Many of y’all know that I have been using TherapyNotes as our practice EHR for over 10 years now. I’ve looked at others, and I just keep coming back to TherapyNotes because they do it all. If you’re interested in an EHR for your practice, you can get two free months of TherapyNotes by going to thetestingpsychologist.com/therapynotes and enter the code “testing”.
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Hey, everybody. Welcome back to The Testing Psychologist podcast. I’m [00:01:00] here with you in summertime. It is June, folks. It is June. And that means that we’re starting to ramp up for the next cohort of The Testing Psychologist mastermind groups.
The next cohorts will start in early August. There’s going to be a Level 4 beginner folks launching their practice; intermediate folks, which I call the get your life back group. This is for overwhelmed solo practitioners looking for better systems and structure, and an advanced group as well. So this is aimed at group practice owners with 5, 6,7,8, 10, 12 clinicians who are looking to talk about scaling, people management, and so forth. So if you’d like to get some support and guidance as you grow your practice, you can go to thetestingpsychologist.com/consulting, and schedule a pre-group call to see if it’s a good fit.
But as for the episode today, we are talking about finances. I get this question a lot in my [00:02:00] consulting: How much does it cost to launch a testing practice? And I haven’t talked about this on the podcast yet, which is a little surprising, but I got motivated because I was doing a talk for our APA interns about a month ago, and this question came up again, and we walked through it on a whiteboard, and decided to turn it into an episode because it’s important and good to have the information out there for those of you who are thinking about launching.
So today we’re going to talk about the costs involved. I’ll run through it line by line. I like to keep it pretty straightforward and concrete. So we’ll go line by line, talk about some of the common expenses. We’ll talk about some of the hidden expenses, the ones that you can easily overlook, that I certainly overlooked when I was starting my practice. And then we’ll talk about how to fund these startup costs and try to answer that question, which is always the second question after how much does it [00:03:00] cost? How do I pay for this? How much should I have saved? How do I manage my finances?
So we’ll talk through all of those things and hopefully, you will walk away with a really clear idea of the costs involved in starting a practice as well as ways to fund it, and how to budget for that major event. So let’s get to it.
All right, everybody. We are back, and we are talking through the finances of launching a testing practice. As I said, this question comes up a lot. And we talked on the podcast before about how psychologists and mental health folks are not the greatest, I don’t think, speaking from personal experience and professional experience, we’re just not the greatest at deliberately making a budget, walking through finances [00:04:00] or getting a really good idea of what things will cost. We tend to wing it.
And some of that’s our fault. A lot of it is not. We’re certainly not trained to be business people. And there’s no reason to think that you should be good at budgeting, projecting costs or anything like that, but sometimes, some of us have other layers in terms of attitudes toward personal finance or money mindset, things like that that might make it easy to be, let’s say, overly optimistic or on the flip side, overly pessimistic, and both of those can be detrimental when you are trying to launch your practice and getting a realistic idea of the costs associated.
So let’s dive right in and get real concrete with this. And like I said in the introduction, hopefully, you’ll walk away with a really good idea of how much you need to save and how to fund that savings, if you don’t have it on hand.
So when I think of starting a practice, there are [00:05:00] three areas that you need to consider and plan for from a budgeting standpoint:
1. Planning and legal setup.
2. Clinical readiness. So this will be test kits, things like that.
3. Marketing and administrative.
We’ll tackle each of these areas and go through some of the common expenses involved there. So let’s start with the legal and administrative. This is a relatively short category, but arguably, the most important because if you don’t set up your business correctly and get your paperwork intact, and things like that, then you’re going to be in trouble.
The first thing on this list is very basic: forming your business. This could be an LLC, PLLC, or an S Corp cost. It could be any of those things. That’s what I’m talking about when I say launching your business or forming your business.
So this is pretty easy in most states, and [00:06:00] it’s relatively inexpensive in most states. The term relative is doing a lot of work here. So when I say relatively inexpensive, I mean the cheapest states to form a business are going to run around $50, and the most expensive states, looking at you, Massachusetts, are going to be up around $500.
