How Much Does It Cost To Run A Physical Therapist Practice Monthly?
Physical Therapist Running Costs
Running a Physical Therapist practice requires substantial upfront capital expenditure (CapEx) followed by high fixed monthly overhead, primarily driven by specialized payroll and rent In 2026, expect total monthly running costs (fixed and variable) to be around $52,300, based on $43,880 in monthly revenue and an $8,410 operational deficit Payroll is the largest expense, consuming roughly 70% of the total fixed overhead Your contribution margin is strong at nearly 85%, but high fixed costs mean you need to hit a monthly revenue of approximately $53,781 to break even This guide breaks down the seven core recurring expenses you must budget for to ensure you have the necessary cash buffer, which the model suggests must cover losses until the Breakeven Date in February 2028 (26 months)
7 Operational Expenses to Run Physical Therapist
#
Operating Expense
Expense Category
Description
Min Monthly Amount
Max Monthly Amount
1
Payroll & Wages
Staffing
This covers the $36,460 monthly cost for 40 FTE therapists and 30 FTE administrative staff in 2026, including the $10,000 Clinic Director salary.
$36,460
$36,460
2
Commercial Rent
Fixed Overhead
A fixed monthly cost of $5,000 is budgeted for the clinic space, requiring careful negotiation of lease terms and escalation clauses.
$5,000
$5,000
3
Billing Fees
COGS
These variable fees amount to 45% of monthly revenue, equaling about $1,975 based on $43,880 revenue in 2026, and must be tracked against collections efficiency.
$1,975
$1,975
4
Professional Insurance
Fixed Overhead
Budget $1,200 monthly for Professional Liability Insurance, a non-negotiable fixed cost essential for risk management and compliance from 01012026.
$1,200
$1,200
5
Marketing
Variable Overhead
This variable expense is set at 60% of revenue, totaling $2,633 per month in 2026, focusing on patient volume growth to reach the $53,781 breakeven point.
$2,633
$2,633
6
Utilities & Maint.
Fixed Overhead
Fixed costs for Utilities ($800) and Clinic Maintenance ($600) total $1,400 monthly, requiring monitoring for efficiency improvements.
$1,400
$1,400
7
EHR & IT
Fixed/Variable Tech
The EHR system combines a $400 fixed base subscription with a variable cost of 20% of revenue ($878 monthly in 2026), totaling $1,278 for critical patient management.
$1,278
$1,278
Total
All Operating Expenses
$49,946
$49,946
What is the minimum sustainable monthly operating budget required to cover fixed costs and necessary variable expenses?
The minimum sustainable operation for the Physical Therapist business requires achieving $\mathbf{$53,781}$ in monthly revenue to cover $\mathbf{$45,708}$ in fixed overhead, assuming variable costs are accounted for in reaching that threshold; have You Considered How To Effectively Launch Your Physical Therapist Business? Honestly, hitting that revenue target first is the only way to manage the burn rate until you reach operational stability.
Fixed Overhead Reality
Total fixed overhead projected at $\mathbf{$45,708}$ monthly in 2026.
Required revenue threshold to cover all costs is $\mathbf{$53,781}$ per month.
This calculation assumes the gross margin from services covers necessary variable expenses.
You must secure funding to bridge the gap until utilization hits the break-even point.
Cash Runway Imperative
If starting from zero revenue, you need $\mathbf{$45,708}$ immediately for base operating costs.
The minimum cash runway must cover the time needed to scale to $\mathbf{$53,781}$ in monthly sales.
If patient onboarding takes longer than expected, the cash requirement increases fast.
Defintely model at least 6 months of runway beyond the initial setup capital needed.
Which recurring cost categories represent the largest percentage of monthly revenue and how can they be optimized?
The largest recurring costs for the Physical Therapist business are personnel and variable operational expenses, demanding immediate focus on payroll efficiency and COGS reduction. Payroll at $36,460 dwarfs rent at $5,000, so understanding your cost structure is key before you even think about scaling; Have You Considered How To Effectively Launch Your Physical Therapist Business? Combined costs like supplies and billing fees eat up 70% of revenue.
