The price floor: the number below which you are paying to work

Why the floor starts with your costs

The minimum you can charge per visit comes out of your own books: what the year costs to run, what you need to pay yourself, what tax that pay carries, and how many visits you will deliver. Divide the first three by the fourth and you have the floor; competitors' rates have no seat in the arithmetic.

A market-first price inherits somebody else's cost structure. A therapist subletting one room two evenings a week and a physical therapist leasing 1,400 square feet with a front desk can post the same rate, and one of them may be quietly losing money on it. The listed rate tells you what patients in the area have been asked to pay, and nothing about what your practice needs to collect, though it is the number everyone looks up first, because it is the one that is public.

The floor is private. It lives in your bank statements, your pay expectations, and your calendar, and no directory publishes it. It is built from a year of overhead, a salary chosen on purpose, the tax that salary carries, and a defensible count of visits. Each number has a trap, and every trap flatters the price downward.

Count the overhead first

Overhead is every dollar the practice spends in a year whether or not a patient shows up. The Small Business Administration's planning guidance has the right first move: sort every expense into one-time costs and monthly costs, and count at least a full year of the monthly ones 1Ref 1U.S. Small Business Administration (2026).Plan your business — Calculate your startup costs.The one-time versus monthly expense split, the guidance to count at least a full year of monthly expenses as the overhead input, and the general break-even formula, fixed costs divided by price minus variable cost per unit, that the per-visit floor adapts.. Send the one-time list to the startup budget and build the floor on the recurring list, annualized.

The recurring list is longer than memory produces on a first pass. Rent, the EHR subscription, the telehealth platform, liability insurance, license renewal and continuing education, bookkeeping, card-processing fees, the website, scheduling software, the laptop's replacement cycle. The Internal Revenue Service has one test for a deductible business expense: ordinary and necessary, meaning common in your field and helpful to the work. It doubles as the filter for what belongs 2Ref 2Internal Revenue Service (2025).Publication 334, Tax Guide for Small Business (For Individuals Who Use Schedule C).The ordinary-and-necessary test for what counts as a business expense and the cash-method rule that expenses count in the year actually paid..

Count what was paid, and when. Under the cash method most sole proprietors use, an expense is generally deducted in the year it is actually paid, whatever year it was billed or used 2Ref 2Internal Revenue Service (2025).Publication 334, Tax Guide for Small Business (For Individuals Who Use Schedule C).The ordinary-and-necessary test for what counts as a business expense and the cash-method rule that expenses count in the year actually paid.. The floor wants the same discipline: the overhead number is last year's bank and card statements, totaled, rather than a budget of intentions.

Keep the personal versions of employer benefits off this line. Health premiums, retirement contributions, and disability coverage are real costs of leaving employment, and they price into the salary line below, where the comparison against a W-2 offer lives. Splitting them that way keeps the same cost from being counted twice.

Pay yourself, then price the tax

The second input is a salary, written down on purpose. Start from what your work would earn as an employee: the last W-2, a current job posting, or the Bureau of Labor Statistics' occupational wage tables, which publish median wages by occupation and by metro area for exactly this kind of benchmarking 3Ref 3U.S. Bureau of Labor Statistics (2026).Occupational Employment and Wage Statistics (OEWS) — National Occupational Employment and Wage Estimates.The existence and shape of the OEWS program as the lookup for occupational median wages by occupation and metro area; no specific wage figure is taken from it..

A wage benchmark is wages only: the employer's share of health premiums, retirement, and disability coverage is not in it. Add a year of those at what they now cost you, or the pay line understates what leaving employment costs.

