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Now the most trivial
question that props up is how to charge what you are worth. The pricing you
charge for your clinical services is one of the most important technical
decisions you will ever make in your practice. The first thing we have to
remember is that we are not shopkeepers who sell products or in our case,
dental materials. I have seen many fellow colleagues arguing with patients and
vice versa too about materials being expensive as the reason for the cost of
dental treatment being high and someone even going to the extent of explaining
the patient about the break up of treatment 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 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 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 clinical pricing of
your services should minimum cover all costs and profits.

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2.     The most effective way to
lower your prices is to lower your costs.

3.     You have to keep reviewing
the prices frequently to assure that they reflect the dynamics of cost and
profit objectives.

4.     Prices must be
established to insure sales.

 

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. I am not sure about the competition, but you can
surely kill yourself with such an 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, 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 or wasted materials, cost of small utilities and desired profits 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 or salary/wage,
since none of us is in 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 come to a
restaurant to eat food and your order chapaati (breads), 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. 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 travel, materials costing Rs. 100 and labour at Rs. 100.
However, the value of the service to the customer – who may have water leaking
all over their house – is far greater than the Rs. 250 cost, so the plumber may
decide to charge a total of Rs. 500. 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.

To maximize your
profitability, find out:

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