I recently conducted a consultation with an Early Career Psychologist regarding the state of her practice and what future route she should take in her career path.
She was a member of a group practice. She was not one of the practice owners, but rather she was an Independent Contractor. She wondered about her current income, future income, and what role she would play in the practice.
Her income was based on the amount of her collections for services provided. While she was busy in her practice she was not consistently full. In addition, the practice owners continued to bring on new associates, that only decreased the likelihood she would maintain a full caseload.
So here are some things I asked her to consider in making this decision. Tolerance for risk, entrepreneurial spirit, need for control in her professional life, and how much money she wanted to make.
Tolerance for risk - Practice owners take all of the financial risk in a practice. They sign the lease to guarantee the landlord they will get paid. They rent/buy the copy machine and phone system. If they become ill for a month and have no income the bills still need to be paid. If all of the percentage model independent contractors leave the practice for whatever reason, they still have to pay the bills. Life is unpredictable. The less tolerance you have for risk, the less comfortable you will be as a practice owner.
Entrepreneurial spirit – One of the Principles of Private Practice Success put forth by Jeff Barnett and myself in our book Financial Success in Mental Health Practice: Essential Tools and Strategies reads as follows:
The mental health professional with the spirit of the entrepreneur is most successful in private practice.
If you like to create practice opportunities it is best to be a practice owner. If an idea comes to you that you think will fill a market need in the community and want to make it part of your practice, it is best to be a practice owner. If you only like seeing clients that are referred to you and find a situation where you don’t have to create opportunities for yourself, it is better to be a practice renter.
Need for Control in Your Professional Life – I once was trying to help out a former psychometrist who had received their doctorate build their practice by referring them “a street kid” that I had evaluated who needed psychotherapy. All services were being paid “full fee” by a trust fund. When I followed-up with him about the case he informed me that he had to refer the case to someone else. He explained, “The practice owners told me that they did not want “street kids” in our waiting room, as this would upset their wealthy clientele.” I never referred him another case. If you want to decide who you will see, when you will see them, for how long you will see them, and how much you will charge them, then it best to be a practice owner.
How Much Money Do You Want to Make – If you are a percentage model renter, and you are quite successful, then you are going to be making someone else a significant amount of money. While the practice owner may be providing space, services, and facilitate your success, this usually comes as a handsome price. If you want the “sky to be the limit” then it is best to be a practice owner. When you work for someone else, that someone else is always going to benefit from your success and your financial bottom line will always be limited.
There is no clear cut answer or cookie-cutter formula in making this decision. Being a practice owner comes with benefits and rewards, as does being a percentage model renter. It is important to know yourself. Examine your values, beliefs, need for control, and how much risk you are willing to take in coming to a decision as to what the right path is for you.