How to Determine What to Pay Hired Therapists in Your Group Practice

One of the most common questions group practice owners ask is, "What should I pay my therapists?" Many immediately look to "the going rate" in their area, assuming that if they match or slightly exceed the average, they’ll be competitive in hiring. While understanding market rates is helpful, it’s only one piece of the puzzle—and focusing on it alone can lead to financial strain, unsustainable growth, and even the eventual failure of the practice.

The real question you need to answer is:

What can my practice afford to pay therapists while maintaining a healthy profit margin?

The key to figuring this out lies in understanding your break-even point and your target profit margin—not just blindly following industry standards.

Step 1: Calculate Your Break-Even Point

Your break-even point is the revenue your practice must generate just to cover its expenses, without making a profit. To find this number, add up all your fixed costs (expenses that don’t change based on the number of sessions provided) and variable costs (expenses that increase with more clients).

Fixed costs may include:

• Office rent

• Administrative staff salaries

• Subscriptions (bookkeeping, website)

• Insurance and licensing fees

• Marketing expenses

Variable costs may include:

• Therapist wages or percentages

• Payroll taxes

• Benefits

• Subscriptions (EHR, Email, Phone)

Once you know your total expenses, you can determine how much revenue the practice needs to generate just to break even.

Example:
Let’s say your practice has $15,000 in fixed costs per month and $30 per session in variable costs (including therapist pay). If your therapists conduct an average of 400 sessions per month, your break-even calculation might look like this:

Break-even revenue = Fixed costs + (Variable cost per session × Total sessions)
= $15,000 + ($30 × 400)
= $27,000 per month

That means before you make any profit, your practice must generate at least $27,000 in revenue per month just to stay afloat.

Step 2: Determine Your Target Profit Margin

Profit isn’t just extra money—it’s what allows your business to grow, sustain itself, and provide security for you as the owner. It enables reinvestment in marketing, training, infrastructure, and emergency reserves.

Most financially stable group practices aim for a profit margin of at least 20-30% after all expenses, including owner salary.

To calculate your target revenue based on your desired profit margin, use this formula:

Target revenue = Break-even revenue ÷ (1 - Desired profit margin)

If you want a 25% profit margin, your target revenue would be:

$27,000 ÷ (1 - 0.25) = $36,000 per month

Now you know that to maintain a healthy profit margin, your practice needs to generate at least $36,000 per month in revenue.

Step 3: Set Sustainable Therapist Pay

Now that you know what your practice must generate, you can determine what you can afford to pay therapists while keeping your business financially healthy.

Therapist pay should be structured in a way that:

• Keeps your practice profitable

• Covers overhead costs

• Provides competitive pay without overextending resources

Three Common Pay Structures

1. Percentage-Based Pay

This is the most common model in private practice, where therapists receive a percentage of the revenue they generate.

• Example:

  • If your practice charges $150 per session and you pay therapists 60%, they earn $90 per session, while the practice keeps $60 per session.

  • If they complete 100 sessions per month, they make $9,000, and the practice keeps $6,000 before covering expenses.

  • If your expenses per session (admin, rent, etc.) are $30, then the practice's net profit per session is $30.

Pros:
✅ Earnings are directly tied to client load.
✅ Easier to scale as the practice grows.
✅ Lower risk to the practice if client volume fluctuates.

Cons:
❌ Can make income unpredictable for therapists.
❌ Less stability for the practice if therapists drop caseloads.

2. Salary Model

Some practices prefer to pay therapists a fixed salary, providing stability while expecting a certain level of productivity.

• Example:

  • You offer a therapist $80,000 per year as a full-time salary.

  • To be financially viable, they need to generate at least 3x their salary in revenue.

  • If your session fee is $150, they need to conduct 133 sessions per month (or about 31 per week) to cover costs and maintain a profit margin.

Pros:
✅ Attracts therapists seeking stability and benefits.
✅ More predictable payroll expenses.
✅ Can foster long-term retention.

Cons:
❌ Requires careful monitoring to ensure therapists meet session expectations.
❌ Higher risk to the practice if client referrals fluctuate.

3. Hourly Flat Rate Model

Instead of a percentage split, some practices offer a flat hourly rate per session, ensuring therapists know exactly what they’ll make per session, regardless of fee structure.

• Example:

  • You pay therapists $50 per session hour regardless of the session fee.

  • If they conduct 25 sessions per week, they earn $5,000 per month.

  • If your session fee is $150, that leaves $100 per session to cover overhead and profit.

  • If your total expenses per session (admin, rent, software) are $30, the practice keeps $70 per session in profit.

Pros:
✅ More predictable income for therapists than a percentage model.
✅ Gives the practice more control over profit margins.
✅ Easier for therapists to understand their pay.

Cons:
❌ Can be less appealing to therapists if they feel they could earn more on a percentage split.
❌ The practice assumes more financial risk if clients drop or if therapists are underbooked.

Which Model Is Best?

The right pay structure depends on your business model, financial goals, and therapist preferences. Some practices blend models, offering base salaries with bonuses, tiered percentage splits, or hourly rates with incentives for higher caseloads.

Step 4: Balance Market Rates with Your Business Model

At this point, you can compare what you can afford to pay with market rates to see if you need to adjust pricing, overhead, or hiring expectations.

• If "the going rate" is higher than what your business can afford, you may need to:

  • Increase session fees

  • Reduce expenses

  • Offer a lower starting percentage but include incentives (bonuses, benefits, admin support, CEU stipends)

• If "the going rate" is lower, consider whether your profit margin allows for higher pay to attract top talent.

Step 5: Adjust as Your Practice Grows

As your business scales, revisit this calculation quarterly or annually to adjust pay, pricing, and hiring plans. Keeping a healthy profit margin ensures long-term success—not just for you, but for your therapists and the clients you serve.

Final Thought: Pay Structure Should Support a Thriving Practice

A financially healthy practice benefits everyone—owners, therapists, and clients. Instead of just asking, “What do other practices pay?”, ask:

• “What does my practice need to stay sustainable?”

• “What compensation structure ensures quality care, therapist retention, and profitability?”

• “How can I balance market rates with my business’s unique financial reality?”

When you make decisions based on your actual numbers, rather than assumptions or external benchmarks, you create a practice that is both competitive and sustainable.

About the Author

Iryna Arute is a licensed clinical psychologist, business coach for therapists, and practice owner. She helps therapists grow sustainable, values-aligned private practices that support both their clients and their financial well-being. Iryna also offers business coaching, website design for therapists, and digital products to simplify private practice ownership.

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