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How much does it cost to start a therapy business

Start Up Costs.


These are the expenses that you need to account for that pop up in the first few months of business. These are single occurrence fees for big ticket items. Start up costs include: furniture, websites, and more.

 Website: If you are starting a brand new website you are going to need a custom website from scratch. While the website may seem like an area to save, do not forget that this is how you standout from your competitors. The website is the visual, virtual representation where you solidify yourself as a professional. In this era, your customers are going to be looking for an authentic brand they can trust. And, they usually make this choice before they call the business. So, the website is crucial for the initial success as well as long term sustainability of your company. If you have website experience and want to design it yourself, you can build one on Squarespace or WordPress. You can expect to spend about $150-$300 if you design it yourself. Consider also the time it will take for you to build the website and maintain it. Can you also design any graphics needed? How about the logo? Each of these are extra costs and skillsets needed. If you are not a web pro, consider hiring a professional to design the website and maintain it in the long run. If you hire a web designer, your best bet is to hire a freelancer or small agency. Make sure they have experience with service based business (not e-commerce) that rely on lead generation. Freelancers and companies can build websites that range from $3000-$9000 depending on how big your practice already is. If you are a startup, you should be looking for quotes on the low end of that range. If you hire someone to do your website, remember that they can likely include designs for things like logos, icons, business cards and more.

Legal/Accounting: When you are starting a new practice, you are going to need legal and accounting services. So set aside a budget for these fees at the beginning of your endeavor. Many people hire lawyers to help write contracts for employees, create HIPAA forms and client agreements. Lawyers can also help with the incorporation of the business including shareholders agreements. Depending on the scope of your business, you should expect to spend anywhere from $2000-$15000 in legal startup fees.

Filing Fees: No matter what you will need to incorporate. Incorporation fees vary by state and by type (e.g., LLC vs Inc). Fees range from $40-$520. See this site for a complete list.

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Office Build Out/Decor: If you are starting a practice that has a physical space (and most do), make sure you put a lot of thought into your office. This is the physical representation of authenticity, professionalism, and validity. How much it takes to make the perfect space depends on your practice. If you are a sole practitioner, you only need one office. So, you want to look for a shared space. Your upfront cost is likely the cost of a deposit and the furniture it takes to decorate that space. You’ll want to budget for a rug, coffee table, end table, desk, couch, and other decorative items. Don’t forget about bookshelves and lamps! Expect to spend $3000. Of course you can try and save money in this area if you are thrifty or already have furniture. Make sure everything looks new and professional. If you are opening a group practice, you may need to pay for the buildout of the office space. These are expensive costs often starting around $10,000. You will also need to decorate multiple offices and the waiting room. You should expect to spend $25000+ for a group practice.


Operating Expenses

 Operating Expenses, sometimes referred to as overhead, refer to the cost of monthly maintenance on the business. In other words, what will it take to operate your business on a consistent basis. The cost of operating will vary and grow over time. The more business you do, the more it takes to operate. It is best to consider how much you will need to spend on a monthly basis and also understand at what point that cost may increase.

Marketing: When you are starting out you will likely rely on as much unpaid, organic attention as possible. This will include things like posting on Psychology Today (~$30/month), posting in local facebook groups (free but time consuming with a low yield), passing out your business card at networking events (the cost of the event + business cards). These are effective methods when you are starting out and will likely help you get your first few clients. These clients come in slowly and will take time and dedication on your part. After you feel comfortable spending a little bit more, you will probably start to consider paid advertising strategies. For a real steady stream of leads (for your solo or group practice), you will need to invest in paid ads like Google and Facebook Ads. Small practices might spend $2000/month on ads like this, while larger group practices might spend $10000+ a month. The advertising budget often varies. For example, do you need to fill multiple caseloads at a rapid speed for new hires or are you just maintaining. However much you spend per month will depend on your needs that month. If you are working with the right digital marketing agency, they can help you calculate how much you need to spend in a given month based on your goals and how much you can expect to make. It is imperative you are considering your ROI so make sure you collaborate with the right digital marketing team. A digital marketing freelancer or agency will have service fees of their own that range from $1200-$5000+ per month. If you spend $10000 a month on google ads, you can expect hire service fees from the ad agency themselves.

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Legal/Accounting/Consulting: Just as you need to budget for these types of fees in your start up costs, you need to set aside funds for ongoing consulting fees. For example, you may need accounting services on a quarterly basis depending on how you decide to handle your bookkeeping and your quarterly filings. You will also need legal assistance from time to time (remember you are liable for everything in your practice!) and may need help from business consultants, marketing strategists, etc. Though some months you may not need these fees at all, others you will rely on them. So pick a number to budget for monthly that is somewhere in the middle. If you are just starting out this can be as low as $200 but by the time you are in business for 2+ years, be sure to set aside a minimum of $1000/month.

Rent/Office Supplies: Any brick and mortar business needs to ensure they are prepared to pay their rent no matter what. Even if you don’t have clients, even if there is a pandemic – rent will be due. It is key that you think about how much you can afford to pay on a monthly basis even while your company is still bleeding. If you are wondering how much rent is going to cost, it is almost impossible to predict. Of course cost increases by the number of therapists in the practice but the average cost per square footage will depend on your location. So if you are in a more expensive city, make sure you know how many clients you will need to pay the high rent.

Software: Unless you are running a solo practice that opened up in another era, you are going to need software. Practice owners use a variety of platforms for different purposes. Some functions include: bookkeeping, billing (insurance claims), calendar systems, payroll, and more. Software cost increase as your practice grows. You can expect to spend $300/month early on and at least $1000/month for a group practice. Make sure to have a comprehensive list of what you need software for. Then, do your research on how much that will cost. Finally, round up to account for unexpected costs or unforeseen needs!

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Administrative Staff: Many private practice owners will handle administrative tasks themselves when they first start out. Administrative tasks are things like answering calls, managing client paperwork, billing, etc. At some point, though, administrative tasks will become too time consuming. It is a balance between administration while effectively managing your clients and staff. So make sure you know how many clients you need to support this cost and about how many hours you will need to delegate. Most administrators will cost between $15 and $25/hour. Groups with about 5 therapists can usually manage with a part time administrator. Whereas groups with 10+ therapists may need to consider 30 hours a week or more. This will grow over time so it is important to think about and plan for now.

Others: Liability Insurance, Subscription Services, Social Media Managers, Part-Time Interns, Networking Events, Etc.


Variable Expenses/Costs (i.e., fees that increase as  your company grows).

 Your operating expenses will grow over time and it is important to plan for that in advance. To do so, identify which fees grow as business grows, when they grow & by how much. For example, some software fees will increase as you hire more therapists (such as scheduling software). Another example is rent. You can only expand so much in a single office.


Unexpected expenses

 Whether we are talking about start up costs or overhead, it’s a good rule of thumb to assume you will spend more. You never know if your office will flood or insurance liability fees skyrocket. If I have learned anything in my years of business, it’s to prepare for everything – especially the worst.


Cost of Sales/Services Rendered

You’ll notice that in the overhead category, we do not include the salary of your other therapists. That is because this is a direct cost of services rendered. The amount that you pay them correlates with the services sold (assuming you pay them hourly). Of course you need to account for paying them but it is not on a fixed monthly fee. Rather you subtract this fee from the total gross income before ever calculating the remaining revenue and expenses.


If you want to discuss your specific costs in more detail – and how long it will take to make your money back – set up a consultation below!