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147FF: How to Set Sustainable Fees in Your Practice

How to Set Sustainable Fees in Your Practice Episode Cover Image

In this Episode...

Are you charging enough to sustain yourself and your practice?

In this episode of Feelings and Finances, Linzy opens up about one of the biggest mistakes she made when starting her private practice: setting an unsustainably low fee. Sharing her personal journey, Linzy explains how the pressure to transition quickly out of agency work and advice to “keep fees low” led her to set a rate that couldn’t support her financially.

Through honest reflections and real-world math, Linzy highlights the long-term consequences of undervaluing your work. She offers insights on the financial and emotional impact of setting fees too low and shares how raising her rates ultimately enabled her to build a sustainable practice.

If you’ve ever wondered whether your fees truly support your needs now and into the future, this episode is for you. Linzy provides a practical framework to help you evaluate your rates and align them with the life you want to build.

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You can easily submit your question to Linzy on a voice recording. Go to the podcast page on our website and click the “Start recording” button. https://moneynutsandbolts.com/podcast/ 

Follow the prompts to record your question. When you finish your recording, enter your name and email to submit the recording. You can also submit your question directly to Linzy’s SpeakPipe inbox: https://www.speakpipe.com/MoneySkillsForTherapists 

Want to work with Linzy?

Check out the FREE masterclass, The 4 Step Framework to Getting Your Business Finances Totally in Order, where you’ll learn the framework that has helped hundreds of therapists go from money confusion and shame to calm and confidence, as well as the three biggest financial mistakes that therapists make. At the end, you’ll be invited to join Money Skills for Therapists and get Linzy’s support in getting your finances finally working for you. 

Click HERE to find a masterclass time that works for you!

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Episode Transcript

[00:00:00] Linzy: Hello and welcome back to another Feelings and Finances episode of the Money Skills for Therapists podcast. These are our short and sweet Friday episodes where I either answer questions from you, the listeners of the money skills for therapists podcast,or I share some other little like 10 minute nugget of financial wisdom for you to take into the weekend with you.

[00:00:21] So, today is our third part of the biggest mistakes that I made in my own private practice and this is my final mistake that came to mind for me. I’ve got some other things that I’m going to talk about in our next episode, that I did right that I’m really glad I did right but this is my third mistake and it’s… it’s a doozy. And it was not setting a sustainable fee.

[00:00:44] So, I remember when I went into private practice, part of going into private practice was that I was basically fleeing my agency. So I knew that I needed to quit my agency. I knew that my mental health couldn’t really do it any longer. I was going on a trip to see my brother, which gave me a natural transition point.

[00:01:03] I’ve used these natural transition points a few times in my career. This is one of them, where I knew I was going to go see my brother. That was really exciting and special. My brother lives on the other side of the country from me. And so I decided this would be a nice natural transition point to stop working at this agency.

[00:01:19] And then when I’m there, I don’t have to worry about work. And when I come back, I can start my practice. And I can step into my practice. So it was a nice little buffer going out west was going to give me. But that meant I had to act

[00:01:31] pretty quickly by the time I made that decision. I’m fairly sure I gave three weeks notice and then, of course, people are naturally asking, what are you going to do? I knew that I probably wanted to start a private practice, but mostly I just needed to tell people that I was doing something. I couldn’t just say I’m running out of here as fast as I possibly can.

[00:01:49] It was sensible that the next thing I would do was start my private practice. And because people were going to ask, I… It almost felt like pushing me into starting that private practice right away. Because I felt like I needed to have an explanation besides just like I needed to get the heck out of here.

[00:02:03] So I remember speaking with somebody in that agency who was older than me, had a lot more business experience and wisdom, and her advice to me was: don’t set your fee too high. She was like, don’t… Set it at like 90 an hour, like no more than that. And as somebody coming into private practice, I was like, yeah, that yeah, I shouldn’t ask for too much money.

