When you open your veterinary practice, you may struggle to set appropriate prices for your products and services. Unfortunately, the problem doesn’t go away. Even when you’ve been a veterinary practice owner for years, you will still need to decide how to raise prices to keep pace with inflation while staying competitive in your local area. If you struggle to find a pricing strategy that works for your business, use these tips to set your prices appropriately.
Know Which Prices Are Shopped
Customers are very sensitive to the prices of some services and may switch to a competing veterinary practice if you raise these prices too high. However, some prices are less likely to be the targets of customers’ shopping around, so you can raise them higher to boost income for your business. In general, the most price-sensitive services are vaccinations and elective surgeries. Urgent pet care is less price-sensitive, as customers are often not prepared to spend time shopping around when their pet needs help quickly.
Price Based on Time
If you pay your veterinarians and technicians an hourly or yearly salary, it makes sense to price your services based on how much time it takes staff members to complete them. First, work out how much revenue you need each employee to generate during each shift they work to give you an acceptable amount of profit. You can then work out a price per hour or per minute for your vets and technicians, which you can use to set prices for the services you offer.
Mark Up Medications, but Not Too Much
There are two ways to make money on veterinary medications: one is to mark up the cost of the medications, while the other is to apply a prescription or handling fee. Most veterinary practices use some combination of these two methods to ensure they make a profit. Traditionally, most veterinary practices mark up traditional prescription medications to between two and two-and-a-half times the cost price and apply a small prescription fee. In most cases, customers are happy to pay for a medication that their pet needs to recover from an acute illness. However, they are more likely to shop around to get the best prices on medications that their animals need to take regularly for chronic conditions, so you may want to reduce your markup on these products to ensure your customers keep coming back.
Offer Payment Plans
Customers are often more willing to pay higher prices for veterinary services if they can spread the payment over several months. Consider offering payment plans that allow customers to pay their veterinary bills in installments to reduce price shock. Of course, you should remember that offering a payment plan means you are effectively giving credit to your customers, so you should check that they are able to meet the repayments. In addition, you need to budget for a small subset of customers defaulting on their payment plans.
Market Your Practice as a Premium Provider
Having the cheapest prices in town isn’t always the best way to attract customers to your veterinary business. Among customers, there is often a perception that veterinary businesses that charge more offer a higher level of service. If you are confident that you can offer a better service than your competitors, don’t be afraid to raise your prices to match.
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