Now the most trivialquestion that props up is how to charge what you are worth. The pricing youcharge for your clinical services is one of the most important technicaldecisions you will ever make in your practice. The first thing we have toremember is that we are not shopkeepers who sell products or in our case,dental materials. I have seen many fellow colleagues arguing with patients andvice versa too about materials being expensive as the reason for the cost ofdental treatment being high and someone even going to the extent of explainingthe patient about the break up of treatment making the materials appearinflationary and being responsible for 80% of the cost of the process, theyfinished; Please remember, the bottom line is that we sell our SKILL via ourservices and not our dental materials which we use in our clinical practice.
No matter what type of services you sell (technical ornon-technical); the price you charge your patients will have a direct effect onthe success of your clinical practice. The above mentioned technical (skilful)or non-technical (routine) in our language means skilful services likeimplantology, surgeries viz. apicoectomy, impactions etc., rotary endodonticsor routine services like a restoration (filling), normal extractions,prophylaxis (scaling and polishing). Setting a price that is too high ortoo low will at best limit your expansion and growth plans. At worst, it couldcause serious problems for your sales and cash flow. If the pricing for your services doesn’t cover all your costs, your cashcollection will be cumulatively negative, you will exhaust your financialresources and your practice will ultimately fail.
Established clinicscan improve their profitability through regular pricing reviews. Though pricingstrategies can be very complex sometimes, the basic rules of pricing are prettymuch straightforward:1. All clinical pricing ofyour services should minimum cover all costs and profits.2. The most effective way tolower your prices is to lower your costs.3.
You have to keep reviewingthe prices frequently to assure that they reflect the dynamics of cost andprofit objectives.4. Prices must beestablished to insure sales.
If you are starting a newset up of clinical practice, carefully consider your pricing strategy beforeyou start and don’t just stoop to the worldly pressures of keeping pricesultra-low to kill competition. I am not sure about the competition, but you cansurely kill yourself with such an approach. Beforesetting the pricings in your clinic, you have to know the costs of running yourclinical practice. To determine how much it costs to run your clinic, include rental,any property or equipment lease, cost of EMI or loan repayment, cost of inventory,cost of materials, any financing costs from parents or any other, salaries andwages etc. Never forget to add the costs of markdowns (discounts), shortages,damaged or wasted materials, cost of small utilities and desired profits toyour list of operating expenses.
When setting your prices, you must makesure that the price and sales levels you set will allow your clinic to beprofitable from day one. You must also take note of where your services standwhen compared with your competition (not necessarily an established one). The singlemost important RULE is to add profit in yourcalculation of costs. Treat profit as a fixed cost, like a loan payment or salary/wage,since none of us is in practice to just break even in the final financialanalysis. One thing you need to remember is that, we don’t have to recover ourCOSTS, but recover our VALUE (skill and worth) as well.
Knowing the differencebetween cost and value can always increase your profitability:1. the cost ofyour service is the amount you spend to produce it2. the price isyour financial reward for providing the service3. the value iswhat your patient believes the product or service is worth to them But then having said that above, pleasealways remember, that patient has come to you for teeth and your service andnot for the cost of your materials. For e.g.
as they say, you come to arestaurant to eat food and your order chapaati (breads), you won’t include thegrams of wheat or flour or water or the time and energy to knead the same andthen the cost of flame or heating usedin that one chapaati. If you will start doing that, your one chapaati which isroughly priced @ Rs. 10 in a normal restaurant will have a landing cost of Rs.100 with profits. So in certain costing, you don’t have to take the literalcost especially small targeted work.
Now imagine a scenario, for e.g. aplumber, the cost for a plumber to fix a burst pipe at a customer’shome may be Rs. 50 for travel, materials costing Rs. 100 and labour at Rs.
100.However, the value of the service to the customer – who may have water leakingall over their house – is far greater than the Rs. 250 cost, so the plumber maydecide to charge a total of Rs. 500. Hence, the pricing should be in line withthe value of the benefits that your clinic or business provides to its patients,while also bearing in mind the prices prevalent in the market or saying incrude language, what your neighbouring competitors charge.
Sometimes pricingdecisions require time and market research and also vary from one clinical setup to another because of fixed and variable costs, the strategy of many dentistsis to set prices once and “hope for the best.” However, such a policyrisks profits that are elusive or not as high as they could be.To maximize yourprofitability, find out: