The Therapists’ Essential Guide to Starting a Private Practice

Embarking on the journey to open a therapy practice is a big step towards clinical autonomy. I can vividly remember sitting in graduate school to become a Marriage and Family Therapist and dreaming of my future office. Back then, I had no idea how to start a private practice. I felt confused and overwhelmed and didn’t have a private practice coach to guide me through the process of starting up a counseling practice. 

• Private Practice Pro Tip: Don’t wait for the ‘perfect time’ to open a therapy practice. Start where you are with what you have. Your practice will evolve as you do! 

Since then, I’ve opened my own modern private practice, hit multi six figure earning years, and managed to prevent burnout by taking care of myself along the way! I’ve helped over 2000 therapists build their practices in my online courses. For those starting a private practice, it’s essential to factor in tools like cloud-based EHR systems, medical billing platforms, and HIPAA compliance practices.

The key to an out-of-network or cash pay therapy practice is building a business that is an extension of your authentic self. When I first started my therapy practice, I thought being a generalist was the way to reach the most out-of-network clients. However, after over a decade of teaching other LSCWs, LMFTs, PsyD’s, and Social Workers how to promote themselves, I can assure you that niching down is the way to go. 

Step 1: Become a Licensed Therapist  

Your credentials are most important. Clients value education, experience, and advanced training. Ensure you have the right licensure for your practice area – whether it’s LMFT, LCSW, PSYD, or PhD.  This step is more than just a formality; it’s about professional credibility and trust. Although coaching models have become increasingly popular, I see clinical value as well as business value in becoming a fully licensed psychotherapist. As licensed mental health professionals, it’s also critical to understand your ethical responsibilities, especially when offering psychiatric treatment, family counseling, or trauma-informed care.

Step 2: Create a Solid Business Foundation 

Your practice is more than therapy; it’s a business. Select the right structure, be it a sole proprietorship, S-corp, or an LLC. This choice shapes your business – from taxes to liability. I highly recommend consulting a small business attorney or certified professional accountant for questions you might have about which type of professional company to become! 

Regardless of whether you decide to take insurance or to be an out of network therapist you will need an NPI and an EIN number. An EIN number is a number that the IRS associates with your business. Your NPI number is a National Provider Identifier that is assigned to you as a healthcare professional. I go into more depth and detail about these specific numbers and how to apply for them in my Private Practice Roadmap Course. Don’t forget to assess compliance protocols for medical records, patient safety, and informed consent documentation.

Step 3: Create a Solid Business Plan for your Practice

A solid business plan will function as your roadmap toward a successful therapy private practice. 

When I first started in private practice I felt hesitant to create a formal business plan. I was busy and the last thing I wanted to do was sit down at my computer and type up a business plan document! But creating a business plan helps you get clear on your goals and creates a framework for executing those goals. 

A solid business plan should reflect not just your financial goals, but also your mission in helping others. Include elements like:

• Your mission statement

• Your ideal client or clients

• What therapeutic services you offer

• How you plan to market your counseling practice 

• Financial, legal, and other logistical practice concerns

Make sure to evaluate healthcare trends, your target market, and the types of therapy you’ll offer—such as CBT, teletherapy, or occupational therapy.

Step 4: Find an Affordable Office for your Private Practice Therapy Practice 

Myth Buster: Your first office doesn’t have to be perfect or permanent. Many successful practices evolve through various spaces over time. Check out this article for other great tips on finding the perfect office for your counseling practice. 

When it comes to finding an office for your therapy practice, location matters! Potential therapy clients want to feel welcomed, comfortable, and warm in your office! Whether a cozy office or a virtual therapy office, your practice space should align with your therapeutic approach. 

Pro Tip: Consider subletting an office from another therapist before you commit to a lease! Therapists often sublet offices together, and spending time networking before you commit to a lease could allow you to find colleagues (aka referral sources) to share space.

If your practice includes telehealth, you’ll also need to evaluate HIPAA-compliant platforms for secure video sessions via phone or computer.

Step 5: Learn to Market Yourself and Your Therapy Practice 

Private Practice Pro Tip: Marketing your therapy practice doesn’t have to feel uncomfortable. Remember, if your ideal therapy clients can’t find you, they are missing out on services they need! 

Marketing your counseling practice might feel tricky. When I opened my first office, I wanted to reach potential clients but I didn’t want to feel like I was, “selling myself.” However, building a thriving private practice requires us to show our faces in the places where our ideal clients might be. In my Marketing for Therapists course, I break down every step you need to take to fill your practice with out of network, cash pay clients. Here are three tips to get you started filling your practice.

• Build a ‘business support network’ – include mentors, peers, and professionals like accountants and lawyers.

• In the digital age, a strong online presence is vital. Create a website that speaks to your ideal client. 

• Engage in social media with authenticity. 

• Remember, your story. How you tell it can be your most powerful tool in connecting with potential clients.

