Try My Therapist Rate Increase Letter Template [So You Don't Burn Out]
Takeaway: Whether you're a seasoned therapist or just starting out, it can be challenging to determine when and how to increase your rates. In this blog post, I delve into the best practices for giving a polite price increase notice, including a customizable rate increase letter template you can use. My guide will help you navigate this important aspect of your practice with confidence.
As a therapist in private practice, it's inevitable that you will increase prices for your therapy services over time. There are a lot of reasons why you would do this. You may realize that you've been undercharging for years, your own costs will increase due to inflation rates, or you may simply decide you want a raise to improve your quality of life. Knowing how to communicate rate increases effectively, confidently, and ethically is critical to your well-being and the longevity of your private practice.
In this post, I'll cover...
How to set your ideal rate,
Common reasons to consider increasing your rate, and
How to inform clients of your increased rate (including my customizable template).
Plus, I'll touch on how private practice coaching can give you the confidence and support you need to make business decisions like these.
Let's dive in.
Everything you need to know about setting (and increasing) your rate in private practice
Rate increases mean more money in your pocket that you can use to pay your rent, take time off, save for retirement, or treat your friends to dinner.
In many cases, rate increases may simply enable you to actually afford your business operating costs and basic needs. Therapists deal with financial stress at an alarming rate despite us being some of the most highly educated and trained professionals.
And though the solution to this problem is right in front of us—increasing rates—most of us feel extreme guilt, worry, and fear about doing so. You may worry about offending longstanding clients, losing them altogether, or boxing people out of being able to access therapy.
(If you're concerned about your clients not being able to afford working with you, check out my blog on How to Set Private Practice Fees to learn how to create a sliding scale that works for you and your clients.)
In order to provide premium quality therapy to all your clients and maintain your business for years to come, you must become intimate with money and gain the skills to make smart financial decisions for your business, including how to set your fees. And that's exactly what you're going to learn now.
4 of my top tips for determining your rate as a private practice therapist
I used to be intimated by money. I felt uncomfortable talking about it with clients and I set my fee based on guilt and fear rather than what I needed to earn to live a comfortable life.
Now, I have fee setting down to an exact science thanks to my tool, The Magic Sheets. You can download it and fill it out as you go. Here, I'm going to walk you through the key decisions you need to make to determine your hourly rate as a therapist.
1. Determine how many clients you'd like to see in a week.
This can be a tough question for therapists. They often come up with this number based on the idea of a 40-hour work week or their prior experiences working in agencies, hospitals, or schools.
When you're in private practice, it's important that you leave adequate time in your week for all the parts of your work outside of seeing clients. This includes marketing, office administration, record keeping, and CEO visioning time.
Most therapists also think that more clients equals more money, but it doesn't have to. For a moment, I want you to imagine that you could make exactly as much money as you want seeing as many or as few clients as you would like. You may take some time to journal on what an ideal week would look like for you. Not just at work, but in the rest of your life too. What number of clients comes to mind when you imagine that?
2. Determine how many weeks off you'll give yourself.
Don't skimp on this number! You have decided to create a business. You deserve for it to be a great place to work. Plus, you can provide more value to your clients when you take great care of yourself. You'll need to decide how many weeks of vacation and sick time you may need. If you're not sure where to start, try starting with 10 weeks off. You can always adjust this number as needed.
3. Determine your cancellation policy.
I have an entire blog post on this topic and why it's so important to choose a "limited" or "no" cancellation policy. Decide the total number of times a client can cancel in a given year without paying the session fee. You'll need to know this number in order to set a fee that allows you to hit your revenue goal. If you're not sure where to start with this, I suggest somewhere between 0 and 4 free missed cancelations per year.
4. Determine how much money you would like to earn in a year.
Again, your number may be based on how much you've made in the past in a nonprofit agency or government job. As someone who used to avoid budgets like the plague, I know that can be a hard place to start. If you need help, you can use The Bad Therapist ® Magic Sheets to create a budget so you'll have an accurate idea of what you need to earn to cover your costs. I'd recommend that you aim to bring in at least $150,000 in revenue.
Taking these steps and using the Magic Sheets will ensure you have calculated a fee that's right for you. Your fee shouldn't be a guess based on what other therapists in your area are charging. It also shouldn't be a lowball number just because you're a new provider. It should be one that not only meets your current expenses but sets you up to achieve your future financial goals.
5 reasons why you should increase your rate
Price increases are a normal part of any business. Though new prices might feel scary, they are necessary for you to continue to provide quality services to clients and ensure your profit margins are healthy.
