This article first appeared in the September/October 2006 issue.
I sit in my office on a sunny spring morning talking by phone to Carol, a licensed counselor in Colorado who’s in the midst of a life-and-death struggle. She herself isn’t ill, but says her private practice is terminal. “It’s so painful to admit to this,” she says. “I feel like the world’s biggest failure. I’ve been in practice for over 17 years. Ten years ago, I had a very full practice of 30 clients a week. Last week, I saw 6 clients! I used to feel confident about myself as a therapist, but not now. I don’t feel I can talk to any other therapist about what’s happening to me because I feel ashamed admitting that I’m not making it. What am I doing wrong? Most importantly, can you help?” she asks.
I listen with concern, both as a psychotherapist with a private practice of 20 years’ standing and as a business coach who’s spent the last 10 years working primarily with therapists. Carol’s story is doubly distressing because I’ve had an increasing number of senior therapists report to me that their once successful, full-time practices are now in serious decline.
Carol feels like the only one with the problem, but in reality, she’s part of a growing trend. This past January, Psychotherapy Financesreleased its latest industry-wide survey of mental health clinicians in private practice, which indicated that after 10 years of relative income stability, the financial picture since 2000 has darkened. Therapists are having a much harder time earning their previous levels of income, and indicators point to a continuation of the trend for the near future.
The survey notes three reasons for the drop in incomes. First, therapists in full-time private practice are fighting a losing battle against managed care, which is becoming more prevalent around the nation. As more employers offer only HMO-based medical plans, fewer employees can afford to go out of plan for mental health services. I hear regularly from therapists across the country who’ve resisted managed care that the majority of their potential clients hang up when told their insurance won’t pay for the sessions. This reality presents a particularly discouraging dilemma to senior therapists who’ve been able to practice independently of insurance: face unfilled hours or accept the average managed care fee of $60 to $75 dollars for an individual session.
Second, the self-pay market, which many senior therapists relied on, is eroding sharply. According to the survey, self-pay clients fell from a high of 44 percent of therapists’ caseloads in 2000 to 26 percent this year. Finally, the cost of doing business remains unchanged from previous years, ringing in at a hefty 30 to 45 percent of a therapist’s total income.
As a result of these factors, some senior professionals, such as social workers, reported a whopping 22-percent decline in overall income since 2000, once inflation is factored into the mix. The average licensed counselor, social worker, or marriage and family therapist in full-time private practice may be making a “salary” or net profit (income minus those hefty practice expenses) of only $30,000 a year, before taxes.
No wonder clinicians with once-thriving practices report that they feel frustrated and even hopeless in the face of an unyielding marketplace. True, some therapists are bucking the trend, continuing to earn in the low six figures. These therapists often work in affluent cities on the East and West Coast, do consulting or coaching that allows them to bill at corporate rates, specialize in hot topics (educational psychological assessments, obesity, childhood sensory integration, court-referred anger management, autism, or Asperger’s syndrome, etc.), or engage in strictly fee-for-service practices that have somehow managed to attract a particularly wealthy clientele. But for the average senior clinician, like Carol, it’s a battle to stay solvent.
On a battlefield, wounded soldiers are triaged or prioritized for treatment: those who have a good chance of surviving if they receive treatment right away are given aggressive, life-saving measures immediately, while the less badly wounded wait their turn. Therapists whose practices have been seriously hurt by this declining market need top-priority treatment, in the form of a business-turnaround plan. By taking decisive action, they can stop the bleeding of their profit streams, regroup via a clear plan of action, and quickly get back on track doing what they do best—seeing clients.
The good news is that, in my experience, shifting an ailing practice from panicked to profitable can occur within a year. Implementing the turnaround plan is simple, but not easy. Therapists must master a lot of information to understand the unpleasant reality of their situation, and then act with discipline and persistence. But when they’re motivated and the process works, I’ve seen them develop a lasting, entrepreneurial toughness. They then know how to weather the twists and turns of an uncertain market, and many report a newfound sense of empowerment: the business of therapy is no longer a mystery, and they understand how to take better control of their livelihood.
When a Market Turns Down
I ask Carol to describe the arc of her business, so I might better understand the challenges she faces now. Like many therapists, when she started—back in the ’80s—she gave little attention to the business details. “My primary focus was on acquiring the clinical skills needed to become a good therapist. I opened an office, contacted a few psychiatrists, and began to see clients. I did pretty well just using my own instincts. I got a lot of training and supervision. I love training and learning how to help others,” she says, wistfully. Carol reminds me of so many of my colleagues, for whom the decision to become a therapist represents a vocation or calling much more than a career.
