As a professional, whether in therapy or not, you have to choose whether to get a job in someone else’s practice, or go out on your own. The latter entails more risk and more work, but potentially far more rewards.
Assuming that latter is what you chose to do, at some point you may have to make another decision – do you stay solo or do you grow your practice.
Times of major disruption, like the present pandemic, are an especially important time to carefully consider your options. Business as usual may not be as successful when a "new normal" sets in.
Three Reasons to Grow Your Practice
First and foremost, growing your practice lets you have a greater impact.
As a solo professional, you can only serve so many clients without burning out. By hiring other professionals and growing your scale to a group practice, you can help many more clients than you can serve on your own. This is especially important in the current situation, when your services may be more needed and more desired than before. Additionally, with so many businesses suffering, it's a good time to find exactly the talented people you want and need if you're to successfully grow. This has the important side benefit of helping the people you hire too.
Second, and related to the greater impact, growing your practice lets you earn more, potentially far more than as a solo professional.
If you structure things properly, you will make a profit on every client seen by every one of your associates, each session. This means you get to take time off for vacation or if you’re ill, and still have ongoing income. With the current uncertainties, higher profits make your practice more resilient, especially if you follow best practices and set up both a personal and a business emergency fund.
Third (especially for the therapists among you), you can make a good living even if you accept insurance.
Many therapists want to accept insurance because it lets them help people who can’t afford (or don’t want to) pay out of pocket.
These therapists may also feel intensely uncomfortable marketing themselves and/or charging rates high enough to let them reach their personal financial goals over time. However, as I describe elsewhere, insurance pays out far too little to make a solo practice sufficiently profitable in most cases.
If you grow your practice into a group with enough associates and panel all of them with insurance plans that pay an adequate reimbursement rate (say, $100 per session), even if you make as little as $10 profit per associate session, your practice can thrive.
If you have 10 associates, each completing an average of 25 weekly sessions, 50 weeks a year, you make a $125,000 profit before you do a single session yourself. If you can make a $20 profit per associate session, the math works out the same with 5 associates (and of course higher if you have more than 5 associates).
Reasons to Avoid Growing Your Practice (or to Shrink Your Group Practice back to a Solo One)
On the other hand, running a group practice isn’t all unicorns and fairy dust.
A group practice requires the following, any or all of which you may not love.
- Buying or leasing, and maintaining, a larger, more expensive space (unless most or all sessions are and will continue to be provided via teletherapy).
- Finding the right people to hire as associates.
- The legal and ethical responsibility to keep making payroll, because a lot of people depend on those paychecks to keep a roof over their heads and food on their tables — that’s a pretty big responsibility.
- Managing a business with employees takes a certain mindset and skill set — it’s not for everyone.
- At scale, you need to hire additional employees who don’t directly bring in money but are necessary to make things function smoothly. These include a receptionist, an admin assistant, a billing specialist, a human resources (HR) person, a benefits person, and/or a marketing person. If you prefer, you can contract for those services, but either way it increases overhead costs that have to be covered by client work.
- Deciding when it’s time to let an employee go, and dealing with that unpleasant task (unless you have an HR person who handles it for you).
- Paying for non-client hours that don’t generate any revenue, since as an employer you’re required to do so (using 1099 contractors as associates runs the risk of having a government audit decide you’ve mis-classified employees, with the attendant penalties and back-costs).
- The employer portion of employees’ payroll taxes.
- More complicated tax reporting and running payroll require a good accountant, bookkeeping, and payroll processing.
- Compliance costs including e.g., workers comp insurance, keeping up-to-date employment posters, etc.
- Cost of benefits (important if you want to attract and retain great associates).
- Higher costs for malpractice and general liability insurance.
- Higher costs for electronic health records (EHR) system.
- Legal costs (e.g., drafting offer letters, employee handbook, support for firing or letting employees go, etc.).
- Marketing costs (unless all your associates are paneled with insurance plans that send you enough clients, you need to spend a lot more on marketing).
All these hold in the best of times. During the current pandemic, they take on even greater importance and may be even harder to keep up with.
The Bottom Line
Running a group practice isn’t simple. If the above makes it seem too overwhelming, you may want to reconsider growing beyond a solo practice. If you still want to do it, you may want to consider getting some help so you do it right.
If you already own a group practice, have experienced first-hand all the implications, and now realize it’s really not for you, it may be time to shrink back to a solo practice. If that’s you, you need to devise a plan that will let you do it with minimal disruption for your employees, and that lets you continue to be profitable.
Financial strategy is all about setting financial goals, crafting a plan to reach them, and doing what's needed to start implementing that plan in both your business and personal life whether you want to grow your practice, keep it the same size, or shrink it. If you'd like to learn what financial strategy can help you accomplish, email me and we'll coordinate a free, no-strings-attached phone call to explore that possibility.
This article is intended for informational purposes only, and should not be considered financial or legal advice. You should consult a relevant professional before making any major decisions.