I want to reassure you that most clients have some understanding that businesses need to raise their rates from time to time. Before you write your fee increase letter using the example at the end of this blog, let's review the five most common reasons therapist need to raise their fees. Keep track of which ones resonate with you.
1. You're probably undercharging
Don't feel bad. Most therapists are. You likely set your fee based on what your friends and colleagues were charging, making sure not to choose a higher rate than your mentors and supervisors. After all, you don't want to hurt their feelings or seem too big for your britches!
You may also have based your fee on what you made at an agency or group practice without taking the time to calculate your new business expenses. Or your fee may just be based on affording a life that you're actually not that satisfied with anymore. No time off since starting grad school? Yeah, that needs to change—which brings me to my next point.
2. You need a vacation
From a client care perspective, taking time off to reset and renew yourself will mean you can do better work with your valued clients. Plus, when you enjoy your time outside of work, you don't find yourself feeling resentful of your clients when they share about their own good fortune.
As a person who is especially sensitive to the plight of others, you may feel guilty imagining having more than enough to meet your bare expenses. I want to reassure you that it's okay to do more than just survive.
It is true that not everyone in the world has the privilege of having time off. But just because that's true, doesn't mean that you also have to forgo creating a life where you can. You may even find that you are able to contribute more to the causes and people you most want to impact after you've had a little R&R. You might surprise yourself.
And look, if it turns out that you hate vacations and you do start to turn into a terrible, greedy monster, you can stop going on vacations. 😉 You're allowed to experiment and adjust.
3. You want to reduce the number of clients you're seeing
Maybe you're tired. Maybe you had a baby. Maybe you want to spend more time on your writing practice, create an online course or program, spend more time with friends and family, or do activities you love.
If you want to reduce the amount of time you spend providing therapy and still want to maintain or increase your income, the most straightforward way will be to do a rate increase.
4. You need a financial safety net
It is very cool to "not care about money" when you're younger, but the reality of avoiding intimacy with your money tends to loom larger as you get older.
Without a robust social safety net, Americans are largely left to their own devices when preparing for retirement or unforeseen health issues that may impact their ability to work. A healthy private practice fee will not only pay for your personal and business expenses, but it will also allow you to create an emergency fund and save for major milestones.
5. You need salary increases to deal with rising costs and inflation rates
At the very least, you should be raising your rates annually to keep up with increased inflation. Years ago, a friend of mine who works in financial education shared this with me. At the time, I was early in my money journey and it blew my mind! It seems so obvious now. But so many therapists won't raise rates for years. Meanwhile, their costs are creeping up every year.
Once your new rate is calculated and you've shifted your practice to that fee, you should continue to raise your rates on a regular basis. In my therapy practice, I raise my rates by $15 annually during my birthday month (I'm a Virgo in case you're wondering) to keep up with increased costs.
6 of my best tips for communicating your price increase to new clients and existing clients
The biggest barrier to therapists raising rates is fear that they will lose clients or concerns that certain clients can't afford higher rates. The truth is that more people are seeking therapy and the stigma surrounding mental health is decreasing. The tide is changing and more and more clients are realizing their mental health is worth the investment.
Furthermore, having a higher rate for your therapy doesn't mean you have to leave people out. In fact with a rate change, you can actually afford to offer sliding scale spots without going broke yourself.
Plus, there are other great ways to ensure you get your full rate while also making care accessible for clients. With Mentaya, you can help your clients take advantage of their out of network benefits while also ensuring you get paid what you're worth. The best part? It's free to use and Mentaya handles all of the claims, freeing up more time for you to do you.
When you finally take the leap and let your clients know about your rate increase, don't be surprised if they are actually happy for you and even proud of you. This isn't an uncommon response and many clients are happy to see that you are taking care of yourself. Of course, certain clients will not feel this way and that's okay too. Remember that you have the clinical skillset to handle a variety of client responses and you are allowed to put your needs first.
Once you calculate your new rates, it's time to communicate your rate increase to your clients. Here are some tips for effectively communicating your new rates with clients.
1. Add rate increases to your informed consent
The increased price of therapy will be less surprising if clients are prepared by seeing it first in their informed consent. Add a paragraph in your informed consent that includes annual fee increases and a statement that fees may be increased at your discretion with notice.
2. Give 3 months' notice
When informing current clients of rate changes, give 1-3 months notice. "Effective immediately" price increases are not clinically or ethically appropriate. Giving your clients notice allows time to discuss the impact of an increased rate and handle any negative impact in a clinically appropriate manner.
It also gives the client time to decide whether or not working with you at the new rates fits into their budget or if you will need to prepare for a termination process and provide the client with appropriate referrals to a new provider.
