There are “magic numbers” for every business, no matter what industry they’re in. For veterinary clinics, finding the right magic numbers is critical because they help to quickly diagnose the clinic’s overall business health. Owners that know their performance can easily identify opportunities to improve on, and celebrate where they’re finding the most success.
The three most common financial reports that show these used by veterinary practice owners and managers that show the ‘magic numbers’ are the profit and loss statement, balance sheet, and cash flow statement. Your profit and loss statement shows you how your business is performing overall during a given period of time. Your balance sheet shows you a snapshot of the overall value of the business at that moment. Finally, your cash flow statement displays your changes in assets and liability values over a period of time.
It is necessary when determining a pricing structure for your clinic that you take multiple factors into account. It is easy to choose one mark-up method and to apply that across the board, but there’s more to it than that.
The categories to be considered are:
- Service Fees, including Shopped and Essential
- Inventory Fees, including Shopped, Standard, High-Cost, and Infrequent
The very first thing to consider when pricing services is to realize that the purpose of your pricing system is to maximize value, not cost. Your clients will shop around for some services based on price. If your goal is to offer the lowest price, then your job is easy. Cut everything by 50% and you are done. Literally.
Study after study has shown that consumers seek value over savings because they understand that “you get what you pay for.” When presented with four coffee makers priced $20, $30, $40 and $50, most shoppers will purchase the $40 unit, because they demand quality but aren’t going to “waste money” on the top of the line model. They do not recognize much difference in quality between the two top models and thus the perception of value is automatic. “I saved $10!” It is precisely the same with veterinary care; they want the best medicine possible but not at a good price. Hovering around the 80th percentile for your market will maximize your profit while helping create a perception of value for your clients.