By the end of the 1980s, with the advent of managed care, Carol began to see the writing on the wall. Scared into action, she immediately joined every insurance panel she could, changed her billing practices to get co-pays, completed countless treatment forms, and often waited months for payment. “It was a nightmare,” she says. “I didn’t like what it did to me, or to the clients I saw. My income suffered, and I began to hate the work of being a therapist.” Now Carol sounds angry and defeated. I hear this psychic split in so many therapists in private practice: they love the clinical work they do, but loathe its business side. This is perfectly normal, but if Carol can’t reconcile these two critical features of her chosen occupation, she’ll find it hard to revive her practice.
Discouraged by the experience of working for an insurance company rather than for herself, Carol finally broke free. “In 1993, with my heart in my throat, I got off all panels and figured I’d just tough it out,” she recounts. I hear her pride as she remembers taking this step. “My practice floundered at first, but then I got back on my feet. All in all, I got lucky, and by 1997, I was making better money, grossing upwards of $75,000 each year, and certainly felt more confident about my future.”
With Carol reflecting on her past glory days, I wonder aloud how she’s feeling today? “Are you scared but brave, ready to take a risk for the sake of your business, or just plain scared?”
“I just feel scared. Scared and exhausted,” she says. “I’m older now, frankly not as strong or energetic as before, and I feel more vulnerable. My practice has been in a real bad slide. I made a total income of just over $42,000 last year. So far, for the first six months of this year, I’m even further behind. I’m stumped at how hard it is to find new clients who’ll pay out of pocket.” Carol worries that she won’t be able to afford her current office space much longer. Indeed, she wonders if she’ll soon be unable to support herself at all. “Is this a case of bad things happening to a good therapist, or a sign I should just give up and try a different career?” she asks, the desperation obvious in her voice.
While it’s normal for Carol to have self-doubts and want to know why she’s in this situation, my job isn’t to probe her insecurities or help her find insights. When I have my coaching hat on, my job is to help a client focus on here-and-now realities and take action. To get her grounded, I normalize her situation. “Carol, let me put this in perspective for you. All small businesses go up and down. It’s the nature of business, and the fact that your practice is hurting doesn’t mean that you’re a bad therapist or even a bad businesswoman. We may never understand all the factors that have caused this, but rather than deliberate on the why, I’d like to talk about the what, as in what are you willing to do to change this?”
“Well, I called you,” she says with a feeble attempt at a laugh.
“You did! That was resourceful. Not every therapist in trouble would have taken the time and expense to reach out to a business consultant, no matter how much they needed help. What other steps are you willing to take right now?”
“I’m willing to do whatever I can to change this situation,” she says, with intent.
Finally,I think. For the first time in our short conversation, I hear a woman with the requisite strength to rebuild her practice. I congratulate her on her determination and tell her that I think she’ll need a highly strategic business plan. When she sounds alarmed at the words business plan,I assure her that she isn’t being tossed to the wolves. “You’re not alone here. As your coach, I’ll back you up in your efforts, as best I can.” Carol’s hopelessness begins to lift, a little.
Getting the Facts
In the next session, Carol starts by saying she’s a complete novice regarding a business plan, but strongly believes in treatment plans. Are they kind of the same? I like her analogy, and expand on it to help her understand the concept of business evolution. “The idea of planning is similar, but you need a different kind of plan for different stages of business. Think of your practice as a changing, developing entity. It goes through stages and needs a different approach for various situations. What works in an affluent or stable market, like 10 years ago, doesn’t apply today, when the market is sliding,” I explain.
For a business turnaround plan, the first step is always the same: getting the facts. Carol knows some of the financial details of her practice, but I want much more data. Who are her ideal clients? Where do her referrals come from? How many client hours did she work last year and the year before? How long does the average client stay with her? What are her biggest expenses? What else has changed that might account for her practice breakdown? Her answer to this last question provides clues to the direction her specific turnaround plan will need to take.
“One big change is the loss of two of my best referral sources. A psychiatrist-friend retired, and the EAP counselor who sent me clients lost her position.” When I ask her what she did about this, she tells me she got additional training so she’d have more services to offer and could cast a wider net. We look over her brochure, which she mailed me before this first phone session. It features a long list of diagnoses she treats and an even longer list of services: child therapy, couples counseling, psychodrama sessions for incest survivors, individual therapy for PTSD adults, group therapy for women with chronic fatigue, spirituality classes for anorexic teens, parenting workshops, and more. A big problem jumps out immediately: her practice lacks focus.
