How to Budget for Your Therapy Practice

If you’re getting ready to launch your own therapy practice, having a clear understanding of your budget is essential. Whether you’re planning to start off virtual-only, in-person, or a mix of both, the first year can bring unexpected expenses. Here's how to set up a realistic budget so you’re not caught off guard.

In this article, we’ll talk about some of the costs to consider that directly contribute to running your practice in the early stages. We’ve written an article about how to set up the legal business entity for your practice here, which can have varying costs depending on your licensure, state, and type of entity.

The Upfront Costs

These are the one-time purchases you’ll need to get off the ground.

• Office supplies: Couch, decor, chairs, and other supplies if you’re doing in-person therapy ($1,000–$3,000).
• Technology: Webcam, mic, second monitor, or even some lighting if you’re doing online sessions ($100–$400).

Core Monthly Costs

These are the recurring costs you’ll need to keep the lights on.

• Office Rent and Utilities: Rent can be variable depending on your location and needs. Don’t forget to include utilities like internet, phone, and others.
• EMR and Billing: Shop around for the right software that fits your needs and personal budget. Ensure that if your EMR does not include secure telehealth options, you should find supplemental software for virtual appointments ($25–$200/month).
• Insurance: You’ll need malpractice and general liability insurance to protect yourself and your practice ($400–$900/year).

Miscellaneous Costs

The other costs that support and help your practice grow.

• Website: A domain for your practice and Wordpress or Squarespace to build a basic website ($4–$30/year).
• Directories and Ads: Get listed on sites like PsychologyToday or GoodTherapy and invest in Google or social media ads to raise awareness of your services ($30–$80/month).
• Accounting: Wave and ZipBooks both have free tiers, but if your accounting needs are more complex, factor in some cost for that.

Now that we have a ballpark estimate of what costs we can expect, we need to factor in some contingency funds in case of emergencies or unexpected costs. Set aside 15–20% of your expected first year budget for this.

Projecting Your Revenue

You’ll first need to determine what your average rate might be. Do some research on what your rate could look like depending on your experience level, type of therapy, and location. Also factor in things like whether you’re taking insurance or private pay only and if you want to implement things like a sliding scale to improve accessibility for your future clients.

Now, we’ll need to project our future caseload. For most therapists, this can be anywhere from 15–30 clients a week. Remember to set realistic expectations.

Don’t count on meeting your caseload goals for the first few months though, getting your first few clients can take longer than expected. Here’s what a ramp up might look like:

• Months 1–3: 20–30% of caseload
• Months 4–6: 50–60% of caseload
• Months 7–12: 75–90% of caseload

With these numbers, you can have an educated guess on how much your practice might make in its first year. Compare your projected revenues to your projected costs and set aside any extra cash you might need to stay afloat during the early months.