How to start an occupational therapy business: your first steps

Starting an occupational therapy business is a rewarding venture that combines your clinical skills with business savvy. The industry is worth billions of dollars, with steady demand for services from children, adults recovering from injury, and seniors.

This guide will take you through the practical steps of validating your business concept, obtaining necessary licenses, selecting the right location, and acquiring equipment to help you launch a successful occupational therapy business in the U.S.

Step 1: Validate your business idea and plan your finances

Conduct market research

Start by analyzing local demographics. Use the U.S. Census Bureau's data to find neighborhoods with high numbers of seniors or young families. This data helps you pinpoint your ideal client base.

Many new owners only look at population numbers. You should also check local income levels and common insurance plans. This information tells you if clients can afford your services.

Also, connect with local pediatricians, orthopedic surgeons, and nursing home directors. Ask them about their current referral process and what services are missing in the community.

Estimate your startup costs

With your market in mind, you can map out your initial expenses. A detailed budget is a foundation for your business plan and helps you secure funding. Expect your initial investment to range from $15,000 to over $50,000.

Here is a typical breakdown:

• Licensing and Legal Fees: $500 - $2,000
• Rent Deposit and Build-Out: $2,000 - $8,000+
• Therapy Equipment: $10,000 - $30,000
• Liability Insurance (annual): $1,000 - $3,000
• Website and Initial Marketing: $1,500 - $5,000

Here are 3 immediate steps to take:

• Use U.S. Census data to identify three potential neighborhoods with your target demographic.
• List five competing OT practices in your chosen area and note their specialties.
• Create a preliminary budget spreadsheet with estimated costs for equipment, rent, and licensing.

Step 2: Set up your legal structure and get licensed

Choose your business structure

Most new practice owners form a Limited Liability Company (LLC). This structure protects your personal assets if the business faces a lawsuit. It also offers pass-through taxation, meaning profits are taxed on your personal return, which simplifies filings.

As your practice grows, you might consider an S-Corp election for your LLC. This can offer tax savings on self-employment taxes but adds payroll complexity. You may want to consult a CPA to see when this makes sense for you.

Secure your licenses and permits

Your primary license comes from your state's occupational therapy board. You must be certified by the National Board for Certification in Occupational Therapy (NBCOT) to apply. State license fees are typically $100 to $300, and processing can take 6-8 weeks.

Many owners underestimate this timeline. Start your application as soon as you decide to launch to avoid delays. You will also need a free National Provider Identifier (NPI) number to bill insurance. Finally, get a local business license, which costs $50 to $400.

Here are 4 immediate steps to take:

• Decide on your business structure and file the paperwork with your state.
• Begin the application for your state OT license for private practice.
• Apply for your free National Provider Identifier (NPI) number online.
• Contact your local city hall about the process for a business operating permit.

Step 3: Secure your insurance and manage risk

Select the right insurance coverage

Your first policy should be professional liability, also known as malpractice insurance. A standard policy offers $1 million per claim and a $3 million aggregate limit. Expect annual premiums to be between $300 and $800.

You also need general liability insurance. This covers non-clinical accidents, like a client who slips and falls in your waiting room. Coverage of $1 million per occurrence is typical, with annual costs from $400 to $900.

If you lease a space, you will need property insurance to protect your equipment and furnishings. Once you hire your first employee, you must have workers’ compensation insurance. This is a legal requirement in nearly every state.

Many new owners forget to insure their therapy equipment for its full value. For all policies, you might want to get quotes from providers like HPSO, CM&F Group, or Berxi. They specialize in coverage for healthcare professionals.

Address practice-specific risks

Beyond insurance, you need to manage daily operational risks. Patient falls during transfers or adverse reactions to sensory equipment are possibilities. Documented safety protocols for high-risk activities are your best defense against accidents and potential lawsuits.

Here are 4 immediate steps to take:

• Request quotes for professional and general liability from a specialist like HPSO or Berxi.
• Review your equipment inventory to confirm its value for your property insurance policy.
• Draft a basic patient safety protocol for common therapy activities.
• Check your state's requirements for workers' compensation if you plan to hire.

Step 4: Find your location and buy equipment

Select and prepare your clinic space

Aim for a space between 800 and 1,500 square feet for a solo practice. This gives you room for a reception area, a treatment room, and a sensory gym. Check with your local planning department for zoning requirements; you will likely need a space zoned for "medical office" use.