• Having a strong niche is essential to marketing a successful, cash pay therapy practice. 

To get found online, use SEO, Google Business profiles, and explore online marketing for therapists. You might also explore platforms like Talkspace, which offer visibility and additional revenue streams.

Step 6: Create a financial plan for your therapy practice 

Private Practice Pro Tip: Don’t undervalue your services. Setting appropriate fees is crucial for sustainability.

Understanding your private practice finances is crucial to the success of your business. Don’t forget to consider the items below. 

• Your fee

• Your overhead or expenses

• Saving for taxes 

Also consider incorporating tools for managing medical billing, tracking therapist retention, and budgeting for growth. Evaluate potential costs like EHR subscriptions, employee assistance programs, and private practice tools for therapists to keep your business efficient.

Step 7: Select the Right EHR for Your New Therapy Practice 

Efficient and confidential record-keeping is the backbone of your practice. Invest in a reliable EHR system and develop a seamless scheduling process. I personally love SimplePractice and I’ve used it since 2016! Here is a link for two months free. Your electronic health record should be HIPAA-compliant and include cloud-based access, secure storage for medical records, and integration with other healthcare tools. Choose an EHR that supports behavioral health documentation and ensures ease of use for both mental health and occupational therapy settings.

Your Practice, Your Journey

Starting your therapy practice is more than setting up an office; it’s about creating a space where healing, growth, and transformation happen. It’s a commitment to yourself and your clients. Stay true to your vision, adapt, and grow. You’re not just opening a practice; you’re opening a world of possibilities for yourself and those you serve.

Watch this video to learn more!

Frequently Asked Questions About Starting a Therapy Practice

1. What are the first steps to starting a private therapy practice?

Start by confirming your professional licensure, choosing a business structure, applying for an EIN and NPI, creating a business plan, deciding where you will see clients, and setting up your financial and clinical systems. You will also need a plan for attracting clients and managing records securely.

2. Do I need to be fully licensed before opening a therapy practice?

The article recommends becoming a fully licensed therapist before independently operating a private practice. Your exact requirements will depend on your license type, location, scope of practice, and professional regulations.

3. What business structure should a therapist choose?

Possible structures include a sole proprietorship, LLC, or S corporation. Your choice can affect taxes, liability, and how your business operates, so the article recommends discussing your situation with a small business attorney or certified public accountant.

4. Do therapists need an EIN and NPI?

The article states that therapists need both an EIN and NPI whether they accept insurance or operate as an out-of-network provider. An EIN identifies your business for federal tax purposes, while an NPI identifies you as a healthcare provider.

5. What should a private practice business plan include?

Your business plan should include your mission, ideal clients, therapy services, marketing plan, financial goals, legal needs, and other practical concerns. It should give you a clear picture of what you are building and how you plan to make it work.

6. Do I need to rent an office when starting a therapy practice?

No. Your first office does not need to be permanent or perfect. You can begin with telehealth or sublet an office from another therapist before committing to a full lease.

7. What should I consider when choosing a therapy office?

Consider location, affordability, privacy, comfort, and whether the space fits the experience you want clients to have. Sharing or subletting space may also help you reduce expenses and connect with possible referral sources.

8. What technology do I need for a telehealth practice?

You will need a secure, HIPAA-compliant platform for video sessions, client communication, scheduling, documentation, and record storage. The technology should protect client information while remaining easy for you and your clients to use.

9. How can therapists market a new private practice?

The article recommends building a professional support network, creating a website that speaks directly to your ideal clients, showing up authentically on social media, developing a clear niche, and using tools such as SEO and a Google Business Profile.

10. Why is choosing a niche important for therapists?

A niche makes it easier for potential clients to understand who you help and what you help them with. The article explains that trying to serve everyone can make your message too broad, while a clear specialty helps the right clients recognize that your practice may fit their needs.

11. What financial expenses should therapists plan for?

Your financial plan should account for your session fee, regular business expenses, taxes, office costs, electronic health record software, billing systems, and other tools needed to operate the practice. Your fees should support both the practice and the life you are trying to build.

12. How should I set my private practice fees?

Start by calculating your expenses, tax obligations, financial goals, and desired caseload. The article encourages therapists not to undervalue their services and to choose a fee that allows the practice to remain financially sustainable.

13. What is an EHR, and why does a therapy practice need one?

An electronic health record system helps you manage scheduling, documentation, billing, client communication, and confidential records. The article recommends choosing a reliable, HIPAA-compliant system that works well for behavioral health practices.

14. Should I accept insurance or run a cash-pay practice?

The article discusses both insurance-based and out-of-network practice models. Your decision should reflect your financial plan, ideal clients, administrative preferences, and the type of practice you want to build.

15. Do I need everything figured out before starting?

No. The article encourages therapists not to wait for the perfect time. You can start with what you have, take one practical step at a time, and allow your practice to change as your experience and goals grow.