When I first started my private practice part-time in 1992, I was excited when I got my first few clients and saw the potential for doing my clinical work in a more authentic way than I could at a clinic. I also saw the potential for making some decent money (though at that time before I studied business, I had no idea just how much I could make).
And I continued that way for a while – I went full time in my practice a year later. When I’d talk to my colleagues, I’d say things like, “Yeah, I had a good week, I saw 22 clients.” Or “Not sure why, but my caseload is down lately.”
When things went well and the money and referrals flowed, I was ecstatic. A colleague and I joked that on weeks when we had more clients, we were “good therapists” that week, even though we knew that the sheer number of sessions in a week actually had little to do with our clinical skill.
As I look back now, those days were like a roller coaster. It would go up and down, feast or famine, and I couldn’t seem to get any steady consistency to it. So I just decided that this was the way it was: you’d have good days, good weeks, good months, and even good quarters, but you’d also have bad ones. You had to roll with the punches, get used to varying cash flow, save up when the going was good for those inevitable slow times.
Well in retrospect, I was dead wrong. What I now can see clearly is that I was treating my private practice like a fun, lucrative hobby. Now I treat my practice like a small business, and that has made all the difference. But it was only after I studied business principles that I realized the difference.
A Lucrative Hobby
A lucrative hobby is characterized by these qualities:
- you begin doing it because it’s relatively fun, easy, fulfilling and profitable.
- you attribute much of your success or failure to factors outside of your control (managed care, the economy, changing philosophies of treatment, etc.)
- you may engage in fantasy or magical thinking about some of the reasons your hobby is doing as well as it is.
- you don’t really have a specific plan for where you want your hobby to go to; you’re content to just take it as it comes. Of course you hope it continues to grow, but beyond a certain point you’re not sure how to increase the likelihood of that happening.
- though you have a general sense of times when things seem to go well or not, you don’t systematically keep track of how you’re doing in your hobby.
- you tend to think about short-term results when you think about making some changes in what you do.
- any further training you undertake is primarily for the purpose of learning how to perform your hobby better.
A Small Business
A small business is characterized by these qualities:
- you begin doing it because you have a clear vision of what your service is; what benefits it can provide for people; and what personal lifestyle concerns of yours it has the potential to address.
- you attribute your success or failure to a combination of your skill in providing your service and your skill as a business professional. You take responsibility for whatever happens.
- you engage in regular, systematic business planning in every phase of your business: you chart a path of future growth based on a realistic appraisal of your business.
- you systematically track your results with a number of measures of how your business is doing, which helps you to predict with great accuracy and consistency how your business will perform in the future.
- you tend to think about long-term results and consequences when you think about the future of your business. You realize that you need to understand longer-term trends that will affect your business, for better or worse, for years to come.
- by realizing the enormous upside potential of optimizing your business, you continually take business and marketing trainings to increase your knowledge of business practices.
Which Do You Have?
By looking at the above comparisons, you can begin to think about whether you have a lucrative hobby or a small business. If you do have a hobby, I would encourage you to start to develop a small business mindset. If you already have a small business mindset, I would encourage you to further deepen and refine it.
The benefit of a mature small business mindset is that you gain a tremendous amount of predictability and control of your practice. Instead of wishing or hoping, or being pleasantly surprised or sadly disappointed, you have a much greater sense of control of your hours, your income and your clientele. By virtue of your business knowledge and application of sound business principles, you are much better prepared to withstand any unusual circumstances in the marketplace or in the world.
If you’d like help in transforming a hobby into a small business, or further honing your small business skills, check out our program entitled The Business of Psychotherapy: Creating Your Ideal Practice, which addresses many of the issues listed in this article.