When you negotiate your lease, ask about a Tenant Improvement (TI) allowance. This is money from the landlord to help pay for modifications like installing grab bars or a wheelchair-accessible restroom. Many new owners miss this opportunity and pay for build-outs themselves.

Acquire your therapy equipment

Your equipment needs depend on your specialty. Instead of buying everything at once, start with versatile items. You can always add specialized pieces as your practice and client base grow. This approach helps manage your initial cash flow.

Here are some typical costs for starter equipment:

• Therapy mats and bolsters: $500 - $1,500
• Sensory integration swings: $1,000 - $4,000
• Fine motor skill kits: $300 - $1,000
• Basic adaptive equipment: $200 - $800

You might want to look at suppliers like Sammons Preston or Fun and Function. They specialize in occupational therapy products and can provide catalogs for detailed pricing.

Here are 4 immediate steps to take:

• Contact your city's planning department to confirm zoning for two potential locations.
• Ask landlords about Tenant Improvement (TI) allowances during your initial calls.
• Create a starter equipment list based on your ideal client profile.
• Request catalogs from OT suppliers like Sammons Preston to budget for equipment.

Step 5: Set up your payment and billing systems

Handle your payment processing

Most practices collect payment at the time of service. You might also offer packages of sessions, which clients pay for upfront. This approach simplifies billing and improves your cash flow from the start.

Many new owners get locked into contracts with high fees and clunky hardware. Look for a solution with low transaction fees and no extra equipment, especially if you plan to offer in-home therapy.

For occupational therapy businesses that need to accept payments on-site or on-the-go, JIM offers a streamlined solution. With JIM, you can accept debit, credit, and digital wallets directly through your smartphone. Just tap and you are done.

At just 1.99% per transaction with no hidden costs, it's a good fit for mobile therapists. Other providers often charge between 2.5% and 3.5%, so the savings add up quickly. Plus, you do not need any extra hardware.

Here is how it works:

• Get Started: Download the JIM app for iOS.
• Make a Sale: Type the sales amount, hit sell, and ask your customer to tap their card or device on your phone.
• Access Funds: Your money is available right on your JIM card as soon as the sale is done. There is no waiting for bank transfers.

Here are 3 immediate steps to take:

• Decide on your payment terms, such as payment at time of service or pre-paid packages.
• Compare the transaction fees of two to three payment solutions.
• Download the JIM app to see how it works on your phone.

Step 6: Fund your business and manage finances

Secure your funding

The SBA 7(a) loan is a popular choice for new practices. You can typically borrow between $50,000 and $250,000. Lenders will want to see a strong business plan and a credit score over 680. Interest rates are usually the prime rate plus 2.75% to 4.75%.

Many new owners go to their personal bank, but you might want to approach lenders with dedicated healthcare divisions. Banks like Live Oak Bank understand practice-specific needs. Also consider equipment financing, which lets you borrow specifically for items like therapy swings and tables.

While grants are rare for for-profit clinics, you should check with your local Small Business Development Center (SBDC) for any regional programs.

Calculate your working capital

You will need cash on hand to cover costs before revenue becomes steady. Plan to have at least six months of operating expenses saved. For a solo practice, this often means having $25,000 to $50,000 in working capital.

This fund covers rent, insurance, marketing, and your own salary. A common mistake is underestimating how long insurance reimbursements take. It can be 60-90 days before you see that money, so this cash buffer is your safety net.

Here are 4 immediate steps to take:

• Contact your local Small Business Development Center (SBDC) for free financial planning advice.
• Request a consultation with a lender that specializes in healthcare, like Live Oak Bank.
• Calculate your estimated operating expenses for the first six months to find your working capital number.
• Review the requirements for an SBA 7(a) loan on the SBA website.

Step 7: Hire your team and set up operations

Hire your first employees

Your first hire will likely be a part-time administrative assistant or a Certified Occupational Therapy Assistant (COTA). An admin can handle scheduling and billing for 10-15 hours a week, which frees you to focus on clients. Many owners delay this step, which leads to burnout.

An administrative assistant typically earns between $35,000 and $50,000 annually, based on experience and location. A COTA, who must be certified, will assist with treatment plans and can earn from $50,000 to $65,000.

As you grow, aim to keep total staff salaries between 45% and 55% of your gross revenue. This ratio helps ensure your practice remains profitable.

Choose your practice management software

With a team in place, you need a system to manage daily tasks. Practice management software handles everything from scheduling and client notes to billing. This is where you will run the business side of your clinic.