“When business times are tough,” I say, “a small business needs to operate effectively and efficiently. Your practice is bloated with too many services and too little focus. I want you to shape it into one that’s more coherent and strategic—make it a leaner and much more profitable venture.”
Carol is silent. The silence grows. “Still with me?” I ask into the void.
“All that bloated and leaner talk makes me think I’m going on a diet or an exercise program,” she says sullenly.
Here we go,I think, hearing her resistance. I use humor to help her get on board. “You’re right! It’s time to build some new entrepreneurial muscles. Let’s be workout partners. Do you prefer the treadmill or an exercise bike?”
Carol laughs and the mood lightens. I’m reminded how critical the concept of partnership is to any coaching process. Once Carol really feels that I’m on her side, we’re ready to move into the next phase of the turnaround plan: focusing her business and eliminating anything that doesn’t directly contribute to either the soul of her practice or its bottom line.
Finding the Focus
I begin the focusing by walking her through an exercise developed by Jim Collins of Stanford Business School, outlined in his book Good to Great. It’s part of his “hedgehog” approach—his way of helping corporations stay competitive in a tight market by avoiding being foxes (crafty creatures who know how to do many things) and instead becoming hedgehogs (keeping it simple by doing one big thing well.) I like this exercise because it’s simple and understandable, even to those with little business expertise.
I ask Carol to get paper and pen, and then draw three equal-sized circles that overlap or intersect with a common center: a Venn diagram. “In the first circle goes the soul of your practice: those services that you’re passionate about offering,” I explain. “The second circle contains your brand: the aspects of your practice that connote your expertise, reputation, and excellence. The third circle is your economic engine: the services or products that are consistently profitable and generative. The point where the three circles intercept—where passion, brand, and profitability overlap—will become the new focus of your business.”
She seems a little confused and irritated, so I slow down. “Look at the first circle,” I say. “Write down the services you offer that convey your greatest passion.”
“How can I choose?” she asks. She says she’s a happy generalist who sees all kinds of clients for all kinds of services. “I’ve trained forever and know about a dozen or more methods: psychoanalytic psychotherapy, cognitive-behavioral approaches, Jungian dreamwork, Bowen family systems, Adlerian play therapy, Gestalt, and attachment-oriented methods. Also EMDR, TFT, NLP, EFT—the whole alphabet soup. They’re all my passions.”
But not every passion is equal, I point out. “Usually passion implies getting selective and prioritizing. For example, I might really, really, really like all 32 flavors of Baskin-Robbins ice cream, but I’m only passionate about Rocky Road. I’ll get out of bed in the middle of the night, when it’s raining, put on slicker and galoshes, for a Rocky Road ice-cream cone. If you take the time to define the services you’re most passionate about, I think you’ll reinvent your practice in a needed way. It’ll help you to develop a stronger identity about your work, and deepen your connection with the heart of what you offer to others.”
Carol agrees in principle, she says stiffly, after a long pause. But not in spirit,I think to myself. I give it another try. “When your practice was doing well, a decade ago, your decision about services and training could be much broader. You had the luxury of time and money. But today, your practice is hurting, and your finances, time, and energy are in short supply. Having a kitchen-sink mentality bleeds away energy, resources, and profits. Each additional method and service requires time to learn, practice, market, and perfect. Each exerts its own pull. Before you know it, you’re tugged in many directions. You need to regroup, get smaller and stronger in your offerings. If you get clear about your three circles, you’ll be halfway home.”
Jettisoning Old Beliefs
On our next call, a different-sounding Carol greets me. I hear a new degree of resolve in her voice. “I don’t know if you sensed how difficult this homework would be for me,” she begins. “I really struggled to complete the circles, but along the way, I had what I can best call a revelation.
“At first I was really annoyed at your request to limit my kitchen-sink mentality,” she said. “I counted up the services I offer: 15 different services for six populations of clients. I know, it’s a lot, but the more I thought about narrowing my focus, the more upset I became. I finally just sat for about an hour, trying to understand why your reasonable request was creating so much angst for me. Is it okay that I talk about this?” she asks shyly. “I know this is business coaching, not therapy, but it feels very relevant to help you understand me better.”