Payroll vs. Overhead Reality
Payroll consumes the largest share of outlay.
Rent is a relatively small $5,000 base.
Focus on therapist scheduling density.
Fixed costs must be covered by utilization.
Squeezing Variable Margins
COGS is a massive 70% hurdle.
Negotiate supply contracts aggressively.
EHR fees are part of 80% variable SG&A.
Marketing spend needs clear ROI tracking.
Payroll is your primary fixed expense, clocking in at $36,460 monthly, which is over seven times the $5,000 in rent. This means that therapist utilization rates directly drive profitability, not just patient acquisition. If you aren't maximizing billable hours per therapist, that high payroll cost becomes a major drag.
Variable costs are where margins evaporate quickly; COGS (Cost of Goods Sold), which includes supplies and billing fees, hits 70% of revenue. Furthermore, 80% of your Selling, General, and Administrative (SG&A) expenses—like marketing spend and Electronic Health Record (EHR) software fees—are variable. You definately need to audit those billing fees first.
Given the projected operational deficit, how much working capital is required to sustain operations until profitability?
The minimum working capital required to sustain the Physical Therapist operation until the projected breakeven in February 2026 is $329,000, which must be supplemented by a contingency fund to manage insurance payment delays.
Cash Runway to Profitability
The projected breakeven date is Feb-28, requiring 26 months of runway.
The minimum cash needed to cover the operational deficit until that point is $329,000.
This calculation assumes utilization rates hold steady against current practitioner capacity.
You must secure this capital before operations begin to avoid running dry mid-year one.
Mitigating Reimbursement Drag
Insurance reimbursement cycles create a significant working capital drag on fee-for-service models.
Plan for an extra $50,000 buffer specifically reserved for claims taking longer than 90 days to pay out.
Immediately review the 15 FTEs budgeted for General Physical Therapists.
Low utilization means you're paying for capacity you aren't selling right now.
Determine the minimum viable staffing needed to cover 65% patient volume.
This is your biggest, fastest cost reduction lever, honestly.
Control Overhead
Start negotiating your commercial rent for lower rates or shared space usage.
Delay the planned hiring of the Marketing Coordinator, scheduled for 00 FTE in 2026.
Fixed costs don't adjust easily, so proactive negotiation is key to survival.
Every dollar saved here directly extends your runway when revenue lags.
Key Takeaways
The primary financial hurdle for a new Physical Therapist practice in 2026 is managing the projected $52,300 in monthly running costs, dominated by a $36,460 payroll expense.
Due to high fixed overhead, profitability is not expected until February 2028, requiring founders to secure a minimum working capital reserve of $329,000 to cover the 26-month operational deficit.
To cover the $45,708 in monthly fixed overhead and necessary variable expenses, the clinic must achieve a minimum monthly revenue threshold of $53,781 to break even.
Since payroll constitutes roughly 70% of fixed overhead, optimizing staffing levels and managing Full-Time Equivalents (FTEs) is the most critical cost lever for mitigating initial cash burn.
Running Cost 1
: Payroll & Wages
2026 Payroll Burden
Payroll is your biggest fixed cost, set at $36,460 per month for 2026 staffing levels. This covers 40 therapists and 30 admin staff, plus the $10,000 Clinic Director salary. You need high utilization to cover this base expense. Honestly, that's a heavy lift.
Staffing Cost Inputs
This estimate hinges on staffing 70 FTEs by 2026. You must model the blended average wage for therapists versus administrative roles. The $10,000 Clinic Director salary is a key fixed component within this total that needs coverage regardless of patient flow.
FTE Therapist Count: 40
FTE Admin Count: 30
Director Salary: $10,000
Controlling Wage Spend
Managing this cost means tightly controlling hiring timelines. If patient volume doesn't support 70 FTEs by 2026, you'll carry excess labor costs. Avoid hiring admin staff too early; they don't generate direct revenue.
