6 Reasons Why Private Practices Fail (And How to Avoid Them)

Are you a therapist, psychologist, or private practice owner feeling burnt out and underwhelmed by the business side of things? You’re not alone.

I’ll explore 7 reasons why private practices fail, along with actionable tips, based on my experience of helping launch and scale over 12 private practices, to help you steer clear of trouble.

1. Lack of Business Planning


Many passionate practitioners dive into private practice without a clear roadmap. A solid business plan helps you define your target audience, set financial goals, and develop marketing strategies.

There are numerous resources available to guide you through the business plan creation process. Here are some steps to get you started:

  • Market Research: Gain insights into your target audience, competitor landscape, and current trends in the mental health field.
  • Define Your Services: Outline the specific therapy modalities you offer and any areas of specialization you possess.
  • Financial Projections: Estimate your startup costs, ongoing operational expenses, and projected income streams.
  • Marketing Strategy: Develop your plan for attracting new clients, building brand awareness, and retaining existing clients.
  • Action Plan: Create a timeline with specific tasks and milestones to keep you on track and accountable.

PRO TIP: Here’s a FREE business plan template that you can use.

Remember, a business plan is not a static document. Review and update it regularly as your practice grows and your goals evolve.

2. Poor Marketing


In today’s digital age, relying solely on word-of-mouth referrals to grow your private practice simply won’t cut it.

To reach a wider audience and attract potential clients actively seeking help, you need a strategic marketing plan that leverages the power of online tools, social media, and collaboration with other healthcare providers.

Here’s a breakdown of key elements to consider when building your marketing arsenal:

  • User-Friendly Website: Your website is often the first impression potential clients will have of your practice. Invest in a professional, mobile-friendly website with clear and concise information. This includes:
    • A clear and engaging bio highlighting your qualifications and experience. Descriptions of the services you offer, including specific treatment modalities and areas of specialization.
    • Easy-to-find contact information and appointment scheduling options.
    • Testimonials from satisfied clients (with permission, of course!).
  • Content Marketing: Become a trusted resource by creating informative blog posts, articles, or videos related to mental health topics relevant to your target audience. Share these on your website and social media platforms.
  • Psychology Today: Many potential clients search for therapists through Psychology Today. Create a comprehensive profile highlighting your specialties and insurance options.
  • Network with Primary Care Physicians: Many primary care doctors refer patients to therapists. Build relationships with local PCPs by providing them with information about your practice and the services you offer.
  • Partner with Wellness Centers or Support Groups: Collaborate with wellness centers or support groups that cater to similar client populations. You could offer workshops, presentations, or consultations.

Remember, consistency is key! Regularly update your website and social media profiles. Engage with your audience by responding to comments and questions. Track your results and adapt your strategy as needed.

3. Financial Blind Spots


Failing to track income, expenses, and profitability can lead to financial blind spots. In my work with practice owners, this is a BIGGY. Understanding your numbers is crucial for making informed business decisions and saving for taxes.

Here’s why financial tracking matters and how to implement a system:


  • Identifying Strengths and Weaknesses: Regularly analyzing your income and expenses helps you identify areas where your practice thrives and areas for improvement.
    • Are certain services generating more revenue than others? Are there hidden costs eating into your profits? Knowing these details allows you to optimize your offerings and streamline operations.
  • Budgeting and Forecasting: Financial tracking provides the foundation for creating a realistic budget. This helps you allocate resources effectively, plan for future expenses like equipment upgrades or marketing initiatives, and make informed decisions about salary adjustments or hiring additional staff.
  • Tax Planning and Compliance: Accurate records are essential for filing tax returns accurately and avoiding penalties with the IRS. Having a clear understanding of your income and deductions simplifies the tax filing process come April.
4 Financial Planning Basics for Practice Owners - David Frank

Building a Financial Tracking System:

There are several ways to manage your practice finances effectively. Here are some options to consider:

  • Simple Spreadsheets: For new practices or those with limited income and expenses, a well-designed spreadsheet can be sufficient. However, manual data entry can be time-consuming and error-prone.

Download my FREE Budget Google Sheet for practice owners.

