| When you start out in private practice, one of the | | | | experience, always underestimated. |
| most difficult things you have to do is determine what | | | | Quite a complex exercise, perhaps, but critical to |
| you are going to charge for your services. This article | | | | determining what your required outlay is likely to be |
| walks you through the 9 steps you need to take to be | | | | over the year. |
| able to set a realistic hourly rate that will allow you build | | | | Now, consider how this fits with your target income. |
| a practice that will bring you a reasonable income and | | | | Are you likely to be left with enough to achieve the |
| cover the numerous expenses that you incur from | | | | living standard you aspire to? If not, we need to |
| your practice. | | | | consider Step 6: |
| Many therapists come to private practice with the | | | | 6. What additional figure is required to allow you meet |
| view that they will charge relatively little for their | | | | your expenses and still have sufficient monies left to |
| services because they are working with a vulnerable | | | | allow you to achieve a reasonable lifestyle? By this I |
| population who need help and therefore they have a | | | | mean if you had initially set a figure of 10x as your |
| moral obligation to make their services affordable so | | | | target income, but discovered that costs come to 5x, |
| that everyone can benefit from them. Now, this is a | | | | and really, you need 8X to be comfortable, then you |
| laudable position to take, certainly, but as a practical | | | | need to revise your target income figure upwards to |
| business proposition, it fails to realise that a practice | | | | 13x. |
| does not run on fresh air. You, the therapist, have | | | | 7. Steps 2 -- 6 establishes the gross annual turnover |
| obligations that you have to meet too, like paying your | | | | you need to generate each year to produce the type |
| mortgage, putting food on the table and bills that have | | | | of income you are hoping for in step 1 above. |
| to be paid. The only way to do this is to calculate a | | | | So, what will your Hourly Rate be? |
| realistic fee range for your services - and understand | | | | 8. Now, work out how many chargeable hours you will |
| how you got to that figure so that you can feel okay | | | | be able to work each year. |
| in asking for it. But how do you arrive at this figure? | | | | This is not a simple 36 hours x 52 weeks, of course. If |
| This article will guide you in some of the steps you | | | | you plan to work Monday to Friday only, that equates |
| need to consider as you work out what you will | | | | to 261 days a year. Now out of this time allocation, you |
| charge. | | | | need to allow for annual leave (if you are looking after |
| First things first: How much do you want or need to | | | | yourself, you will take at least 20-30 days leave, for |
| make each year to be "solvent"? So, Step 1 is: | | | | which, obviously, you will not get paid), CPD time |
| 1. Establish your required/anticipated annual salary from | | | | (possibly 5 - 10 days a year), Bank Holidays (8 in the |
| the work -- perhaps you could initially use what a | | | | UK), sick leave (do not say you will not get sick |
| practitioner would be likely to get in the Public Sector, | | | | because we all might, and it is an employment cost |
| for the level of experience and the type of work and | | | | that must be scheduled in), admin time (allow around 2 |
| location, as a guide figure (this can change as you | | | | days per month), marketing and business development |
| come to understand your market's potential). | | | | (aim for maybe 3 days a month) etc. That reduces |
| Next, look at the costs you are likely to encounter: | | | | your "earning" days to around 160 days per year, and |
| 2. Consider the entitlements an employee might | | | | within this time, few practitioners can expect to be |
| expect, such as pension contributions, health insurance, | | | | busy for 7 hours each of these days, so calculate |
| continuing professional development costs, mileage and | | | | optimistically at around 4 earning hours a day across |
| other reimbursements for out-of-pocket expenses | | | | these 160 days, leaving around 640 earning hours! |
| which might reasonably be met for this type of work. | | | | 9. Divide the total in 7 by the total in 8 to see what |
| 3. Add on costs for office provision, secretarial costs, | | | | your hourly rate must be in order to achieve the salary |
| test and equipment purchases, computing and IT | | | | you are seeking. |
| facilities, office furniture, etc., annualised in terms of | | | | Surprised? I imagine that you are, but I hope that this |
| capital and depreciation costs (I am not an accountant, | | | | exercise helped you get some perspective on the |
| so you may need to seek professional guidance on | | | | question of how you calculate what you will charge for |
| this in time). | | | | your services. If you still wish to support less |
| 4. Add on sundry other costs, such as employing | | | | financially-able clients, certainly you are free to do so, |
| people to clean your office and waiting area, provide | | | | but build their "costs" into your calculations and settle |
| tea and coffee to patients and other visitors, | | | | on a realistic hourly rate for your services. This is what |
| secretarial and receptionist costs, advertising, public | | | | you will need to charge to make the living that you |
| liability insurance, IT technician costs plus others that | | | | aspire to. It is certainly possible, but you need to go |
| you will not realise you need until something goes | | | | forward with a clear understanding of how you came |
| wrong (e.g. electrics, Health and Safety, Information | | | | to set this fee for your services so that when it |
| Commission requirements etc.). And do not forget the | | | | comes time to tell your potential client what you |
| Taxman will need a cut! | | | | charge, you can do so safe in the knowledge that you |
| Nearly there, but just in case: | | | | are asking a reasonable and realistic amount for you |
| 5. Add in a 10% contingency because costs are, in my | | | | services. |