The first thing we haveto remember is that we are not shopkeepers who sell products or in our case,dental materials. We have seen many fellow colleagues arguing with patients andvice versa too about materials being expensive as the reason for the high costof dental treatment and someone even going to the extent of explaining the patientabout the break-up of treatment charges 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 own expansion and growth plans. At worst, itcould cause serious problems for your sales and cash flow. If the pricing for your services doesn’t cover allyour costs, your cash collection will be cumulatively negative, you willexhaust your financial resources and your clinical practice will ultimatelyfail.
Established clinics can improve their profitability throughregular pricing reviews. Though pricingstrategies can be very complex sometimes, the basic rules of pricing are prettymuch straightforward:1. All pricing of your clinicalservices should minimum cover all costs and profits.2. The most effective way tolower your prices is to lower your costs because you can’t control the output,but you can definitely control the input.3. You have to keep reviewingthe prices frequently to assure that they reflect the dynamics of cost and fulfillthe primary aim of any business; to see flourishing profit objectives.4.
Prices must beestablished to ensure proper sales and productivity. 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. We are not sure about the competition, but youcan surely kill yourself with such a timid approach.
Before setting the pricings in your clinic, you have to know the costsof running your clinical practice. To determine how much it costs to run your clinic,kindly do include rental, any property or equipment lease, cost of EMI or loanrepayment, cost of inventory, cost of materials, any financing costs fromparents or any other, salaries and wages etc. Never forget to add the costs ofmarkdowns (discounts), shortages, damaged, expired or wasted materials, cost ofsmall utilities and your desired profits (of course, decent ones) to your listof operating expenses. When setting your prices, you must make sure thatthe price and sales levels you set, will allow your clinic to be profitablefrom day one.
You must also take note of where your services stand whencompared 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 EMI or salary/wages,since none of us is in the clinical practice to just break even in the finalfinancial analysis. One thing you need to remember is that, we don’t have torecover our COSTS, 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 go to arestaurant to eat food and if you just order for a chapaati (Indian bread), youwon’t include the grams of wheat or flour or water or the time and energy toknead the same and then the cost of flame or heating used in that one chapaatibecause if you will start doing that, your one chapaati which is roughly [email protected] Rs.
10 in a normal restaurant will have a landing cost of Rs. 100 withprofits. So in certain costing, you don’t have to take the literal costespecially small targeted work. Now imagine a scenario, for e.g. a plumber, thecost for a plumber to fix a burst pipe at a customer’s home may be Rs.
50 for visitcosts, materials costing Rs. 100 and labour at Rs. 100. However, the value ofthe service to the customer who may be having water leakage all over his houseis far greater than the Rs. 250 cost, so the plumber may decide to charge atotal of Rs. 500 and the customer will also be happily ready and willing to paythat cost to minimize that damage. 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.