So there’s quite a range here, and this is easily found by doing a Google search where you can find a list of costs to form a business by state, and to see how much that’s going to cost, but relatively inexpensive compared to some of the other expenses we’re going to talk about.
The other aspect that I would put under legal and administrative is malpractice insurance. So you may already have this. So this may not fall under a true startup cost for launching a practice, but it’s important to budget it in. So malpractice insurance is typically going to run somewhere between $500 and $1,500 per [00:07:00] year.
So the initial component is not going to be super high. You may have to make that first payment, and they will do payment plans at least through the trust. So make that first payment of $200, $300, maybe $400 just to get started. And then it might top out between $500 and $1,500 for the year.
The last thing in this category is going to be legal consultation for paperwork, informed consent, office policies, things like that. If you’re going to be hiring folks quickly, then you’ll need to get legal consultation for contracts as well, employment documents.
But this is one of those places people ask, do I really need an attorney to draft my paperwork? And when I first started consulting several years ago, I would say probably yes. These days, I have wavered on that a bit
simply because there are so many consultants out there who are selling attorney-approved [00:08:00] paperwork or paperwork that’s already been reviewed by an attorney.
I don’t know that you have to go to an attorney and have that person develop your paperwork for you. It’s going to be expensive. Attorneys typically run between $200 and $400 or more per hour. So you don’t want an attorney to draft your paperwork from the very beginning.
If you’re going to do anything, I would suggest you purchase a paperwork packet or even devise your own. You could likely use AI at this point to do it for you. And then take it to an attorney to review instead of generate from scratch. And that’s going to save you a lot of money in the process.
But all that to say, this would likely run you somewhere between $200 and $1,000, maybe more, depending on how much work you want the attorney to do, and how expensive that attorney is. So that’s legal and administrative. Again, just running through the numbers, this could range anywhere from $800 up to about $3,000 just to get [00:09:00] started.
Let’s move to the office and tech setup, or the clinical readiness part. As far as office and tech, I’m guessing you’re going to need a physical office. A lot of us are doing some hybrid work at least, and I know there are some practices out there who are doing remote work. So you may just be working from your home office. That’s fine. That’s great. It will be cheaper for you, but I’m going to talk about what it will cost to lease a physical office.
So I would say there are always going to be outliers, those of you that are in super expensive areas or super cheap areas. But generally speaking, for an office lease, you’re going to need a full-time office lease. So for a full-time office lease, you’re going to need to budget somewhere between $400 and $2,000 for a full-time office lease, give or take.
[00:10:00] One of those possibly hidden costs that we don’t think of is you’re going to have to do a security deposit of first and last month’s rent. So whatever your monthly rent is, triple that. So if you are going to be paying $500 a month for the monthly rent, bump that up to $1,500 to account for the first and last month’s rent or security deposit.As far as office setup, you will likely need furniture. This can vary wildly, but I typically budget $1,000 to furnish an office. I’ve furnished many offices over the years in my group practice here in Colorado, and I found that you can pretty easily furnish an office for $1,000. It’s not a bargain basement, but it’s also not luxury by any means.
So that can vary wildly. Many of these things can, but I think you could budget easily [00:11:00] $1,000 for office setup. You could also go up to $2,000 pretty quickly, especially if you are dealing with things like soundproofing. And if you want to get a really nice ergonomic desk chair or something like that, you can even push up. You can push as high as you want to go, but a nice chair on its own could run you $1,000 pretty easily.
So we’ll talk about ways to save some money in each of these areas as we go along, but this is just a general estimate of what it might cost. So, furnishing the office, let’s say $1,000 to $2,000.
If you don’t already have a computer, you’re likely going to need one of those. I’m a big fan of MacBooks. I have used MacBooks for probably 20+ years now. I’m on my third MacBook Air, not because they fail or [00:12:00] break, but just because I like to get new stuff every two to three years.
