Dental practices continue to undercharge for services: What you can do to change that
Too many dentists still undercharge for their services. It's the old fear that dental patients will leave if prices go up. This is hardly ever the case. Here's what you can do to charge what your services are worth.
They’re afraid that if they raise prices they’ll lose patients. But we at Sterling Practice Management haven’t seen any dental practice clients incur much risk at all when they actually increased their prices. It’s important to know how to do it.
The average patient loss to higher prices is between 2% and 30%, depending on the patient base. If the patient base is low-income and cash-based, then the loss will be on the high side. One could lose 30% of patients if the reason they came to the practice in the first place was because of low fees. But that’s not a typical practice.
Many dentists are convinced they’ll lose patients when some of them complain about the new fees. These practices would be better off without these complainers. They can then enter a new market of better paying and better overall patients who don’t mind paying for high quality dental care. We typically see between 0% and 2% of patients leave because of higher fees. These figures are representative of both large and small practices.
The economy will always fluctuate, so it’s never a good idea to wait to increase prices. Do it now. First, look at your profit. Is it about 35% of gross collections? If not, consider raising your fees. Secondly, compare your fees to the highest paid dental practices in your specialty within a few dozen miles. Ask yourself, “Why can’t I charge those fees? What are they doing that I can’t do? Do I give better service overall than they do?” It’s likely you’re a better dentist with a higher quality of service who isn’t charging enough.
When you don’t adjust your prices for inflation, you lose about 30% of your gross collections and about 10% in profit (the amount you as owner can pocket). The best formula is to allocate 33% for payroll, 33% for expenses, and 33% for the owner. This is a rule of thumb. We seen practices that show 55% profits from gross collections, and they aren’t particularly superior.
Indications that you’ve waited too long to adjust prices is realizing you can’t afford new equipment, software, or staff, money is tight, and you’re unable to invest in cutting-edge of technology. Nothing stays the same in business. It’s either expanding or shrinking, and if you don’t watch what isn’t working internally, or don’t monitor economic changes and marketplace shifts, you risk becoming the effect of your business and not a causative player.
There are dynamics that every business must keep in place to ensure client loyalty and retention and good word of mouth. These are especially true when you plan to raise your prices. Build real value into your services, and always create awareness of that value in your clients’ minds. You should always deliver more than expected, but never assume your patients know this. Don’t be afraid to point it out.
Maintain good and frequent communication with your patients. Become known as a highly responsive practice. Ensure customer service is exemplary. Educate patients on things that are relevant to them—new techniques, better ways to keep their teeth healthy, good hygiene, etc. This creates enormous affinity that will survive any fee increases.
Solicit patient testimonials and use them throughout your website and in all promotions and brochures. Note what your competitors are doing. While it’s sometimes hard to know what may be working for them, you can still compare it to what you’re doing. Let everyone know that you’re raising your fees in order to improve the patient experience and better service client needs. They will especially understand this if the above points are in place.
Keep in mind that while price often plays a role in patients’ perception of value, if you’re playing the long game, great value must truly be there. When you raise prices, you raise the tide for your practice. The increase isn’t just to make more profit, but also for the resources necessary to improve the service facilities and staff needed for you to have long-term success and an ever increasing, loyal following—in any economy.
Wilson, Kevin. "Hiring Breakthrough." Personnel: Your Most Valuable Resource or Greatest Burden – based on the works of L. Ron Hubbard. Sterling Management, 2013. Amazon, 2013. Web. 14 Jan. 2016.
Kevin Wilson is the CEO of Sterling Management, founded in 1983. By survey, active Sterling clients see a 10% to 20% increase in production in the first four to six months and a 30% to 40% increase in the first year. Sterling Management has delivered over 500,000 hours of business consulting and achieved more than 135,000 training completions among 175,000 business professionals from 1,700 cities in every state. The company has won more than 75 local, national, and international awards, including twice appearing on the Inc. 500 list of America’s fastest-growing, privately-held companies. For more information, visit Sterling.us.