Pick the number a reasonable employer would have to pay for your hours, and resist the founder's instinct to pay yourself nothing. A salary of zero makes every price look profitable and defers the reckoning to the first month rent is due at home. Whatever number you choose, the practice has to earn more than it, because self-employment adds a tax that employment used to split. Self-employment tax runs a flat 15.3 percent, split 12.4 percent for Social Security and 2.9 percent for Medicare 4Ref 4Internal Revenue Service (2024).Self-employment tax (Social Security and Medicare taxes).The 15.3 percent self-employment tax rate, its 12.4 and 2.9 percent split, and the deductibility of the employer-equivalent half in figuring adjusted gross income., and it applies once net earnings from self-employment reach $400 for the year 5Ref 5Internal Revenue Service (2025).2025 Instructions for Schedule SE (Form 1040).The $400 net-earnings threshold that triggers self-employment tax and the 2025 cap of $176,100 on income subject to the Social Security portion..

As an employee you paid half of that through withholding and your employer paid the other half invisibly. As an owner the practice pays all of it, so the floor has to recover the salary and the tax on it together. The employer-equivalent half of the tax is deductible in figuring adjusted gross income 4Ref 4Internal Revenue Service (2024).Self-employment tax (Social Security and Medicare taxes).The 15.3 percent self-employment tax rate, its 12.4 and 2.9 percent split, and the deductibility of the employer-equivalent half in figuring adjusted gross income., and for 2025 the 12.4 percent Social Security portion stops applying above $176,100 of income subject to it 5Ref 5Internal Revenue Service (2025).2025 Instructions for Schedule SE (Form 1040).The $400 net-earnings threshold that triggers self-employment tax and the 2025 cap of $176,100 on income subject to the Social Security portion.; both refine the arithmetic at filing without changing the planning number, and the refined version belongs with your tax preparer. For a first-year practice, the flat 15.3 percent is the safe planning figure.

Income tax is deliberately absent from the formula. The target salary is gross pay, the way a W-2 salary is gross pay, and income tax comes out of that salary the way it always did rather than out of the floor.

Count the visits, and count them low

The number you divide by is kept, billed visits across a year, and it is always smaller than the calendar version. Weeks disappear to vacation, holidays, illness, and conferences, and inside the weeks that remain, documentation, scheduling, billing follow-up, and the empty slots of a still-filling caseload take the hours. Build the count from your own schedule, discount it for what your own no-show pattern shows, and stop there.

No source this page rests on publishes a conversion rate from working hours to billable visits, and the page will not invent one. Any precise percentage you read describes somebody else's practice. The workable substitute comes from your own calendar: the weeks you will genuinely work, times the visit slots you intend to fill in a normal week, times the kept-visit rate your own book shows once it has a few months of history. A new practice without history guesses conservatively and corrects at the first recompute.

But the denominator is where owners lie to themselves.

An inflated visit count flatters the floor downward, and the error compounds: the price prints lower, the shortfall arrives monthly, and the diagnosis usually lands on marketing rather than on the arithmetic that was wrong from the start. Underestimate instead. If the year delivers more visits than the count, the extras arrive priced above the floor.

The formula, worked once

The floor is overhead plus target pay plus self-employment tax, divided by kept visits. The shape is borrowed from the Small Business Administration's break-even formula, fixed costs divided by price minus variable cost per unit 1Ref 1U.S. Small Business Administration (2026).Plan your business — Calculate your startup costs.The one-time versus monthly expense split, the guidance to count at least a full year of monthly expenses as the overhead input, and the general break-even formula, fixed costs divided by price minus variable cost per unit, that the per-visit floor adapts., and adapted for a service practice where the unit is a visit. Worked once with real numbers, it stops being a concept and becomes a rate.

Suppose a second-year solo clinician renting a treatment room, no staff. The figures below are illustrative arithmetic, chosen round, and that includes the no-show discount in the visits row, which is picked to make the example run and published nowhere; yours come from your own statements and your own schedule.

Read the result as a boundary, and read the missing line too. At $134 this practice pays its bills and its owner and nothing else: no margin for a dead laptop, a slow February, or eventual help. Deciding how much cushion to price in above the floor is worth doing on paper in the same sitting.

