There’s no official rulebook for setting your hourly rate in psychotherapy private practice, so how do you decide how much to charge? In this article I offer a few simple tips to help you be on your way and feeling confident about setting your hourly rate in psychotherapy private practice.
If you plan to charge some or all of your clients out of pocket, it’s important to set your rate before you begin marketing your services.
Or maybe you’re already charging a certain hourly rate but you realize it’s time to reevaluate whether you’re charging the right amount.
Either way, I got you covered in this step-by-step guide to help you set your hourly rate in psychotherapy private practice!
Mistakes to Avoid when Setting your Hourly Rate
Before I dive into the steps, I need to clear the air for a second. There is a mistake I see so many early career therapists make when they set their hourly rate in private practice: undercharging.
Yep. I’ve done it before, and chances are you’re guilty of it too. Here’s how the (incorrect) theory plays out in our minds:
- If we charge a lower hourly rate than our competitors, potential clients are more likely to contact us first
- Our private practice fills up quickly and we end up earning more income than if we charged market rate
In reality, here’s what actually happens with this strategy: when potential clients see that you charge much less than the other local therapists, they take it as a sign that you’re having trouble getting business. Most people then make the further assumption that you must not be a very good therapist if you’re unable to fill up your practice.
…But we both know you’re a great therapist! You’re just trying to grow your business.
Let me tell ya. I’m a frugal gal and I’m all about shopping around to find a great deal (hello Free People dress for $8 at Goodwill!), but a therapist is not something I’m willing to cut corners on for the sake of budget. Would you be willing to skimp on the cost of your personal therapy when you’re in crisis?
What happened when I undercharged my clients
I learned this lesson the hard way. As a postdoc, I worked in two private practice locations to accrue hours for licensure. At one practice, my supervisor required I charge market rate for my qualifications ($120 per session). At the other practice, my supervisor set my hourly rate at $90, with a sliding scale down to $40 per session. Most of my clients at the second location were paying $40 per session.
Turns out that not only did I make more money in the practice where I charged a higher rate (while seeing fewer clients), but the types of clients I saw at each location varied significantly. Minus the occasional exception, most clients paying $40 per session were not fully committed to the process. No-shows were commonplace, and people didn’t seem especially bothered by paying the $40 no-show fee. They were literally not fully bought-in to the therapy process.
I quickly burned out because not only was my income barely enough to cover gas money after receiving my cut of the fee, but the work was not very fulfilling given that my clients largely were unwilling to do the work.
All that to say, it’s important to charge what you’re worth – for more than one reason!
Step-by-Step: Set Your Hourly Rate in Psychotherapy Private Practice
I’d like to offer a simple strategy for how to set your rate so that you are paid what you’re worth and you don’t burn out meeting with clients who aren’t interested in doing the hard work of therapy.
Like having a printout to follow along? I created a handout for you to print out. Be sure to read through each step here before you fill out the form so you have the right numbers to fill in! Click here to snag your free handout to set your hourly rate in private practice
1. Determine your ideal income
Rather than picking an arbitrary hourly rate, it’s best to start at the end and work backwards. So, assuming someday your practice is as full as you’d like it to be, how much would you like your yearly income to be?
Depending on your cost of living, expenses, and other preferences, this number might vary quite a bit. Pick a number that fits for you.
2. Calculate your expenses
If only you could pocket 100% of your client revenue! But the reality is that you may have some pretty hefty expenses to account for. Expenses vary widely depending on where you live, whether you’re working part-time or full-time, and other personal preferences of yours.
If you’re not sure how much private practice will cost you, here are a couple of video links to get you acquainted with the startup costs of private practice:
It’s important to have at least a rough number in mind of your startup and annual costs so you can do some proper math once you’re a few more steps along.
3. Determine the ideal size of your caseload
Next you need to determine how many clients per week you plan to meet with once your practice is at full capacity.
How many clients per week is reasonable? The short answer is: it’s really up to you! I know therapists who are happy making $50,000 per year and capping their practice around 10 clients per week. I also know therapists who want to make over $200,000 per year and who see 30 or more clients per week.
If you’re tempted to think you can clock in 35 client hours or more per week and just be rolling in the dough, let me encourage you to steer clear from that strategy. In my experience, therapists who see much more than 30 clients per week tend to have more difficulty prioritizing family, self-care, and other key values (which we’re trying to model for our clients). Don’t forget to account for 15 or 20 hours a week dedicated to marketing, paperwork, bookkeeping, etc. So 20 to 25 client hours per week really is full-time work.
If you are seeing 35 clients a week and you’re not earning the income you had hoped for, that means it’s time to raise your hourly rate!
4. Determine your time off
How much time will you take off per year? Like the previous steps, this item is really up to you and your preferences. However, I do suggest you allow yourself a bit of time off. It’s not healthy or reasonable to attempt to work more than 50 weeks per year!
In fact, I notice most therapists take more time off than the average person. Be gracious and remind yourself that your job is emotionally taxing and requires extra self-care. We can’t be helpful therapists if we are burning out ourselves.
As a reference point, in 2018 I took a total of 6 weeks off for vacation. I hope you feel permission to do the same!
5. Do the math
Math is important, especially when it comes to running a business! Don’t skip out on doing this math and you’ll know exactly how much to charge for your hourly rate.
Here’s what the equation looks like:
(Ideal Yearly Income + Yearly Expenses) ÷ Number of Yearly Work Weeks ÷ Number of Weekly Clients
…Say what?? I always need an example to watch how the numbers play out. So let’s create a realistic example. Let’s say you completed steps 1-4 and you came up with these numbers:
Ideal Yearly Income: $100,000
Yearly Expenses: $15,000
Ideal Caseload: 20 clients per week
Total Yearly Work Weeks: 48
Let’s plug these numbers in to the above equation:
$100,000 + $15,000 = $115,000
Divided by 48 = $2395
Divided by 20 = $119
In this example, you need to average making $119 per session based on the other parameters you set. You can tweak some of these numbers around a bit and try them out in the equation again until you feel good about all the parameters.
Math used to be the bane of my existence. But when it comes to running a business, it’s incredibly empowering. Suddenly, your future income doesn’t have to be a mystery. You can also use this equation to see how many weekly clients you need to meet with at that rate in order to break even. Just remove your ideal income from the equation. Let’s see how that plays out:
$15,000 divided by 48 = $312.50
Divided by $119 = 2.62
See what we did there? If you anticipate $15,000 of yearly expenses and you work 48 weeks per year averaging $119 per session, you will already turn a profit if you average at least 3 clients per week. Not too shabby!
6. Decide on whether you will utilize a sliding scale
This is a big beast of a question, one I will dedicate an entire post to in the future. A sliding scale can be a great option for those of us who are not in-network with any insurance panels. Be aware that if you are on insurance panels, they consider the lowest rate on your scale as your full rate. So I typically recommend doing one or the other, but not both. Insurance and sliding scales just don’t get along!
If you offer a sliding scale, be sure that you consider your ideal client fee when taken all together. Personally, my ideal client fee is $125 per session. My full rate is $165 per session and it slides down to $100 based on income. In reality, I average about $145 per session. The design of my scale sets me up for success so I’m not griping that I didn’t earn the income I wanted despite seeing my ideal number of clients.
Ready to dive deeper into starting a private practice? I have a free guide for that! Check it out here to grab your free guide: Start a Private Practice in Counseling
Hopefully these tips help the process of setting your hourly rate feel a bit more manageable to you. Until next time, from one therapist to another: I wish you well.