The Therapy Business Podcast

Mailbag: Answering More of Your Business Questions

• Craig Dacy • Episode 48

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Craig addresses the challenges of running a successful therapy practice, sharing insights on setting fees, creating consistent income, and making strategic hiring decisions. 

• Setting appropriate fees requires knowing what income you need, how many clients you can realistically handle, and calculating your session rate accordingly
• Consider both personal income requirements and business overhead when establishing fee structures
• Some potential clients will be deterred by higher rates, but those seeking quality care who find the right fit will often prioritize value over price
• Implement a limited sliding scale with clear parameters if you want to serve clients with financial limitations
• Pay yourself consistently as a business owner with a regular salary, not just compensation for client sessions
• Use multiple bank accounts (Profit First system) to ensure stable personal income regardless of business fluctuations 
• Before hiring, understand your profit margins and ensure you can sustainably afford additional staff
• Start with administrative support before hiring clinicians to free up your time for revenue-generating activities
• Test your hiring readiness by setting aside potential employee salary for several months
• Consider the pros and cons of W-2 employees versus contractors based on your practice needs and tax implications

Send your questions for future mailbag episodes to info@craigdacy.com or submit them at therapybusinesspod.com.


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*Intro/outro song credit:
King Around Here by Alex Grohl

Speaker 1:

My name is Craig and I'm the owner of Daisy Financial Coaching. Our team is on a mission to make your therapy practice permanently profitable. If you own a solo or group practice, we're here to help you build a business that creates more time, makes more money and serves more people. This is the Therapy Business Podcast. These mailbag episodes are some of my favorites, because I know how lonely it can be as a business owner. A lot of us are therapists by trade and business owner just because that's what we fell into and we're trying to navigate this thing and figure it out.

Speaker 1:

I was in those shoes myself almost a decade ago, when I left education to start this coaching business, I knew I was passionate about helping people with their finances. I had never run a business that I was relying on for my sole income. I had been a serial entrepreneur in the sense and I put entrepreneur very loosely in the sense of. You know, I had been a musician. I'd run a music business. I toured for multiple years in my twenties. I had always had side hustles. I was always finding other ways to earn incomes and managing the finances and all those areas, but never had I been dependent on those incomes to live my life, and so I was figuring it out as I go, and I needed people who had been there before me to lean on. And now here I am. I love running a business and I've become so passionate about it that I'm now teaching others how to do it as well, largely because I'm still figuring it out as I go, as I hit new thresholds in my business. I'm still learning and adapting, because I'm in the trenches with you, and that's why these questions, I think, are so valuable when you send them to me, that we are working through this together, because, likely, when you send a question in, you're not the only person dealing with it, frustrated with it, worried about it. All right, let's talk about these questions. So the first one I'm going to dig into is setting your fees without scaring people off.

Speaker 1:

This is really challenging for people is setting a fee that is valuing them their expertise and making sure it meets with all your needs, but also we're afraid that nobody's going to want to pay it, that people are going to be too afraid to pay it, and so what often happens when I see therapists fees is they are drastically undervaluing themselves and undercharging. This can lead to a lot of problems because it's really hard to scale when you're not charging a lot. We are in this industry of therapy where it's one-on-one or, if you're in physical therapy, it's typically a one-on-one engagement. You are capped at how many patients or clients you can work with. You only have so many hours in the day, and so at some point you are going to hit a ceiling of what you can do. Now this can lead into hiring, growing your team, but also at the same time, if you're not charging enough, that makes it really hard because you don't have a lot of overhead to make those hires. You're suddenly hitting this ceiling of what can I afford to do and you don't have the cash to expand, and so setting our fees is really really important and really delicate.

Speaker 1:

So I always say the first thing you should do is start with what do you need to be making? What do you need to make? How many clients do you specifically want to work with, or can you work with, without reaching that point of burnout? Early on, you might be working with more people, and so whatever number you come up with, it doesn't have to be your forever. If you're saying I want to meet with 20 to 30 clients a week. That doesn't have to be where you are forever. Maybe, as you expand and grow your team, you can bring that back.

