Starting a private practice is a significant milestone in the career of a psychologist. According to the American Psychological Association, approximately 45% of psychologists work in private practice. While opening a private practice in psychology comes with various benefits, it also entails more responsibility.
Private practice psychologists enjoy the freedom of being their own boss and having control over their schedule. They also have more autonomy in their practice, a privilege that mental healthcare professionals working in teams at outpatient clinics, nursing homes, hospitals, and medical schools do not have.
However, it is important to note that private practice therapists also carry more responsibility and liability. Starting a private practice can be isolating and overwhelming, especially in the initial years. Running a practice requires more than just a desire to work independently; it demands hard work, time, and financial investment.
To ensure success when contemplating your options, it is advisable to seek tips and advice from private practice psychologists who have experience in starting their own practices.
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What Do You Need Before Starting a Private Practice in Psychology?
Many psychologists pursue a private practice after obtaining years of clinical experience. Psychologists hold a valid state license and a doctoral degree in psychology from an accredited university. To open a private psychology practice, they must also meet the business requirements set by their home state.
Any licensed psychologist with a National Provider Identifier number can apply for a business license. Those taking insurance may also need to register with CAQH ProView, says Dr. Robin Hornstein, licensed psychologist and co-founder of Hornstein, Platt & Associates.
"Following the state guidelines in each state is important. Your license to practice is a given, but it is also important to know how to protect yourself," Hornstein says, explaining that private practice therapists must consult with tax accountants and lawyers.
Obtaining Clinical Experience
Starting a private practice without clinical experience can be challenging, but it is not impossible. Megan Pietrucha, Psy.D., a licensed clinical and sport psychologist in private practice, explains that while many psychologists begin their private practices early in their careers, having prior clinical experience can be vital.
"I would definitely recommend having experience with a wide variety of populations and clinical issues as well as in one to two niche aspects of the field so that you can market yourself to stand out amongst your colleagues," she says.
In addition to standing out among colleagues, clinical experience provides essential skills, confidence, and a deeper understanding of client needs, which can be crucial for building a successful private practice.
“Having diverse work experience prior to starting a private practice gives you the confidence to know how to manage ethical dilemmas, interpersonal issues, and a wide range of clinical issues.”
—Megan Pietrucha, Psy.D.
Creating a Business Plan
Creating a business plan is key to a successful launch into private practice in psychology. While you will customize your plan to fit your practice, it should include these components:
- Mission Statement: Describe your core values and goals and why you offer distinctive services.
- Business Overview: Provide information on your therapy approaches and specialty areas.
- Marketing Plan: Consider building and maintaining a website and a social media presence.
- Financial Projections: Calculate your operating costs, including expenses for rent, utilities, supplies, etc.
Choose a Practice Type
Before moving into private practice, consider what type of practice works best for you and your intended clients. If you want the freedom to create your own vision and manage your practice on your own terms, you might find solo practice more rewarding. A group practice may be the right choice if you prefer to reduce risk by working with colleagues who will share the burden when it comes to administrative decisions.
According to Pietrucha, individual and group practice have advantages and disadvantages.
"Group practices require you to be informed of employment law, liability, and how to manage other people in addition to all the other administrative aspects of starting a private practice. Group practices can be more lucrative, but there are also increased overhead costs with supporting employees. If you prefer not to be in a management or administrative role, independent practice might be better suited for you."
Many therapists offer virtual therapy because of its convenience and greater accessibility for clients. However, some therapists find it difficult to connect with clients online, preferring the intimacy of in-person engagement. In-person therapy may also allow for more thorough assessments and treatment interventions not available virtually. "Virtual practices are becoming more common and allow for increased accessibility for many clients," says Pietrucha. "However, virtual practices also have unique ethical and legal considerations (i.e., HIPAA, record keeping, messaging, boundary concerns, crisis management) that one should be well-versed in prior to starting a telehealth practice."
Establishing a Speciality
Therapists in private practice should carefully consider how a specialty will attract clients and drive revenues. Therapists with training and experience in specialized areas and populations should determine if there is a demand for this kind of practice. You may have the credentials to provide services that no other therapists in your location offer.
The social and demographic trends where you practice can shed light on potential client needs. For example, if you practice in a market where many young families or older people reside, you can adapt your interests and market to the needs of these specialized groups.
Challenges to Starting Your Own Private Practice in Psychology
Private practice psychologists enjoy certain freedoms, but they also face many challenges that come with owning a business. Running a private counseling practice requires working long hours and performing tasks outside a psychologist's purview.
While you cannot avoid all the obstacles of owning a private practice, preparing for common responsibilities ahead of time can ease the load.