Stagger admin hiring post-revenue ramp.
Benchmark therapist cost per visit.
Ensure utilization drives headcount planning.
Fixed Cost Impact
Since this is a major fixed cost, your break-even point is heavily influenced by these wages. If therapist productivity dips, you must quickly adjust scheduling or risk burning cash before the next revenue cycle hits. Defintely watch those utilization rates.
Running Cost 2
: Commercial Rent
Rent Commitment
Your clinic space locks in a $5,000 monthly fixed cost, which is a major overhead component. This figure demands aggressive negotiation on the lease length and the annual escalation rate to protect future operating margins. Don't just sign the first offer; this is your bedrock commitment.
Cost Inputs
This $5,000 covers the physical location needed for your one-on-one therapy sessions. You must know the square footage required and the local market rate per square foot to benchmark this quote. Since this is a fixed cost, it hits regardless of patient volume, unlike variable costs like billing fees.
Inputs: Square footage needed.
Benchmark local rates.
Fixed cost impact.
Manage Lease Risk
Focus on minimizing the escalation clause, aiming for 2% annual increases instead of the common 3% or 4%. Try to secure a 5-year lease with a tenant improvement allowance to defer initial build-out cash outlay. You should avoid signing personal guarantees if possible, though that’s defintely tough for new operations.
Cap escalation clauses low.
Seek tenant improvement funds.
Negotiate lease length.
Modeling Escalation
If the lease includes a 4% escalation, that $5,000 rent jumps to $5,200 next year, increasing pressure on your $36,460 payroll. Always model the cash flow impact of the highest possible escalation rate for the first three years of operation.
Running Cost 3
: Billing Service Fees (COGS)
Billing Fee Impact
These variable billing fees are a significant Cost of Goods Sold (COGS) component, hitting 45% of revenue. Based on projected 2026 revenue of $43,880, this equates to roughly $1,975 monthly. You need tight tracking here, because this cost is directly tied to how fast and how well you collect patient payments.
Fee Calculation Inputs
This cost covers the third-party service processing claims and collecting patient co-pays or insurance reimbursements. The key input is your total monthly revenue, multiplied by the 45% rate. If revenue shifts, this COGS line shifts too. Defintely monitor the relationship between collections speed and this expense line.
Input: Monthly Revenue
Rate: 45% variable
Estimate: $1,975 per month
Cutting Collection Costs
Since this fee tracks collections, optimization means improving your Accounts Receivable (AR) turnover. Faster collection cycles mean less time the billing service spends chasing money, potentially allowing for rate renegotiation. Avoid slow payers, as they inflate this direct cost.
Improve AR turnover speed.
Negotiate based on quick payment volume.
Ensure clean initial claim submission.
Watch Collections Closely
Your 45% variable fee is high for typical service COGS, making collections efficiency your primary lever here. If you collect slower than projected, this $1,975 estimate balloons quickly, squeezing your contribution margin from every patient visit. You can't afford billing delays.
Running Cost 4
: Professional Insurance
Mandatory Insurance Floor
Professional Liability Insurance is a fixed operating cost of $1,200 per month, mandatory for compliance starting January 1, 2026. This coverage protects patient claims against negligence or errors in therapy delivery, which is critical given the high-touch nature of one-on-one care.
Coverage Inputs
This Professional Liability Insurance shields the practice from suits alleging professional negligence or malpractice during treatment sessions. Estimate this cost based on quotes secured for your $1,200 monthly fixed budget, factoring in the number of licensed practitioners providing care. It is a baseline expense, separate from general liability.
Managing Risk
Since this is a compliance minimum, cutting the premium harms protection. Focus instead on reducing claims frequency by ensuring consistent adherence to evidence-based treatment protocols. If onboarding takes 14+ days, churn risk rises, defintely affecting your risk profile negatively.
