How To Decide When Raising Fees Is The Right Decision For You & Your Practice

BusinessBusiness Planning , Accounting

How To Decide When Raising Fees Is The Right Decision For You & Your Practice

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Published: Jun 19 2023

Is it time for you to consider changing your current fee for therapy? 

Are you worried about how to implement this shift, and what your clients may think?

As you become more experienced and senior in your career, and as you earn new credentials or certifications, the value of your professional services also increases. 

And with today's economical landscape, it’s become necessary to keep up with rising costs and inflation.

Not to mention your need for financial freedom. 

Keep in mind the long-term sustainability of your practice when reflecting on your own fees. 

Undercharging can eat away at you from the inside out, leading to burn out, resentment, and a lack of joy in the work. It’s crucial that you prioritize your own needs alongside those of your clients and your practice.

Because of this, it’s important to listen to your gut if you’re feeling a need to reassess your rates. 

And If you’re having trouble, it’s important to take a moment for self-reflection to understand what’s holding you back. 

Why Should a Private Practice Therapist Increase Rates?

Before we answer the question: “how do I increase my rate as a therapist?” — let’s start with the why

Before we answer the question: “how do I increase my rate as a therapist?” — let’s start with the why

Raising rates with existing clients may sometimes be a necessary measure to expand or maintain your practice, and it’s doubtful that your clients will take offense at you making reasonable rate adjustments in order to match the financial demands of running a practice. 

If therapists never raise their rates to keep up with financial realities, they begin to slowly but surely feel burnt out, as if they're running on empty for many years. I’ve even heard people say they’re considering leaving the field because they're reaching their limit - emotionally, financially, or both.

Self-Assessment in Raising Therapy Fees

Ask yourself: what might be holding you back from raising your fees? 

We each have a unique relationship with money and our own sense of worth. The main challenge many therapists face is in our own consciousness towards our work, money, and our own sense of self. 

You may take a moment to ask yourself: Do I have an impoverished consciousness around my practice, or one of abundance? 

If you’re undervaluing or underpricing yourself out of fear or guilt, it may be time to reflect on your fee structure. You may feel that you’re not worthy of charging more, which may be limiting the health of your practice, and yourself.

Trauma from Previous Workplaces Causing Fear of Raising Therapy Fees

I’ve heard so many heartbreaking stories about therapists being underappreciated, uncompensated, and a general sense of being unseen.

Perhaps you’re reluctant to raise your fees because you’ve been underpaid in the past. You may have been told to “take a vow of poverty” at an agency, or work at a place that underpaid its staff. 

Addressing your willingness and resistance to see your worth and challenging these ingrained negative beliefs can help you build the private practice of your dreams — one that isn’t based on myths, limitations, or an impoverished mindset. 

Setting Fees in Private Practice with Humility vs. Grandiosity

Equally important to address is the alternative mindset of being overly grandiose. 

Do you have the combination of expertise, relatability, and the ability to articulate why you charge what you do beyond, “well, that’s the market rate”?

Are you only trying to charge a premium price that’s higher than the market, without understanding the market?

Do you know your niche and what your ideal clients can afford? Are you attracting those clients? 

It’s one thing to have a grand vision, it’s another to confuse grandeur with grandiosity.

We all need to self-assess grandiose ideas. 

If you’re struggling to get the rate you’d like, you may need to take a dose of humility and have a diversity of fees to avoid alienating potential clients and cannibalizing your practice. 

Raising Therapy Fees to Keep Up with Ever-Increasing Costs

Rent, electricity, and groceries are just a few examples of what you may have found to be more expensive this year compared to years past. Raising fees for a therapist is often required to keep up with the rising costs of running a business

Examining the difference between your earnings and expenses on a regular basis and making adjustments as needed are essential to building a sustainable practice. 

few expenses that could cause your costs to rise the most are:

  • Inflation: The average annual rate of inflation over the past few years has been about 3%. As a result, on average, the price of consumer goods and services has increased by 3%. If you aren’t raising your fees by at least 3% annually, the money you’re making today is worth less than the money you made last year. Your private practice therapy rates need to go up to account for inflation and maintain the same buying power as in previous years.
  • Rental increases: Rent for commercial space is typically subject to a yearly increase of some kind; however, the exact amount can vary depending on location and the terms of your lease. If you don’t raise rates, your profit margins will drop, which may slow down the expansion of your private practice.
  • Salary increases: Working in a private practice allows you to bring on administrative support in the form of a biller or more therapist specialists. If you want to create and maintain a healthy working environment where people are incentivized to continue working with you, you need to evaluate compensation every year and consider increasing pay with the rate of inflation. Once again, you’ve seen an increase in your expenses, and a corresponding rise in your rates is warranted.

