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The Difference Between Group Practice and Solo Practice? About a million dollars (but probably more)

Updated: Apr 6, 2023

My business partner, Paul Peterson, has been running the numbers comparing agency, group practice and solo practice gross income. As he was sharing the numbers with me, I knew we had to share them with you. So we collaborated and wrote this blog post. The contrast between how much you can make is… striking to say the least.


Hope this serves you.

 

How Much Do Counselors Make Per Hour?

According to a 2018 simple practice study, the upper 25% of therapists in Arkansas (where we work) charge about $165 for every 90837 (53-min) session[1]. Are you seeing all of that in your bank account? If your hourly earning is anything less than $165 per hour, you’re probably not.


How much does that impact you, long-term? If Group and Private Practices charge that rate for each session, let’s see…


For a therapist seeing 22 clients a week, 47 weeks a year, at a Group that takes 40%:

You: WAIT, you’re telling me I’ll end up paying my Group Practice $1.69 million by the end of my career? That’s like, $1,300 a week! Indefinitely.


Well… it’s actually worse than that.

 

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Group Practice Rates are Half of Solo Counseling Practices

In this example we’re assuming you take only the highest paying insurances in Arkansas.


Oftentimes group practices don’t know how to get clients. To compensate, they partner with companies, EAPs, and take insurances which don’t pay very well. We estimate this lower “group practice” rate to be about $130, if not lower.


That means, if your average client session earns $130, and you pay your group practice 40% you take home $78.[2]


Why Group Practices Pay Counselors So Little


So, if you work for yourself, you can decide to take only the high paying insurances and take home $165 a session. Or you can work for a group practice where you take home $78.

That’s a difference of $1,914 per week in your pocket, or $89,958 per year.


You: But hold-up, my Group provides lots of expensive stuff, like marketing, referrals, a room, a front desk, scheduling help (kind of), etc. If I go out on my own, I’ll have to pay all of that myself and it will basically be the same in my bank account.


That’s true. And not true.


The trouble is the economics are totally different for a group practice than an individual private practice.


For example, to host a team of 30 clinicians, a group practice owner might have to rent a million dollar building and hire front desk and billing staff. You’re paying 40% of your earnings to cover this overhead.


As a solo practice owner expenses are much lower. For example, my (Paul) expenses for 2022 were things like:

  • Renting an office,

  • Liability and malpractice insurance,

  • Billing software to send in insurance claims,

  • Franchise tax for my business license,

  • Fees from credit card swipes, etc.

In total, I (Paul) spent $7,894 on these things. And these expenses can be even lower. Jordan's practice is 3/4 virtual and he spent $3,134.16 in 2022 on expenses.


So minus business expenses, what would it look like for Paul? Let's run the numbers, assuming 22 clients per year, 47 weeks a year:


Simply put, between paying overhead and struggling to get clients, group practices are inefficient businesses.


We want to stress this point. Most group practice owners are good people.


We're merely saying that while a lot of cash flows through a group practice, for each clinician the owner hires, the more expensive overhead becomes. So group practice owners probably aren't making as much as you'd think.


Solo private practices? Well, those are efficient businesses. They give you lots of cash flow for low overhead expenses.


But wait, doesn't a counselor income go up over time?

We’re saying you’ll earn an extra $1.5 Million in 25 years, but the truth is actually a bit higher…


Group practices sometimes don’t know how to scale and increase pricing effectively over time.


That's the fancy way of saying, they don't always let you raise your rates.


But, in the generous scenario below, both Private and Group practice session rates increase by $3 per year. Again, all graphs assume 22 clients a week, 47 weeks a year.


This is how much additional money you’re actually making when you make the jump to Solo Practice:

So $2.33 Million in 25 years. Or, $853k in 10 years.


Happy retirement!


A Few More Charts for Math Nerds...

But what if my group practice's cut is 30%

Here are the numbers for a practice that takes 30% instead of 40%:


What if you’re getting a percentage, and just getting a flat rate?

This is what it looks like if you’re making $60/hr flat (a common Group Practice setup):

This is what it looks like if you’re making $25/hr flat (a common starting Agency Job):

And most importantly, what if I'm not in Arkansas?

Like we mentioned earlier, we ran these numbers for Arkansas—where we live. But what if you live somewhere else in the US? Well, according to the 2018 simple practice study, the national average charge for the upper 25th percentile, for 90837, is $150 per hour.


So here are the numbers with the national average rates.

The Magical Freedom of a Solo Counseling Practice

You: So Paul and Jordan, what are you guys saying? What’s the point of all this besides pointing out how much money I’m losing?


Basically, we think you should go into solo practice.


It’s not just about the money though. It's also about life satisfaction. I (Paul) asked different therapists about their experience working with an agency, a group practice, and in solo practice. Here's what they said.

We’re not gonna lie, running a practice does take extra work. We’d estimate that it takes about 1.5 extra hours per week after you’re up and running. So, honestly, it may not be worth it to you.


But if you want control over your time and your schedule, solo practice may be worth it.


For Jordan and I, going into solo practice has bought us freedom.


Want to Learn More?

Jordan and I started a mentorship where we coach therapists to start their own practice. If you want to learn more, come to our FREE webinar Friday, April 7th, at 12 CST.


Feel free to show up or get a link to the recording. We'll do plenty of Q&A if you have detailed questions or want to know how we pay therapists to leave their current job to start their own private practice.


Just remember registration closes Wednesday, April 5th at 11:50 pm CST.


Best,

Paul Peterson + Jordan (the Counselor),

-Fin-

[Notes]

[1] The upper national average is closer to $150 for each 90837 session, so these numbers might not be exactly the same for you. However, we believe the principle still holds up.


[2] If you pay your group practice 30%, you take home $91 per hour. And that’s assuming your average client session is $130. If you take EAPs or other programs, it could be much lower.

 

If you liked this post, consider reading this next. I think you'll like it ;) It's about how to make 100k as a counselor.

4,087 views6 comments

6 comentarios


Invitado
04 abr 2023

You are using numbers very irresponsibly here. The Simple Practice article you linked provides rates for what places are actually billing, not for what insurance is paying out. $165/hr is a ridiculous number to use to drive your point because it’s way, way higher than the national average for what therapists actually get paid. Also, you have not quantified the administrative expenses of running one‘s own practice in terms of work hours and only included costs of subscriptions and rent. Again, a super misleading article. i Don’t disagree with you that it’s easier To make more money in solo practice, but it’s not as simplistic as you are making it out to be.

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paulwpeterson
paulwpeterson
04 abr 2023
Contestando a

This is a really important comment; thank you for engaging us here. Your pointing out of the languaging in the study is essential—I didn't realize it was billed rates instead of reimbursement rates. We've updated the language in the blog to reflect this. We do, however, have a few insurance companies that will reimburse between $160-$170 in Arkansas. We can't speak for all states, but this is true for our area. The numbers in these charts do reflect accurate incomes for (selectived) insurance-billing therapists in Arkansas. I thought insurance rates were much lower for a few years, until I did the real research and got the rates for each insurance company. I was stunned. This may not be true in your area, but…

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Invitado
03 abr 2023

In Ohio $165 is CRAZY. Even best payors range from 87-110 for a 90837. Group, solo or agency.

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Invitado
04 abr 2023
Contestando a

Agree I don't know any insurance plans paying that much. In my area it's much lower.

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