[00:02:22] That would be bad. And so I didn’t quite take her advice, but I was pretty damn close, and I set my fee at 100 an hour.

[00:02:29] So this is about 10 years ago now. I believe I started my practice in 2013. So a hundred dollars an hour. Now, when I got into practice and I started working, a hundred dollars an hour doesn’t go very far if you’re like me, and you can’t see a lot of clients.

[00:02:46] I talked about this in the previous episode about the mistake that I made around scheduling, trying to see too many people, or trying to see people at the wrong time of day. I don’t have a huge capacity as a therapist. I know there are folks listening, and there’s folks that I’ve known, who can see 20-25 clients a week.

[00:03:03] That always blows my mind because my embodied response is the deep belief that I would drop into a coma if I did that. I just cannot understand, I cannot imagine, it is not at all within my capacity to see 25 clients a week. My maximum was 16, usually I did 16. Even better would be 12. So, when I set that 100 fee, as I started to build my practice, and I started to hit that natural limit of like, oh, I can’t really see more than 16 sessions a week, or I start to get exhausted, I had entered into a math equation that did not work.

[00:03:43] So I’m going to play with this math equation right now. if you’re watching on YouTube, you get the pleasure of watching me look at my phone calculator, which is sometimes my top used app, which is really geeky, and I’m kind of proud of that. But 100 an hour… so I’m going to put 100 an hour into my calculator right now.

[00:03:58] I’m going to put in 16 hours a week, which is me working full tilt. Probably 16 sessions for me would have also included some hour and a half session, so it’s probably something more like 18 hours of actual session work. But I’m going to make it a little bit less because, of course, my folks get sick. I get sick. People miss sessions.

[00:04:15] I’m going to multiply that by… I’m going to multiply it by 47. So that’s like four weeks actually off and then I’m going to give an extra week there for illness and people missing sessions. I’m just making the numbers a little more conservative. Actually I’m going to make it 46 because let’s be real. People don’t always show up, and there’s two weeks of normal holidays in any given year.

[00:04:37] And then if you’re actually going to take time off as well, or get sick, which is, you know, something that I like to do sometimes. Okay, so I’m going to do a hundred dollars an hour times 16 sessions a week times 46. These numbers are still probably optimistic. That makes my revenue for my practice for the year 73, 600, but that money couldn’t have all gone home to me.

[00:04:57] I was running a business. I had rent. I think my rent was about 850 a month at that time. So I’m going to multiply it by the normal Profit First amount of 0. 7 percent actually going to me. That’s assuming 30 percent goes to operating expenses. So now I’m like taking up the portion of the money that actually would have gone to running the business.

[00:05:15] And that puts my potential salary, if everything goes exactly to plan, at 51, 520. 51, 520, was a lot of money, in the 1980s. But now, and I’m increasingly seeing this working with therapists all over North America, that is no longer enough money to really have your needs met, in this modern age of inflation.

[00:05:43] So basically I had set up a practice that if everything went perfectly, and I took some time off and I was sick a little bit, but my clients basically showed up 95 percent of the time, I could only make about 50, 000 a year. That’s not enough. It’s not enough to be able to save up for a down payment.

[00:06:02] It’s not enough to be able to save for retirement. It’s certainly not enough if you have kids. And I have heard it said now that a middle class family, a true middle class income, now would be about 300, 000 a year. So each parent, if it’s a two income household, contributing about 150, 000 pre-tax each, puts you into a comfortable middle class. Life has gotten a lot more expensive.

[00:06:27] So in setting my fee at 100 an hour, because I didn’t want to charge too much and ruffle feathers, I set up a practice that could never actually really take care of me. And I felt that for several years, and for folks who have watched the masterclass, or worked with me in Money Skills for Therapists, you will have, you know, heard me talk about this, kind of reaching that limit and realizing this, this practice isn’t actually going to be able to take care of me.