So a MacBook Air is going to cost you about $1,000, maybe a little bit less. And you can get other computers that are just fine for doing the work that we do for anywhere between $500 and $800. I recently was able to go on eBay and buy a used Lenovo ThinkPad for one of our admin staff. And that was about $500 to get a nice Windows-based computer that’s two years old. So don’t be afraid to go on eBay and look for certified refurbished computers as well.
Either way, you’re going to need a computer, likely going to need a printer/scanner, and maybe some backup; a tech backup or cloud backup. So [00:13:00] that all can run you easily between $1,000 and $2,000.
I’m not going to go deep into the software stack or the tech stack. We’re just going to leave it at an EHR for now. You will need an EHR that’s going to run somewhere between $50 and $100 a month. So all in, huge range here, but it’s going to range somewhere between $2,000 and $6,500 or $7,000, depending on how intensely you go on this office setup, how much you want luxury furniture versus basic furniture, what kind of computer you get, and things like that. And how expensive your rent is.
Let’s talk about assessment materials. This is a big one. People wrestle with this a lot. How much did I spend on assessment materials? Well, I do think at this point in time, you still have to buy at least one or two paper kits, [00:14:00] especially if you’re doing autism testing, people feel differently about the ADOS. There are different opinions about whether we should use it or not. But if you buy the ADOS, that right there is going to be $2,000.
Other paper kits are going to be between $1,200 and $1,800, depending on which ones you get. I’m talking about the WISC, the WAIS, the WIAT, the KTEA, things like that. So if you buy two paper kits or physical kits, you can easily be in that $4,000 to $6,000 range.
I’ve told the story many times on the podcast where I launched my practice, and back then, it was only paper kits. I went to my wife one day. I remember this, standing in the kitchen of our first starter house that we were renting. This was before we had kids or anything. [00:15:00] I had this conversation with her and said, I think I’m going to need about $12,000 from our bank account. What do you think about that? Her jaw hit the floor, but it worked out, luckily.
So if you’re buying all paper kits, that cost can escalate pretty quickly. Luckily, though, we have things like Q-interactive and other online platforms. I just did that episode a few weeks ago on the digital record form from PAR. So there are some online platforms that are helping here, but if you go the Q-interactive route, you’re still going to pay an annual licensing fee of about $300, $350, and then you will pay by the test, or by the subtest. So it’s not as expensive right from the beginning in terms of buying physical kits, but it will add up, especially if you have to buy two iPads.
So to get started, just with Q-interactive plus two iPads, [00:16:00] you could easily be in for about $900. But then you just pay by the test, and it is still cheaper than using physical kits or buying physical kits for everything.
Either way, as you can tell, there’s a lot of variability here in terms of how much you can spend just for test kits, but I would easily budget $5,000 to $6,000 for testing materials to get started. That should get you two physical kits, some Q-interactive access, and two iPads, if you want to go that route.
If you’re going to be storing your test kits, you will likely need a locked cabinet of some sort, or some kind of locking system, unless you get a roller bag and you’re going to roll it around everywhere. And those can be a small expense. It might cost you $100 or $200.
All right, so let’s move to the marketing side. So marketing, like the other [00:17:00] areas, is going to be a place where you can spend a little bit of money or a lot of money. One of the biggest expenses here is going to be website design and hosting.
So let’s tackle the obvious question right off the bat. Do you even need a website? I would say unequivocally yes; you need some kind of website. It doesn’t have to be fancy, but you need something so when people search for you, they can find you, read a little bit about you, and possibly book an appointment, and that kind of thing.
So website design and hosting are going to vary wildly in terms of how much you can spend. You could start with $150 for the year with something like Squarespace, if you feel comfortable building your own website using their tools. And then you can go all the way up. You can easily spend $3,000 to $5,000 on a website, and the price just goes up from there depending [00:18:00] on who you contract with, and how much that person charges.
But I don’t think we personally, as mental health folks, have any need for fancy a website. You can get a really nice, well-designed site for, let’s say, $3,000 give or take, from reputable folks.
