Starting a Private Practice
How to start a private therapy practice
Congratulations! You’ve decided to start a private therapy practice. You’re likely feeling excited and overwhelmed. You’re certain you can help clients achieve their therapy goals, but not sure of all the steps needed to take to build your practice. Graduate school may have given you a foundation for therapy, but it did not teach you how to start a private therapy practice or run a business. In this guide, we will provide helpful information on starting a private therapy practice.
Where do I start with a private therapy practice?
An important question to ask yourself in the beginning of building your practice is “Who do I want to help?” Determining your private therapy practice niche will guide many of the decisions you make as you build your practice. Clearly defining your niche will be the driving force behind the answers to many important decisions you will have to make.
Having a clear niche can help you with:
- Developing your business plan
- Developing your business structure
- Naming your practice
- Identifying what services to offer
- Marketing, branding (website, social media, etc.)
Business Building Basics
Running a private therapy practice is more than seeing clients. You need to legally establish and create a business. When making decisions, completing paperwork, and establishing the business, it is important to consult an attorney regarding laws within your state and local municipality. You should also consider consulting with your tax preparer regarding how certain options may impact your finances and taxes. Some people may also choose to contact a small business counselor for advice and guidance on starting a private therapy practice.
How to Structure Your Business
The business structure of your practice legally establishes your business as a particular type of entity. The structure you select is an important decision. It impacts how you pay taxes, general business operations, and how much protection your personal assets have.
The common business structures or business entities are:
- Sole proprietorship
Creating the business structure and following the requirements is a complicated and confusing process. Business attorneys and business counselors can help to guide you through the process and to ensure that you take all the necessary steps and precautions.
It’s all in the name
The name of your private therapy practice builds the connection with your clients and represents your practice to the community. It is the first and loudest message people receive regarding you and your practice. Before deciding on your practice name, you should conduct market research on other business names, trademarks or copyrights owned by other businesses. You should also research the availability of domain names associated with the names you like.
Once you have selected your name, you most likely need to legally register the name as a business in your state. Registering the name is not only a legal requirement but it should provide you with protection from someone else operating a business with the same name. When asking yourself how to start a private therapy practice, consider that some states also require that businesses register as a legal entity in the state. Your business attorney and/or business counselor can help you to understand what you need to do and how to register your business and business name in your state and local municipality.
When you decide on the name of your private therapy practice, you will also want to secure a domain name associated with your practice. The domain name is how you connect your business to the internet. Your domain is the easily recognizable component of a website address (such as TheraPlatform.com) and what comes after the “@” in an email address.
The domain name should be descriptive of your private therapy practice and easy for people to:
You will need to conduct some research to find available domain names. There are many domain registration companies where you can search ideas you have for domains, and then pay to register your domain name. You will have to pay annually to register the domain name.
Time for taxes
An Employee Identification Number (EIN) serves as your business federal tax identification number. The Internal Revenue Service issues the EIN.
You will need an EIN for many components of your private therapy practice such as:
- Filing corporate taxes
- Receiving payments from third-party payors such as insurance companies
- Paying any employees or independent contractors
- Opening a business bank account
Once you have received your EIN, you can open up a separate business bank account. You will need an account different from your personal bank account to track your business income and expenses.
National Provider Identifier (NPI)
As part of opening your private therapy practice you will need to apply for a National Provider Identifier (NPI). Health care providers must have an NPI as part of HIPAA requirements. An NPI is a unique identifier number that is used to submit health care information electronically.
You can check to see if you already have an NPI or apply for one through the National Plan and Provider Enumeration System (NPPES) site. If you have previously worked for an agency or another practice, you most likely already have an NPI. When you apply for an NPI, all the information you enter is public information. Keep in mind, anyone can see the address and phone number that you submit.
Start 30-day Free Trial and explore TheraPlatform. HIPAA Compliant Video and Practice Management Software for Therapists.
Do I need a business license?