[00:06:51] And so for me, eventually, doing some fee races was necessary to get me to the point that I could actually be okay. Right? Because being okay financially isn’t just about covering your needs today. It’s also about being able to actually save some money for the future. And with saving money for the future, with investing, the money that you save today is always more valuable than the money that you’re going to save two years from now.

[00:07:13] That is the magic of compound interest. And if you want to learn more about compound interest, you can check out my episode from last season with David Frank, where he helped to explain the difference between simple interest on investments and compound interest. Compound interest is powerful, and when we can put money away for retirement in our 20s and 30s and 40s, that money grows much more and goes much further than the money we’re going to put away in our 50s and 60s and 70s, right?

[00:07:38] So having a sustainable practice isn’t just about covering your bills now. It’s being able to put money into investments. It’s about being able to invest in a home. Real estate is another form of investment. And there’s, you know, debate about what’s better, but ultimately it’s generally a good thing to spread your money around.

[00:07:56] And for me setting that fee at a hundred dollars an hour was never going to get me there. And it was only when I started raising my fee –and this is about my personal expenses –once I started raising my fee to 150 and eventually 175, which is where I ended off my fee several years ago now, that I was actually making enough money that I could be well, show up for my clients and be the good therapist that I wanted to be and have my current needs covered,

[00:08:20] and the future. Setting up a practice at a hundred dollars an hour for me could never have done that, and didn’t do that. And I gradually made that change to get me to where I wanted to be, but I did it too slowly. I raised my fee. My first fee raise was 10, up to 110. You know, I thought I was going to barf.

[00:08:37] I thought everybody was going to fire me. Nobody did. But at the end of the day, that didn’t actually make the financial impact it needed to. It’s for me when I got into that 150, 175 range that my financial needs could actually be taken care of with the capacity that I had. So if you’re listening right now, and you’re wondering about your own fee,

[00:08:54] you can play with the numbers in a really light way, in the way that I just did. Just think about, okay, if most of your clients show up in a week, let’s not say all of them show up, though, how many hours a week is that that you can work? What is your hourly fee, or what is your hourly reimbursement from insurance

[00:09:08] if you’re an insurance panels? Multiply that by the amount of weeks in a year that you actually want to work, take away the money that it takes to run the business, and you’re going to see a number that is basically your potential salary. Is that salary enough to cover your needs for the place that you live?

[00:09:24] the specific situation of your family, your specific medical needs, saving for the future, kids’ education, retirement… Getting sober about that number is not fun, but if we’re not sober about it, then we are diluting ourselves, unfortunately. And when we can start to see what our fee actually means for our salary, for our cost of living, then we can start to make informed decisions about how to make the business actually take care of us, which I’m very passionate about.

[00:09:53] So, that is my big mistake that I made out the gate. and I wish that I had raised my fee sooner. It would have given me the compensation that I actually needed to take care of myself, doing that hard work that I was doing. If you have a question that you would like me to answer on one of these upcoming episodes of Feelings and Finances, all you need to do is click on the link in the show notes, or head over to our podcast page, you’ll see a little link, submit a question for Linzy. Just click on the record button, introduce yourself, give a little context, and record your question.

[00:10:23] And I should say, those questions are edited. So, if you are nervous about getting it right the first time, don’t worry about it. You can start recording, and you can pause, you can start over, you can re-record if you want to. But you can also just keep asking your question until it comes out right.

[00:10:39] Trust me, I did not record this podcast episode in one take. There are many edits that have happened to make me sound articulate. And we can do the same for you. Ashley, our editor, makes me sound articulate and like I don’t have to start over, which I do regularly. And she will do the same for you.

[00:10:56] So do not worry about getting it right on the first take, but I would love to hear your question, and I would love to answer it on an upcoming episode of Feelings and Finances. Thank you so much for joining me today.

Picture of Hi, I'm Linzy

Hi, I'm Linzy

I’m a therapist in private practice, and a the creator of Money Skills for Therapists. I help therapists and health practitioners in private practice feel calm and in control of their finances.

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