You might want to look at platforms like SimplePractice, WebPT, or Cliniko, as they are designed for therapists. Monthly costs usually run from $60 to $150 per clinician. Do not just pick the cheapest option; prioritize features like integrated insurance billing and customizable note templates.

Here are 4 immediate steps to take:

• Write a job description for a part-time administrative assistant.
• Research local salary ranges for both COTAs and administrative staff.
• Sign up for a free trial of a practice management system like SimplePractice.
• Outline your daily clinic operations, from client check-in to payment collection.

Step 8: Market your practice and get clients

Build your referral network

Your most valuable marketing channel is other healthcare professionals. Physician referrals can account for over 70% of a new practice's clients. Do not just drop off brochures. Instead, schedule brief meetings with office managers at pediatric, orthopedic, and geriatric clinics to introduce your specialty.

Also, connect with local schools and senior centers. Offering a free in-service presentation on a topic like "Fall Prevention for Seniors" can quickly build trust and generate word-of-mouth referrals. This positions you as a community expert, not just another provider.

Establish your online presence

With your referral network in mind, turn to your digital front door. A simple, professional website is enough. It only needs to clearly show who you serve, your services, and how to contact you. You do not need a complex site to start.

Next, claim your free Google Business Profile. This is how local clients will find you on Google Maps. Ask your first few clients for reviews. Aim for 5-10 positive reviews in your first 90 days to build credibility and improve your local search ranking.

Here are 4 immediate steps to take:

• List ten local physicians, schools, or senior centers to contact for referrals.
• Create and complete your free Google Business Profile.
• Outline the three main pages for your website: Services, About, and Contact.
• Brainstorm a topic for a free community workshop to host in your first six months.

Step 9: Set your prices and billing policies

Determine your service rates

Your pricing directly affects your clinic’s financial health. Most solo practices use a fee-for-service model. A 60-minute evaluation typically costs between $150 and $250, while follow-up sessions run from $125 to $200. Your location and specialty will influence these numbers.

You might also offer service packages. This approach improves cash flow since clients pay upfront. For example, you could offer a package of 10 sessions for $1,350, which is a 10% discount from a standard $150 per-session rate. This incentivizes client commitment.

Analyze your costs and competition

Before you set final prices, calculate your break-even cost per session. Add up all your monthly expenses, including your own salary, and divide by the number of sessions you expect to provide. Aim for a net profit margin of 15-25% above this cost.

Now, look at your local market. Call a few competing practices and ask for their "self-pay" rates. Many new owners price too low to attract clients, but this can make it hard to cover costs. Confident pricing reflects the value of your expertise.

Here are 3 immediate steps to take:

• Calculate your cost per treatment hour based on your total monthly expenses.
• Call three local OT practices to ask for their self-pay evaluation and treatment rates.
• Draft a fee schedule with prices for single sessions and two discounted packages.

Step 10: Monitor your quality and plan for growth

Measure your practice's performance

To maintain high standards, you should track specific metrics. Start with patient-reported outcomes. You can use a tool like the Canadian Occupational Performance Measure (COPM) to quantify progress. This data is powerful for showing your value to physicians and clients.

Also, monitor client satisfaction. A simple Net Promoter Score (NPS) survey can show how likely clients are to recommend you. A score above 50 is a strong indicator of a healthy practice. You should also track your client retention rate from evaluation to discharge.

Know when to expand

Many owners hire based on feeling busy, which can strain cash flow. Instead, use data. A good trigger to hire a COTA or another OT is when you are consistently booked at 80-85% capacity for more than two months straight.

Before you post a job opening, make sure you have at least three months of the new employee's salary saved. This cash reserve covers their pay during the credentialing and ramp-up period before their billing generates consistent income.

Your practice management software, like WebPT or Cliniko, has features to support growth. You might want to check if your current plan can handle multiple clinician schedules and separate performance reports. Upgrading your plan is often a part of scaling your team.

Here are 4 immediate steps to take:

• Choose one patient outcome measure, like the COPM, to track for all new clients.
• Calculate your average clinician utilization rate for the last month.
• Set a revenue or utilization benchmark that will trigger your next hire.
• Review your practice software's features for managing a second clinician.

Conclusion

You have the steps to launch your occupational therapy practice. Remember that your connection to the community is just as important as your clinical expertise. With a solid plan in place, you are ready to build a business that helps people thrive.

And when it comes to payments, keep things simple. JIM turns your smartphone into a card reader, so you can accept payments anywhere for a flat 1.99% fee with no extra hardware. Download JIM and get paid from your first day.