Opening your own practice means more than finding some office space and tacking your shingle up on the wall; it involves thinking hard about your own preferences, making tough legal and business decisions and minding myriad practicalities, explained psychologists Jean Birbilis, PhD, and Diana Gordick, PhD, at APA's 2003 Annual Convention.
At a symposium on how to build a practice, Birbilis, interim dean of professional psychology at the University of St. Thomas in Minneapolis, and Gordick, a practitioner from Decatur, Ga., who helps other psychologists build their practices and business skills, highlighted the key considerations and steps necessary for practitioners to get their businesses up and running.
Laying the groundwork
Your first step, said Birbilis, should be to reflect on your expectations for independent practice. What about your personality may fit or conflict with being an independent practitioner? For example, are you likely to practice good self-care? What is your tolerance for risk? What are your values and beliefs about money, and how do you feel about collecting fees from patients? Are you able to juggle many tasks?
This is also an opportune time to tap training courses and conduct informational interviews with independent practitioners, Birbilis said. You can also get information from your local library, the Small Business Administration, local small-business development centers, state regulatory boards and professional associations, said Gordick.
If you still think independent practice is right for you, the next step is to assess your personal and financial resources, said Birbilis. For example, when are you free to meet with clients? Lunchtime, dinnertime and Saturday mornings are peak times to attract clients, explained Birbilis. You will also need to gather professional contacts for support, she said. Find other psychologists for making and receiving referrals, and to provide consultation and supervision when necessary. A colleague can also mentor you in learning the ropes of business, she advised. Your ongoing professional support team should also include accountants and legal advisers with experience serving psychologists, added Gordick.
Moreover, do you have the money and the business know-how to get off the ground? Since few psychologists get formal training in how to set up or run an independent practice, said Gordick, odds are you'll need some business help. That means you'll have to factor the fees of business consultants, accountants and attorneys into your start-up budget, Birbilis said.
Developing a business plan
To get a clear financial picture, Gordick advised psychologists to nail down a business plan that articulates your goals, skills, experience and marketing strategy. Having such a plan is essential if you want to take out a business loan, she said, because it shows the lender that you're well-prepared.
"Not only should it be the groundwork and foundation for what you're doing," said Gordick, "but think about it as a living statement of who you are as a professional, what you offer and how you intend to offer it."
One important aspect of the plan is your business structure, which should be determined in consultation with an attorney and an accountant, said Gordick. Your personal goals, tax concerns and personal liability issues can all play a role in what structure you select, she said. Gordick outlined just three of the many options:
Sole proprietor. One person directly owns the company. Pro: You pay minimal start-up costs. Con: You pay self-employment taxes.
Partnership. Two or more people agree to share profits, losses, assets and liabilities. Pro: Like a sole proprietorship, it is relatively easy and inexpensive to set up. Con: You have unlimited liability for the mistakes or debts of your partner.
Corporation. A legal entity that has the rights and obligations of a legal person. Pro: You are not personally liable. Con: It pays its own taxes, so you are in effect double-taxed.
Another key to your business plan is a list of start-up and continuing costs, such as fees to incorporate your business, office rent, utilities, property insurance, taxes and liability insurance, said Gordick and Birbilis.
Your business plan should also include information on your marketing plan, said Gordick. The key, she added, is to do your own market analysis. For example, how many psychologists are already in the area where you want to open your office? If there are many, you might be better off a short distance away, for example, where there are fewer. Identify a service gap that your expertise can fill, said Gordick, and carve out your own niche. Referrals will materialize when you're known for something, she said.
Covering the basics
There are also practical details, said Birbilis. For example, what mailing address will you use? If you incorporate your business, for example, be aware that the address you provide will be public information, said Birbilis. She got a post-office box for her business to keep her home address private.
Some other practical tips Birbilis offered:
Keep your personal and business finances separate. Open a bank account and credit card designated for your practice, she said, to avoid tax-time accounting nightmares.
Build in the end of your practice. Create a professional will outlining what will happen if you should die or unexpectedly become unable to provide services. Similarly, include language in your consent forms so that you can transfer patient information to another therapist in such situations.
Be aware of the rules that govern your practice. Know state and federal laws and regulations, and the APA Ethics Code. Think about those rules as you plan for your practice. For example, they may guide you as to what you should include in your consent forms.
Think about managed-care considerations. Do you want to join managed-care company panels? If so, be aware that some won't credential you if there are too many providers in the area--something to check on before you settle on an office location. Also, the credentialing process can take up to eight months, said Birbilis, and many insurers will not reimburse you whatsoever until your paperwork clears, so start early.
Investigate your office space. Is your office building accessible for people with disabilities? Moreover, is the office ideal for the kind of work you want to do--for example, would it accommodate group or family therapy? Think about confidentiality, as well. For example, how are the office acoustics? Will the fax machine hookup be in a public area?
Consider a billing service. While software packages are available for psychologists to do their own billing, Birbilis cautioned against that.
"All of the psychologists who I know who have tried to do billing on their own...just end up getting behind," Birbilis explained. "So better to put your attention toward things that you know about."
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