You’re going to likely have some monthly cost for hosting as well. That’s going to be somewhere around $5 to $15 a month, depending on what kind of hosting you get. You can also pay for maintenance that will increase the cost a little bit for someone to maintain your website. But generally speaking, let’s call it $200 all the way up to $5,000 for a website, depending on how much you want to do yourself versus having someone else do it.
Branding is another area that you want to think about. [00:19:00] So the same question with websites applies here to branding as well. Do I need branding? Do I need a logo? I would say with the tools available to us now, yes, you need to put a little bit of time into devising a logo and having some kind of branding.
Again, this does not have to be fancy. I have paid, gosh, the very first branding job that I paid for was $500 back when I started my practice and got a very nice logo, font, and some customized branding. And within the last year, I went to the other end of the extreme and paid $20,000 for updated branding for our practice. The difference between those was massive, but it’s just different stages of practice.
So these days, when you are just starting out, there are plenty of sites that’ll do this for you. [00:20:00] Logo.com is super cheap, $10 a month, and you could get something decent. There are other sites that will do the same thing. You could just do a Google search for logo generator or AI logo generator, and they’re fine.
So, in my uninformed opinion, just based on personal experience, there are two tiers of branding. One is the lower, probably 90%. So the lower 90%, I don’t think there’s a lot to distinguish one business from another. You can live in this lower 90% and be totally fine.
So this is like logo.com or low-level designers, options like that, where you will get a logo, a font, and some colors, and that’s great. That’s all you need. I don’t think we need something incredibly complex, intricate, or unique [00:21:00] in our industry. We just need something to increase legitimacy and build some kind of brand recognition. And you can do that pretty cheaply.
So I will call that the lower 90%. And then you could also jump up to what I would call the upper 10%, which are those branding portfolios that really stand out. You look at these websites and you’re like, oh, this is a different level. My hope is that that’s what we jump to with this most recent and more expensive branding engagement, but my point being, you don’t have to spend a lot of money on branding. It’s more about the act and having a logo, and some kind of brand that’s not just your name or just a Times New Roman font on your website. You just need something, and that’s really easy to do, really [00:22:00] cheaply.
So all that to say, you could do a logo and branding for pretty cheap, as easy as $10 or $20 a month for two months to do your own, all the way up to … I think reasonable expenses can be $2,000, $3,000, $5,000. I went over the top with this branding person because I wanted to treat our practice after our transition last summer.
So what else do you need in the marketing realm? So, online presence is huge. This is a big umbrella, and it covers a lot of stuff, but for the purposes of this discussion, I’m going to say we’re talking about SEO setup, Search Engine Optimization, and maybe some Google ads.
So to get set up and do some SEO work, let’s just ballpark $1,000 to $2,000. To get set up with Google ads, it’s going to be probably [00:23:00] $500 setup fee, and then $300 to $500 a month if you want to run ongoing Google ads. Other online presence is pretty cheap, but I think it’s worth investing in Search Engine Optimization, especially in the beginning, to get your website ranking as highly as possible when people search for you.
I have that question a lot. Practices that are launching will ask this, Hey, I built my website, but it’s not showing up in Google. And that is where Search Engine Optimization comes into play. I think it is worth investing in, in the beginning, to make sure that people can find you if they do search for your name or your practice name.
The last thing that I’m going to cover in this realm is professional photos. Same as everything else. You can do it yourself with photos if you want to. Unless you’re a photographer or your partner or you have a friend who’s a photographer, they’re probably going to [00:24:00] be pretty good, but not great. So if you want to pay for professional photos, we’re going to call that $250 to $750 just to get some headshots and professional photos done.
So let’s do some tallying. With all of that, we had maybe $200 to $500 for a website, $200 for branding. So
in this realm, you could maybe get away with $1,000 or $1,500 on the low end. And then, depending on how much you want to spend on a website and branding in particular or photos, then that could escalate all the way up to, oh gosh, easily $8,000 to $10,000, if you want to go pretty.
