Therapy Practice Profitability: Are You Scaling for Growth or Chasing Revenue?

Building a Financially Profitable Therapy Practice without Increasing Overhead

As a Chicago psychotherapy practice owner, are you working harder but still not seeing the profit margins you deserve? Many local practice owners I work with are managing heavy caseloads yet struggling to increase their revenue and maximize profitability. The problem might not be how hard you’re working, but your approach to scaling for growth. You may want to consider strategies for scaling your therapy practice to optimize for profitability.

The start of the new year inevitably prompts practice owners to consider their profit margins, revenue and overhead costs. It is rare that they feel satisfied with their practice finances. I frequently hear from owners seeking to boost profits — many of whom generate most of the practice revenue themselves.

Unable to further muscle the practice revenue ahead themselves, some owners reason that increasing revenue through hiring additional therapists will automatically translate to higher year-end profits. While hiring is a common growth approach among psychotherapy practice owners, it’s just one of several revenue-building strategies. 

In theory, by keeping your overhead costs steady and growing revenue, your business will be more profitable.  But how you grow your revenue is critical and will impact whether your costs increase and whether or not you are able to generate more profit. Knowing the difference between scaling for practice growth and chasing revenue is essential.

A Tale of Two Growth Plans

Approaches to Financial Profitability: Growing vs. Scaling

For example, consider two practice owners who want to improve profitability in a small therapy practice. Both have a steady stream of requests for service.  

Owner A, with a practice of 6 therapists, decides to hire more therapists in the new year. 

• They assume that 2 more therapists would help the practice increase its revenue by 25-33%.  
• They know it takes time to build the new therapists’ caseloads, so they predict revenues would trend upward over 12-18 months.  
• They forecast that at the end of the second full year of the new staff’s employment the practice would have greater revenues and greater profit. 
• But Owner A has not considered the added costs to their practice overhead that would come with new hires. Costs like adding licenses to their practice management platform and Zoom, new emails, an increase in liability insurance, PTO expense, FUTA/SUTA (employer paid payroll taxes), perhaps supervision costs, as well as the time and energy it will take to onboard, train and build the caseloads of new staff.

Owner B, also has 6 therapists, and decides that revenue growth would also impact profit beneficially.  

• Owner B is curious about why they are not more profitable already and decides that they will analyze their current therapists’ caseloads and dates of service completed in the preceding year.  
• In doing so, they realize that their current staff has many open hours and might be able to accommodate 20% more DOS.  
• Instead of hiring additional staff, Owner B, plans to discuss with each therapist the possibility of increasing their DOS at the annual review and forecast the increase in revenue and profit based on the commitments the staff make to additional DOS. 
• In doing so, Owner B discovers that some of her staff is having a hard time retaining clients past 2 or 3 sessions.

These are over-simplified examples, but it is clear that Owner B has identified at least one possible issue undermining her therapy practice profitability. So, instead of hiring over the top of an unaddressed issue, as Owner A plans, she will address the issue that is specific to her practice situation and look to see if it can be improved. 

A Path to Sustainable Practice Profitability

Owner B is scaling her business strategically. She identifies specific issues affecting profitability and searches for ways to grow revenue without significantly increasing practice overhead costs. Methodically scaling for practice growth requires patience but leads to sustainable growth. 

Owner A has not identified an underlying issue that may be the cause of his profit problem.  While his strategy may increase revenue or expand his practice, he risks simultaneously increasing costs—potentially resulting in lower profitability during the first 6-15 months.

Many practice owners working to maintain practice profitability in a competitive therapy market are tempted to chase revenue by hiring more therapists. In fact, I succumbed to this very impulse early in my previous practice, but it did not work because adding staff added costs at a faster rate than it added revenue! A combination of changes including a proprietary training program and a measured hiring plan that anticipated therapist resignations helped us right the ship. We could not rely only on adding new staff. We scaled for practice growth by building on competencies and resources we already had. This strategic approach employed scaling to help us add highly profitable new revenue.

The Critical Difference Between Scaling and Growing Your Practice

Both scaling and growing imply a business getting larger. “Growing” a business generally means increasing revenue through adding more resources like staff or capital. “Scaling,” however, means significantly increasing revenue without a proportional increase in costs.  

When you scale your practice, you achieve greater growth with similar resources by optimizing your existing processes and systems for maximum efficiency and impact. The scaling approach focuses on improving what you already have, rather than simply adding more.

Why Scaling is the Smarter Growth Strategy for Therapy Practices

Scaling is a “smarter” and more conservative approach to growth. At its core, it focuses your efforts on increasing profit. It is not spending in hopes of something working. Further, I would argue scaling is more appropriate to small businesses like psychotherapy and other professional practices where opportunities to grow through significant investments in equipment or other resources is anathema to the spirit of personalized care upon which helping organizations often focus. 

Learn more about scaling for practice growth in Julie Herres’ book, Profit First for Therapists, Chapter 13.

Strategic Options for Scaling Your Therapy Practice for Profit

There are multiple approaches to scaling for practice growth and growing effectively and profitably. While adding staff is one common strategy, consider these additional pathways:

• Developing a specialized treatment focus, innovative training programs or bundled service packages
• Expanding to new locations
• Addressing specific client issues
• Enhancing your practice’s connection to and visibility within key communities
• Maximizing income through specialized therapy services

As the examples above illustrate, knowing what to change to increase revenue without a proportional increase to overhead costs is key to successful scaling efforts.

• How and when do you identify the issues holding your practice back?  
• If you have identified several issues, how do you know which to prioritize? 
• And what to do if some issues are entangled with one another?  
• How do you forecast for and track the change(s)you are planning for?  
• How do these changes dovetail with your vision and long-term goals for the practice?

Your optimal growth strategy should align with your practice strengths and address the underlying challenges you’ve identified in your practice. The most successful strategic solutions will leverage your practice’s unique qualities and capabilities while respecting its limitations and core values.

Spring Traction Pod: Scaling Your Practice

This Spring, Join Me to Learn How (& When) to Scale Your Business

Starts May 1, 2025

This Spring, I’m offering a “Scaling Your Practice” Traction Pod, a one-of-a-kind learning lab where practice owners receive support to identify issues and take action to improve their practice’s financial wellbeing. Traction Pods are focused on stage-specific practice issues to harness the power of peer learning in a structured setting. I leverage my experience, knowledge and guidance to keep each owner and specific progress on track. 

This small peer advisory group is designed to support practice owners to improve and scale their businesses. We will be a group of 4-6 participants meeting for 2 hours each week over 2 months (8 meetings). You will have the opportunity to dig into the details of your practice situation, learn from others and make changes to grow your profit. Read more about the curriculum here.

Ready to stop working harder for the same profits?

Join fellow local therapists in our 8-week Scaling Your Practice Traction Pod starting Thursday, May 1. Limited to 6 participants to ensure personalized attention.