“The greatest challenges or barriers to running a successful practice are being able to balance everything and know everything.”
—Dr. Jerry Opthof
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Balancing the Clinical and Business Aspects of Private Practice
Opening a private practice requires mastering many business functions. Besides seeing clients, psychologists must order office supplies, pay taxes, and manage support staff.
Dr. Jerry Opthof, a psychologist with over 20 years of experience, explains, "The greatest challenges or barriers to running a successful practice are being able to balance everything and know everything."
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Marketing Your Practice
Private practice psychologists perform many tasks outside of counseling, such as marketing. As Opthof explains, "You need to know how to market yourself. No one can sell you better than you can sell yourself."
Identify your target customer and the facets that make your business stand out. Then, you can build a strong social media presence and intuitive website to drive traffic to your private counseling practice.
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Managing Finances and Taxes
Every business owner needs to understand financial management. In addition to tracking expenses, Hornstein explains that private practice therapists must consider financial incidentals, such as their own health insurance and salary, business taxes, and payroll.
Hornstein suggests reaching out to professionals: "To me, it is all a puzzle, and you need to rely on the right advisors to make a safe, profitable organization for yourself."
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Bringing on New Associates
There comes a time when every private practice psychologist must consider expanding. Hiring additional staff requires making major decisions.
"As you grow beyond working as a solo practitioner, you may also need support staff as well. If you add associates, you'll need to decide on compensation and if you'll engage them as independent contractors or employees," Hornstein explains.
Legal Considerations for Private Practice in Counseling
Choosing Between an LLC, S Corp, and Other Business Structures
Before opening your private practice, decide on the business structure that best fits your needs. This must happen before registering for a business license or permit and impacts both small and large-scale business decisions.
A limited liability corporation (LLC) remains the most popular business entity for a private psychology practice. With an LLC, business owners do not pay corporate taxes, and the structure provides a reduced liability risk compared to a sole proprietorship. Instead, the LLC's assets and liabilities remain separate from the private practice therapist.
However, some states don't allow licensed private practice psychologists to form an LLC. In that case, the next best option may be a professional limited liability corporation (PLLC), which incurs taxes like an LLC.
An S corp, another option open to therapists, also operates like an LLC in that the business profits and losses remain separate from the owner or owners.
Taxes and Accounting
While complex financial matters warrant consultation with tax accountants and attorneys, private practice therapists can learn basic accounting to protect their business and avoid tax penalties.
Business owners should ensure that their personal assets remain separate from their business finances. A small business owner may use Quickbooks or other accounting software programs to track incoming revenue and outgoing expenses, whereas a larger company may use an accountant.
A private counseling practice's business structure dictates how it pays taxes. Nevertheless, every private practice psychologist must keep business receipts and maintain financial paperwork to write off expenses. Additionally, they must pay quarterly self-employment taxes to avoid a large tax bill or penalties come tax day.
Insurance
Psychologists can choose from various insurance policies. The most appropriate insurance coverage for a private counseling practice depends on the business and its size, as insurance needs differ. Regardless, basic insurance should cover the private counseling practice, the business, and the private practice therapist, including the following types of coverage.
- Professional Protection: Suppose a client sues your private counseling practice. Malpractice insurance would cover the legal fees. The amount you pay for malpractice insurance depends on the coverage you need.
- Business Protection: Running a business requires renting or owning an office space. A business owner needs liability insurance to cover potential accidents on the property. The same goes for equipment and furniture that could become damaged from a fire or leak.
- Personal Income Protection: Disability insurance offers protection from unforeseen circumstances. Suffering a temporary or permanent disability or illness means a loss of income. With disability insurance, a private practice psychologist would receive financial compensation.
HIPAA Compliance
Running a private counseling practice requires maintaining HIPAA compliance. Private practice therapists and all healthcare providers need to meet national HIPAA standards.
Businesses legally need to maintain written policies and procedures addressing HIPAA laws. Private counseling practices also need to maintain the security of their patients' files. Psychologists must protect digital information from cyber breaches and keep paper records in a locked cabinet.
HIPAA rules also affect a private counseling practice's payment system. Venmo and PayPal, for example, do not meet HIPAA compliance rules. Business owners must use a HIPAA-compliant payment system that signs a business associate agreement explaining a third party's responsibility regarding protected health information (PHI).
To organize your practice HIPAA-compliantly, Hornstein advises investing in "a good electronic health record (EHR), which can also manage your money and billing."
Accessibility
All businesses must comply with the Americans with Disabilities Act (ADA). Private counseling practices must remove barriers that would prevent people with disabilities from accessing therapy at their own cost.
