Starting a private practice
Deciding to open a private practice is an extremely exciting next step in your career. Numerous processes and key aspects are involved with starting your own healthcare business. After all, you want to ensure you are aware of and prepared for each.
While the benefits of operating a successful business are hard to ignore, you must ensure you're educated on certain challenges—the most significant of which are related to finances, like the average startup costs.
Ongoing costs can range from a few hundred dollars to thousands, many of which you may not even know. The first step requires a clear understanding of relevant costs. From here, you will know whether you need to save a little bit more for initial costs, seek out a loan for leasing office space, or even partner with other mental health counselors.
Although each business's specific costs will differ depending on its size, services, and location, we've developed an approximate guide that outlines the fees you can expect.
Benefits of mental health professionals running a private practice
While business owners' challenges can be difficult to manage, the wide array of benefits from running your own private practice often counteracts these.
Although the specific factors that lead to practitioners starting their own business will differ, we've compiled a list of some of the most influential reasons to start a healthcare practice:
Financial growth
As a business owner, you will have a much higher earning potential. Because you are in charge of your business's growth, you can aim higher and earn more, leading to increased opportunities for your professional life.
Decision-making
Being a business owner means you have the last word in decisions. Although this is a big responsibility, you can push yourself and your team in the direction you want to go.
This may mean implementing new equipment and technology, streamlining finances, using telehealth options, or even determining your business's vision.
Working underneath someone can limit your professional opportunities and development, so owning your practice is the perfect way to make a positive difference in the way you want to.
A respectful and trusting environment
Everyone wants to work in an environment that fosters respect and trust; you can push for this as a business owner. You can set your standards and goals and strive to achieve them.
This will improve relationships with colleagues and coworkers and can also lead to establishing loyal relationships with clients and a reputable business.
How much does it cost to open a mental health clinic?
Now, to the important part: how much money does it cost to start a mental healthcare business? It's important to remember that before you start earning any revenue, you will be spending money.
As such, you must ensure you have budgeted correctly and can fund the start-up fees and the first few months of business.
Website costs
Building a website is one of the very first costs you will incur. Given the current dominance of technology, you must have an engaging and well-developed website to promote your health services.
After all, this is usually the first thing that prospective patients will check. Typically, the development of a website will cost somewhere between $150-300 USD if you design it yourself or $3,000-9,000 USD if you outsource it, depending on the size of your business and how detailed you want your website to be.
Liability insurance/Legal/accounting costs
Accounting liability insurance and law regulation requirements are necessary for starting any healthcare practice. Hiring a lawyer to draft client and staff contracts for you and create HIPAA forms may be a good idea. This will cost between $2,000-15,000 USD.
Filing fees
Every startup business needs to be incorporated before it opens its doors to clients or customers. Depending on the state of your private practice and the type of incorporation, you should expect to pay around $50-550 USD.
Office space build-out/décor
Budgeting for an office space buildout and decor may seem like a way to save money. Still, it would be best to remember that having an aesthetic, clean, and professional office space will greatly impact patient impressions.
If you are a sole practitioner, you only need to decorate one space, costing between $2,000 and $3,000 USD. However, if you are opening a group practice, you will need to organize numerous examination rooms and shared spaces, which can cost up to $25,000 USD .
Marketing expenses
Marketing is the backbone of attracting new clients and consequently improving revenue at any private practice. You should allocate between $2,000 and $5,000 USD monthly to marketing expenses, although the specific monthly cost will depend on your current needs.
Legal/accounting/consulting
Legal fees, accounting, and consulting will require ongoing costs. Again, these vary depending on your own private practice's specific requirements at different times, but allocating around $1,000 USD monthly for ongoing expenses in these areas is a good idea.
Rent/office supplies
Rent payments will always be due, regardless of how your new mental health center is going, whether you have clients, or even if there is a global pandemic. The actual cost of rent varies significantly depending on location and size, so we can't provide you with an estimate. However, ensure that you always have float money readily available!
Software
Software is an integral component of every healthcare business. If you run a small practice, software licensing fees are typically around USD 300 a month, but this can increase to $1000 as your business grows.
Administrative staff
Hiring administration for your private practice is a decision that will depend on the size of your business. When you begin, you will most likely be able to handle administrative tasks independently or with a part-time employee. However, if your business expands, you must hire more administrative staff, costing between $15-25 USD/hour.
Cost of sales/services rendered
Paying your clinical staff falls under services rendered. Their income will depend on their qualifications and whether you pay them hourly, but you should always subtract this from your total gross income before calculating revenue and expenses.
Case study: Estimated cost to build a therapy business
To look at a possible total of start-up costs, let's look at a hypothetical therapy business. This is a fee checklist for a counseling business with startup costs (all calculated in USD) that will indicate how much money you'll need to save or loan for mental health centers.
- Registering the business: $750
- Setting up and launching a website: $600
- Legal expenses and accounting services, including obtaining licenses and permits: $3,330
- Marketing: $3,500
- Hiring a business consultant to help with the production of a business plan: $2,500
- Insurance: $2,400
- Renting office space: $80,000
- Decor and office fit-out, including furniture, televisions, telephones, filing cabinets, etc.: $10,000
- Operational costs for the first three months of business, including employee fees: $40,000
- Store equipment and devices required for your specific services: $30,000
- Miscellaneous, including stationery, phone deposits, and CCTV installation: $6,000
The total of all of these costs is $179,080. It is hard to estimate rent and employee fees, and the costs related to equipment will largely depend on the mental health services you offer.
Nevertheless, knowing how much money you need to save before considering opening your own business entity can be helpful. Remember that seeking a loan is always an option when calculating your savings!
Take home message
Starting a mental health center requires significant expenses and careful planning. Nevertheless, the financial, professional, and personal growth you will almost certainly see after your business is up and running makes these costs worth it.
When assessing how much money you initially need to save and loan, you must do as much research as possible. This may mean reading guides like this one, contacting other business owners, or hiring a business plan specialist who can explain expected fees.
Although there will always be risks involved with running your own practice, the advantages should outweigh these as long as you have a good plan. The final tip we want to leave you with is the importance of preparation.
Always, always, always prepare for the worst-case scenario—slightly over-budgeting will give you savings to fall back on in an unpredictable emergency!
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