Regulations vary by state and local municipalities regarding business licenses. Research your state and local laws regarding operating a business to best understand what you need to do.
What type of insurance will I need?
A private therapy practice needs several different types of insurance coverage.
The policies may be available from one company or you may need to find separate companies.
- Malpractice (also referred to as liability): Provides coverage for the therapy services provided
- Cyber Liability: Provides coverage for any breach of electronically stored information
- General Liability: Provides coverage for any injuries or damage to visitors to your office
Download free private practice checklist
Most therapists do not want to start a private therapy practice because they love numbers, finances, and accounting. The financial components of a practice can be daunting, stressful, and confusing. However, gaining control of your business finances is a necessity for running a successful private therapy practice. It may help to consult with a business counselor, coach, and tax professional while creating your budget and learning about the financial aspects of your business.
Fees and payments
Therapists can operate their practice with various different fee structures. Some therapists decide to take referrals from insurance companies. They get credentialed with a variety of insurance companies and accept contracts with set fee schedules. Other therapists prefer to not work with insurance companies. They set a fee that works for them.
It is a very personal choice and you can read much about the advantages and disadvantages of each style of private therapy practice. Making this decision is an important step to take as part of establishing your budget and financial plan. It can help you to gain a better understanding on planning for the income portion of your budget.
If you decide to accept insurance, then you need to get credentialed with insurance companies. You can approach insurance credentialing by hiring a company that does most of the work involved with credentialing. You can also choose to contact insurance companies and work through the steps needed to complete the credentialing process. For many insurance companies, the process can be tedious and take several months to complete.
If you decide not to accept insurance in your private therapy practice, then you’ll need to determine your fee per session and if you will offer any sliding scale slots in your practice.
Financial decisions will be guided by your budget. Your budget will likely change for several months in the beginning of planning and implementing your business practices. That’s OK. Running a private therapy practice is a learning experience and you will most likely accrue unexpected expenses. It can help you to have a time set aside each month for a budget review to make adjustments, add in new expenses, and remove or eliminate any expenses.
Some common expenses to consider include:
- Office rent
- Practice management system
- Billing software or billing company
- Bookkeeping and accounting expenses
- Website related expenses
- Marketing expenses
- Office supplies
- Domain registration
- Liability insurance
- Payroll fees
- Continuing education
- Licensure (professional and business licenses)
- HIPAA compliant software packages (ex: email, telehealth, cloud services)
As you work through your budget, the information you learn will help to make some other important decisions such as how much rent can you afford? How many hours will you need to see clients to earn your desired income?
Time To Open An Office
So now you have created the building blocks for your business. It’s time to work on opening your private therapy practice office and seeing clients.
Location of the Office
Selecting the location of your office is a big decision. It can also be a fun and exciting decision. It may help to first do some market research regarding therapists in your area who provide similar services. This information can help to guide your decision on the best location for your office.
Once you narrow down your choices for a physical location, then it’s time to begin looking at properties within the price range you determined in your budget.
Some important things to consider when selecting the exact office are:
- Secure, private, confidential space for your sessions (also needed for virtual sessions)
- Waiting area for clients
- Handicap accessibility
- Accessible to public transportation
- Parking availability
- Location of bathrooms
- Internet accessibility
- Extra charges to consider (ex: coffee/tea service, fax service, cleaning service)
Co-working spaces have become popular options in many communities. Keep in mind that you need a private, secure, and confidential space to see your clients. Many co-working spaces do not offer such options or charge a premium rate for it.
Decorating your office can be a fun and expensive project. The decorating style in your office space sets the tone for your clients so take some time to consider the style and atmosphere you want to create.
It’s also important to keep in mind the furnishings and decorations should be appropriate for the clients you expect to see in your private therapy practice. For example, if you will be working with children and families you will need to have appropriate seating, therapy tools, etc.
Practice Management Necessities
There are important puzzle pieces that each practice needs to run smoothly and effectively.
Practice Contact Information
In today’s world, people may contact your private therapy practice in a variety of different ways. It’s important to decide how you would like for clients, prospective clients, and other business contacts to communicate with you.
