertising
- Creating and publishing social media posts
- Writing blog posts and publishing fresh content to your website
- Optimizing your business for local search (SEO)
- Paid advertising and online ads (PPC)
While you can rely on word of mouth for referrals, you’ll probably also want to take advantage of paid advertising opportunities when you’re accepting new clients. This advertising could include social media or more traditional methods. How much you spend is up to you, but be sure to monitor where clients are coming from so you can determine where best to spend your dollars. If you want to know more about paid advertising, check out our post on how to advertise counselors’ services.
To position yourself as an authority in the field, you may want to look into content marketing. While you can write blog posts yourself, you may find it easier to outsource blogging, email newsletters, and other website updates to a specialist or agency. You can tell them what topics you want to be written about and can be as involved or hands-off as you want. These agencies can also handle your social media and Google Business Profile posting, giving you the time to work on other things. The return on investment for regular content on your website and ongoing outreach to potential clients can be great.
By investing time and resources into networking and community outreach, you can establish yourself as a trusted provider in your local community and build a successful private counseling practice. Networking and community outreach can be effective ways for you to connect with potential clients and referral sources.
Counselors report spending an average of $100 a month on basic marketing and advertising. If you decide to hire a professional copywriter or SEO consultant, that will quickly increase to $1,000 per month. This amount is increased even further if PPC campaigns are operating.
Keep in mind you can keep these amounts to a minimum to start and increase the marketing budget as your practice grows.
Website Maintenance
Now that your website is up and running, you must maintain it, and you may think of things you want to add.
Things to consider when budgeting for ongoing website maintenance include:
- Domain renewals = $20/year
- Monthly website hosting = $25-$100/month
- Website maintenance for software updates = $100/month
- Website updates and improvements = $125 to $250 an hour
If you went with an all-in-one website builder like Wix or Weebly, you’re limited to what you can add based on your chosen company. If you went with a custom website in WordPress, the world is your (slightly more expensive) oyster. Either way, the work is not done. You’ll need to renew your domain name yearly, which is typically more expensive than registering the domain initially.
You’ll also have recurring hosting costs that keep your website online. These, again, vary depending on your chosen hosting platform. You should shop around to make sure you get the best deals.
Legal and Accounting
You may have legal and accounting fees that you need to pay one time and others that are ongoing.
Legal and accounting fees you need to pay may include:
- Creating contracts for clients
- Registering for payroll taxes
- Running payroll
- Submitting sales tax and payroll tax to the state
- Running financial statements
- Filing state and federal income tax
A business lawyer will charge about $150 to $325 an hour for any tasks you need completed.
Your accounting fees may vary depending on how complex your needs are. A Certified Professional Accountant will cost $150 to $450 an hour. You may hire an accountant or bookkeeper to help set up financial accounts, create a budget, and track expenses and income. A bookkeeper will cost more like $30 to $90 an hour. Alternatively, you may also need to pay for accounting software or other tools to help manage finances.
Insurance
There are many different insurances to consider for your private practice.
Professional Liability Insurance (PLI), or malpractice insurance, is critical for any mental health professional. PLI protects you against claims of negligence or harm arising from your professional work with clients. It costs about $450 a year for liability insurance to cover your practice.
Renters insurance protects you if someone injures themselves in your space and also protects against damages to the contents of your office. It costs about $100 a month.
Finally, striking out on your own means you’ll be solely responsible for any health insurance you need. The national average for health insurance per person, per month is $456.
Business Licenses
Running a business means you’ll need all relevant licenses. These don’t last forever, so you must reapply or renew your licenses semi-regularly. How often you must do this depends on your city or state. Check local regulations and set a calendar reminder to renew all licenses to ensure you operate legally.
Ongoing Business Compliance
Every small business has some degree of business compliance they need to maintain each year. In addition to the business licenses referenced above, maintaining a registered agent and filing an annual report with the state will also be required. Both will cost you about $100 to $200 annually.
Continuing Education Courses
As a licensed psychiatrist, you must maintain a certain number of continuing education credits each year to keep your status. This education is essential to ensuring your clients have confidence in your knowledge of the most effective diagnostic and treatment methods available. Not only that, but many states mandate it.
How many hours of continuing education you need depends on where you’re licensed to practice. The courses don’t have to be overly expensive (some are even free), but you must pay for them yourself, so it’s essential to factor in these costs each year. The bright side is you get to choose which courses to take and can make sure they align with your interests and existing expertise.
Professional Memberships and Licensing Fees
You may be a member of a professional organization that requires annual dues to be paid. These memberships can benefit you by providing networking opportunities, continuing education, and resources to support professional development. If you don’t continue to pay your membership fees, you will lose access to these resources. How much these memberships cost depends on the organization.
Maintaining your license is an important part of practicing as a therapist, so you’ll need to remember to pay any fees to your licensing body to be able to keep practicing legally. How much this will cost depends on where you’re licensed to practice. In most areas it is probably a couple of hundred dollars a year. Failure to pay these fees can result in disciplinary action or revocation of your license to practice.
Miscellaneous Costs
Finally, you’ll also have to budget for any other ad-hoc costs that don’t fit into any of the categories above.
Some miscellaneous costs you may find yourself needing to pay include:
- Cleaning and maintenance – As a professional, you must ensure that your physical practice is always clean. Hiring a regular professional cleaning service means keeping the place sparkling. You’ll also want to have a maintenance company on hand in case anything goes wrong with the fittings and fixtures of your office.
- Furniture replacement – You can’t predict when furniture will fail, so it’s a good idea to have some money handy for replacing any damaged furniture or items that reach the end of their lifespan due to normal wear and tear.
- Taxes and accounting – Regardless of how much your practice brings in, you’ll have to pay taxes. To make this easier, you may consider hiring an accountant so you don’t get any surprises. Getting the amount of tax you must pay right is essential for everyone. You should put away a portion of your monthly revenue to pay your taxes.
- Unexpected expenses – There may also be expenses you don’t expect. Consider setting some cash aside each month for any unexpected bills that may come in.
Let Us Help You Grow Your Practice
There are a lot of different costs associated with opening up a private practice, so you shouldn’t take the decision lightly. The costs vary widely depending on location and the individual choices you make.
To maximize your chances for success, you must carefully consider your startup budget, your ongoing costs, and develop a solid business plan before launching your practice.
All Counseling can help you grow your mental health practice. Our therapist directory connects potential clients with counselors and therapists. Whether you’re considering opening up a private practice now or in the future, claim your All Counseling profile today.
