Setting the price of our services can be one of the most daunting and humbling tasks a Veterinary owner can undertake. Yet the reality of staff salaries, rent, equipment, utilities and your own paycheck necessitate this “chore”. Asking a price for your services and setting them at a competitive level can seem “hard” and “businesslike” in a profession that prides itself on compassion, humanity and caring. But without adequate “sales” a veterinary business cannot obtain current equipment, maintain a quality staff, attract and keep quality associates and, bottom line, pay the rent. This newsletter will discuss this delicate balance of setting fair and current income by setting fair prices.
How do you determine the price of a service? Do you:
- Call other clinics in your area to find out what they are charging?
- Charge the most you think your clients will pay for a service?
- Charge a fair fee based on what your area will substantiate?
- Randomly choose a price you believe your clients will not object to?
- Combination of all of the above?
If you do not charge the proper price for your services, you will be in a cycle that may sound very familiar.
- STAFF SALARIES ABOVE 22%
- DOCTORS TOTAL SALARIES ABOVE 24%
- NET INCOME DECREASE
- OWNER WORKS HARDER
- MONEY NOT AVAILABLE FOR NEW EQUIPMENT
- STAFF SALARIES WITH NO BENEFITS
- RESULTS IN TURN OVER OF STAFF/DOCTORS
In my consulting, the one consistent thing I have found is that ALL THE PRACTICES feel they are at the upper limits of what their area will accept. It does matter if the clinic is in Paris, TX or Dallas.
In digging deeper, it’s not that they know all the prices of the surrounding clinics, it’s what the OWNER BELIEVES and what they are told by the staff when a client complains (about the prices being too high). Many price structures make no sense. Services that are based on staff time turn into loss leaders.
THERE IS A WAY TO DETERMINE PRICING THAT IS FAIR TO YOUR CLIENTS, YOUR PRACTICE AND YOU, THE OWNER. YOUR PRICE IS BASED ON YOUR LABOR COST TO PROVIDE THAT SERVICE PLUS REPLACEMENT COST FOR THE EQUIPMENT.
It is not easy, but you begin with the actual time of each procedure. Write down this time in a log, so better estimates may be made in the future, leading to a correct and realistic charge list. Timing a procedure, start to finish, show the doctor(s) the efficiency of the surgical doctor. It also gives a realistic time in minutes can be charged.
No two clinics have the same labor cost. Certain prices will be on a low profit formula (or loss leader) and other prices are based on a high profit formula. Examples of low profit services would be spays & neuters, vaccines. The “shopped items” have to be competitive with surrounding practices. Practices in small town or rural areas with little or no competition may set their prices at the comfort level of the Dr. in staff. My experience has shown these practices underprice their goods and services and don’t have the reference point on what the prices need to be to provide for profit and growth in the practice
Example of high profit items include anesthesia, anesthesia monitoring, fluids, hospitalization, surgery, lab work, radiology, dentistry. The highest profit item in most clinics is the lab. There is a set price we pay and we put a multiple on top. That is easy.
Services such as hospitalization which is based on labor can be a high profit item for the majority of practices.
THE DOCTOR AND THE HOSPITAL ARE LOSING MONEY IF THEY ARE USING OUTPATIENT SERVICES TO SUPPLEMENT INPATIENT CARE.
Office calls and vaccines cannot help cover the cost of the pet being hospitalized. It doesn’t work! It may have worked twenty years ago but not in this decade!!
An added benefit to this pricing is when giving staff raises or doing annual planning, it is easy to adjust your price structure so the raises are reflected in new prices and NOT OUT OF THE OWNERS PAYCHECK!
Many Veterinarians are too close to the situation to come up with an objective and
FAIR price list. Your clients will pay fair prices and will pay for higher cost services if the service level of the practice is equal to the value they receive.
Are you in this situation? Prices that don’t make sense, overhead too high, working long hours and not making the percentage you should. This newsletter is for Veterinarians by a Veterinarian. I know I can assist you. You can make more income, your staff can get more benefits and the best thing of all is you can know how much something costs and charge reasonably for it and feel good about your overall prices.
Everyday you wait to correct your price list, you lose money.