The Ultimate Guide to Starting a Private Practice in Counseling

When establishing your therapy private practice, consider these significant factors:

1. Specialization  — Decide on the types of therapy services you will offer, such as individual therapy, couples therapy, family therapy, group therapy, or specialized services like cognitive-behavioral therapy (CBT), trauma therapy, or play therapy.
2. Professional license — Ensure you have the necessary professional license to practice therapy in your state. This typically involves completing a graduate degree in counseling or a related field, obtaining supervised clinical experience, and passing a licensing exam.
3. Choose a location — Select a location that is convenient and accessible for your clients. Ensure the space is adequate for private sessions and has a comfortable waiting area.
4. Insurance credentialing — Apply to become a provider with insurance companies if you plan to accept insurance payments. This process can take several months, so start early.
5. Register your business — A limited liability company (LLC) is the best legal structure for new businesses because it is fast and simple. Form your business immediately using ZenBusiness LLC formation service or hire one of the best LLC services on the market.
6. Legal business aspects — Register for taxes, open a business bank account, and get an EIN.
7. Industry associations — Join industry associations such as the American Counseling Association (ACA) or the American Psychological Association (APA) to network with other professionals, gain access to resources, and stay updated on industry trends.

Step 1: Decide if the Business Is Right for You

Pros and cons

Therapy private practice industry trends

Industry size and growth

• Industry size and past growth – The U.S. behavioral therapists industry is worth $11 billion in 2023 after growing 8.2% annually for the last five years.((https://www.ibisworld.com/united-states/market-research-reports/behavioral-therapists-industry/))
• Growth forecast – The U.S. behavioral therapists industry is projected to grow 1.1% in 2023. 
• Number of businesses –  In 2023, 132,015 behavioral therapists businesses are operating in the U.S.
• Number of people employed – In 2023, the U.S. behavioral therapists industry employs 224,928 people.

Trends and challenges

Trends

• Venture capitalists have taken an interest in the mental health industry and its emerging technologies, such as mental health apps.
• The mental health of children is a growing focus, presenting an opportunity to start a children’s therapy practice.

Challenges

• Some insurance companies only offer limited mental health care coverage, keeping some people from getting the treatment they need.
• The rise in demand for mental health services is overwhelming private therapists. 

Demand hotspots

• Most popular states – The most popular states for mental health therapists are California, Washington, and North Dakota.((https://www.zippia.com/mental-health-therapist-jobs/best-states/))
• Least popular states – The least popular states for mental health therapists are Mississippi, Florida, and Lousiana.

What kind of people work in therapy?

• Gender – 77% of mental health therapists are female, while 23% are male.
• Average level of education – The average mental health therapist has a master’s degree.
• Average age – The average mental health therapist in the US is 44.8 years old.

How much does it cost to start a therapy private practice business?

Startup costs for a therapy private practice range from $8,000 to $17,000. Costs include office space rental, furnishings, and medical billing software.

You’ll need a handful of items to successfully launch your therapy private practice business, including: 

• Computer
• Furnishings
• Medical billing software

Start-up Costs	Ballpark Range	Average
Setting up a business name and corporation	$100 - $500	$300
Business licenses and permits	$100 - $300	$200
Insurance	$100-$500	$300
Website	$500 - $1,000	$750
Space rental	$2,000 - $4,000	$3,000
Furnishings and decor	$5,000 - $10,000	$7,500
Billing software	$500 - $1,000	$750
Total	$8,300 - $17,300	$12,800

How much can you earn from a therapy private practice business?

When you’re just starting out, you should be able to charge about $100 per hour. Your profit margin after your office costs should be about 40%. 

In your first year or two, you could have 25 clients per week, bringing in $130,000 in revenue. This would mean $52,000 in profit, assuming that 40% margin. 

As you gain traction, you might have 40 clients per week. With annual revenue of $208,000, you’d make a tidy profit of $83,200.

What barriers to entry are there?

There are a few barriers to entry for a therapy private practice. Your biggest challenges will be:

• Having the required education and licensing
• Funding the startup costs

Step 2: Hone Your Idea

Now that you know what’s involved in starting a therapy private practice, it’s a good idea to hone your concept in preparation to enter a competitive market. 

Market research could give you the upper hand even if you’ve got the perfect product. Conducting robust market research is crucial, as it will help you better understand your customers, your competitors, and the broader business landscape.

Analyze your competitors 

Research therapy private practices in your area to examine their services, price points, and customer reviews.

• Make a list of therapy practices that offer similar services. 
• Review your competitors’ services –  pricing and quality – and marketing strategies.
• Check out their online reviews and ratings on Google, Yelp, and Facebook to get an idea of what their customers like and dislike.
• Identify your competitors’ strengths and weaknesses. 

This should identify areas where you can strengthen your business and gain a competitive edge to make better business decisions.

Why? Identify an opportunity

You’re looking for a market gap to fill. For instance, maybe the local market is missing a private therapy practice that caters to children or teenagers or a counseling practice for the elderly. 

