How many shoes is that?

Remember, in private practice you are only paid for patient contact hours (and there may be a lag between time of service and collection). Do some calculation ahead of time, so you don’t find yourself in trouble later. For the purposes of an easy example, let’s assume you will charge $100/hr.

What is your typical tax rate? It is worth checking in with your accountant for an estimate of this. It may be very different now that you are self-employed. Assuming a total rate (federal and state) of 30%, you will “make” $70/patient contact hour. But don’t go shoe shopping yet!

Add up known expenses for the year. (*note: I am not taking into account expenses if you decide to rent space, but for the typical clinician making visits to a home or contract location) These will include: ASHA dues, state license fee, malpractice insurance, continuing education expenses, forms, and possibly others. Let’s estimate the total for these items at $1200, and then, just in case, add another 10% to the number—wiggle room in the event of surprises. Now we have $1320 of known expenses.

Come up with a realistic number of contact hours you will have per week. Consider that holidays, vacation, illness, cancellations will have a greater impact on you now, plus you are just getting started….Ok, multiply that number by 52 (weeks in the year) and then, to be safe, decrease it by 10%. So, as an example, you are thinking you’ll work part time, about 20 hrs/week. Taking in to account travel time, paperwork, marketing and missed sessions this will probably average 10-12 hrs of patient contact time/week. Let’s be conservative, 10 contact hours x 52 weeks= 520 hours. Subtract 10%, and you have 468 hrs. Divide your expenses (estimated at $1320 above) by contact hours (estimated at 468). This works out to just under $3/hr ($2.82 actually).

Which means the maximum you can pay yourself is $67/hr; and, if you do, you will have, theoretically, no additional monies for materials, tests, etc. Honestly, in a young business you’ll have lots of “surprise” expenses and wants. Personally, I “pay” myself half my net rate, choosing to leave more to invest in my business. But I’m not the breadwinner in my family, so who am I to judge? Best of luck!

(Disclaimer: I am NOT an accountant. I have never taken an accounting class, nor plan to. This is my common sense way of planning for myself. Use at your own risk!)


You might also like:



Comments

  1. Brynn Rhodes says

    Hi. So glad I discovered your blog and particularly this post. This is just what I wanted– a hypothetical scenario to give me some starting point to begin to compare apples to oranges– my current job in a school to my dream as a private practioner. So here’s my question… in your example, would your annual income be $31, 356? Am I figuring that correctly (468 patient contact hours x $67/hr. to pay yourself), or, as you described your personal philosophy of keeping half your net rate, you’d net just $15,678 per year? Before I devote more time into launching a business and all of the research into the specifics, I wanted to get SOME idea if it was realistic to dream of working 30-35 hours per week and making (roughly) the same amount I do now in a school working 50 hrs (but being paid for 38 on a teacher contract). Any thoughts? Thanks so much for your help!

    • admin says

      Brynn, Thank you so much for reading so thoughtfully! Yes, you are on target with the example I gave above, but let me remind you of a few items: the example is based on 10 hrs of paid contact time/week and because the number of contact hours is low, the expenses/contact hour are higher. So, to continue this line of reasoning, if you were able to generate an average of 15 contact hours per week, you would be able to “pay” yourself an extra dollar an hour (since the expenses are spread over more hours). Make sense? This would also give you an annual net salary of $47736. Realize, too, that my conservative “pay myself half” is a luxury I indulge because I’m currently able and because I have my eye on different business goals further down the line. It’s like my own 401K :)

      A word of caution, lots of private practitioners are finding it hard going right now. Clients seem few and far between, so be sure to plan accordingly–starting small while maintaining your current job or having savings to get you through the first 6-12 months.

      This post was wrapped into several others and presented in the December 2011 ASHA Leader as “Forge Your Own Path.” http://www.asha.org/Publications/leader/2011/111220/Forge-Your-Own-Path.htm. It was certainly exciting to see my work in print, but what really thrilled me was having a “reader response” printed a couple months later. An audiologist turned accountant, wrote in that a quick rule of thumb is to estimate you will need to generate 60% of your current salary in your private practice to have a commensurate level of income. Check it out here: http://www.asha.org/Publications/leader/2012/120214/Readers-Respond–February-14,-2012.htm

      Best of luck to you! Please let me know how it goes! Kim

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>