How to Set Fees for Your Private Practice: A CPA's Guide

As a CPA turned therapist, I love money talk.

And here is a hard truth:

If you’re not aiming for profitability, your private practice might not make it.

Sure, you didn’t become a therapist for the money, but your practice is still a business. To help the clients you want to serve, you need to be profitable.

So, how do you set fees that work for you?

Let’s break it down step by step. It might get a bit technical, but I’ll keep it as straightforward as possible.

1. Do Your Market Research

Start by understanding what therapists in your area charge. Check websites like Psychology Today or Google local therapists and see their rates. If you have specialized skills (e.g., EMDR, brain spotting, couples therapy), you might be able to charge more.

2. Calculate Your Overhead

You need to know your expenses to set your fees. Here’s how to break it down:

• Fixed Costs: These are consistent each month (e.g., EHR system, rent).

• Variable Costs: These fluctuate (e.g., utilities, marketing).

• Annual Expenses: Costs incurred once a year (e.g., license renewal, malpractice insurance).

Example:

Fixed Costs:

• Rent: $300/month

• EHR: $80/month

• HIPAA Compliance: $20/month

Variable Costs:

• Utilities: ~$100

• Marketing: ~$50

• CEUs & Misc: ~$50

Annual Costs:

• License Renewal: $100

• Malpractice Insurance: $300

• Business Filing Fee: $80

Monthly Breakdown:

• Total Fixed Costs: $400

• Total Variable Costs: $200

• Total Annual Costs: $480/year = $40/month

Total Monthly Expenses:

• $400 (Fixed) + $200 (Variable) + $40 (Annual) = $640

3. Determine Your Desired Net Income

Decide how much you want to earn after taxes. For example, if you want a net income of $100,000 annually:

Annualize Your Expenses:

• $640/month x 12 months = $7,680

Calculate Total Required Income:

• Desired Net Income: $100,000

• Annualized Expenses: $7,680

• Total Needed Income: $100,000 + $7,680 = $107,680

Weekly Income:

• $107,680 / 48 weeks (allowing 4 weeks for vacation/sick time) = $2,243

Per Session Fee:

• $2,243 / 18 clients per week (example) = $125/session

Include Taxes:

• $125 x 1.25 (to account for estimated tax rate) = $156/session

So, your fee should be approximately $156/session.

4. Assess Your Fee

Is your calculated fee reasonable for your market and skill set? Compare it to your market research. If it seems high, consider alternative income streams like group therapy or specialized training. If necessary, look for ways to reduce costs.

5. If You Take Insurance

Insurance reimbursement rates can limit your flexibility. Here’s a way to work backward if you take insurance:

Example:

• Insurance Reimbursement: $90/session

• Number of Clients/Week: 18

• Weekly Income: $90 x 18 = $1,620

• Annual Income (pre-tax): $1,620 x 48 weeks = $77,760

• Post-Tax Income (assuming 25% tax rate): $77,760 x 0.75 = $58,320

Subtract your annual expenses to find your net income. If the net income isn’t sufficient, consider increasing self-pay clients, negotiating rates, or exploring other income sources.

Need More Help?

Starting a private practice can be challenging. If you need personalized assistance, I offer 1:1 coaching and will soon launch a comprehensive course.

Need budget help: If you want to look at numbers in excel, I sell a budget template that can be super helpful here.

Stay tuned for more posts to help increase your practice’s profitability and success!