Speaker 1:

But right now, if you're looking at 20 to 30, look at how much you want to be taking home every month. What's that number? And then work backwards. If I need X dollars every month, and here's how many sessions I can realistically handle every week, what does that look like per session? So take those numbers, figure out. How much should I be charging per session in order to make that happen? So if we are looking at let's just say, you're charging a hundred dollars per session and you're seeing 20 people a week, right, that's $2,000 a week. That's about $8,000 a month. Can you live on that? Does that work for you? If not, then we need to make some changes. If it works, awesome, then keep it there. But also you start to run into that ceiling. You're like I would rather be seeing 10 to 15, but I need to be making 10,000 a month.

Speaker 1:

So this is where you can see we might need to adjust our rates. What can we afford to charge to make sure it's covered? That's piece number one. Number two is we got to know in our business what does our overhead look like? What is taxes? What is our operating expenses? Do we have a office space that we pay rent on? Do we have a team? Do we have an admin? All of these things come into play and we have to have again profit margin in order to cover this. So if we don't have enough cash on top of what we are once we have covered all those expenses, that's where a business can run into trouble. When we are worried about scaring people off is where we start to run into issues is we are afraid that people are not going to want to pay us, that we're going to quote them and tell them our rate and they're going to run for the hills.

Speaker 1:

And I'm going to be honest, some people will. Some people are bargain shoppers. Some people are looking for the cheapest therapist they can find. Now, a lot of them it's circumstances. They just can't afford to pay a premium. They can't afford to pay two to $300 per session. That's just where they are. Some of them maybe can afford it, but they just don't want to afford it. They're looking for who is going to be the cheapest, most affordable person and, truthfully, those are probably not going to be your ideal clients.

Speaker 1:

Anyway, it really boils down to who do I want to work with. If you really want to work with somebody who's going to engage, who is seeking out the best quality of care they're looking for the right therapist, the right person for them then money most often is not going to really be a deterrent. If they find someone who is the right fit, who they feel secure with, who they feel really confident can help them, then they're going to find a way to make that fee work. Now you can always introduce a sliding scale if you want to make a variable price range. So maybe you have a way that you can serve some people who would be a great fit. They just economically don't have the bandwidth to afford your fee. Then maybe you can create space to hold three to five clients in your back pocket that you can give a reduced rate to.

Speaker 1:

I would just be very cautious about capping that. What are the circumstances before you even get in there? What does it look like? Who would qualify for? Very cautious about capping that. What are the circumstances before you even get in there? What does it look like? Who would qualify for it? What is the cap? How many of these can I take on. And if you've reached that, so if you're saying I can do five people at a reduced rate of, let's just say, 50%, so of half. So instead of 200, we're charging them 100. I can do five people. Once you hit those five, if other people are coming to you at that point, you can either wait, list them for the reduced rate, or you can refer them out, or you can tell them the rate is 200 and that's what it is, and they can take it or leave it.

Speaker 1:

I always revert back to when it comes to scaring people off. You can serve clients without taking them as a client. You can serve people without taking them as a client. Some people just aren't going to be the right fit and there's a lot of factors that come into play. And it's okay if finances is one of those factors. Now, that has to be a piece. You are a business, you have a livelihood. What often happens is therapists reach burnout if they don't price their prices accordingly. So it's really important to go about it that way, to remember that it doesn't have to be the end, all be all. That's not the only factor we're looking for, but also it's an important one. And then, lastly, if you have certain designations, qualifications, specialties, things that you primarily focus on, these can help drive up what you can charge and, again, will make you more appealing to people and more willing to find a way to afford those rates, if they can. All right.