It’s best practice to have a separate business phone number for your private therapy practice. A mobile phone is basically a computer that we carry around wherever we go, so you must follow HIPAA guidelines regarding your phone.
Some important suggestions to keep in mind regarding your phone and HIPAA are:
- Keep your phone password protected and locked at all times.
- Do not let anyone else use your phone (including your family).
- Do not keep client contact information stored in your phone.
Taking a HIPAA training course for a private therapy practice can help to provide you with necessary information regarding practices for all sorts of components of your practice, including phone usage.
Watch the below video on common pain points in private practice and TheraPlatform’s solutions.
Start your free trial now
Some therapists may find it helpful to have a fax line. Some insurance companies still communicate by fax. They may send authorizations by fax, request claim forms by fax, or send requests for documentation by fax. If you decide to use an electronic fax service, it must be a HIPAA compliant service that offers a Business Associate Agreement.
You should have a separate email address for your practice. For marketing purposes you may want to consider having an email address associated with your domain name. This way, your email serves as another way to communicate about your private therapy practice and connect the recipient to your website.
When sending emails, you need to follow HIPAA guidelines. Make sure the email provider you choose offers you the opportunity to sign a Business Associate Agreement.
Practice Management System
A practice management system, such as Theraplatform, is a computer program that automates different processes of your private therapy practice into one streamlined platform. A practice management system can save you a lot of time and a lot of money. Of course, your practice management system must be HIPAA compliant and offer a Business Associate Agreement.
Some of the functions of a practice management system include:
- A secure way for clients to complete and sign paperwork
- A place to safely and securely store credit card information
- Process credit card transactions
- Process insurance claims
- Create invoices and super bills
- Calendar function that can securely sync with your website or other calendars
- Securely message with clients
- Automated appointment reminders
- HIPAA compliant telehealth platform
Some practice management systems offer other benefits such as webinars, blogs, worksheets, and community forums.
Not many therapists enter private therapy practice because they love paperwork. It is a necessary and critical part of private therapy practice. The role of paperwork begins at intake and continues through discharge. A practice management system can help to streamline your paperwork and documentation processes. Most of them will offer some standard forms and also allow you to create your own templates to use.
The intake process for clients should include certain forms. You may want to consult with an attorney regarding necessary information to collect at intake, provide to the client, and what signatures to gather. There are several companies that put together paperwork packages for private therapy practices that you can buy.
Some of the important forms to include in your intake packet are:
- Informed consent
- Cancellation policy
- Financial agreement
- Telehealth consent
- Social media policy
- Electronic communication policy
- Release of Information
- Privacy practices
Based on your scope of private therapy practice, they may be other necessary and important forms that you should have clients review and sign.
Your initial assessment begins your treatment process with new clients. You can also conduct assessments annually or other critical points in treatment. The information you gather during the assessment will help you to develop the treatment plan and guide your treatment process. You may also want to include some common assessment questionnaires like a PHQ-9, GAD-7, or other assessments appropriate for your private therapy practice.
Progress Notes and Treatment Plans
The dreaded progress note and treatment plan duo! Both are necessities in the documentation standards for a private therapy practice. The practice management system should help to make documentation a less stressful process by integrating checklists, interventions, etc.
Policies and Procedures
Just like any business, you will need to create a policy and procedure manual for your practice. Even if you are a sole practitioner, it is an important part of your business operations. The policies give you a standard of practice to follow, may offer you some liability protection when you follow them, and communicate to your clients important policies.
You can do some research online and find some example policies and procedures to individualize and create for your private therapy practice. You can also find some available for purchase from various companies. Make sure that anything you use as a guideline or purchase is specific to your industry practice as well as to your state.
Some policies and procedures to consider for your private therapy practice are:
- Missed appointments
- Late cancellations
- Court appearance policy
- Fees for other services
- Communications policy
- Therapist availability
- Social media policy
- Therapist sick policy
- Suicidal client procedures
- Violent or homicidal client procedures
Of course, you will likely see a need for other types of policies and procedures based on your scope of private therapy practice, size of your practice, and services you offer.