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All right, let’s get back to the podcast.
So, before we transition to some of the hidden costs, I have two random costs that you might need to think about. One is the licensure fees for your state. You may have already paid this if you were working for another entity, so it could be a non-issue, but this can range from $100 to $500. And then CEs also can vary pretty significantly. I think you could go [00:27:00] with some of the commoditized CE sites and do a subscription of $50 a year, $100 a year for unlimited CEs. You should be good there.
Let’s transition and talk a little bit about hidden or maybe overlooked costs. One is supervision or consultation fees. So if you’re a newer psychologist or you’re trying to work with a new population, you’re going to need to pay for supervision or consultation. I would ballpark at least $150 an hour for that, all the way up to, depending on where you are, $300, $400 an hour for clinical consultation.
Business consultation will also range from, gosh, could be $200 an hour all the way up to, back when I was making some changes in my practice, this is almost 10 years ago now, I was paying close to $800 an hour. So consulting can vary [00:28:00] widely as well. That’s a theme in this episode, as you can tell.
Another hidden fee that you might not think of is credit card processing fees or payment processing fees. So that’s going to be about 2.9%, we can call it 3% of any payments you receive via credit card, plus 30 cents per transaction. If you’re billing $10,000 a month, then that’s going to be $300 in credit card fees plus 30 cents per transaction.
Another hidden fee, you may want to hire some admin support. That can range from $20 to $40 an hour. If you’re just launching, you can easily do 5 hours a week for admin support. So that’s going to range from about $100 to $200 per week, or $400 to $800 per month.
Secure email or [00:29:00] fax system, that can be, let’s just call it $15 to $30 a month to go in on those. Building workflows, templates, and things like that, you can pay folks to do that for you. That could be anywhere from probably $50 to $200 an hour, or you can just take the time and do it yourself, and then you’re paying in time versus money.
Down the road, you’ll have to think about test kit renewals and replacement forms. So the cost of goods sold is what real businesses call this number, but it’s essentially how much it costs you to administer an assessment? For us, we ballparked at around $150 per evaluation. That includes all the forms, questionnaires, test kit materials, digital scoring, things like that. So you can do that number for yourself, but a good ballpark might be about $150.
Insurance paneling support, this could [00:30:00] be, I’ve heard $100 per panel, somewhere in that range. So, depending if you want to pay someone to panel for you, you can anticipate paying about $100 per panel, give or take.
I think that’s about it, as far as hidden costs and things to think about. We could keep turning over rocks and finding tons of little fees here and there, but I think we’ve covered 98% of the costs associated with starting a practice.
What are we looking at, then, when we boil all this down? There are three budget scenarios as far as I’m concerned. You can do your lean self-starter bootstrapped scenario, which is going to come in around, let’s call it $8,000 to $10,000 all in to launch a practice, [00:31:00] and get things going.
You can go with a moderate hybrid approach. So this is where you’re spending a little bit more on office furniture, maybe a broader set of test kits, a little bit more on a website, and branding. Maybe you pay for an attorney, that kind of thing. You do some marketing.
This is going to fall, maybe more in the range of, let’s call it $12,000 to $15,000, depending on how much you want to spend. I would say this is probably the most common scenario. So if you walk away with nothing else and you hear nothing else during this episode, then you can just have that number stick in your head. You will need, let’s just call it $12,000, to launch your practice.
And then on the upper end, we’ll call this the premium launch. Maybe you’re in an expensive area. You get a really nice office. You furnish it really well. You do a [00:32:00] full test battery where you’re spending $8,000, $10,000 on your kits. I know there are plenty of you out there who are like, oh my gosh, I spent way more than $8,000 to $10,000, but we’re just going to call it $8,000 to $10,000.
Website, you pay a lot for the website. You have someone do it for you. You hire some help right off the bat. You do some Google ads. You are putting in a buffer for some income delay. You can easily get up into the $20,000, maybe even $25,000 range if you want to do a premium option.
