Working out the financials for your private practice
- Working out the financials for your private practice
- What can a therapist actually earn in private practice?
- What is the profit margin for therapists?
- How much do you need to start?
- Work with an accountant early on
- Think about whether you’d benefit from a financial advisor
- When does private practice become financially worth it?
Key takeaways
- Your session fee isn’t the only thing that influences your income. Capacity, structure, and overheads all play a part in your take-home pay.
- Strong profit margins are achievable in private practice, but they rely on actively managing costs, pricing and systems rather than seeing more clients.
- Avoid projecting full capacity from the moment you open your doors. Around 75% capacity is a far more realistic starting point.
- Having savings behind you, plus early advice from an accountant or financial advisor, can remove a huge amount of pressure in the first year.
- Private practice can absolutely become financially rewarding, but it usually takes 6 to 12 months before income starts feeling predictable.
<div id="section-1">Working out the financials for your private practice</div>
Most practitioners who decide to go out on their own know that private practice can pay better than a salaried role, and most of the time, it eventually does. The important word there is “eventually”. It’s not always the case that revenue takes a long time to build, but there is usually an adjustment period as you get used to a completely different way of working.
You’re no longer simply trading time for a salary. You’re running a business and making decisions that directly affect what you take home. The fees you set, the costs you carry, and the way your days are structured all feed into the bigger picture. Getting your head around that before signing a lease, setting your fees, or handing in your notice is one of the best things you can do for yourself.
<div id="section-2">What can a therapist actually earn in private practice?</div>
The Australian Psychological Society suggests that a standard psychology session should be around $318 in 2025/26, just as an example, but many experienced psychologists charge more than that.
So to work out your revenue, all we have to do is take your session fee, multiply it by how many clients you plan to see each week, then multiply that by the number of weeks you work across the year. For example, a psychologist charging $280 per session and seeing 20 clients a week over 46 working weeks would be looking at a gross revenue of roughly $257,600.
But you need to be realistic about capacity. 20 billable sessions a week assumes your calendar is always full, and that’s rarely how private practice works, especially in the early days. It would be naive to think you wouldn’t experience cancellations, no shows, quieter periods over the summer, and the natural ups and downs that come with running a practice.
That’s why many practitioners use around 75% capacity as a more achievable figure. In the same example, that would bring projected revenue closer to the $193,200. Anything above that is a great result, and once your practice is established, 85% is a reasonable target. It’s just not the smartest number to build your initial financial projections around.
And keep in mind that this is all before expenses are taken into account.
<div id="section-3">What is the profit margin for therapists? </div>
Profit margin is the percentage of your income that’s left once all your business expenses have been paid. For a sole practitioner in allied health, a margin somewhere between 50 and 65% is normally achievable once you’re established, although it’s usually lower in the first year while you build your client base and carry setup costs.
There’s no exact Australian benchmark for therapist profit margins because every practice runs a bit differently, but that range generally lines up with what accountants, practice consultants, and established practitioners regularly see.
For example, if your practice brings in $200,000 a year and expenses total $80,000, your profit margin sits at 60%. Things like underpricing, high fixed rent, and poor cancellation management tend to drag these margins down, while flexible rent, good pricing, and strong systems usually improve them without increasing your workload. These margins aren’t fixed; they need to be actively managed and reviewed.
<div id="section-4">How much do you need to start? </div>
We’ve covered the startup cost breakdown in detail in a separate post, so we won’t go through every line item here. But the headline figure worth planning around is somewhere between $2,500 and $5,000 to cover the non-negotiable basics before you see your first client. This includes things like AHPRA registration, professional indemnity and public liability insurance, business name registration, a website, and practice management software.
On top of that, your core ongoing monthly costs, excluding room rental and marketing, will generally sit somewhere around $400 to $700 a month for a sole practitioner. But these are all dependent on what you want to invest in.
Although that number is important, the thing that matters most is how many months of funds you have in reserve before you launch. 3 to 6 months is the figure most financial advisors recommend, and it exists for good reason. Income in private practice never builds as quickly as practitioners hope in the first few months, and having that buffer means you can make good decisions rather than desperate ones.
<div id="section-5">Work with an accountant early on</div>
Many practitioners wait until tax time to speak to an accountant, but getting advice before you even open your doors can save you hundreds, if not thousands, down the track. They can help you understand things like sole trader vs company structures, GST obligations, how much tax to put aside, and what you can claim.
Just as importantly, they can help you avoid the very common experience of looking at your revenue and thinking you’re earning far more than you actually are. A practice can appear to be doing really well on paper, but once tax, super, insurance, and rent are factored in, the reality can be very different if you haven't planned ahead.
<div id="section-6">Think about whether you’d benefit from a financial advisor</div>
For anyone leaving a stable salary for the first time, it can definitely be worth investing in a financial advisor. Private practice income fluctuates far more than salaried work, and that shift from predictable salaries to a variable revenue stream is a bigger adjustment than most people anticipate.
A good financial advisor can help you build a plan around your emergency buffer, structure your personal investments properly, and make sure your superannuation isn’t being forgotten about. There’s no employer making contributions on your behalf anymore, and without a plan in place, it’s easy to keep pushing it down the priority list until years have passed.
The practitioners who tend to benefit most from early advice are those supporting a family, carrying a mortgage, or relying entirely on practice income from day one rather than transitioning gradually. If any of those apply to you, one conversation with someone who understands self-employed income well before you make the leap is time well spent.
<div id="section-7">When does private practice become financially worth it? </div>
Most practitioners reach a financially comfortable position somewhere between 6 and 12 months in, assuming they’ve started with a realistic plan and haven’t significantly underpriced themselves. As we’ve already mentioned, expect the first few months to be quiet. Going from 0-100 is just simply not going to happen; these things take time.
The approach that tends to work for many practitioners is to begin one or two days a week alongside existing employment. It takes longer to build momentum that way, but it removes the pressure that leads to you taking on clients who aren’t a good fit, discounting fees out of anxiety, or burning through your savings faster than you expected because you projected at full capacity from month one.
The aim of your practice isn’t just to cover your costs. It’s to build something that pays you well, gives you room to work the way you want, invests in your professional development, and grows over time. That’s what financial sustainability actually looks like, and it’s entirely achievable when you get the basics right from the start.
