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One of the most frequent questions I get is, "how do I make the most money as a counselor?"
Let's try and solve this problem. Forget being a counselor. Forget having a profession. Let's say you just want to make a ton of money.
As fast as possible.
In a way that was legal.
What would you do?
You'd go into real estate. You'd start a business. You'd buy stock/bonds/crypto.
These are the three main tools of wealth. Let’s do an overview of these tools and then apply them to counselors.
Real Estate.
Real Estate is the easiest way to become a millionaire (on paper at least). This is because it's fairly easy to get a large loan to buy a big house. If you wanted to, you could get a large loan, buy a house, rent it out, and then use the house as collateral for a second house.
Rinse and repeat and in a few years you'll have several houses feeding you rental income, while they increase in value, with you having put very little money down.
Of course it's not quite that simple, but I do think real estate is the most straightforward way to become wealthy.
It's much more straightforward than, say, starting a business.
Start a Business.
While real estate is the most straightforward way to wealth, owning a business is how you create the maximum amount of wealth.
This is in large part because businesses sell at a multiple of their revenue. A small business might sell for 2.5x its revenue. A large business might sell for 10x its revenue. So a business generating a million dollars a year might sell for 2.5 million while a business making 10 million might sell for 100 million dollars.
The trouble is, running a business is tricky. You've got to hire and manage people, deal with regulations, occasionally get sued, and a bunch of other things.
Ideally you'd own the business without running the business. That means either hiring an operator to run the actual business or buying stock.
Stocks and other financial assets.
Owning stocks (and other financial assets) is the closest thing to having passive income. That's because when you own stock you own a piece of a business. And, if you can pick a good business, you essentially get to own the business without having to run the business.
The trouble is that picking which stocks to buy is really, really, really hard. Most of us (like 99.5%) can't do it. The trick is to play an easier game. Instead of trying to pick stocks, you'd buy a stock index that tracks the S&P, buy government bonds, or in the crypto space, only buy bitcoin (as opposed to other cryptocurrencies).
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How to use these tools to make the most money as a counselor.
If you wanted to make the most money as a therapist you'd probably do something like,
Own your own building that you rented to therapists. You'd use their rent to cover your mortgage and maintenance, and allow the building to appreciate over time. You'd also want to charge enough to have a little extra cash flow.
Start a therapy adjacent business, preferably in something that you know well and that has low start up cost. For instance you could start a tutoring service.
You'd save the excess in some combination of a stock index, US bonds and/or bitcoin.
Let's run some numbers.
In our previous article, The Salary of A Group Practice Owner Will Probably Shock You, we estimated that a reasonable salary for a solo practice owner in our area was $142,914 (after expenses).
Let's use this same scenario and say that you bought a building.
Since you'll be owning your own building, you won't pay rent. We estimated rent at $550 a month, or $6600 a year. So let's add that back into your income.
$142,914
$6,600
-----------
$149,514
In our example we assumed rent for a 5 person office was $2,550 a month. Let's say you fill that with 4 other people. That means rent per month is $637.5 per person. But you'll want to charge a little extra for repairs as well as a little bit of cash flow. So let's say you charge an even $700 per month.
That means you're making an additional $62.5 per month per counselor, so that’s an extra $250 per month (62.5 x 4 =$ 250).
Over the course of a year that's an extra $3,000. Let's add that to your total income.
$149,514
$3,000
------------
$152,514
Finally, let's assume you start a therapy adjacent business where you tutor new therapists on passing the NCE.
Tutoring packages vary. A reasonable price is $400 for an 8 week NCE course. The first time you create the course you'll spend a lot of time and money creating materials but after that you'll have the materials made. Let's say you get 5 people in the course each time. That's an additional $2,000. If you run the course twice a year, then you'll make an additional $4,000 per year.
Let's add that to your total income.
$152,514
$4,000
-----------
$156,514
You went from making $142,914 to making $156,514. That's an additional $13,600 per year. Not bad.
Now, let's say you don't raise your lifestyle. Instead you invest that money in a stock index for 10 years. At a 10% rate of return you'd have $216,784.97
But that's not all. Houses appreciate 3-5% a year. So let's assume appreciation on your building at 4%. Your building has gone from being worth $400,000 to being worth $592,097. That's an additional $192,097.
That means that you've earned an additional $408,845.97 over the decade.
This of course is on top of anything you've saved over that time.
Let's say that you were already saving 10% of your income. That means your yearly savings was $27,891.2. If you invest that money and add it to our total, you just earned a grand total of $636,610 over the next 10 years.
Not bad.
I realize we’re making a lot of assumptions. It takes time to get all this stuff set up, and we're not factoring in all the things that will go wrong. Still, I think this is directionally correct. While some things will go terribly wrong, others will go fantastically right.
On the one hand you could default on your lease, waste money trying to build a NCE course, and the stock market could plummet. On the other hand your tutoring business could take off, you could get the opportunity to buy an extra building for cheap, and the stock market could have a historic run.
Mostly likely some combination of the good things and the bad things will happen. And you only need a little bit of financial good to dramatically outpace the financial bad.
If you default on your lease the bank takes the building and you’re back at zero. If your tutoring business takes off, it could generate 20k, 30k even 100k in additional revenue.
So yes. It will be difficult. You will have ups and downs.
But that doesn’t make this bad advice. What makes it bad advice is it encourages a lack of focus.
Why this is a bad idea.
I wrote this article for two reasons. First, because it was a fun thought experiment. Second, because this is the type of advice people expect us to dish out.
But, honestly, for most of us this is bad advice.
Each thing you add isn't a “side hustle,” it's a new career. If you want to have a practice and own a building you have to become a counselor AND a real estate developer.
If you want to have a practice and tutor new therapists you have to be a counselor AND a curriculum designer.
If you want to have a practice and pick stocks you have to become a counselor AND a financial analyst.
It's a complete career shift. For most of us, that big of a jump is really hard. So hard that if we split our attention we will get half the results. If we have a practice and then try to go into real estate most of us will do both at 50%.
The alternative is to keep working in our practice and make it better and more efficient. For counselors, most of the time that means simply finding ways to raise our rates.
In the above example we used an estimated salary of $142,914 a year after expenses. That works out to about $135 per session. If we raised our rates to $165, guess how much we would make per year?
$177,414 (use this calculator to run your own numbers).
Now of course, we'd have to figure out how to get more clients and how to get off of insurance.
But making money is never easy. Anyone who told you otherwise was just lying.
So you can do the “side hustle” thing and make $156,514, or you can figure out how to raise your rates and make $177,414
Do as I say, not as I do.
That being said, I'm not solely focused on running my practice. I have a business where I (along with my business partner Paul Peterson) coach people on how to launch their practices.
I do this partly because I need something else besides straight counseling. I also am involved with various projects around deliberate practice and process coding for counselors. I'm involved in these because I'm convinced that deliberate practice and process coding are the leading edge of how we create more effective therapists who help more people.
I say this to indicate that there's a tension here.
On the one hand if you want to make the most money you should follow the simplest past to wealth.
On the other hand, there is no one right way for everyone. And there are reasons other than money to work on certain projects.
You've got the tools now. Find your own path.
I wish you only the best of luck.
Best,
Jordan (the counselor)
Paul Peterson and Jordan Harris are co-founders of Private Practice Incubator, a consulting firm dedicated to:
Helping clinicians earn more money.
Helping clinicians help more clients.
If you'd like to learn more about launching your practice, visit us here.
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