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The Only Two Ways To Make More Money [The Definitive Guide For Private Practice Therapists]

Updated: Jul 11, 2023


The other day I saw this video by Alex Hormozi.


For those of you who don't know, Alex Hormozi is a 30 something entrepreneur who spent a decade failing and then became a $100 millionaire. Now that he has a ton of money he gives free business advice on social media.


He's become one of my heroes.

Animated Alex Hormozi
Alex Hormozi

In the above video he breaks down the only two ways to make more money. I literally watched this video like 5 times trying to understand what he was saying. I decided to write this post to apply it to therapists wanting to increase their income and make more money. I was never taught anything about business, so as I learn more about how to run a profitable business I want to share it with you.


I hope this serves you.

 

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1/4 The only two ways to increase your salary as a therapist.

There are only two ways to make more money. You have to see more clients or make each client worth more.


Now there are various ways to see more clients or make each client worth more, but in the end these are the only two ways to make more money.


That's it.

2/4 Increase your income by seeing more clients.

If you have to see more clients to make more money then your income is capped.


I have a buddy who charges $180 an hour. He works 42 weeks a year and sees 25 clients a week. If we do the simple math (180*42*25) that means he makes $189,000 a year. If we estimate he pays 30% in taxes and expenses he takes home $132,300 per year.


That's close to the max he can make.


Each therapist has a comfortable caseload number of clients they can see and still maintain their mental health. Your comfortable caseload number fluctuates over different life seasons, but we all know that each client you see over your comfortable caseload number is a recipe for disaster.


My comfortable caseload number is 16. I usually try and see 18. If I see 20 then at the end of the week all I want to do is sit in a dark closet for hours.


This means that for most therapists there are only two ways to see more clients: start a group counseling practice or start doing group therapy.


1/2 Start a group practice

If you hire an intern, instead of getting paid for one hour of therapy, you're getting paid for your work plus the intern’s hours of work. You've basically doubled your billable hours (albeit at a lower rate).


There's nothing wrong with that.


Where many group practices go wrong, in my opinion, is they don't support their counselors. I've heard numerous stories of counselors signing with a group practice and still having to get their own clients. Or they have to do a bunch of additional tasks—but they aren't employees, they're contractors. Or if they have questions (like how do I get insurance as a contractor) they get dismissed.


If you have a group practice I think you should provide your clinicians with training necessary to succeed. But as long as you take care of your therapists, godspeed.


Also when I've talked to group practice owners, group practices seem to get exponentially more expensive to run the bigger they get. For example a group practice of 3-5 might make the owner 100k, but a group practice of 20 might only make the owner 200k. Now 200k is a lot of money, but it's not as much as you'd think with 4 times the employees.


Trouble is, the larger the group practice, the more overhead you have. A group practice of 20 requires front door staff, a billing department, a million dollar building, etcetera, etcetera, etcetera.


Also, as my friend Paul Peterson points out, running a group practice means running a business. So you’ll have less time for counseling. It’s a total shift in roles which many counselors just won’t want to do.

2/2 Do therapy groups

Another way to see more clients is to run groups. When I've talked with other clinicians about groups the numbers sound really good. If you can get 10 clients in a group paying 50 bucks your hourly rate jumps to $500.


Problem is, in my experience, group therapy is a hard sell to clients. Clients want 1-1 attention. Most of the successful therapy groups I've seen bill insurance on mandated clients, which creates another set of problems. Mandated clients are notoriously difficult to deal with and billing on those clients is a nightmare.


For most counselors in solo counseling practice I don't think group therapy is worth the cost in overhead and energy.


I did hear of one guy who years ago was making like $300 an hour or something running groups. So if you know how to do it, please let me know. I'll let you write a guest post here. Otherwise, I'd recommend against it.


Final thoughts on seeing more clients.

So those are my thoughts.

  • Every counselor has a comfortable caseload number. Working past your number is not worth your mental health.

  • Start a small group practice and make sure to support your people.

  • Don't do group therapy.

This means that, for counselors and therapists wanting to stay in solo counseling practice, the main thing we have to do is make our clients worth more.


3/4 Increase your income by making clients worth more.

How do you make clients worth more? Alex says there are 6 ways:

  1. Decrease cost

  2. Get clients to stay longer

  3. Raise prices

  4. Upsell

  5. Cross-sell

  6. Down-sell

Yeah, half of those words made no sense to me, which is why I watched the video like 5 times. Let's break each of these down and apply them to counselors.


1/6 Decrease cost

Let's keep this super simple.


If you make 100k a year as a counselor, but pay 6k in rent, you take home 94k a year.