  • Accounting Software: Investing in practice management software designed for therapists can significantly streamline financial tracking. These programs often offer features for appointment scheduling, billing, insurance verification, and automated reports.
  • Hiring a Bookkeeper or Accountant: For established practices with complex financial needs, outsourcing bookkeeping or accounting tasks can be a wise decision. Professionals can ensure accurate record-keeping, generate financial reports, and provide valuable insights to support your business decisions.

Regardless of the system you choose, sticking to the plan is essential.  Establish a routine for recording income and expenses. 

Regularly reconcile your bank statements and categorize your outlays for clear analysis. Don’t be afraid to seek professional help from a bookkeeper or accountant if needed.

4.  Client Satisfaction Issues


In the competitive world of mental health services, happy clients are your best marketing tool. 

Here are some key aspects to focus on when creating a client-centered experience:

  • Communication is Key: Ensure clear and consistent communication with your clients. This includes appointment reminders, prompt responses to inquiries, and actively listening to their needs and concerns during sessions.
  • Convenience: Make scheduling appointments, appointment reminders, communicating with you, and accessing client information about your practice as easy and convenient as possible. A solid EHR like Simple Practice can make the above very easy.
  • Create A Feedback Loop: Do you have a mechanism to understand how your clinical work is performing with clients or with those on your clinical team?  Utilize surveys or reviews to gather feedback and actively seek to understand their experience. Implement changes based on their suggestions to continuously improve your services and overall practice experience.

A positive client experience is an ongoing process. By prioritizing open communication, making things easy for your clients, and demonstrating genuine care and respect, you can build lasting relationships, foster client loyalty, and ultimately ensure the success of your private practice.

Turn Calls Into Clients Intake Process Cover Image

5.  Neglecting Automation & Virtual Assistants

The administrative burden of running a private practice can easily consume valuable time that could be better spent providing therapy to your clients. Fortunately, technology and virtual assistants (VA) offer a multitude of tools to streamline these tasks.

  • Freeing Up Your Time:  Imagine eliminating the endless phone tag associated with scheduling appointments. Online scheduling tools through your EHR or a VA to follow up with your client’s needs.

  • Leveraging Software:  Technology like an intake CRM can significantly improve the efficiency and accuracy of your practice to quickly qualify and communicate with potential clients.  Imagine automating those initial emails 

This reduces the risk of errors associated with manual processes and allows you to manage your practice with greater efficiency.

Technology is a powerful tool, but it shouldn’t replace the human element of therapy.  By leveraging software and virtual assistants you can free up valuable time to focus on building rapport with your clients, providing exceptional care, and ultimately achieving better therapeutic outcomes.

6.  Going it Alone

The world of private practice can be incredibly rewarding, allowing you to help individuals on a deep and personal level. However, the solo nature of the work can also lead to feelings of isolation. 

Building a strong support network of colleagues, mentors, and business coaches can be a game-changer, fostering a sense of community, providing valuable guidance, and propelling your practice forward.

There are numerous avenues to cultivate a supportive network as a private practice owner:

  • Professional Organizations: Join associations relevant to your field of practice. These organizations often offer conferences, workshops, and online communities where you can connect with colleagues facing similar challenges.
  • Mentorship Programs: Seek guidance from experienced professionals in your field. Many organizations offer mentorship programs, or you can reach out to established therapists you admire.
  • Online Communities: There are numerous online forums and social media groups specifically for mental health professionals. These platforms provide a space for virtual connection, sharing resources, and asking questions.
  • Business Coaching: Consider investing in a business coach specializing in supporting private practices. They can provide personalized guidance on topics like business development, marketing strategies, and financial management. Want to grow a private pay practice, consider this program that involves business coaching in a group setting. 

Actively participate in professional events, nurture connections with colleagues, and don’t be afraid to seek guidance from mentors or business coaches. The sense of community, shared experiences, and valuable insights gained will not only enhance your professional journey but also contribute to the overall success and fulfillment you experience in your private practice.

By recognizing these potential pitfalls and taking proactive steps, you can build a successful private practice that serves your passion for mental health care while achieving your business goals. 

Remember, you don’t have to go it alone. Resources and support are available to help you navigate the challenges and build a thriving practice.

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