3. Provide the client with a price increase letter
Therapists wonder whether it's better to communicate rate changes in session or a rate increase letter. My personal preference is to communicate the rate change in session and then follow up with a rate increase letter. Whether you choose to start with a letter or a face-to-face discussion, I still recommend having information about your increase in writing.
4. Be clear with clients about their options
Most therapists don't prepare for what they'll do or say if a client says they can't afford the rate increase. Are you terminating? Are you suddenly saying, "Never mind!"? Do you drop your fee back down?
Before having the conversation, get clear with yourself about what your clients' options are. Know how long you will continue to work with a client at their current rate. If you plan to increase your rates but would also accept a lower rate, know what the "floor" is. Know how low you can go and how many clients you can afford at that lower rate.
5. Don't assume your clients are going to leave and don't make it weird
When you act like you're delivering terrible news, your clients are more likely to perceive what you're saying as terrible news. Don't explain or attempt to justify your fee increase. Chances are you're raising your fee for a multitude of reasons, some of them deeply personal. When clients ask me why my fee is increasing I say, "This is what I calculated my fee needs to be to support the business and myself so I can continue to provide premium quality care."
Many clients won't mind a fee increase at all. They'll receive the information and quickly move on. While it's true that some clients will be unhappy with your new rates and may even decide not to continue working with you, many won't. And you won't help that conversation go any more smoothly by making it weird. Which will be a lot easier if you...
6. Spend some time on your own money wounds
Raising rates may bring up a lot for you. (It does for most therapists.) Concerns about what other therapists will think about you, the people you may not be able to serve, being in a different socio-economic class than the one you grew up in, and so much more can prevent you from charging fees that would actually allow you to thrive.
If you feel angst about increasing your rates, take some time to explore your own associations with money, value, wealth, and work. I don't care what your socio-economic background is—we ALL have money shit to heal. I've been working on mine for years and though my relationship with money is so much better now (read: less scary), I still have work to do.
If you're in the same boat, I hope you'll do yourself a favor and join my online community, Healing Money. There you can find my free course, Healing Money, specifically made for therapists wanting to heal their money wounds.
My sample rate increase letter to therapy clients
You have calculated your perfect fee, made a plan for your rate increase, and spent some time attending to your own relationship with money. Now, all that's left is to share the new price increase letter with your clients.
As I said before, I typically introduce fee increases in session and would send a fee increase letter only so that there is a paper trail proving I informed them. Because of that, my rate increase letter is very brief.
Feel free to use this simple practice rate increase letter and make any changes to suit your needs. You may want to include more personalizations and niceties but remember, this isn't a place to explain, justify, or ask for permission or approval. Keep the communication clear and clean.
Try my therapist rate increase letter template below!
Dear CLIENT NAME,
Thank you for being a valued client at NAME OF YOUR THERAPY PRACTICE. I'm writing to inform you that the annual rate increase of $XX will be going into effect on DATE. This may work just fine for you or perhaps you have questions or concerns. Both are perfectly normal responses. Regardless, I will make sure we discuss the rate change in your next session to ensure we're on the same page or address any concerns you may have. My goal is to continue to support you with the highest level of care.
Thank you again for being a valued client. Look forward to seeing you THIS/NEXT week.
Warmly,
YOUR NAME
When informing clients of your rate increase, I also recommend sending an official notice which you can attach to the email or provide your client with during a session.
How much should your fee actually be?
I love how straightforward this template is, and now you just need to plug in your own information. But here’s the thing—this letter will only make a big change if you have clarity and insight into your practice and know exactly what your fee increase needs to be! For example, maybe you need to raise your fee by $15 with half your caseload or maybe in your specific practice it needs a much larger increase that you roll out over time. Let me give you (for free!) the tool I created to figure all this out so you don’t wait another six months to raise your fee, but feel empowered to make the change and start making more money right now.
Sign up for my free private practice fee calculator, The Magic Sheets.
Beloved by private practice therapists everywhere.
Still feeling intimidated by the idea of a price increase? That's where I come in.
It's normal to worry about what will happen if you change rates with clients. However, the consequences of continuing to undercharge don't just impact the service you provide—they impact your whole life. And your well-being is far too important to let fear of the reaction of select clients stop you from raising your rates.
Working with a business coach can help give you the support and courage to make dramatic changes in your business for the better. As a therapist myself, I understand the risks and rewards of private practice. That's what makes business coaching with me so different.
Through my fee course, The Fee Formula, private business coaching, my private practice building group program, coaching intensives, and retreats, I've helped therapists achieve their private practice dreams. I help you clarify your ideal client, hone your marketing and messaging, heal your money wounds, and increase your visibility online to increase your income and create a bigger impact. Explore the 'Work with Me' section on my website to learn more about current offerings.
