Discounts and low fees are costly to your practice

Jan 13, 2017 by Edward L. Blach, DVM, MS, MBA

There are few activities in managing your practice that will make you more money than adjusting fees.  Every transaction involves your fees.  If your fees are set at a level that undervalues or discounts your services, it is very difficult to make up for that undervaluation by seeing more patients.

For example, if your fees are undervalued by 10%, and your gross profit margin is 40%, then you will need to see 33% more in sales revenue in order to make the same profit.  Yes, that is correct.  You will have to see a third more patients, generate a third more revenue to make up for your fees being 10% lower than they should be.

Let's put numbers to this.  If your revenues are $2 million per year, and your gross profit margin is 40%, and your fees are 10% lower than they should be (or you discount 10%), then you will need to generate $2,666,666 in revenues to earn the same profit you would with $2 million in revenue and fees set properly.

Don't suffer the effects of indiscriminate discounting or fees that are set too low.  Review your fees today and set them at a level that earns the profits you establish as a goal for your practice.

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