Simple enough.


This means you can increase how much you take home by cutting cost. Say you stop seeing clients face to face and only do telehealth. You no longer pay 6k in rent and now you take home 100k.


That's simplistic, but you get it.


But be careful. You can only decrease cost so much before it becomes burdensome for you.


For instance, I'm not great with numbers, so I hire an accountant to do my books. I could save that money if I did my own payroll and whatnot, but it’s actually worth it to me to pay someone else.


For many therapists in solo private practice this means that you should pay someone to do your insurance billing. Don't skimp. Your business should be sustainable for you, and most times paying someone to do your insurance billing is way cheaper than paying 30%-40% to a group practice.


So find the balance. Pay for the services which make your business easier and cut the rest [1].


2/6 Get clients to stay longer

Each client has what's called a "lifetime value."


If my average client comes for 10 sessions and my hourly rate is $100 then the average client makes me $1,000 (10 * $100 = $1,000).


But it also cost me money to acquire that client.


If I run $100 of Facebook ads and get 1 client, that means my cost of acquisition is $100.


That also means my lifetime value for any one client is $900. (They made me $1,000 but cost $100 to acquire. $1,000-$100 = $900).


Again, a little more goes into it, but that's the basic idea.


Knowing this math, technically if a client comes for more sessions, their lifetime value goes up.


If my average client comes for 20 sessions, and I charge $100 an hour, that's $2,000 and if it costs me $100 to acquire that client, then my lifetime value jumps to $1,900.


I think the idea of lifetime value is important for all business owners to know, but I don't think decreasing cost of acquisition is useful for most therapists, partly because most counselors don't run ads. Most therapists get clients from word of mouth sources. You have a contact at a local school/ church/ non profit who sends you tons of clients. That's free.


Also, if I run ads, then it's just another cost. So to my understanding this falls into the above bucket of "decrease cost." I suspect that if you work in a high turnover industry, cost of acquisition matters more.


3/6 Raise prices

The Rock saying "prices just went up." Therapists can raise their salaries by raising prices.

The easiest way to make more is to simply raise your prices.


In my area most therapists are undercharging by at least $30. That means if you see 20 clients a week for 48 weeks a year you're missing out on $28,800 per year ($30*20*48= $28,800).


And that's the low end.


This is also the hardest thing for most therapists to do for two reasons.


First many therapists feel like they are hurting their clients if they raise their prices. "What about the people who can't pay?" they ask.


Many of the therapists who ask this question aren't really asking this question, they are having an emotional response.


Which is perfectly valid.


I only point this out because pointing it out tells us where to focus. Me giving a rationale for why you should (or shouldn't) raise your prices won't do a thing to change your mind, because you're not really asking the question. The task then is to just clarify your values and your goals. Maybe your goal is to provide affordable care. Totally valid. That just means raising prices isn't for you.


Whatever the underlying value or emotional need, honor that. Let's also acknowledge that you'll need to choose a harder path to making more.


The second reason therapists don't raise their prices is they are afraid they won't be able to pay their bills because too many clients would leave.


Again, another real fear. You need to pay your bills. Let's also be clear, if this is you, you don't have a pricing problem, you have a marketing problem.


Think about it, if you had 100 people calling your phone a week how many of them could pay your rate? Could 5 out of 100 pay your rates?


If 5 could pay your rate, in 4 weeks you'd be seeing 20 clients a week.


Your rate isn't your problem. Your marketing is your problem. You're not getting enough calls to support your rate. So lean into marketing.


4/6 Upsell

At the beginning of April I turned off my website. I was getting too many client requests to handle them all. Then I had several clients drop out and on April 17th reopened my site. For a week and a half no one called me.


I almost had a panic attack.


The month ended and I looked at my financials. I'd made the same amount of money. I was confused. I'd lost clients but made the same amount of money?


How?


Part of it was 2 of my couples wanted an extended session and about 3-4 clients wanted more frequent sessions.


I'd accidentally stumbled upon the idea of the "Upsell."

***

An upsell is when you sell someone more of what they are already buying.


If you go to McDonalds and they ask if you want to supersize your meal they've just upsold you. It's the same meal (burger, fries, drink,) but you're getting more of it.


I think upselling is the hidden secret of cash pay practice.


You can offer clients longer sessions. This is an upsell based on duration.


You can offer clients more sessions per week. This is an upsell based on frequency.


Say you currently take insurance and make $2,500 per week seeing 25 clients. You decide to go cash pay and 12 clients come with you.


Let's say you offer all your clients extended 80 minute sessions which you bill at $200. 2 take you up on the offer. That's $400 per week.


