[The following information does not represent any specific counseling practice; however all items are common expenses encountered by a private practice in counseling, social work, or psychology. For the ease of creating examples in this article, a counseling session fee of $100 is used and numbers are rounded to the nearest dollar. ]

Costs and Expenses in Counseling Practices

• The "50 minute hour"

• Professional Status

• Ongoing Education and Training

• Office Space and Utilities

• Business Equipment and Supplies

• Licenses, Fees, and Insurance

• Administrative Expenses

• Self Employment Taxes

• Advertising and Marketing

• Hidden Time: an Example

• Summary

The "50 minute hour" was initially implemented to allow the counselor 10 minutes to write up the notes of the session, get materials for the next session, and perhaps even grab a cup of coffee. In days past, 10 minutes was generally adequate to cover the needs related to a single session. However, compliance with increased regulations, more complex documentation requirements, authorizations for treatment, collaboration with other professionals, and other recent requirements have resulted in 10 minutes being insufficient to complete all the obligations associated with any given session. It is common for a counselor to spend 1 1/4 hours of their time for a 50 minute counseling session and the requirements specifically related to that session. That does not include time spent on other "business aspects", which are covered in the "Administrative Costs" section. So in "real money" terms, a $100 session fee usually translates to a hourly rate of about $80/hr for the time the counselor spends related to any particular session.

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When you meet with a counselor, social worker, or psychologist you are meeting with a licensed professional. Long gone are the days when any person could hang out a shingle and present himself as a counselor.  Since the 1990's all states have been raising the bar on what is required to practice as a counselor or psychotherapist. Overall this is a good thing for clients, because it provides assurance that they are working with someone who has met a minimum level of competence. But, it also means a person interested in becoming a counselor must make a significant investment in time and expense before meeting those requirements. The common requirements to become licensed to do psychotherapy includes earning at least a master's degree, followed by a minimum of 2000 hours supervised practice over at least 2 years time. In many cases this supervision is paid for by the counselor-to-be, generally at a rate exceeding $100/hr. All together, by the time counselors are eligible to offer their services in private practice they have committed at least 8 years to preparation; including 6 years of college and 2 years of post graduate supervised work.

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One might think after 8 years of preparation that a counselor's education and the associated expenses would be over, but that is not the case. All counselors must renew their license on a regular basis. To be eligible for renewal they must attend a minimum amount of approved training each year. For instance, in North Carolina a Licensed Clinical Social Worker (LCSW) must attend at least 20 hours of continuing education each year. The cost of these trainings varies, but typically a LCSW will spend at least $500 each year for continuing education. And of course, time spent at training is time not seeing clients, so their potential earnings are also reduced. Many counselors also choose to specialize and seek out additional advanced training in the areas of their interest, resulting in additional costs to them.

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This is an obvious and fairly straight forward expense. In order to meet with clients the counselor must have a suitable office, furnishings, and pay for electricity, heat, and water. Office expenses can vary widely depending on several factors, many that are common to any real estate rental or purchase. The local market, convenience of the location, having a lobby or waiting area, and any added comforts all increase this expense. In our local area (Asheville, NC) the minimum cost for renting an office with a waiting area is about $4000 yearly. Even counselors in part time practice who rent office space for "per session work" will typically pay at least $10 from each session for the use of an office. In counseling the old adage "don't judge a book by its cover" often holds true; for a counselor in a modest office space may be trying to help hold the clients' fees down.

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Like any other business, a counseling practice needs basic office equipment and supplies. At the very minimum  counselors need a computer, printer, copier, locking filing cabinets, and a phone. They also use up the common consumable office supplies (paper, pens, folders, envelops, stamps, etc.) One unseen expense is software specific to counseling practices, especially related to assessments, accounting, billing, and documentation, each of which may cost several hundreds of dollars. Counselors who use computers for any part of client records are required to secure that information by using encryption programs. Depending on the size of a practice, office expenses run from several hundreds to thousands of dollars annually.

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Like any business, counseling practices must pay common business fees, but will also additional expenses specifically related to their professional status. In order to "conduct business" they pay fees to obtain "privilege licenses" from the state and sometimes the city. They must pay a fee each time they renew their professional license. Most professionals also belong to at least one professional association, with annual dues. Each of these fees are usually modest by themselves, but combined they will typically add up to a $400 - $1000 dollars each year. Increasingly, counselors are likely to require guidance from attorneys, accountants, or billing specialists and have the expense of their hourly fees. Another significant expense is malpractice and liability insurance, which any professional in private practice should carry. Such insurance is not only important for the counselor, but it also provides assurance they will be able to remain available to serve their clients in the case of a false claim. Again, the costs for this insurance varies by location and professional discipline, but usually is in the range of $500 - $1000 or more annually.

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A successful counseling practice must commit a significant amount of time to the "administrative functions" that are necessary to conduct the business, but have no direct bearing on the counseling itself. Of course, these include basic office functions such as managing appointments, keeping books, generating invoices, and so forth. If a counselor offers clients the convenience of using credit or debit cards for payment, between 2% - 5% of the fee will go to the bank providing that service. Perhaps the most significant cost in this area is the increasingly complex overlay of legal, regulatory, and eligibility requirements brought on by governmental and insurance rules and guidelines. In order to meet these demands a counselor has the choice of handling administrative functions himself or hiring others to do them for the practice. Either option results in additional "expense" to the practice, which in turn affects client fees. A counselor who manages the administrative work himself has less time to meet with clients. If instead, he hires office staff or contracts professionals he is available to see more clients and create more income, but a portion of each session's fee must then go to pay the added staff.

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Anyone who is self-employed in any manner already knows all about self employment tax. Everyone who earns income pays this social security tax, but employees have half of it paid by their employer. A counselor in private practice is a self employed person who pays their half like any employee; but since they are "their own employer" they also pay the other half. Currently, the rate of this tax is 15.3%. So, the counselor in private practice pays 15.3% tax on any "profit" they have earned from their fees (after business expenses.) For example, if a counselor spends $35 of each $100 session to cover business expenses, she would have $65 remaining. But, she will pay 15% tax ($10) of that in self employment tax, leaving $55 as actual income. This tax is before her personal income tax, which is then paid on the $55.

Advertising and Marketing Expenses

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This is a fairly common scenario and used to demonstrate the hidden time often encountered by counselors in the service of their clients; and also the type of "real income" counselors earn from their work. Of course, there are many clients who don't require any additional time beyond the sessions and the related documentation. On the other hand, many counselors accept managed care rates or reduce their fees to match a client's managed care option. In that case, the counselor will receive much less than $100 per session, usually in the $50 - $75 range. Since their fixed business expenses stay the same, it simply means the counselor earns that much less per hour.
 

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