So with all that said, you can clearly tell there’s a lot of fluctuation and variability in how much you might spend. The good news here is that you have a choice. So you can go as lean as you want. There are lots of DIY options if you’re willing to trade time for money and do things yourself. [00:33:00] And if you have the money to spend, then you can also spend the money and save that time.
So, how do you minimize some of the costs here? Let’s talk about cost-saving strategies a little bit, if you want to go that route. One, you can buy used test kits. There are tons of advertisements for used test kits on The Testing Psychologist Facebook group and other listservs. You can buy in bulk with your scoring subscriptions. So, a lot of the questionnaires, in particular, will give you a discount for buying in bulk.
You can start with just a few core measures. So that question comes up a lot. I’m not going to dive into it here on this episode, but the question of basically, what measures do I need to get started? A lot of people buy too many. I think we over-test in general. So I would be deliberate about this and not overbuy in the beginning.
You can also try to work out arrangements, like if you have a local [00:34:00] university or training clinic, and they would allow you to borrow materials. If you have a colleague and you want to share some materials. Those are some great options to save on the test kits.
As far as branding and marketing, like I said, Squarespace and other similar tools are pretty easy to do yourself, and have them look decent. You can do DIY graphic design, branding, and that kind of thing with something like Canva. These are very small monthly subscriptions where you’re not going to be putting out thousands of dollars to someone to do it for you.
But just know, typically, unless you have an eye for that kind of thing or are good at copying what you may see somewhere else on the internet, the quality is probably going to suffer. This is one of those places where, unless you have an eye for design, you know someone who does, or you can copy well using these tools, I would [00:35:00] probably consider paying someone at least a little bit of money to do your website and branding. But you can DIY all of that and save quite a bit of money.
Other ways to save money, like I said, don’t pay an attorney to do all of your paperwork for you. Just purchase a packet from someone and have an attorney review it, or even just have ChatGPT review it and give you some suggestions.
Okay, so we are moving right along here. Hopefully, you have a decent idea of what it might cost and how to save a little bit of money. Let’s talk about the financial part: how to make this happen.
One component we did not talk about here is the personal income component. We’re just talking about how to launch a testing practice and how much that will cost. On top of that, depending on your personal financial situation, you may need to add 3 to 6 months [00:36:00] of personal living expenses if you plan to just leap into private practice without any other income, partner income, or something like that.
So when you’re thinking about how much money do I need? How much do I need to save? You can take the amount that it will take to launch your practice, which we will ballpark $12,000 for a middle of the road option, and then add 3 to 6 months of personal expenses on top of that, if you’re trying to figure out how much do I save before I can take the leap into private practice.
That accounts for the revenue ramp-up. So I tell people to ballpark 6 to 9 months before their practice is in a viable place where it can sustain you and is hitting probably 75%, 80 % of your income target. So with that 3 to 6 months of personal living expenses plus maybe a little three month ramp up for revenue, then that [00:37:00] gets you in that 6 to 9-month range where, essentially you need to be prepared for, I would say, if you’re being super conservative, nine months of business and personal expenses in order to launch a practice. That should be pretty safe.
So, how do we do that? How do you actually fund this stuff? One, you can save money. So if you’re in another job, you can set a savings target and just save up over time until you are ready to leap. So, saving for those nine months of personal and business expenses, you can just save it up.
What if you can’t save it up, or you don’t want to save it up? You want to find other funding sources. There are lots of options. One, you could do a 0% credit card. There are a lot of credit cards out there that will give you a 0% interest rate for the first 12 to 18 months while you [00:38:00] launch your practice.
These are great for a lot of the expenses. You likely can’t put your office deposit, lease, and rent on a credit card, but most of the other expenses that we talked about, you can put on a credit card. So this is great for people who just have short-term needs. You can pay it off within 12 to 18 months, and you need the money relatively quickly to make large purchases for test kits and things like that, furniture and so forth.
This is the route that I went. I got a 0% credit card and then just set up a payment plan where I knew I would pay it off within, I think, 12 months back then. And that worked out well. So, a 0% credit card is an option.