Let's say 9 stick to seeing you once a week at $150. That's $1,350.


Let's also say you also offer them multiple sessions a week. 1 of them wants to be seen twice a week so that's $300.


Add it all together.

$--400

$1,350

$--300

---------

$2,050


You just went from 25 clients making $2,500 a week to 12 clients making $2,050 a week.


Sounds crazy. But it works.


Some therapists will push back against this. The idea of seeing the same client for more sessions is looked down on in some circles. We are taught to not create dependence after all.


I don't think this is a real problem. I think the research is pretty clear that people who have more therapy sooner get better faster. If it usually takes you 10 sessions to help a client, seeing them twice a week means they get their result in 5 weeks instead of 10. Of course, with increased frequency, some clients will abuse that. It's our job to create clear boundaries. We need to clearly tell clients when we will and won't be taking calls, and when and how they should call emergency services.


That being said, I've not had a problem seeing clients more often. If you don't like the idea, then consider a downsell or cross sell.


5/6 Cross-sell

Cross selling is where you sell an additional service that helps people reach their outcome.


Every fast food restaurant has this. You have the meal, and they cross sell you a drink.


There are a few different ways to do this as a counselor. I think it comes down to knowing your ideal client.

Little boy meditating. Therapists can raise their salaries by cross-selling

For instance if you work with anxiety you can cross-sell subscriptions to a meditation app like Headspace or Calm.


If you work with couples, you can cross sell child care. Hire someone to take care of the client's kids for an hour while they are in therapy. Charge the client $50 extra, pay the baby sitter $30 and pocket $20.


If you do sex therapy, sell some fancy silicon based lube.


If your niche is anti medication, sell psychiatric grade nutritional supplements like Hardy nutritional.


You get the idea.


Remember, the goal is to make more money. So you need to find things which make you more money while not incurring lots of cost.


Because of this, I think adding a psychiatrist is a bad idea for a solo counselor. Getting into medication management sounds like a good idea because it makes a lot of money, but the overhead is enormous. If you already have a big organization, maybe it's worth it, but for smaller group practices or solo practice counselors it's probably not worth the work.


6/6 Down-sell

Down-sell is where you sell something which is less valuable than your main thing.


If you've ever gone to a restaurant and just bought an appetizer instead of a main dish then you've bought a down-sell.


What's an example for therapists?


I used to work with a guy who ran weekend seminars for couples. It was 12 hours for $200. If a client called him and didn't want to pay his rate, he could have down-sold them into his next weekend seminar.


I think down-selling is really important for counselors. When clients come see us, they are scared. Not only are they struggling with whatever their problem is, they are also struggling with whether they can trust you.


It's really hard to open up and tell a stranger about your problems. Sometimes clients need a low risk test drive.


A down-sell is a great way to build trust. It's a low risk way to give clients a taste of who you are and how you work. In fact even if you don't actually sell your down sell I think you should have a down-sell. Record a podcast, write a blog post, make a video talking about your niche. And if people can't pay your rate, give them the podcast, blog, or video for free.


Either they will be helped by the free resource, or they will consume it, trust you more, and call you back to book a session.


It's a win-win.


Traditionally if you're in a group practice the down-sell is the provisionally licensed therapist/intern.


I think that's a bad idea.


If you're cash pay, even your professionally licensed counselors could be billing cash rates. My business partner, Paul Peterson, took cash straight out of grad school, and now we coach other therapists how to do the same. If your intern is billing a low rate, you're leaving money on the table.


Final thoughts on making clients worth more.

So those are my thoughts on making clients worth more.

  1. Don't go crazy cutting cost.

  2. Raise your rates.

  3. Upsell clients into more therapy.

  4. If you have a niche, cross-sell them something useful.

  5. Create free down-sells, and make sure your interns/not yet fully licensed therapist bill high rates.

4/4 Hey therapists, this isn't really about increasing your income.

Honestly I don’t know how to end this article.


It’s all laid out above. What else is there to say?


I guess I’ll end with this. The thing I want most of you is not that you make more money. The thing I want for you is to feel a sense of agency.


I believe knowledge is a source of agency. Now that you know how to make more money you have a choice. You can charge premium rates and make a lot. You can take insurance or have low rates and serve disadvantaged communities. You can do a bit of both.


Because now you have the knowledge and knowledge is power and power is agency. Which is what it’s all about.


Best,


Jordan (the counselor)

Note:

[1] Special thanks to Paul Peterson for making this clear to me.

 

If you liked this post, consider reading this next. I think you'll like it ;) It's about how much more money you make in solo practice.

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