Your marketing message is how you will bring new clients to your practice. Through marketing efforts, you will create your unique message about your private therapy practice that will help you find your clients and then engage with them to maintain an effective relationship.
As you begin the marketing process, create a marketing plan for your practice. The plan should be fluid and allow you to make changes as you learn more about your private therapy practice, marketing strategies, and where your strengths lie.
Branding helps to set your practice apart from other businesses.
It should define more about your private therapy practice and should be clear and consistent across all your marketing platforms. Branding can incorporate a:
- Color palette
- Slogan, phrase, tagline, hash tag
Some therapists may hire a professional such as a graphic designer to help to create the branding for their practice. Other therapists may choose to use different software available and develop their branding independently. Whichever option you choose, branding can always change as your private therapy practice grows or your vision changes.
The Digital Space
Your marketing plan should incorporate online marketing strategies related to a website and social media. This online space can help to target clients related to your niche and then engage with them to help build your private therapy practice. It gives you the opportunity to speak directly with potential clients, current clients, and other people in the community about your unique services and how you can address their needs.
Your website should clearly represent your practice to the public. It communicates the message about your services, who you are as a therapist, and how you can help people. It should incorporate your branding and speak directly to the public with your unique voice.
Your website should also provide visitors with additional opportunities to connect with you and further develop a relationship with you. You can create this opportunity by adding relevant blog posts and resources that are consistent with your private therapy practice. Your website can also offer accessible features for clients such as online scheduling.
Social media gives you the opportunity to speak directly with followers interested in your service. It should be an integral part of your marketing plan. Different client populations hang out on different social media platforms. Doing some market research on the niche you serve in your practice can give you some insight into where you should focus your time and money with social media.
Using social media most effectively can be a learning process. You may want to consider doing some research, attending training courses, or consulting with a social media manager. As with websites, you may choose to manage your social media on your own or contract it out to another professional who can manage your social media on your behalf.
Download our free worksheet on how to Market your private practice.
In-person networking remains a highly effective way of marketing your private therapy practice. Networking involves attending events where you have the opportunity to interact with other professionals and talk about your practice. Networking can happen at an industry-specific level (ex: therapy related conferences, meetings, or workshops) or a more general level (ex: larger networking groups, chambers of commerce meetings, serving on boards). Networking gives you the opportunity to build your business and learn about other resources that you can offer your clients.
There is much to learn about when opening a private therapy practice.
Fortunately, the private therapy practice community offers many opportunities for learning, support, and consulting. Some important trainings you might want to consider include:
- Basic bookkeeping
- Time management
- Social media
As you work through the business and practice building processes, you will familiarize yourself with new information and face some challenges. Don’t give up! If you continue to learn, work through the challenges, and make changes, you can reach your dream of building a successful private therapy practice.
"So, never worry about failure. It's GONNA happen. But that's okay – go ahead, take chances … and you might just find that what feels like failure isn't failure at all. It’s what inspires you to dream even bigger."
Kermit The Frog
Centers For Medicare and Medicaid Services. “NPI: What You Need to Know.” March 2022. Accessed August 10, 2022.
"Find Your Mental Health Niche to Supercharge Practice Growth." Brighter Vision. Accessed August 8, 2022.
Internal Revenue Service. “EIN Assistant.” Accessed August 9, 2022.
US Small Business Administration. “10 Steps to Start Your Business.” Accessed August 9, 2022.
- Starting a private practice in counseling
- Mental health billing
- 9 things all therapists should automate
- The Ultimate Insurance Billing Guide for Therapists
- The Ultimate Teletherapy E book
Please keep in mind that the information in this guide serves as helpful guidance in building your private therapy practice. It is not legal or business advice. It is recommended that you consult an attorney and tax preparer when appropriate or necessary.