One of the most human things is to want to compare yourself, your town, your school, your state, or your country to others. If you want proof that most of us (including me) are guilty of this, look no further than some of the most widely read articles online:
- “Best Places to Live 2016” (our town was number 1! *fist pump*)
- “Best States Rankings” (ours was 13th, *just meh*)
- “These Are the 10 Best Countries in the World” (the US is not #1 ☹ but at least it’s in the top 10)
- “National University Ranking” (UMD, where my wife got her MFT degree, is tied for 60th out of 311 schools ranked there, not too shabby)
- “How Close Are You to the Top 1%?” (that would be telling ;))
So when I saw this headline “This Map Shows the Average Income in Every State—and What It's Really Worth” I was intrigued. What I really liked was that it went beyond the simple dollar value, adjusting for each state’s cost of living. For example, Hawaii and California are 3rd and 10th in median income ranking, but adjusting for cost of living, they drop to 14th and 27th!
Why Does Your State’s Median Income Matter to You?
I always try to look at things from the perspective of how they affect your private practice, and this time is no different. The answer is simple really. The rates you can charge for your services are strongly affected by how much money your client pool make. That’s why if you practice in Mississippi (median household income $40.6k), you can’t charge the same rates as therapists serving the same populations in Maryland (median income $75.8k). The same is true for all businesses, including those who rent you space, sell you supplies, etc., so your expenses are likely much lower there. However, this isn’t a one-to-one correlation, and the median real income in Maryland is still 47% higher than that of Mississippi.
Which State Is Best for Private Practice?
The answer to this one is not so simple. Judging strictly by how well off the median family is in dollars, the answer is Maryland. However, Maryland has the third worst business-survival score, so you may be better off opening a business in Wyoming, according to Business Insider. By the way, Alaska scored #2 in the Business Insider ranking for small businesses, has two of the top three cities in a ranking for mental health counselors, has the highest median household buying power, and is the best-paying state for mental health counselors according to US News. Maybe I should talk with my wife about moving to Alaska… ;).
How Does Your State’s Median Income Rank?
You can see the full list of the 50 states and District of Columbia below, ranked by cost-of-living-adjusted median income. If you’re curious, you can compare your own household income to your state’s median. Just in case that comparison has you sad, I added the world-percentile of each state’s median income. As you’ll see, the median income even in Mississippi, at the bottom of the list for the US, is higher than 99.63% of households in the world (though that world ranking doesn’t adjust for cost of living)!
So What Can You Do if You Live in a State with Lower Median Income?
First and foremost, while anyone in private practice should set their rates based on their real costs and income needs, if your state's median income is on the lower end, it's even more crucial that you do this (here's where you can get my free rate-setting worksheet). Since your rent and other expenses are likely to be much lower than those of practitioners in a high-income state, you'll be able to do well even if you don't charge $200+ per session.
Second, you need to make some important choices about what sort of practice you want to build. You could go for high volume, adding associates and getting them panelled with insurance companies that pay a reasonable rate. If your associates see enough clients, you can create a very profitable practice that makes a difference for a lot of people.
You could also go in the opposite direction, setting up a more boutique-like practice catering to the affluent population in your area. After all, just because the median is lower than the national one doesn't mean there aren't a lot of very well-off people near you, and since money doesn't solve all problems, many of them also need your help.
The critical thing is to not try to be all things to all people, or your marketing will be a mile wide and paper thin, making it inefficient at bringing in the right clients in the right number.