Speaker 1:

Next let's talk about how to pay yourself consistently as a business owner. This is, truthfully, the most common challenge that we see when people come to us. It's like how can I pay myself a consistent paycheck? How can I make sure that my bills are covering the business and that I'm taking home the same amount every single time? What often happens is we stumble into this business thing, just like I alluded to at the beginning. We are your therapist and you now find yourself running this therapy business and previously maybe you were working with another practice. You were one of the therapists on their team and they paid you a regular paycheck based on how many clients you saw. You got paid every other week or every month or whatever that rhythm is.

Speaker 1:

Then we get into our own business and what we often find is we are not paying ourselves that way. We are not paying ourselves that way. We're not paying ourselves on a consistent basis. It's, I see, a lot where we're dipping into the business to cover our expenses. It's I hope I got a bill due. I'm going to pull money out of the business. Oops, I need my bank accounts getting low. I'm going to pull some more money out of the business. What we need to be is on a consistent paycheck rhythm.

Speaker 1:

Here's the other piece is if you're paying yourself based on the clients you see, you're not paying yourself as a business owner, you're paying yourself as a therapist, as an employee. Essentially, I'm a firm believer that, as the business owner, you should be on a salary. Now, if you want to get paid for the clients you see, plus a flat rate salary or stipend, that's great. But you need something to be paying you for the marketing and for the managing the systems and processes and managing the team members and managing all of the things that come with being a business owner. Simply paying yourself 50, 60% of client session fees? You're just a therapist and you happen to work for yourself. We wanna move into that business owner mentality. So I'm a huge fan of making yourself on salary, getting yourself a very consistent paycheck. Here's what I get paid every single time, the same amount on the same rhythm, so that way you're not worried about if I go on a vacation, if I'm off for a week, if whatever.

Speaker 1:

You know, here in Texas a couple of years ago we had what we call snowpocalypse, because we were not well handled for snow and ice, so it shut the whole town down for like three days and so therapists here weren't able to see clients if, especially because power and electricity was all down too so you couldn't even do telehealth. It was a mess. If that happens and you're set on a regular pay schedule, you're going to get paid the same amount. You're not going to take a pay hit just because those days off, and that can help with that stress and anxiety. We are big believers in using multiple bank accounts. We allude to it a lot and we even have a whole episode on what we, where we teach the profit first system. It's episode number two, I believe, if you go all the way back to the beginning, where we talk about how to set up multiple bank accounts to make sure that you're always paid on time consistently. So I would go find that episode, listen to it. It's really helpful.

Speaker 1:

All right, last question for today's mailbag is how do I know if I can afford to hire or expand. So this is for my, my solo therapists, who are maybe you're reaching that cap, that burnout point we were talking about. You're running out of hours and you're going. I'm either this is not sustainable because I've overloaded my caseload, or you're just going. I want to continue to grow and I'm starting to hit that ceiling of what I can afford to do.

Speaker 1:

So how do I know if I can afford to hire? So first of all, we need to know our numbers. So we have to know what is our profitability right now? What are our expenses? What are we bringing in? What are our expenses? What are we paying ourselves? What are we setting aside for taxes? All of those things no-transcript, no-transcript. Open up a bank account, nickname it new employee and start setting money in there. Pretend like you're paying them already. That's one way to find out if you can afford a new employee is to start paying them on paper but putting that money into an account to save up usually three to six months of expenses, but having enough to, I would say, three to four payroll cycles, that you have a cash cushion, especially if there's going to be some training and some runway you're going to need before they're going to start generating an ROI. We want to have a little bit of a cash cushion to help with those growing pains of bringing that new employee on Now.

Speaker 1:

Knowing what kind of employee you want is really important as well. So are we going to start with, again, the admin or the coach? Typically, it's best to go with a virtual assistant or an admin of some kind. They're going to be able to take a lot of stuff off your plate. They're going to be able to ease into the job and it's a great way to kind of test the waters of that employment. So you can still see it frees you up to either maybe see more clients or to focus your energy on marketing or growing leads, so that you will be more ready to hire a clinician to work under you. So a VA is going to be able to offload all of those tasks that you are filling your day with that you shouldn't probably be doing in the first place. So there's a lot of admin tasks, background tasks that you can offload to them. Free up your time to focus on growth, expansion or working with more clients. They can also help with retention.