This could jumpstart your word-of-mouth marketing and attract clients right away. 

What? Determine your services

Your services should be based on your education and experience. You could decide to specialize in a niche, or you could offer a variety of types of therapy. 

How much should you charge for therapy services?

Your prices should be based on market prices in your area, but also on your overhead costs.

Once you know your costs, use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.

Who? Identify your target market

Your target market will depend on the niche that you select. If you specialize in children, you’ll be targeting parents. You could market to them on Facebook. 

Where? Choose up your counseling private practice office

You’ll need to rent out an office space. You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices. Here are some tips for setting up a counseling private practice office:

Location:

• Choose a safe, private, and centrally-located space.
• Ensure accessibility for all (e.g., ADA compliant).

Interior:

• Opt for neutral, calming colors.
• Invest in comfortable seating.
• Ensure sound privacy and adjustable lighting.

Equipment & Setup:

• Have secure, locked storage for files.
• Equip with basic tech (computer, phone).
• Display credentials and confidentiality policies.
• Offer tissues, water, and possibly calming background noise.

Professionalism & Safety:

• Use encrypted communication methods.
• Set a protocol for client entrance (e.g., knocking).
• Regularly check safety features (alarms, exits).

Business Essentials:

• Display clear signage (if allowed).
• Decide and communicate your billing method.
• Ensure professional liability insurance.

Step 3: Brainstorm a Therapy Practice Name

Here are some ideas for brainstorming your business name:

• Short, unique, and catchy names tend to stand out
• Names that are easy to say and spell tend to do better 
• Name should be relevant to your product or service offerings
• Ask around — family, friends, colleagues, social media — for suggestions
• Including keywords, such as “therapy” or “counseling”, boosts SEO
• Name should allow for expansion, for ex: “Life Spectrum” or “Vital Voyage”over “HealthHorizon Clinics” or “MindMend Therapies”
• A location-based name can help establish a strong connection with your local community and help with the SEO but might hinder future expansion

Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these. 

Finally, make your choice among the names that pass this screening and go ahead and reserve your business name with your state, start the trademark registration process, and complete your domain registration and social media account creation. 

Your business name is one of the key differentiators that sets your business apart. Once you pick a name, reserve it and start with the branding, it’s hard to switch to a new name. So be sure to carefully consider your choice before moving forward. 

Step 4: Create a Private Practice Business Plan

Here are the key components of a business plan:

• Executive Summary: Provide a concise overview of your therapy private practice, highlighting your mission, target clientele, and goals.
• Business Overview: Introduce your therapy practice, including its location, types of therapy offered (e.g., individual, couples, family therapy), and any specialization areas.
• Product and Services: Detail the therapy services you offer, such as counseling for mental health issues, therapy modalities (e.g., CBT, psychotherapy), and any unique therapeutic approaches.
• Market Analysis: Analyze the local and broader mental health services market, considering factors like demand for therapy, demographics of your target audience, and potential growth opportunities.
• Competitive Analysis: Identify other therapy providers in your area and explain how your practice differentiates itself, whether through specialization, pricing, or client-focused services.
• Sales and Marketing: Outline your strategies for attracting clients, including online marketing, referrals from other healthcare professionals, and community outreach.
• Management Team: Introduce yourself and any other therapists or staff members, emphasizing your qualifications, licenses, and experience in the field.
• Operations Plan: Describe how your practice will operate day-to-day, covering appointment scheduling, patient confidentiality, and billing procedures.
• Financial Plan: Present financial projections, including startup costs, expected revenue, and profitability forecasts based on your pricing structure and client volume goals.
• Appendix: Include any relevant credentials, client testimonials (with consent), and brochures or promotional materials for your practice.

If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.

Step 5: Register Your Business

Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business! 

Choose where to register your company

Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to therapy private practices. 

If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state. 

Choose your business structure

Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your practice will shape your taxes, personal liability, and business registration requirements, so choose wisely. 

Here are the main options:

• Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
• General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
• Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts. Here’s how to form an LLC.
• C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation. Read how to start a corporation here.
• S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just need to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.

We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have. 

Step 6: Register for Taxes

The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN. 

Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.

It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.

Step 7: Fund your Business

Securing financing is your next step and there are plenty of ways to raise capital:

• Bank loans: This is the most common method but getting approved requires a rock-solid business plan and strong credit history.
• SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
• Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
• Venture capital: Venture capital investors take an ownership stake in exchange for funds, so keep in mind that you’d be sacrificing some control over your business. This is generally only available for businesses with high growth potential.
• Angel investors: Reach out to your entire network in search of people interested in investing in early-stage startups in exchange for a stake. Established angel investors are always looking for good opportunities. 
• Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
• Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
• Personal: Self-fund your business via your savings or the sale of property or other assets.

Bank and SBA loans are probably the best option, other than friends and family, for funding a therapy business. You might also try crowdfunding if you have an innovative concept.  

If you have an idea for a unique technology to deliver therapy services, you may be able to attract angel investors or venture capital. 