Typically, you can get approved pretty quickly. The [00:39:00] balance might be a little bit low because you are a new business, but this is likely a viable option for a lot of folks.
The one thing you want to look out for here is a high interest rate after the initial 0% interest rate. So most of the time, if you go past 12 or 18 months, it’s going to default back to that high typical interest rate, and then you’re going to pay a lot more on those expenses if you haven’t paid them off.
Another option is, small business loan or a line of credit. I think these are great for larger needs. A small business association micro loans, for example, you can get up to $50,000. Bank or credit union loans are out there. You do have to have good credit and some documentation of your business. So this can be a little tricky. It’s like a chicken or the egg question, but [00:40:00] these are good options if you need larger amounts like $10,000, $15,000, $20,000, $30,000, $40,000. This is where we get into small business loans or lines of credit.
I like the line of credit option just to have a revolving line of credit for your business if you need it as a backup or emergency funding source, but lines of credit also work well for short-term funding as well. So these are good because the interest rates are typically lower than a credit card. So not a 0% credit card but typically lower than a regular credit card interest rate.
You can pay them back over longer terms. So the repayment period might be 18, 24, or 60 months. These can work well for larger amounts of funding that you want to pay over a longer period of time. And you can look at [00:41:00] Small Business Association, you could look at your bank or credit union, you could look at an online lender like Fundbox or Bluevine.
We have our line of credit right now for our practice through Bluevine, which is going to probably give you faster approval, but maybe a higher interest rate. So these are all options as well. It’ll also help you build business credit, which is great.
These can be difficult because you often have to document some kind of business income. And if you’re just starting out, then you may not have that. Some of them have loopholes or provisions for businesses that have just started out, so you can do some research and figure out if that works for you.
The third option, you can look at grants. There are plenty of grants out there for mental health providers or minority owned businesses, or women-owned businesses. Some examples that I found were the Amber Grant for women entrepreneurs, the NASE Growth Grant for micro businesses, state-level small business grants where you can [00:42:00] check with your secretary of state or economic development office, and then private foundation grants.
The pro here is that it’s free money. You don’t have to repay it, which is awesome. It can also add some legitimacy to your practice. Cons are that they’re competitive. The application is typically pretty time-consuming. It may be months from start to finish between applying and having the money dispersed. So this, to me, is one of those things you would maybe look at when you launch your practice, but not count on it for 6 to 12 months down the road, and in the meantime, you would need another funding source.
Other options: you could do a personal loan or a home equity line of credit. This is good for low-interest, long-term borrowing if you already have good credit or home equity. Interest rates are pretty low. You can use it flexibly, [00:43:00] which is nice. Draw on it when you need it. Only take as much as you need. And then pay it back and so forth.
The difficulty here is that you are bringing your personal assets into the business; there’s risk there, for sure. The application process can be a little bit lengthier, certainly than a credit card, and might take a while. And you have to provide more documentation. So I think you would only consider doing this if you’re pretty confident in your practice’s viability. I’m risk-averse in terms of bringing personal assets into the business finances, if you can avoid it.
I’ve never heard of anyone doing this, but it is an option. You could do something like peer-to-peer lending or a crowdfunding kind of thing, where you go online. There are plenty of options, like Lending Club or Kiva are options for peer-to-peer [00:44:00] lending.
They are viable options. I’ve just never heard of anybody doing it. There’s no bank bureaucracy involved, which is nice. It’s all human to human. The cons, though, are that you have to sell your story to someone else. To me, that’s hard. I’m not great at that. But if that’s you, then this could be a great option for you.
And then lastly, there is bootstrapping. We talked about saving over time. We talked about building up slowly. I like the bootstrapping approach. I’ve done that in all of my businesses. And so this is where you start slow. You get only the kits you need. You keep your part-time job while you’re building your practice. You allocate funds to the private practice as they’re available. And you just know that you’re going to do a slow ramp. Maybe it’s going to take a year [00:45:00] to fully build up the practice before you quit your job. And that is totally fine.