Should a Therapist Increase Rates with More Experience?

Spending another year in a private practice means another year of learning and developing your skills. You and your business can command higher compensation in line with your increasing level of professional competence.. 

Does Professional Development Justify Raising Therapy Fees?

The additional income can then be reinvested in you, your colleagues, and your practices professional development. With more economic flexibility, you’ll be able to invest in more resources, training, or possibly a certification that will benefit your clients directly. 

Will Raising Therapy Fees Help Better Support Your Ideal Life?

Ultimately, you can give better service to your clients when your needs are met and are living the life you desire. 

Ask yourself the following questions to help you solidify the right time to raise your rates: 

  • Are you burned out? Finding the right pace and client-to-fee ratio can prevent further burnout. You don’t have to see more clients than your system can handle. If you need to reduce your hours, you’re allowed to think of how to ethically increase your income.
  • Are you stressed? This may be a sign that you may need to see fewer clients and raise your rates so that you can feel more balanced, energized, and in-tune with the work.
  • Are you a highly sensitive person? If you’re a highly sensitive person, you may want to consider seeing fewer clients at a higher rate. A smaller quantity of higher paying clients may help you hone in on the quality of your work with each individual, without running yourself ragged.
  • Are you just getting started in private practice? When you’re building your practice at the beginning, you may want to start off more competitively with a lower rate and work with a range of fees. Over time, as your weekly income reaches a place where you feel more comfortable and you can be more discerning with your time, you may want to consider raising your fees.
  • Do you have other sources of income? You may not have to raise your rates quite as much if you have access to alternative revenue streams. As these other sources of income ebb and flow throughout your career, it might be helpful to revisit your rates.
  • Are you the sole provider in your family? It’s not easy to manage the stress that’s often associated with being a sole provider. If you are, you’ll want to increase your fees to better support your family.
  • Are you financially stressed? Get guidance on how to set your fee with various fee calculators available online. These tools take into account the big picture of your finances, income, and expenses to help you set a fee that aligns with the life you want to live. Temporarily raising your fee may help you feel more at ease during a difficult period. Remember, you don’t have to take a vow of poverty.
  • Are you thinking about expanding your practice? If you have an entrepreneurial spirit and want to scale your practice, what will it take to grow your practice? You’ll want to have a solid understanding of the costs and expenses associated with expansion so that you’re set up for success. This way, you’ll be clear on what additional income you’ll need to grow your practice and execute the expansion you envision.
  • Are you planning for a significant life event? If you’re planning for a significant life event like buying a home, getting a mortgage, or starting a family as a self-employed person, there might be a period of time when you need to be seeing more clients and raising your rates.
To help you figure this out, here are a few considerations to make when setting an hourly rate.

How Does a Therapist Go About Setting Fees in Private Practice?

Hopefully something mentioned above resonated with you. 

Now that you’ve been reminded that you’re allowed to revisit your rates, you can start thinking creatively about how to set new ones. 

To help you figure this out, here are a few considerations to make when setting an hourly rate.

Research Local Therapist Fees Online

Many people are genuinely unaware of the rates that they can charge based on location (your ZIP code) and specialty. 

You can look up what the rates are for your area on the fair health calculator

You can also find out what other people are charging by looking at internet directories like Psychology Today or Good Therapy

This should help you discover current competitive prices in the market, which will let you make decisions about what fee range you can set.

Poll Your Private Practice Therapist Colleagues

Your network and colleagues provide a powerful resource for you. Connect with colleagues and discuss reasonable rates given where you are in your career; ask them to consider the number of clients, specialties, and years of experience you bring to the table, as well as what your personal and professional goals are.  

Plan Backwards From Your Goals Rather Than Basing Your Price on Market Conditions

Another way to determine your fee increase is by basing it on your goals. 

The simple equation to use is to consider the annual income goal you’ve set for yourself, then multiply that figure by 1.5. With this figure, you should theoretically have enough money to pay your taxes and meet the necessary financial obligations that can come with operating your own private practice. 

Next, determine how many sessions per week make sense and how many weeks of vacation you intend to take throughout the year. With these figures, you’ll be able to determine how much you need to charge per session. To make life simple, you can use this therapist fee calculator.