Step 8: Apply for Therapy Practice Licenses and Permits

Starting a therapy private practice business requires obtaining a number of licenses and permits from local, state, and federal governments.

You’ll need to check with your state to find out their professional license requirements for a therapy practice.

Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits. 

You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more. 

You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.

If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.

Step 9: Open a Business Bank Account

Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.

Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your therapy business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.

Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account. 

Step 10: Get Business Insurance

Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.

Here are some types of insurance to consider:

• General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
• Business Property: Provides coverage for your equipment and supplies.
• Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
• Worker’s compensation: Provides compensation to employees injured on the job.
• Property: Covers your physical space, whether it is a cart, storefront, or office.
• Commercial auto: Protection for your company-owned vehicle.
• Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
• Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of the above insurance types.

Step 11: Prepare to Launch

As opening day nears, prepare for launch by reviewing and improving some key elements of your business. 

Essential software and tools

Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.  

You may want to use industry-specific software, such as Simple Practice, TheraNest, or Therapy Brands, to manage your appointments, client information, and billing. 

Accounting

• Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero. 
• If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.

Create a website

Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism. You can create your own website using services like WordPress, Wix, or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.

Your customers are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. SEO will help your website appear closer to the top in relevant search results, a crucial element for increasing sales. 

Make sure that you optimize calls to action on your website. Experiment with text, color, size, and position of calls to action such as “Schedule Now”. This can sharply increase purchases. 

Marketing

Here are some powerful marketing strategies for your future business:

1. Utilize Online Reviews: Encourage satisfied clients to leave positive reviews on platforms like Google My Business or Healthgrades, enhancing your online reputation and credibility.
2. Offer Specialized Workshops or Webinars: Host events addressing common mental health concerns, showcasing your expertise and providing a platform for potential clients to connect with you.
3. Collaborate with Local Businesses: Partner with local wellness centers, gyms, or businesses to offer your services on-site or through joint promotional events, expanding your reach within the community.
4. Educational Content on Social Media: Share informative and relatable content on social media platforms, demonstrating your expertise and establishing a connection with your audience.
5. Community Outreach Programs: Engage with local schools, community centers, or religious organizations to offer free educational seminars, fostering goodwill and increasing your visibility.
6. Create Referral Partnerships: Establish relationships with other healthcare professionals, such as physicians or nutritionists, who can refer clients to your practice for complementary mental health services.
7. Leverage Teletherapy Services: Advertise your ability to provide therapy services online, appealing to clients who prefer the convenience and accessibility of virtual sessions.
8. Implement a Loyalty Program: Reward clients for referrals or consistent attendance with discounts on sessions, encouraging them to become advocates for your practice.
9. Local Print Advertising: Place targeted ads in community newspapers, magazines, or bulletin boards to capture the attention of individuals who may not be actively searching online for therapy services.
10. Create Engaging Content Through Podcasts or Videos: Share your expertise in a more personal format, reaching a broader audience and establishing a connection with potential clients.

Focus on USPs

Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your therapy private practice meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire. 

Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your therapy private practice business could be: 

• You can feel better with help
• Better health through peace of mind
• Empowering individuals to make positive changes

Networking

You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a therapy private practice business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in therapy practices for years and can offer invaluable insight and industry connections. 

The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in therapy private practices. You’ll probably generate new customers or find companies with which you could establish a partnership. 

Step 12: Build Your Team

If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a therapy private practice business include:

• Receptionist – greet clients, take calls, make appointments
• Marketing Lead – create and implement marketing strategies
• Office Manager – billing, accounting

At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need. 

Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent. 

Step 13: Run a Therapy Practice – Start Making Money!

While it’s unfortunate, the need for therapy practices is growing, but you could help people that are suffering by starting your own therapy private practice. You’re likely to find yourself with more clients than you can handle, but for a business, that’s a positive.

You understand the business part now, so you’re ready to get your successful practice up and running!

Q&A

Is a therapy private practice profitable?

A therapy private practice can be profitable, but it depends on several factors such as the location, competition, marketing strategies, pricing, and the number of clients. With the right marketing strategy and effective management of expenses, a therapy private practice can generate a good amount of revenue and profits.

What happens during a typical day at a therapy private practice?

During a typical day at a therapy private practice, therapists see clients for scheduled appointments where they provide mental health counseling and therapy services. This may include individual therapy sessions, group therapy sessions, or couples and family therapy sessions. Therapists may also spend time outside of sessions doing administrative tasks, such as managing client files and scheduling appointments.

What is the growth potential of a therapy private practice?

The growth potential of a therapy private practice can be significant, especially as mental health awareness and the need for therapy services continue to increase. The demand for therapy services is likely to continue growing, especially as more people become aware of the benefits of mental health counseling and therapy.

What type of business is a therapy private practice?

A therapy private practice is a business that provides mental health services to clients on a fee-for-service basis. Typically, therapists in private practice are licensed mental health professionals who provide psychotherapy, counseling, and other mental health services to individuals, couples, families, and groups.