Under the law, people with disabilities must have equal access to healthcare, whether a private practice therapist currently treats them or not. The government considers the business's size and financial capability when enforcing the law.
Maintaining ADA compliance requires making facilities accessible to all clients. Businesses need wheelchair accessibility and designated parking. Private counseling practices, including telemental health companies, must also apply ADA compliance to their websites, making them accessible to individuals with visual and hearing impairments.
Major Decisions You'll Encounter When Starting a Private Practice in Psychology
Starting a private counseling practice involves personal sacrifices and large financial commitments. The major decisions business owners make early on influence their counseling practice's day-to-day operations and long-term profitability and viability.
With proper planning, private practice psychologists can set their business up to succeed. If you know what decisions to expect early on, you can be better prepared to handle them.
As Hornstein explains, private practice owners must consider the practical and logistical business questions: "Who will cover me if I am sick, on vacation," or in other unpredictable life situations?
Other decisions, Hornstein adds, affect daily operations like fees. Ask yourself: "If I don't take insurance, will I have a sliding scale?"
As you run your business, you might need to consider the following questions:
- Do I have enough clients to make the jump to private practice?
- What will my work schedule be? Should I be prepared to work nights and weekends?
- What is my fee? How do I decide how much to charge?
- How do I find the right attorney or accountant?
- What do I do if a disgruntled client leaves a public review?
- How much should I invest in my office? What's necessary, and what's optional?
Tips for Starting a Private Practice in Psychology
Expect Ups and Downs
Every business encounters ups and downs. Hornstein explains that you can create opportunity during the "lulls or rushes" in business. Psychologists can use this time to provide pro bono sessions to those who need counseling.
Hire Help When You Can
Draw on professionals to help you build your social media presence. Ask lawyers for advice on legal issues and enlist staff to handle invoices or perform time-consuming administrative tasks. Running a business means being able to delegate responsibilities when needed.
Build Your Brand With Free Workshops and Events
Freebies are a good way to market your private counseling practice. Complimentary workshops and events also build business recognition.
"Charging for everything is a foolish mistake when you are just starting out," Hornstein explains.
Build a Network of Colleagues
Building a network of psychologists allows you to get help from your colleagues on business matters. "You also need a network of colleagues so you don't feel lonely," Hornstein says.
Additionally, a tight professional network lets private practice psychologists refer out clients and ensure appropriately matched clients.
Understand the Different Types of Group Practice
Psychologists interested in group practice can choose between shared or primary ownership.
Pietrucha explains, "In a shared group practice, liability, costs and ownership are shared amongst colleagues. This might be advantageous in terms of division of labor and liability, but also requires good working relationships to maintain the practice. In a primary ownership group practice, your colleagues would be your employees, thus you would assume more of a management and supervisory role in addition to clinical roles."
Meet Our Contributors
Megan Pietrucha, Psy.D.
Megan Pietrucha, Psy.D., is a licensed clinical and sport psychologist in private practice. She has also served as the training director for an APA-accredited internship program and taught undergraduate and graduate courses in psychology. She specializes in college student and athlete mental health, mood disorders, life transitions, stress management, eating concerns, body image, and performance psychology. She works with high school and college athletes, recreational fitness programs, artists, business leaders, and anyone motivated to optimize their potential in work and life. Pietrucha also provides assessment services, supervision, and clinical consultation. Her PsyPact credential enables her to practice teletherapy with clients in over 20 states. She earned her bachelor's in psychology from Illinois Wesleyan University and her master's and doctoral degrees in clinical psychology from the Illinois School of Professional Psychology at Argosy University.
Dr. Robin Hornstein
A co-founder of Hornstein, Platt & Associates, Dr. Robin Hornstein has been a licensed psychologist and counselor for over 30 years. Before that, she completed a degree in early childhood education and worked with young children. After earning a doctorate from the counseling psychology program at Temple University, she spent many years serving clients in recovery before entering private practice. Wanting to contribute to the Delaware Valley community in a more significant way, Dr. Hornstein co-founded Hornstein, Platt & Associates, where she has been the clinical director, focusing on ensuring their therapists provide the most effective treatment possible and matching clients with therapists who will best meet their needs. HPA serves the diverse community around Philadelphia and its suburbs, focusing on inclusive care.
Dr. Jerry Opthof
Dr. Jerry Opthof has been counseling individuals, couples, and families for over 20 years. His practice is built on connection, relating to his clients as whole people, not just the problems they face. He offers strategies built on his professional knowledge, experience, and the perspective that he has gained from his own life challenges.Dr. Opthof specializes in individual and marital counseling, sexual, relationship, and family issues, addiction and recovery issues, and grief, depression, and anxiety.
Page last reviewed on May 2, 2024