Understand Your Audience

It’s important to understand the macro level trends as well as your individual clients’ needs when setting your fees. Unless otherwise stated in a contract, you are free to decide whether to increase rates for all clients, only new ones, or for certain professionals (such as in family or group therapy). 

Regardless of what your decide in terms of fee structures, you want to ensure you aren’t being discriminatory in your approach. 

Consider Sliding Scale and Pro-Bono Work

The APA code of ethics encourages us all to consider how to offer accessible care and to engage in some form of pro-bono work.

Clients who ordinarily might not afford your counseling services may be able to do so if you offer them on a sliding scale fee structure.

There have been many times when I have had to reassess if a client needs a reduction in their rate to be able to maintain therapy. I’d rather make a temporary reduction in a fee in order to be of service to a client and the work we’re doing, with the expectation that one day they’ll be in a financially robust place again soon, at which point we’ll reassess a fee that’s more in line with a proper rate. 

On the other end of the spectrum is when you have a reduced rate set for a client whose financial situation has improved. If this is the case, you might want to raise the rate if your client is underpaying and they now have the resources through their insurance or additional means. This will let you consider opening up a new reduced fee appointment time in your schedule and extend that graceful offering to someone who may otherwise may not be able to afford and access therapy.

Follow Trends in Insurance and Inflation When Raising Therapy Fees

You also want to be raising your rate based on trends in insurance and inflation. 

Unfortunately, I’ve heard more and more of some insurance companies and federal agencies trying to undercut what they pay in-network providers.

If you're out-of-network and don’t raise your prices by at least the rate of inflation, you’re essentially accepting a pay cut. You should ensure that your rates are increased annually to account for the general trend of rising costs.

If you’re an in-network, you’ll want to contact your local provider representative and request a rate increase. 

Position Yourself as a Thought Leader

If you want to see fewer clients and raise your rate, you’ll need to build out a niche for yourself by finding a specialty and position yourself as an expert. 

You can do that through copy unity, writing, and connecting with the press. You’ll also want to make sure your website has a high domain authority with search engines, which will increase Expertise, Authority, and Trustworthiness (E-A-T), and demonstrate your thought leadership in the field. 

Provide Options when Setting Fees in Private Practice

In deciding how you’ll implement your fee increase, you can consider two options:

1. Raising Therapy Fees Across the Board

If you choose to raise the fees for the majority of your current and new clients, you need to be well connected, maintain a strong professional network, and feel very confident in being able to convey to clients that your fee is what it is and that it’s equal across the board. 

  • Fixed point in time: Some people raise their fees every one or two years at a fixed point in time. For example, a therapist may choose to increase fees slightly every two years in September.
  • Flat percentage increase: Some therapists use a flat percentage to raise their fees across the board. For example, therapists may say, “I’m going to raise my fees by 10% at the beginning of every year, or after one year of working with each new client.”
  • Nominal value increase: Other colleagues may pick a nominal value for all clients — like every client will have an increase of $20.

I recommend blending the above options on a case-by-case basis. Fee increase practices, like therapy, aren’t cookie cutter and should be based on what’s reasonable and fair for your clients and yourself.

2. Operating With a Range of Fees

If you’re like most therapists in private practice, you likely have a range of fees.

This model is very effective when you are first building your practice and is highly recommended; it helps prevent burnout and allows you to have more flexibility in your practice.

  • Different rates for allocated slots: Seeing clients with a larger fee range allows you to be less stressed and have more opportunities to adjust as needed. For example, you may want to have 20 clients in your practice, so you could take on ten people at a specific price point (perhaps $150). Then once those spots are occupied, you could take on five people at a higher rate, and then the final spots are available for higher fee clients.
  • Staggering increases: If you have clients that you know are having financial difficulties, you may want to stagger your rate increases or delay them altogether.
  • Pro-bono work: You may also want to raise or lower your fees if you want to take on pro bono clients. If you do take on pro bono clients, you might want to take on a few higher fee clients to offset the difference and average out at a more reasonable rate.
At the end of the day, we all need to feel balanced and grounded.

Finding Your Balance with Setting Fees in Private Practice

At the end of the day, we all need to feel balanced and grounded.

Think about how you can continue to be practicing ethically and legally and striking a balance between thinking deeply about the field at large, your own financial needs, and what a client can reasonably afford. You have every right to offer a range of fees within your practice. These and many others are reasons to explore your ideal caseload and fee model.

Keeping these considerations in mind will help you develop a plan for your ultimate success.

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