You’re billing sessions, the money is coming in, and somehow the number in your bank account at the end of the month is a lot smaller than you expected. If that’s a familiar feeling, you’re not confused – you just haven’t seen the full picture of where private practice money actually goes.
This is a breakdown of where your money actually goes in a therapy practice, what counts as healthy overhead, and where the leaks tend to hide. No complicated formulas. Just the real numbers.
What Counts As Overhead In A Private Practice?
Overhead is everything you spend to run your practice that isn’t paying yourself — rent, software, insurance, marketing, contractor fees, supplies, and anything else that hits your business account.
For most solo therapy practices, overhead runs between 20% and 35% of gross revenue when things are reasonably tight. Group practices with employees and office space can run 40% to 55% or higher, depending on how many clinicians are on staff and what the lease costs. The IRS and accounting industry generally treat 50% overhead or below as sustainable for a service business, but private practice has enough variation that the range matters more than any single number.
If your overhead is above 50% and you’re solo, that’s worth a closer look. Let’s break down where the money tends to go.
Office Rent: The Single Biggest Line Item For Most Practices
If you rent physical office space, it’s almost always your largest expense. For private practice therapists, office rent typically runs $600 to $2,500 per month depending on city, suite size, and whether you’re sharing space or renting your own.
Some therapists sublet by the hour or half-day, which drops the fixed cost significantly but adds complexity when you’re trying to scale sessions. If you’re seeing 20 clients a week in a major metro area and paying $1,500 for a private suite, that’s about $75 per client session in rent alone before you’ve paid a single other bill.
Telehealth-only practices can skip this entirely, which is one reason many solo therapists keep some hybrid model even after returning to in-person work. If rent is eating more than 15% to 20% of your gross revenue, it’s worth running the math on alternatives.
EHR and Software Subscriptions: Small Individually, Meaningful Collectively
Your electronic health record system (EHR — the software where you keep client notes, schedule appointments, and process payments) typically runs $30 to $150 per month for solo practices. SimplePractice, TherapyNotes, and similar platforms land in this range.
The issue isn’t the EHR itself. It’s the stack that builds around it: a scheduling tool, a telehealth add-on, a HIPAA-compliant texting service, an email marketing platform, a website subscription. We’ve seen therapists spending $400 to $700 per month on software without ever sitting down to add it up.
Once a year, pull your credit card and bank statements and total every recurring charge. Cancel anything you haven’t opened in 90 days. Most practices find at least one or two subscriptions that auto-renewed and weren’t being used.
Malpractice And Liability Insurance: Non-Negotiable, But Shop It
Professional liability insurance (malpractice coverage) for therapists in private practice typically runs $500 to $1,500 per year depending on your licensure, state, and coverage limits. That works out to roughly $40 to $125 per month.
This isn’t a line item to cut. It is one to re-quote annually. Carriers raise rates quietly, and switching providers after a clean claims history often saves $200 to $400 a year. The NASW, APA, HPSO, and similar associations offer group rates that are frequently lower than individual plans.
Some therapists also carry general business liability insurance, which adds another $200 to $500 per year. If you rent a physical office, your landlord may require it.
Marketing And Directory Listings: Where Many Practices Overspend
Psychology Today is the most common marketing cost for private practice therapists, running about $35 per month as of 2026. That’s the standard listing. Add a Google Ads campaign, a Headway or Alma profile, and a few specialty directories and you can easily hit $300 to $500 per month in marketing spend without much to show for it.
The benchmark most practices aim for is 5% to 10% of gross revenue on marketing. For a therapist billing $80,000 a year, that’s $4,000 to $8,000. If you’re spending more than that and your caseload isn’t growing, the spending isn’t the problem and neither is the budget — the tracking is.
Know which directory or ad source actually brings new clients through the door. If you can’t answer that question, you’re spending blind.
Our post on setting fees in private practice gets into the relationship between marketing spend and session rate if you want to connect those dots.
Continuing Education And Supervision: Deductible, But Still A Cost
Licensure renewal requirements vary by state, but most therapists spend $500 to $1,500 per year on continuing education (CE) credits. Add supervision hours if you’re pre-licensed, consultation groups, and any professional development conferences, and this number can climb to $3,000 or more annually.
The good news: nearly all of these costs are deductible as ordinary business expenses under IRS Publication 529, which covers work-related education that maintains or improves skills required in your current work. That doesn’t make them free, but it does reduce the after-tax hit.
What’s Healthy Overhead For A Solo Practice Vs. A Group?
For a solo therapist seeing 20 to 25 clients per week and billing around $80,000 to $120,000 annually, a healthy overhead target is 25% to 35%. That leaves you with a practice profit margin of 65% to 75% before your owner draw and taxes.
Group practices have a fundamentally different structure. When you add associate salaries or 1099 therapist splits, your overhead as a percentage of gross revenue rises significantly. Group practice owners often run 45% to 60% overhead, and that’s not a red flag – it’s the cost of scale. What matters at that level is whether your profit per clinician is growing alongside your headcount.
Let’s look at an example. A solo therapist billing $100,000 in gross revenue with $28,000 in overhead has a 28% overhead rate. After a $50,000 owner draw and $22,000 for taxes, there’s very little left as retained profit. That math works, but it’s tight. Bringing overhead below 25% by cutting underused subscriptions and re-quoting insurance can meaningfully change what you keep.
Where The Leaks Hide In A Therapy Practice
Most of the overhead surprises we see fall into three categories: subscriptions that auto-renewed and stopped being used, a billing leak (insurance claims that were denied and never appealed), and underpriced sessions that make every other ratio look worse than it is.
If you’re accepting insurance, your effective rate per session is often 30% to 50% lower than your private-pay rate. That changes the overhead math significantly. A therapist billing $150 per session out-of-pocket vs. $90 per session through insurance has a very different overhead-to-revenue ratio even if every other expense is identical.
Our breakdown of managing bad debt in a therapy practice covers the billing side in more detail – specifically what to do when insurance doesn’t pay and what a healthy collection rate actually looks like.
What To Do If Your Overhead Feels Too High
Start with a line-item audit. Export your last three months of business bank and credit card transactions and put every expense into a category: facilities, software, marketing, professional development, insurance, contractors, other. Total each one.
Once you can see the categories, the cuts are usually obvious. Most practices find at least one area where they’re paying for something that isn’t actively contributing to client growth or practice operations. The goal isn’t to run as lean as possible – it’s to make sure every dollar of overhead is doing something.
If your overhead is in a reasonable range but your take-home still feels low, the issue is often on the revenue side: too few sessions, rates that haven’t been adjusted in two or three years, or a payer mix that’s weighted toward lower-reimbursing insurance plans. We can help you look at both sides of the equation.
If you want a second set of eyes on your practice numbers, let’s chat.
TL;DR:
Most solo therapy practices should be running 25% to 35% overhead. If yours is higher, the culprits are almost always office rent, accumulated software subscriptions, or a billing leak – and all three are fixable.