I love that approach. If you’re not pushed into leaping into private practice, and there’s not a ton of urgency, this, to me, is the best hybrid option. You keep your job for 10, 20, even 30 hours a week. You build up your practice on the side. You ramp down your job as your practice gets busier. And it provides you a safety net of funding and income while giving you a longer runway for your practice. So if you can do that, that’s great.
So all that said, just some wrap-up strategy, recap, mindset tips, things like that. So if you take nothing away, like I said, let’s ballpark about $12,000 plus about six months of personal expenses [00:46:00] to launch your practice.
I think before you get into any funding, you want to think about a repayment plan. So it’s exciting to be approved for a credit card or a loan, and it feels like, oh my gosh, I’ve been given this money. But you do have to repay the vast majority of options. So just think about that ahead of time, how you’re going to do that.
I’m a big fan of making things concrete. So if you end up borrowing, let’s just say, $15,000. Well, let’s call it $12,000, just to keep it even and map it to a year. So $12,000, you’re to pay that back in $1,000 a month. How many clients are you going to have to see to make that payment each month? And just do that math, and map it out.
Certainly, you want to avoid any kind of predatory lending situation. You can tell these from a mile away. I seem to get 50 texts a week [00:47:00] from people trying to give me funding for my business. It sounds attractive, probably just predatory. So don’t get wrapped up in that.
And then the last thing is being careful not to overfund your practice if you can avoid it. So you can always upgrade down the road. I think the things that are super important to spend money on in the beginning are your test kits, and make sure you have what you need. You don’t need to overtest.
You need a basic website. You need some basic branding, but you can always upgrade down the road. So, just avoid that temptation to overfund your practice in the beginning. I would put money into Search Engine Optimization, and a little bit of marketing, if anything, but it’s tempting to throw a lot of money at a fancy website, or even a logo and branding, and things like that. Honestly, I don’t think you need that as long as you have some basic provisions in those areas. And then a nice marketing [00:48:00] engine via SEO. You should be pretty good to go.
So I hope that you’re walking away, as always, with some concrete information and a little bit of hope. The intent here is to demystify the launching costs. It can sound like a lot of money, and when you break it down, like let’s just say we’re paying back $1,000 a month, typically, that’s going to be much less than you would charge even for one evaluation. So I think it’s very doable.
And as I’ve said in the past, math can solve or help a lot of anxiety. So do your numbers, look into some of these funding sources, and know that it is totally doable.
Alright, y’all. Thank you so much for tuning in to this episode. Always grateful to have you here. I hope that you take away some information that you can implement in your practice and in your life. Any resources that we mentioned [00:49:00] during the episode will be listed in the show notes, so make sure to check those out.
If you like what you hear on the podcast, I would be so grateful if you left a review on iTunes or Spotify, or wherever you listen to your podcasts.
And if you’re a practice owner or aspiring practice owner, I’d invite you to check out The Testing Psychologists’ mastermind groups. I have mastermind groups at every stage of practice development: beginner, intermediate, and advanced. We have homework, have accountability, we have support, we have resources. These groups are amazing. We do a lot of work and a lot of connecting. If that sounds interesting to you, you can check out the details at thetestingpsychologist.com/consulting. You can sign up for a pre-group phone call, and we will chat and figure out if a group could be a good fit for you. Thanks so much.
[00:50:00] The information contained in this podcast and on The Testing Psychologist website is intended for informational and educational purposes only. Nothing in this podcast or on the website is intended to be a substitute for professional, psychological, psychiatric, or medical advice, diagnosis, or treatment. Please note that no doctor-patient relationship is formed here, and similarly, no supervisory or consultative relationship is formed between the host or guests of this podcast and listeners of this podcast. If you need the qualified advice of any mental health practitioner or medical provider, please seek one in your area. Similarly, if you need supervision on clinical matters, [00:51:00] please find a supervisor with expertise that fits your needs.Click here to listen instead!