Speaker 1:

What we often find is maybe you are getting a lot of leads. You're just not following up with them because you don't have time, and what we find in sales is that it takes seven to 12 touch points before a sale happens. So somebody reaches out to you on your website they want help. Maybe you email them responding hey yeah, let's connect and talk, let's set up a free consultation. And then they never do and you never follow up, not because you're lazy, but probably just because it just doesn't happen. You get busy, things happen and they fall between the cracks. An admin can help with this. You can set them up, give them a process where they are following up with leads. They are calling them regularly that's seven to 12 times right To get them on a schedule and then they get added to a database where they're checking in with them every couple months. So prospecting is what we would call that where they're reaching out to a list of old or current leads and just tapping their shoulder trying to make sure they're getting help. This will help grow your practice tremendously. So once that process gets moving, that admin can actually help generate revenue for you without ever seeing clients. Then, from there, you're looking at hiring a clinician.

Speaker 1:

Now there's a lot of different ways to pay clinicians. We have full episodes on the different pay structures you can use and there's pros and cons for each one. I believe it's called Pay Structures 101. Go back through and you can find that episode it's really really helpful to look at. Is commission-based, is fee-based, is salary-based? Which one is the best way to go? They all depend, but a lot of times for somebody who's trying to make their first hire, commission-based can be a great way to do it. Or a flat fee, meaning when they meet with a client they get paid for that client session directly, so they're not making money if they're not seeing clients. They're making money if they are, and so that way it's a lower risk on you. If you're just paying them, you know 50 to 60% of what that client session fee is. This is where having your prices marked higher and going back to that, setting your fees in a way that's scalable, that makes sure that all your bases are covered, is really important so that as you pay your clinician, you still have enough cash to help offset some of those other costs like payroll, the payroll fees, the payroll tax, any other overhead costs you might have, adding a simple practice or whatever softwares you have to add for them.

Speaker 1:

So there's a lot of other factors that come into play that we want to take into consideration. The last thing we need to think about is do you want to go with W-2 contractor? Which one makes the most sense at this juncture in your business? Again, each one has its pros and cons and also there's going to be some gray area that you need to make sure that you are abiding by. Contractors, in theory, are their own business. They are their own business. They are not part of your company directly and so, as you're giving them clients, you're limited on what you can dictate, what you can require of them, of how they do things, because you're sending business out to their business on paper. So there's pros and cons. However, contractors are cheaper in the tax side, so W-2 is going to come along with payroll tax, unemployment tax, all those things come into play. So there's just a lot of those factors. Whereas a contractor, they're going to be in charge of their own simple practice account, their own softwares, all their expenses are on them, whereas a W-2 employee, that's going to fall on you. So these are all pieces we need to be thinking about as we go about it.

Speaker 1:

So I always recommend take your time. I once had a coach tell me to start hiring before you're ready to hire. Meaning start this process Doesn't mean go out hire somebody to start tomorrow if you're not ready for them, but it means start figuring this stuff out what can I afford? Start saving for it and then also start interviewing. Take your time interviewing. You want to find the right fit, the person who is the right fit for you, for your clients, so that when you are ready to hire you can do it confidently.

Speaker 1:

All right, these mailbag episodes, like I said, they're some of my favorites to do. So please send your questions to me. Go to therapybusinesspodcom. You can submit questions to me via email. Info at craigdaceycom. You can send me an email directly if you like. I'm happy to answer your question on a future mailbag episode. Otherwise, y'all good luck. Let me know how I can best serve you and we'll see you in the next episode. Thanks for joining us on the Therapy Business Podcast. Be sure to subscribe, leave a review and share it with a practice owner that you may know If your practice needs help getting organized with its finances or just growing your practice. Head to therapybusinesspodcom to learn how we can help.

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Craig Dacy

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