The first thing we have
to 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 and
vice versa too about materials being expensive as the reason for the high cost
of dental treatment and someone even going to the extent of explaining the patient
about the break-up of treatment charges making the materials appear
inflationary and being responsible for 80% of the cost of the process, they
finished; Please remember, the bottom line is that we sell our SKILL via our
services and not our dental materials which we use in our clinical practice. No matter what type of services you sell (technical or
non-technical); the price you charge your patients will have a direct effect on
the success of your clinical practice. The above mentioned technical (skilful)
or non-technical (routine) in our language means skilful services like
implantology, surgeries viz. apicoectomy, impactions etc., rotary endodontics
or routine services like a restoration (filling), normal extractions,
prophylaxis (scaling and polishing). Setting a price that is too high or
too low will at best limit your own expansion and growth plans. At worst, it
could cause serious problems for your sales and cash flow. If the pricing for your services doesn’t cover all
your costs, your cash collection will be cumulatively negative, you will
exhaust your financial resources and your clinical practice will ultimately
fail. Established clinics can improve their profitability through
regular pricing reviews. Though pricing
strategies can be very complex sometimes, the basic rules of pricing are pretty
much straightforward:

1.     All pricing of your clinical
services should minimum cover all costs and profits.

2.     The most effective way to
lower 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 reviewing
the prices frequently to assure that they reflect the dynamics of cost and fulfill
the primary aim of any business; to see flourishing profit objectives.

4.     Prices must be
established to ensure proper sales and productivity.

 

If you are starting a new
set up of clinical practice, carefully consider your pricing strategy before
you start and don’t just stoop to the worldly pressures of keeping prices
ultra-low to kill competition. We are not sure about the competition, but you
can surely kill yourself with such a timid approach. Before setting the pricings in your clinic, you have to know the costs
of 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 loan
repayment, cost of inventory, cost of materials, any financing costs from
parents or any other, salaries and wages etc. Never forget to add the costs of
markdowns (discounts), shortages, damaged, expired or wasted materials, cost of
small utilities and your desired profits (of course, decent ones) to your list
of operating expenses. When setting your prices, you must make sure that
the price and sales levels you set, will allow your clinic to be profitable
from day one. You must also take note of where your services stand when
compared with your competition (not necessarily an established one). The single
most important RULE is to add profit in your
calculation 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 final
financial analysis. One thing you need to remember is that, we don’t have to
recover our COSTS, but recover our VALUE (skill and worth) as well.

Knowing the difference
between cost and value can always increase your profitability:

1.     the cost of
your service is the amount you spend to produce it

2.     the price is
your financial reward for providing the service

3.     the value is
what your patient believes the product or service is worth to them

 

But then having said that above, please
always remember, that patient has come to you for teeth and your service and
not for the cost of your materials. For e.g. as they say, you go to a
restaurant to eat food and if you just order for a chapaati (Indian bread), you
won’t include the grams of wheat or flour or water or the time and energy to
knead the same and then the cost of flame or heating used in that one chapaati
because if you will start doing that, your one chapaati which is roughly 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 literal cost
especially small targeted work. Now imagine a scenario, for e.g. a plumber, the
cost for a plumber to fix a burst pipe at a customer’s home may be Rs. 50 for visit
costs, materials costing Rs. 100 and labour at Rs. 100. However, the value of
the service to the customer who may be having water leakage all over his house
is far greater than the Rs. 250 cost, so the plumber may decide to charge a
total of Rs. 500 and the customer will also be happily ready and willing to pay
that cost to minimize that damage. Hence, the pricing should be in line with
the 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 in
crude language, what your neighbouring competitors charge. Sometimes pricing
decisions require time and market research and also vary from one clinical set
up to another because of fixed and variable costs, the strategy of many dentists
is to set prices once and “hope for the best.” However, such a policy
risks profits that are elusive or not as high as they could be.