I tell her that as a business coach, I have two clients: the business and the business owner. Some of the most productive business turnarounds come when the therapist challenges old beliefs and the client learns to go beyond a set way of seeing herself or the world. I encourage her to go on.
Carol takes a breath. “I tried to think why I was so attached to having such a diverse, or as you might say, diffuse practice. I know my practice is vague; it even feels scattered to me, probably because I do so many things in an impulsive way. This has always been true for me, being so scattered.” She goes on to say that when she’d started her private practice shortly after graduate school, her father said it wasn’t a real job—he’d always undermined her efforts and belittled her achievements. Then her first husband called her work an “expensive hobby,” even though by the time they divorced, she was making more money than he did.
“I always felt demeaned by this putdown of my work. As I sat thinking about the need to focus my services, to eliminate some so I could streamline my practice, and as I got sadder and sadder at the thought of this, I suddenly got it.” Carol pauses. “Even though I’ve put myself through college to earn a master’s degree, even though I always supported myself and paid more than my fair share of household expenses, even though I’ve worked extremely hard, by staying so scattered and diffuse in my work, I’ve been living out other people’s low estimation of my capacity.” Carol sounds very sad and her voice breaks. “To stay unsuccessful and scattered is a form of acting out my history. It’s my way of still declaring that I’m not really a grown-up: I’m still a child. And my practice isn’t really a business: it’s just my playground.”
In my coaching practice, I see repeatedly an opportunity for personal self-confrontation and transformation conferred by needing to overcome the obstacles inherent in small business ownership. I appreciate Carol’s developmental shift. “I can’t help but wonder who you’ll become when you take on the full leadership of your business,” I say.
Now Carol’s voice is low and strong. “I’ll become a full adult. My practice isn’t a hobby. This is my livelihood!”
“So as the CEO of your practice, will you take me through your three circles?”
Carol responds with confidence. “The first circle is the services I’m passionate about offering. There are three: play-therapy sessions with young children in my office, parenting classes for families I offer through a neighboring church, and couples workshops I give in a rented space. I absolutely love all of these.
“Before I could fill out the second circle, my reputation and expertise, I checked with some of my colleagues to ask how I was perceived in the local community. They said I’m known as a very good family therapist, in a town where most therapists prefer individual work, but that they most often hear my name come up in reference to child therapy.
“The third circle is harder for me to fill in. I don’t know what my economic engine is or how to define it.” To help Carol find what Collins calls the economic denominator—the most profitable of all her services, which can be repeatedly generated with the least amount of expense—we cost out each service, looking for any obvious or hidden profit drains. Carol makes the most money per hour with the couples workshops she teaches, but when she factors in the unpaid hours spent preparing material, registering couples, collecting deposits, finding and renting space, setting up the room, taking down the room, and then resting from the exhaustion of the process, it’s clear that the workshops have too many hidden costs to be her economic engine. Her most consistently profitable service (to her surprise) is play therapy, a specialized service of child therapy for which she bills and gets full fee.
Next we look at each circle for the area of overlap. “This is so interesting,” she says. “My favorite service, play therapy, is also what I’m known for in the community, and now I see it’s how I make the most money. It all fits together.” She chuckles. “It’s funny, isn’t it? Instead of treating my practice like a playground and being unsuccessful, I’m going to focus on play therapy and be profitable! “
I then asked her to apply all her resources for the next six months to sustaining this one area of focus. She’s immediately anxious: “You mean forget about everything else I do? What about existing clients who don’t fit that category? What about referrals that come in for other services? I can’t afford to turn any clients away!”
I explain patiently that focusing her practice is a process; I don’t expect her to achieve it immediately. Carol says she’ll think about it. But on the next call, she sounds resolute and agrees to use her marketing resources, small advertising budget, and networking contacts to promote play therapy. “I thought about everything we discussed, and I know I’m just scared to change. But its time for me to put up or shut up,” she declares.
“Or maybe just grow up,” I suggest softly. I then reinforce her strengths: “It takes courage to be willing to take on a challenge, and in this case, you’re taking on a big one.” In this spirit, we get specific with a list of action items. She agrees to say no to all new opportunities that would distract her from her focus, to take on no new trainings, to promote her focus when networking, to change her website text to more accurately reflect the core of her retooled practice. She makes “to do” lists and “stop doing” lists. We set up times to talk twice a month for 45 minutes to review her list of wins, challenges, goals, and action steps.
