subject: How to Charge For Your Psychotherapy Services - 9 Steps to Help Calculate and Set a Realistic Fee [print this page] How to Charge For Your Psychotherapy Services - 9 Steps to Help Calculate and Set a Realistic Fee
When you start out in private practice, one of the most difficult things you have to do is determine what you are going to charge for your services. This article walks you through the 9 steps you need to take to be able to set a realistic hourly rate that will allow you build a practice that will bring you a reasonable income and cover the numerous expenses that you incur from your practice.
Many therapists come to private practice with the view that they will charge relatively little for their services because they are working with a vulnerable population who need help and therefore they have a moral obligation to make their services affordable so that everyone can benefit from them. Now, this is a laudable position to take, certainly, but as a practical business proposition, it fails to realise that a practice does not run on fresh air. You, the therapist, have obligations that you have to meet too, like paying your mortgage, putting food on the table and bills that have to be paid. The only way to do this is to calculate a realistic fee range for your services - and understand how you got to that figure so that you can feel okay in asking for it. But how do you arrive at this figure? This article will guide you in some of the steps you need to consider as you work out what you will charge.
First things first: How much do you want or need to make each year to be "solvent"? So, Step 1 is:
1. Establish your required/anticipated annual salary from the work -- perhaps you could initially use what a practitioner would be likely to get in the Public Sector, for the level of experience and the type of work and location, as a guide figure (this can change as you come to understand your market's potential).
Next, look at the costs you are likely to encounter:
2. Consider the entitlements an employee might expect, such as pension contributions, health insurance, continuing professional development costs, mileage and other reimbursements for out-of-pocket expenses which might reasonably be met for this type of work.
3. Add on costs for office provision, secretarial costs, test and equipment purchases, computing and IT facilities, office furniture, etc., annualised in terms of capital and depreciation costs (I am not an accountant, so you may need to seek professional guidance on this in time).
4. Add on sundry other costs, such as employing people to clean your office and waiting area, provide tea and coffee to patients and other visitors, secretarial and receptionist costs, advertising, public liability insurance, IT technician costs plus others that you will not realise you need until something goes wrong (e.g. electrics, Health and Safety, Information Commission requirements etc.). And do not forget the Taxman will need a cut!
Nearly there, but just in case:
5. Add in a 10% contingency because costs are, in my experience, always underestimated.
Quite a complex exercise, perhaps, but critical to determining what your required outlay is likely to be over the year.
Now, consider how this fits with your target income. Are you likely to be left with enough to achieve the living standard you aspire to? If not, we need to consider Step 6:
6. What additional figure is required to allow you meet your expenses and still have sufficient monies left to allow you to achieve a reasonable lifestyle? By this I mean if you had initially set a figure of 10x as your target income, but discovered that costs come to 5x, and really, you need 8X to be comfortable, then you need to revise your target income figure upwards to 13x.
7. Steps 2 -- 6 establishes the gross annual turnover you need to generate each year to produce the type of income you are hoping for in step 1 above.
So, what will your Hourly Rate be?
8. Now, work out how many chargeable hours you will be able to work each year.
This is not a simple 36 hours x 52 weeks, of course. If you plan to work Monday to Friday only, that equates to 261 days a year. Now out of this time allocation, you need to allow for annual leave (if you are looking after yourself, you will take at least 20-30 days leave, for which, obviously, you will not get paid), CPD time (possibly 5 - 10 days a year), Bank Holidays (8 in the UK), sick leave (do not say you will not get sick because we all might, and it is an employment cost that must be scheduled in), admin time (allow around 2 days per month), marketing and business development (aim for maybe 3 days a month) etc. That reduces your "earning" days to around 160 days per year, and within this time, few practitioners can expect to be busy for 7 hours each of these days, so calculate optimistically at around 4 earning hours a day across these 160 days, leaving around 640 earning hours!
9. Divide the total in 7 by the total in 8 to see what your hourly rate must be in order to achieve the salary you are seeking.
Surprised? I imagine that you are, but I hope that this exercise helped you get some perspective on the question of how you calculate what you will charge for your services. If you still wish to support less financially-able clients, certainly you are free to do so, but build their "costs" into your calculations and settle on a realistic hourly rate for your services. This is what you will need to charge to make the living that you aspire to. It is certainly possible, but you need to go forward with a clear understanding of how you came to set this fee for your services so that when it comes time to tell your potential client what you charge, you can do so safe in the knowledge that you are asking a reasonable and realistic amount for you services.
Dr Colin Clerkin is a psychologist and coach in the UK. He expands some more on setting up a Visit ZamZuu Here
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