Hi
The hourly rate of several private practice psychotherapists in LA is around $160-200+/hour. But when I check the salary range on e.g. indeed, it comes out something like $60/hr.
In any case, in LA if we just take the hourly rate of $60/hr, and convert to annual at 2000hr/yr, it comes to $120k -- and if we take something like 200/hr it comes to 400k. Assuming you prep for 1 hour per 1 hour of counseling, it's still $200k/yr. But again on indeed and other sites the private practice salary is more like 50-70k.
So which is it? How come the therapists in my area charge about $180/hr, but the salary on indeed is about $60k/yr?
Thanks!
-Neal
If you go solo private practice full time, expect to pay no less than $11k-30k per year on business expenses, including office, internet, software, marketing/website, multiple liabilities insurances, business license, tax prep, CEs, decor, etc. It can go up from there if you get a fancy office in a highly desirable area. This is BEFORE taxes have to be taken out. So before I even make a cent in my practice, I have to make Over $1000/month JUST to break even (even with super cheap rent in my area. If rent is over $1k a month, you’re looking at much higher monthly expenses in the $2000+ range to just break even). Anything above that initial income per month will be profit (except you’ll always set aside 35% of it for taxes). So as you can see, it’s not as straightforward to make a profit as most people think.
Most folks don’t realize this when considering private practice...,they see the hourly rate and think they’ll immediately be rich. They don’t realize that a huge chunk of their income will go to taxes and business expenses.
This isn’t even taking competitiveness and saturation of the market in your area (LA), which is a completely different issue but affects your stream of income. Many folks will lose money in their first 6 months to a year while they’re building up the practice unless they have a steady referral source and/or take a lower rate via insurance panels (which reimburse maybe $75-90/hr and cost a lot of time in billing/administrative tasks).
Example: let’s say your business made $40k one year, which isn’t great, but normal when folks are building up after a year or two cash only practice. You'll only take home up to 30-50% of it as disposable income, so you have to have many weekly clients paying full fee to turn a decent profit.
Once you add your own health insurance and try to plug some away for retirement, the income will need to be much higher than that to make a decent living after taxes, expenses, and perks that most jobs provide that you have to buy yourself. And when taking vacations, you actually lose money from not practicing, which hurts your bottom line when have no PTO to rely on.
It’s doable, but much harder than people realize to get there.