Empowering women clinicians as private practice business owners
“You’re going to do what? That will never work.” This was often the response I was greeted with when I told people I wanted to create a therapy group practice, but instead of it being a private for-profit entity, I’d incorporate it as a nonprofit.
Almost six years into running a nonprofit group practice, I still get asked that question. I also get asked why I would go through the trouble, and what benefit there is to being a nonprofit entity.
For me, the answer is simple—I wanted (and still want!) to change how we think about private group practices, community mental health, and mental health for our cities and communities.
After years of working in community mental health, I wanted a different way, something other than giant caseloads and massive burnout.
I wanted clients to walk into a warm and welcoming space and feel valued by the intentionality of the therapist they saw.
I wanted therapists to feel like they were a part of something for the community, not just a group practice owner’s business.
And I did not want to do it alone or without accountability. I wanted to have others with me, supporting the mission of the practice.
The community mental health model didn’t fit for what I wanted to do, and neither did running a for-profit practice, which led me to ask, “Why can’t we have a group practice that’s a nonprofit?”
When I started, I didn’t know the first thing about running a group practice or a nonprofit, but over the last six years, I have learned some of the pros and cons that come with the for-profit and nonprofit models.
I am going to discuss some helpful questions to ask yourself if you are interested in exploring incorporating as a nonprofit, including some key differences between for-profit and nonprofit entities that can highlight the right fit for you depending on your stated values and purpose as an organization.
What is a nonprofit?
According to Merriam-Webster, a nonprofit organization “is an organization or entity that is not operated for the purpose of making a profit... Nonprofits have a legally approved purpose or social cause beyond profit generation. Their income is not distributed to shareholders, but instead is invested back into the organization.”
In the United States, to receive tax-exempt status, an organization must apply for 501(c)(3) status with the Internal Revenue Service (IRS). For the purpose of this article, I will use nonprofit and 501(c)(3) status interchangeably.
Mission and your why
Nonprofits are often defined as mission-driven. This sets nonprofits apart, because everything comes back to and is guided by the mission of the organization.
In Simon Sinek’s book Start With Why, he says, “Knowing your Why is the first step to finding your voice and making the world a better place.”
What drove you to want to start a group practice?
Was it to make your community a better place?
Was it financially motivated?
Was it to be an excellent employer?
Was it to change the way mental health work is done in your community?
Sinek says, “The clarity of Why gives you focus.”
Our mission at Redemption Counseling Center (RCC) is: “Redemption Counseling Center (RCC) is a non-profit, group practice in Flagstaff, AZ. We are a team of therapists who have a desire and eagerness to meet the needs of those seeking counseling, including those who are uninsured or underinsured. We offer specialized services in EMDR, working with trauma, vicarious trauma, and faith and spiritual integration.”
When making the decision to be a for-profit vs. nonprofit organization, the why, as it relates to your mission, is one of the most important elements to consider.
After you have figured out your mission and your why, an essential question to ask yourself is: Can others get behind and support your mission?
For-profit organizations are not required to have a mission statement, but nonprofit organizations must present their mission to the IRS in the application process with justification for why the mission warrants a 501(c)(3) tax-exempt status.
Most people who start group practices want to make the world a better place, but everyone’s why is different.
Do you want to have full autonomy and be your own boss?
Do you want to dictate your own budget without oversight?
Think about whether or not your why is one you want to share with others and if their input can help shape the organization you have built or are wanting to build.
Leadership and accountability
All group practices are, by essence, more than one person, but nonprofit organizations take team to the next level.
Every nonprofit is required to have a Board of Directors for accountability and financial governance. This means that the founder/executive director does not have the last say in governance.
There is accountability and shared decision-making.
This can be incredibly invigorating, or it can feel stifling.
Knowing how you operate and who you want to share the practice with is essential when thinking about for-profit vs. nonprofit.
Nonprofits are set up to support a mission that serves others in the community, rather than the interests of the founder.
Financial implications
Nonprofits are able to generate income through fee-for-service, insurance, and donations.
Grants and government contracts can also be a way that nonprofits secure funding.
I am often asked if nonprofits have to “pay poorly” because so many have had experiences of working for nonprofits that barely paid minimum wage.
Nonprofits, by definition, put the money back into the organization, rather than the founder or employees taking the “extras.”
According to the IRS, nonprofits are permitted to pay “reasonable” compensation.
While compensation cannot be considered “excessive,” paying employees poorly does not need to be a marker of a nonprofit.
There are many pros and cons to running a group practice, and running a practice as a nonprofit is no exception.
Knowing what you, as the founder, want to do with your practice and the impact you want it to have on your own life and the community around you is important to consider.
Key differences that set group practice nonprofits apart:
501(c)(3) tax-exempt status: Nonprofits require an extensive application process reviewed and approved by the IRS.
Tax benefits: Nonprofits do not pay taxes on income received.
Governance: A nonprofit is overseen by a Board of Directors rather than solely by the founder or executive director.
Mission-driven: Nonprofits must have a clearly defined mission that drives their work.
Fundraising ability: Nonprofits can fundraise and provide donors with charitable tax receipts.
Community focus: Nonprofits prioritize serving their communities.
Ownership limitations: Nonprofits cannot be sold or used to generate profit for the founder.
Running a group practice as a nonprofit is not only doable; it can also be incredibly fulfilling.
How group practices engage in mental health care for our communities can manifest in many different ways, and the for-profit model is not the only possible way.
Nonprofit work doesn’t have to be unsustainable, with a burnt-out workforce within an organization that can never make ends meet.
Curiosity and exploration of your mission and your why can be an excellent way to lean into doing things in creative ways.
Get curious. Maybe there is a different way to make your dreams for your community come to life.
Sources
Internal Revenue Service. (n.d.). Tax information for charitable organizations. Retrieved from https://www.irs.gov/charities-non-profits
Internal Revenue Service. (n.d.). Form 1023: Application for recognition of exemption under Section 501(c)(3). Retrieved from https://www.irs.gov/forms-pubs/about-form-1023
Merriam-Webster. (n.d.). Nonprofit. In Merriam-Webster.com dictionary. Retrieved from https://www.merriam-webster.com/dictionary/nonprofit
National Council for Behavioral Health. (n.d.). Resources for nonprofit behavioral health organizations. Retrieved from https://www.thenationalcouncil.org
Sinek, S. (2009). Start with why: How great leaders inspire everyone to take action. Portfolio/Penguin.
Internal Revenue Service. (n.d.). Charitable organizations: Inurement/private benefit. Retrieved from https://www.irs.gov/charities-non-profits/charitable-organizations/inurement-private-benefit-charitable-organizations
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