Ultimate Guide for Starting a Private Practice

Starting a private practice is a popular option, making up 82% of all agencies. Operating and owning a private practice requires extensive knowledge of mental health law, finance, marketing, and technology, outside of your chosen specialty.

This article outlines and discusses the primary steps required to start your private practice, including business strategy, legal structures, and tips for success.

1. Define Your Specialty

Not all mental health specialists have the same roles and responsibilities or provide the same service to clients. Below we highlight the differences between therapists, counselors, psychologists, and psychiatrists.

Choosing your specialization is important as it defines the type of client or issue you will work with. Doubling down on your niche can also provide an outline for the location you are stationed. However, you can develop a more generalized practice, specializing in a wide range of issues, with a board client group.

2. Develop a Comprehensive Business Plan

A comprehensive business plan is necessary to drive the business forward and achieve the goals you have set out. Critical components of a business plan for your private practice include the following:

• Mission: Your mission statement defines your practice’s purpose. In the face of setbacks and challenges, a mission statement helps you stay focused on your “why.”
• Target clientele: Determine the clients you will be treating, such as the age range, mental health concerns, and situations. This will help you better understand their needs and how to reach them.
• Services: Define the treatment services you will offer to help your clients. Consider therapeutic methods, approaches, and treatment options.
• Market analysis: In business, you will have direct or indirect competitors. Conducting a market analysis will help you understand your practice’s competitive advantages and how to best reach your target clientele.
• Operational structure: The operational structure gives you an overview of your business’s workflow. Workflow outlines how you physically provide services to your clients.
• Financial projections: Financial projections outline your business expenses and estimate how you will generate revenue. Office rent, office utilities, salaries, equipment, marketing, and software fees are some key finances to consider.

3. Select an Appropriate Legal Structure

Choosing the appropriate legal structure for your private practice is essential, as it will determine your taxes, paperwork and management requirements, fundraising abilities, registration for an employer identification number (EIN), and others. The different legal structures include:

Sole Proprietorship

This is the simplest and most common business legal structure. One person is responsible for all the company’s debts and profits.

• Advantages: Easy to set up, low cost, you may be eligible for certain tax deductions, and simple to exit and dissolve your business.
• Disadvantages: Less legal and financial protection and limited capacity to raise capital.

Partnership

Two or more people own a partnership. There are various types of partnerships, each with its own structure, roles, rules, and legal implications.

• Advantages: Easy to form; you are more likely to obtain a business loan and special taxation.
• Disadvantages: Unlimited liability, taxation, potential for conflict, loss of autonomy, and exit strategy complications.

Limited Liability Company (LLC)

This hybrid legal structure allows shareholders to limit their personal liabilities and enjoy the flexibility and a partnership’s tax benefits.

• Advantages: Shareholders are protected from personal liability, and profits and losses don’t need to be shared equally.
• Disadvantages: Self-employment tax, difficulty transferring ownership, and limited liability in protecting your assets.

Corporation

In this league structure, the private practice is an entity that is independent of its owners. This makes this structure more expensive and complex.

• Advantages: Liability protection, tax exemptions, business continuity, and quick capital.
• Disadvantages: Double taxation, which is more complicated to form and has higher costs and more requirements.

4. Ensure Compliance

You are responsible for ensuring that your private practice complies with state and federal laws. Laws and compliance requirements will depend on the type of practice and its location. Running a private practice that handles protected health information (PHI) requires ensuring and maintaining HIPAA compliance. Here are some helpful HIPAA-compliant resources:

• Free therapy intake form template and best practices
• HIPAA-compliant print and letter mailing services

All businesses are also expected to comply with the Americans with Disabilities Act (ADA) by making their facilities accessible.

5. Finance Your Private Practice

To figure out the initial financial considerations for starting your private practice, consider creating a pro forma. A pro forma is a version of a business plan that tells a story of your revenue from the first to third year of operating.

Funding options may include personal savings, investments, business loans, a combination of personal savings and credit, or loans from family members.

Some financing tips include:

• Find divisions of a bank that specialize in the healthcare industry
• Shop around for a loan
• Keep your numbers conservative
• Use the waiting period wisely

6. Choose a Suitable Location

When choosing an office, remember location is everything. It is essential for your business survival that your practice is located in the demographic of the population you serve.

Ideal characteristics for a private practice include:

• Easy access and convenience for clients
• Wheelchair friendly
• Adequate parking
• Private setting
• Cost-effective
• Amenities that cater to your practice

7. Set Up Your Office

Ensuring that you have created a safe and inviting space to see your clients is important. Essential office requirements include but are not limited to:

• Office furniture
• Electronic health record systems
• Practice management systems
• Medical billing services
• Business mail services
• Credit card processors

8. Obtain Insurance

No matter how accurate you are, mistakes may occur, which could lead to a lawsuit filed against you or your private practice. If your private practice provides health-related services, you will need malpractice insurance.

Medical malpractice insurance protects health care professionals against claims of negligence and other mistakes in patient care. It covers:

• Malpractice that results in bodily injury
• Malpractice that results in medical expenses
• Malpractice that results in property damage
• Expenses associated with defending malpractice claims

9. Hire Staff

Hiring support staff, such as an office manager or receptionist, can help you save time and money. Adding members to your team will often depend on the size of your practice, your schedule, and if you are experiencing a bottleneck in daily business functioning.