Now the tedious work begins. Month by month, I help Carol stay on track. Despite thinking this is “cool,” implementing her focused action plan is hard. She still longs to offer more services and take additional training. I remind her of her earlier insight, and we agree that it’s hard to conquer her fears of success. I ask her to consistently do more marketing and networking than she wants, to build her refocused practice—three networking calls in person a week, additional cold calls by phone, sending out weekly letters to potential referral sources, and attending all professional meetings of the local psychotherapy association. She needs support and encouragement to stay on task, especially when there are no apparent results from these activities after two months.
At my urging, she uses unfilled client hours to plan and practice marketing efforts, and pencils them into her calendar. I ask her to see problems as opportunities; for instance, when a play therapy association rejects her proposal to present at the national conference, she submits the same proposal to a private elementary school PTA and is immediately scheduled to present—a great way to meet parents and teachers. I brainstorm with her; we make lists of people she can call and meet, places she can speak, ways to maximize her time, ideas for cutting unnecessary expenses. I commiserate when times are tough. At the end of each coaching call, she has a list of action steps to stay on plan. Between sessions, she e-mails me her wins, so I can cheer her on. We celebrate each and every success and I reinforce her strengths, praising her for taking both small and large steps in the right direction.
Finally, she sees clear progress as the marketing begins to generate dollars. She affiliates with two private schools as a child-therapy consultant, on call to observe problem children in the classroom. She does this at a minimum fee of $85 an hour, but they promise she’s at the top of their list as a referral for treating targeted children. Referrals slowly begin to fill her schedule. She gives talks for two parent associations and joins an association of elementary-school educators, sitting on their advisory board as a child-behavior expert, all of which results in paying clients.
Six months into her plan, her client caseload of play therapy clients is steadily growing. She’s rented out her office during the hours when she isn’t working, stopped all paid advertising, and continued her networking. For the month of January, her net income is up by a whopping 45 percent, and her caseload is now holding steady at 15 clients a week.
Carol says she’s satisfied and can continue on her own from this point. She wants to take a break from coaching, which is fine with me, since my goal is for therapists to need my services less and less over time. A few months later, she calls to say it’s too difficult to keep progressing without the accountability and support of our calls, and we resume coaching. The last week of June, a year from her initial session, she calls and says she has big news: she’s booked her ideal caseload of 20 client hours for the first time in many years. “I can’t believe I did this!” she exclaims. “It means the world to me that I can bring my practice back to life. I really like the clients I’m seeing, I’m doing my best work in years, and every hour I work, I earn my top fee!”
She’s ready to stop again, but this time, before she leaves, I have one more coaching request: I want Carol to develop an ongoing, sustainable support group of peers, to help her counter her earlier professional isolation. “It takes a village to raise a business,” I say. “As a business owner, you need to be a good parent for the business you birthed. But just as single parenting is a daunting task, being a sole proprietor with little in the way of professional support can be overwhelming. You need more ongoing professional business support than you give yourself.”
When therapists reach out to others for business-oriented sharing and collaboration, they often flourish. Any small business owner who feels isolated can, with time, create an informal board of advisors, a diverse circle of colleagues, friends, acquaintances, even family members to call on for ideas, enthusiasm, empathy, or the occasional kick in the butt. Carol decides to place an online message board ad, offering to host a support group for senior psychotherapists, to meet monthly. She’s surprised and delighted at the response, and soon is hosting a group of six clinicians each month—another act of leadership and commitment to her practice.
When a private practice is in financial trouble, the concept of business triage can help a therapist get focused by identifying the passionate essentials of his or her services. With that established, making sure that the brand of the practice and its economics stay congruent allows the business to regain profitability.
As Collins writes in Good to Great, a business’s adherence to core values, combined with a willingness to change, preserves the business and stimulates progress. He makes a distinction between purpose—what a business stands for (which should never change)—and process—how it does things (which should never stop changing).
Being a successful entrepreneur in today’s uncertain market means becoming an informed strategist. Amidst the confusion and concern that many are feeling, we have an opportunity to rethink our relationship to our chosen work, stretch our capacities, learn new skills, and affiliate with our peers for much needed professional business support. We need to do all of this, and more, to ride out the current downward market, stay viable, and ultimately thrive together.
Lynn Grodzki, LCSW, MCC, is a psychotherapist in private practice, a master certified coach, and the author of Therapy with a Coaching Edge: Partnership, Action and Possibility in Every Session and Building Your Ideal Private Practice.