The tax line is the conservative version of itself. The employer-equivalent half is deductible in figuring adjusted gross income 4Ref 4Internal Revenue Service (2024).Self-employment tax (Social Security and Medicare taxes).The 15.3 percent self-employment tax rate, its 12.4 and 2.9 percent split, and the deductibility of the employer-equivalent half in figuring adjusted gross income., and the exact liability at your numbers is a computation for your tax preparer. Let the table's rounding run high; a floor built on the generous side of the tax fails safe.

Notice what moved the number. Overhead of $30,000 contributes $30 of the $134; the pay and its tax contribute the other $104. For a solo practice the floor is mostly the price of your own time, which is why the salary line deserves the most deliberate choice and the denominator the most suspicion.

What the floor cannot answer

The floor sets the bottom of a range and nothing above it. Where inside the range to price is a market judgment, a positioning judgment, and sometimes a judgment about who should be able to afford you. Two situations are worth settling before a rate card gets printed: a market that sits below your floor, and a cash price offered to a patient Medicare covers.

When comparable practices list rates below your floor, the arithmetic points back at its own inputs: the overhead, the visits a week can hold, and the pay you named. At least one of them has to move. Pricing below the floor moves none of them; it is a decision to fund each visit from savings, which puts a limit on how long the configuration can run, and it deserves to be made deliberately rather than by default.

Moving up is the opposite calculation: raise the price, lose some patients. It deserves the same paper-first discipline before any letter to your caseload goes out.

A cash rate card also does not suspend Medicare's billing rules. For every covered service furnished to a Medicare beneficiary, the practice is required to submit the Medicare claim, regardless of any private fee arrangement with the patient; it may not charge the patient for preparing or filing that claim; and the civil monetary penalty runs up to $2,000 per violation 6Ref 6Noridian Healthcare Solutions (CMS Medicare Administrative Contractor, Jurisdiction E Part B) (2025).Mandatory Claim Submission - JE Part B.The duty to submit a Medicare claim for every covered service furnished to a beneficiary regardless of private fee arrangement, the bar on charging patients to prepare or file it, and the up-to-$2,000 civil monetary penalty per violation.. A clinician who wants a purely cash relationship with Medicare patients may have a formal route, opting out, which runs as a two-year standing status that renews automatically unless it is cancelled in time 7Ref 7Noridian Healthcare Solutions (CMS Medicare Administrative Contractor, Jurisdiction E Part B) (2026).Opt-Out Period, Renewal, and Cancellation - JE Part B.The two-year Medicare opt-out term and its automatic renewal absent a timely cancellation, the standing status a clinician commits to for a purely cash relationship with Medicare patients., with its own paperwork and consequences rather than a line on a price list. Settle the Medicare question before the card is printed, including whether your practitioner type can opt out at all, with your MAC's published guidance in front of you and counsel where the answer stays unclear.

Recompute it every January

The floor is a dated number, correct for the year of the statements that built it. Rent moves, software subscriptions creep, the tax figures reset annually, and the kept-visit count is a guess until a year of your own schedule replaces it. Recompute the floor every January from the prior year's paid expenses and kept visits, and treat any floor more than a year old as expired.

The cash method makes the recompute cheap. The books already state what was paid and when 2Ref 2Internal Revenue Service (2025).Publication 334, Tax Guide for Small Business (For Individuals Who Use Schedule C).The ordinary-and-necessary test for what counts as a business expense and the cash-method rule that expenses count in the year actually paid., so the overhead line is a report rather than a project, and by year two the schedule knows its own kept-visit rate, so the denominator stops being a guess. The whole exercise shrinks to an afternoon.

Keep the result where you will see it. The floor belongs next to the handful of figures a one-person practice watches monthly, the solo dashboard, because a cost line drifting upward moves the floor under your price without announcing itself. The gap between your price and your floor is the margin, and it is the first thing worth knowing each month.