If you decide to hire staff, it is crucial to understand and comply with labor laws. You must also determine if you are hiring full-time, part-time, or on contract. You can drive staff loyalty and retention with a positive work environment, competitive compensation, benefits, etc.

Market Your Practice

Marketing is an integral part of attracting new clients to your business. The most basic marketing goal is to match your practice with clients looking for the services you provide. Well-defined marketing strategies can benefit your private practice in several ways:

• Audience generation
• Brand creation
• Outward education
• Inward education
• Financial performance
• Long-lasting impact on clients

Potential marketing strategies may include:

• Link building services
• A professional website
• Search engine optimization (SEO)
• Social media marketing
• Local networking
• Advertising
• E-mail marketing

10. Ongoing Management and Improvement

Set clear policies to help manage your private practice.

• Regular practice evaluations: Regularly evaluate the effectiveness of your practice. This could involve client surveys, reviewing client outcomes, or consulting with peers or mentors. Use this feedback to continuously improve your services.
• Continual process improvement: Always be on the lookout for ways to improve your practice. This might involve updating your intake process, improving appointment scheduling, or finding ways to reduce no-shows. Regularly review your processes and make changes as necessary.
• Adapt and evolve: The healthcare industry is continuously changing. Stay adaptable and be willing to evolve your practice as necessary, whether in response to new research, changes in healthcare laws, or shifts in your client base.

Potential Setbacks and Solutions

Even with a well-constructed strategy, potential challenges may/will occur when starting your private practice. These setbacks can range from financial difficulties and slow growth to professional isolation and industry regulatory changes. When faced with regulatory challenges, do the following:

• Actively look and collaborate to understand the new regulations
• Assess the impact on your business
• Perform an impact assessment and gap analysis
• Implement and test any new controls

Tips for Starting a Successful Private Practice

Here are our top 10 tips for a successful private practice:

1. Have a clear vision of all the challenges and rewards of going into private practice
2. Develop a solid business plan that will help you get capital to start your private practice
3. Take time for some business training
4. Conduct regular risk assessments to ensure compliance with HIPAA and other regulations
5. Build professional relationships
6. Maintain a healthy work-life balance
7. Prioritize client satisfaction and outcomes
8. Invest in yourself with both finances and professional development
9. Perfect your paperwork
10. Revise your business plan

1. Define Your Specialty

Not all mental health specialists have the same roles and responsibilities or provide the same service to clients. Below we highlight the differences between therapists, counselors, psychologists, and psychiatrists.

Therapists

Therapists are clinicians who treat mental health concerns. There are various specialties, such as grief and loss, marriage and family, child and adolescent, substance abuse, clinical social work, group, and divorce. Their key roles and responsibilities include:

• Refer clients to other therapies.
• Help clients reflect on issues to make changes.
• Create individualized treatment plans according to client needs.
• Monitor the client’s progress and adjust their treatment if necessary.

To become a therapist, you must:

• Earn a master’s degree from an accredited program.
• Complete post-graduate hours.
• Pass a state licensure exam.
• Take a jurisprudence exam if required.

Counselors

Counselors are life advising or coaching practitioners. They work with individuals, communities, or groups to improve mental health. Careers in counseling span many fields, such as marriage and family, mental health, recreation, school, rehabilitation, and pastoral. Their key roles and responsibilities include:

• Refer clients to psychologists and other services.
• Help clients define their goals, plan action, and gain insight.
• Encourage clients to discuss experiences and emotions.
• Develop therapeutic processes.

To become a counselor, you must:

• Earn a master’s degree in counseling.
• Complete clinical supervision hours.
• Pass counselor examination.
• Maintain certification with continuing education.

Psychologists

Psychologists study emotional, social, behavioral, and cognitive processes by observing how clients relate to their environments and others. Various specialties are available, such as clinical, counseling, developmental, forensics, industrial-organizational, rehabilitation, and school. Their key roles and responsibilities include:

• Conduct scientific studies of brain function and behavior.
• Identify emotional, behavioral, psychological, or organizational issues.
• Diagnose mental health disorders.
• Discuss treatment problems with clients.
• Interview and observe individuals.
• Write research papers, articles, and reports.
• Supervise counseling professionals, clinicians, and interns.

To become a psychologist, you must:

• Earn a doctoral degree in psychology (PhD or PsyD).
• Accure supervised hours.
• Pass the Examination for Professional Practice in Psychology (EPPP).
• Pass a jurisprudence exam if required.

Psychiatrists

Psychiatrists are registered medical doctors who specialize in mental health. They can enter different fields, such as addiction, geriatric, emergency, child and adolescent, and forensics. Their key roles and responsibilities include:

• Prescribe medications.
• Oversee medication management, including doses, efficacy, and side effects.
• Evaluate and diagnose patients.
• Perform ongoing patient evaluation and care.
• Conduct other treatments, such as psychotherapy or electroconvulsive therapy.

To become a psychiatrist, you must:

• Earn a Doctor of Medicine (MD) or Doctor of Osteopathy (DO) degree.
• Certification from the American Board of Psychiatry and Neurology (ABPN).
• Maintain board certification.

Choosing your specialization is important as it defines the type of client or issue you will work with. Doubling down on your niche can also provide an outline for the location you are stationed. However, you can develop a more generalized practice, specializing in a wide range of issues, with a board client group.