Overhead Reality
Treat the $1,200 allocation as a hard overhead floor, not a variable expense tied to patient volume. Failure to budget this starting 01012026 stops operations cold due to regulatory requirements, regardless of revenue performance.
Running Cost 5
: Marketing & Acquisition
Marketing Spend vs. Breakeven
Your marketing expense is fixed at 60% of revenue, costing $2,633 monthly in 2026, which means patient growth is critical to clear the $53,781 breakeven revenue. That's a steep variable cost to manage.
Acquisition Cost Drivers
This 60% variable cost covers all patient acquisition efforts, like physician outreach and digital ads, necessary to fill your appointment slots. Inputs are total monthly revenue projections. If you hit $53,781 in revenue, this line item costs $2,633, so volume is everything.
Physician referral development costs.
Digital advertising spend tracked.
Cost tied directly to revenue realized.
Lowering Acquisition Ratio
Since acquisition is 60% of revenue, optimizing conversion efficiency is key; aim to lower your Cost Per Acquisition (CPA) below industry benchmarks for physical therapy. Focus on high-return channels like physician partnerships to secure steady referrals. Don't defintely overspend on broad awareness ads early on.
Prioritize physician referral conversion rates.
Track Cost Per Patient Visit closely.
Negotiate fixed costs within marketing contracts.
Risk of High Variable Spend
A 60% marketing cost is extremely high for a service business; if patient utilization dips below projections, this expense will quickly erode contribution margin before fixed overhead is covered. You must monitor the ROI of every marketing dollar spent against the $53,781 revenue hurdle.
Running Cost 6
: Utilities & Maintenance
Utility Overhead
Utilities and maintenance combine for a fixed overhead of $1,400 monthly. Since these costs don't scale with patient volume, keeping them tight is key to improving your overall contribution margin. You need to watch these line items defintely.
Cost Inputs
This $1,400 fixed expense covers essential operating costs for the clinic space. Utilities are budgeted at $800 monthly, while Clinic Maintenance is set at $600. These figures are static, meaning they hit your Profit & Loss statement every month regardless of patient load.
Utilities: $800 fixed.
Maintenance: $600 fixed.
Total: $1,400 monthly.
Efficiency Levers
Because these are fixed, you manage them through operational discipline, not volume. Look at your $800 utility bill for energy efficiency upgrades, like smart thermostats, which can yield savings. Don't skimp on maintenance; deferred upkeep turns into expensive emergency repairs fast.
Audit utility usage patterns.
Negotiate service contracts annually.
Budget for preventative maintenance schedule.
Overhead Context
That $1,400 is part of your baseline overhead before paying staff or marketing. If your break-even revenue target is $53,781 (as projected for 2026), every dollar saved here directly improves your operating leverage. This is low-hanging fruit for margin improvement.
Running Cost 7
: EHR & IT Software
EHR Cost Structure
Your Electronic Health Record (EHR) system costs $1,278 monthly in 2026, built from a $400 fixed fee plus a 20% variable charge on revenue. This cost covers essential patient management functions. Focus on utilization to keep the variable portion manageable.
Inputs for Patient Software
This $1,278 expense covers vital patient management software, which is non-negotiable for compliance. To estimate this cost, you need projected revenue, since 20% of that revenue feeds the variable component. For 2026, the variable portion is $878, added to the $400 fixed base.
Fixed fee: $400.
Variable rate: 20% of revenue.
2026 estimate: $878 variable portion.
Managing Variable Software Fees
This cost hinges on optimizing revenue per patient, not just cutting the $400 base subscription. Since 20% scales directly with collections, high patient throughput reduces the effective percentage. Watch out for hidden per-provider licensing fees that defintely inflate the fixed component.
Maximize patient visit volume.
Negotiate variable rate tiers early.
Ensure billing integration is efficient.
EHR as a Variable Overhead
Because 20% of revenue is tied to this software, it acts like a high-margin cost of goods sold (COGS) component. If your collections efficiency drops, this $878 variable cost balloons, directly pressuring your $36,460 payroll overhead.
