The science that proves the need to think hard about your pricing
How do you think our clients see the finances behind the veterinary industry?
Many will think our services are expensive, and assume that our professionals earn an awful lot of money.
But we know that this isn’t necessarily true. Compared to professions that require a similar amount of training and investment such as doctors, lawyers and accountants, our earning capacity isn’t what our clients may assume.
To put this into context, a veterinary graduate must complete five years at university. At £9,500 a year tuition fees, and roughly £10k a year maintenance, that’s the best part of a six figure investment.
It’s important to bear this in mind in relation to how much we charge for our services.
And the best way to explain why is through a hypothetical case study.
Not sure how to about auditing your prices? We’re here to help.
LET’S DO SOME MATHS: THE CONSULTING CONUNDRUM
When we’re setting our prices, what do we take into consideration?
What our competitors are doing? What we’ve charged in the past? How much we think our clients will accept?
All understandable reasons. But when you break down the figures, the value of these approaches is brought into question.
To illustrate this point, we’re going to work out two figures: the true cost of a veterinary appointment and the value of the price that we charge.
HOW MUCH DOES IT COST TO PUT A VET IN A CONSULT ROOM?
An average vet will consult for six hours a day, meaning there are 24 15 minute slots available. Not all of them will be filled every day, so we’re taking 21 slots as an average – which is a fairly busy day for most vets.
The average salary for a veterinary surgeon in the UK is £44,000. But that’s not the true value of how much that vet will cost a practice. Once you factor in things such as NIC, pension contributions and CPD budgets, you’re looking at a figure around £51,800.
Increasing numbers of vets are working four day weeks. Add in five weeks of holiday, five days of CPD and another day for inevitable, understandable absences such as illness, and you’re looking at a vet having 176 days in practice every year.
However, the practice – and hence the consult room – is open 253 days a year, taking into account weekends and bank holidays. That means that you need 1.5 full time equivalent vets to operate your consult room every available day of the year.
So, £51,800 multiplied by 1.5 gives us a figure for the cost of having a vet in a consult room throughout the year. But there’s one more thing to consider.
Our clients are buying our services including VAT, which we have to cover on our end.
So the veterinary cost to cover one consulting room annually is £93,000.
HOW MUCH WE'RE CHARGING V HOW MUCH WE'RE MAKING
Now let’s look at how we’re charging for these consultations.
We’re choosing to use the example of a practice charging £60 for a 15 minute consultation.
In actuality, many practices will be charging less than this.
But maybe that wouldn’t be the case if we tell you that the actual average revenue is going to be a lot less than what you’re charging – and in this instance £60 becomes £41.
We have re-examination fees, which are lower. We have minimum consult fees. We have no shows, reduced fees for nail clips and anal sacks, empty slots in the diary.
During the pandemic, empty slots disappeared, and we were all working overtime just to fill demand. But we’re now noticing the empty slots growing once more.
So it could be that £41 from £60 is actually optimistic. But it’s what we’re working with here.
WHAT THIS ALL MEANS
We’ve established that the cost of staffing our consult room with a vet works out at roughly £93,000 a year. But there’s more to consider here.
When we look at the figures, our support team costs are invariably pretty similar to our vet team, so we can confidently predict that our nursing and front of house teams supporting the vet in the consult room will double that cost.
We then have direct costs such as getting rid of waste and running our lab, which we can tab at £15,000 a year, and overheads such as rent, electricity and insurance, which we’ll cost at £48,000 here.
That’s £249,000 a year to run one consult room.
So you do the maths, divide that figure by the number of slots you’re looking to fill, and you arrive at the cost of running a consult room per session.
It doesn’t take us to tell you that if you’re spending £42 to deliver a service that is making you £41 each time it’s purchased, you’re not in a good place.
SO WHAT CAN WE DO ABOUT IT?
This is just a thought exercise with rough figures, but what it illustrates is that thought needs to be put into how much you charge for your services.
What it shows is that we may actually be losing money on a service that gives access to one on one time with exceptionally well trained and skilled professionals.
The fact is this is a hypothetical situation focused on one service. When you extrapolate this across the range of services your practice offers, the need to take a scientific approach to pricing becomes abundantly clear.
But where do you start? Fortunately, we’re here to help.
With decades of experience in the industry, our team has established systems that allow us to consult with practices on the costs associated with running a practice, the profit margins of the services we offer and the best way to introduce new pricing structures into your business.
If you’re interested in finding out more, we’d love to hear from you. Get in touch today to set up a one to one chat with our experts.
Don't charge less than you're worth.
Let us guide you through the process of creating a clear veterinary pricing strategy
0113 347 0057