How to Establish and Maintain an Emergency Fund for Your Solo Therapy Practice 

Running a solo mental health practice in Canada means managing everything from client care to administration and finances. One area that often gets overlooked is building emergency reserves, or a dedicated cash cushion that can mean the difference between staying open or shutting down during a crisis. 

Why Emergency Funds Matter for Solo Clinics 

The COVID-19 pandemic highlighted how vulnerable small businesses can be. According to Statistics Canada, nearly 100,000 businesses that were active in February 2020 had closed by November of that same year, many due to insufficient financial reserves. For solo mental health practitioners, having an emergency fund is crucial for long-term stability. 

What Qualifies as an Emergency in a Private Practice? 

Emergencies aren’t limited to global events. In a clinic setting, they may include: 

• Unexpected lease termination 

• Illness or incapacity of the clinic owner 

• Cyberattacks or data breaches 

• Critical equipment or software failures 

These are different from expected recurring costs like software renewals or seasonal marketing. Emergency funds should be reserved for events that are sudden and unpredictable. 

How Much Is Enough? 

The Financial Consumer Agency of Canada recommends a reserve of 3–6 months’ worth of essential living expenses for individuals. For solo clinics, that advice still applies but with some modifications. 

Start by targeting 3 months of fixed clinic costs, such as: 

• Office rent or virtual office subscription 

• Insurance premiums (e.g., malpractice, liability) 

• Core software (e.g., Jane, Owl, encrypted email) 

Consider scaling toward 6 months or more if: 

• Your revenue is seasonal 

• Your practice depends primarily on private pay 

• Your clinic is your main or only source of income 

The value of liquidity extends beyond small practices. A recent Deloitte survey of North American CFOs found that 46% plan to increase or maintain larger cash reserves in 2025, showing that financial preparedness is a growing priority at every level. 

How to Calculate Your Emergency Fund Target 

• Export the last 12 months of expenses from your accounting software 

• Tag each expense as fixed or variable 

• Calculate the average fixed monthly cost 

• Multiply by your desired coverage (e.g., 4 months × $9,000 = $36,000) 

• Optional: Add a 10–25% buffer if your clinic is less than 18 months old or if you draw more than 60% of revenue as personal income 

Where to Park Your Fund 

Keep your fund accessible but separate from your day-to-day operating account. Options include: 

• A high-interest business savings account (CDIC insured) 

• A ladder of cashable GICs for staggered access 

Set up automated transfers from your operating account to ensure consistent contributions. While long-term investing is important elsewhere, your emergency fund should prioritize liquidity over returns. 

How to Build a Reserve on a Lean Budget 

If your practice is still in its early stages, setting aside an emergency fund may seem unrealistic. But small, consistent steps can make a big difference over time. Try the following: 

• Set aside 5–10% of your monthly net income 

• Use windfalls like GST refunds or consulting fees 

• Review expenses quarterly for cost-saving opportunities i.e., cancel underused subscriptions or downgrade plans 

Monitor and Maintain 

Establish clear internal guidelines once your fund is in place: 

• Only use the fund for genuine emergencies 

• Replenish the fund if the balance falls below 75% of your target 

• Re-evaluate your reserve annually based on changes to your business 

Key Takeaways 

• Aim for 3–6 months of fixed costs, adjusted to your risk profile 

• Use bookkeeping software like Xero to differentiate fixed and variable costs 

• Park your fund in a secure, liquid, and separate account 

• Be consistent: Small contributions add up over time 

Prioritizing cash reserves like many larger organizations do is a practical strategy, not an overreaction. In a solo practice, your ability to serve clients depends on your financial resilience. 

Need help reviewing your clinic’s financial health? Take our self-assessment and get a personalized Financial Wellness Blueprint today.