smallerscalesDental business coach Alun Rees looks at the perception of price, cost and value

It is said that a cynic is ‘someone who knows the price of everything and the value of nothing’ but I think that attitude is not limited to cynics. Too much is written about pricing and profit and not nearly enough about value.

Many dentists – in common with other professionals – would love to comfortably charge a premium for their work.

Unfortunately, or perhaps fortunately for the successful ones, the majority are never in a position (whether by choice or circumstance) to demand the price that they deserve.

Price and costs

No matter under what system or scheme you run your dental business, the simple law of commerce demands that income must exceed expenditure. The way to do this has been described since time began. Take your last year’s outgoings (expenditure) and increase them by the current rate of inflation that applies to your specific situation (A). Next add in what you want your personal income to be (B). Decide how many hours you want to work per week and multiply that by the number of weeks you will be working in the year (C).

So A plus B divided by C is the minimum that you must earn every hour of every day that you attend to see patients. There is no escape and very little wriggle room with this method. Membership schemes can effectively provide some degree of buffering around the absolute figure but it is never going to go away.

Many dentists, lawyers and accountants are wedded to their hourly rate. They work out their fees by sticking absolutely to the rate per hour, or even per minute, and charge everything by the book, their book. Others translate this into a ‘per item’ price list where often one size will fit all and no allowance is made for degree of difficulty. You are in effect selling widgets of different sizes, shape and colour.

Whilst mentioning the degree of difficulty, the late Colin Hall-Dexter used to suggest that one worked out fees by adding time taken and laboratory fee but then adding a percentage of 10% – 20% for what he called the ‘buggeration factor’.

One problem with charging an hourly rate is that human nature often means that you will fall short of it. Over optimistic estimations of the number of hours to be worked and how well associates, therapists and hygienists will perform can lead to a failure to earn what you need. Hourly rate should not be an absolute. There should be a number of variable rates based upon the value and complexity of the treatment being provided.

Establishing value

What I have described so far is how the price comes to be charged, thereafter it tends to be passed to the patient as a ‘cost’ to them. This does nothing to involve the patient in the fee setting process and takes no account of their wants. More important, it does not involve itself in discovering and establishing the value of the service that you are delivering for your patient.

Yet value is the main way by which our patients will judge our work. Of course it is vitally important to the dentist and their team that they know their patient medically and dentally. Equally important for success is that they have taken time to know and understand what value each and every patient places on the dentistry that they are offering and, hopefully, providing.

In order to understand their wants you must know what goes on in their world not ours. This takes time, experience and an ability not only to ask the appropriate questions at the appropriate time but also to listen for, to properly hear and to respond appropriately to the answers.

Price alone

The patient must understand the risks of not investing in the treatment or of choosing to have treatment purely on price alone. I used to have this quotation, attributed to John Ruskin, displayed prominently in my reception area:
’It is unwise to pay too much, but it is unwise to pay too little. When you pay too much you lose a little money, that is all. When you pay too little, you lose everything, because the thing you bought was incapable of doing the thing that you bought it do. The common law of business balance prohibits paying a little and getting a lot. It can’t be done. If you deal with the lowest bidder it is as well to add something for the risk you run. And if you do that, you will have enough to pay for something better.’

‘There is hardly anything in the world today that some man can’t make just a little worse and sell just a little cheaper. And the people who buy on price alone are this man’s lawful prey.’

None of this takes away from the basics:
•    You and your team must be sure of the quality of your treatment both in its delivery and its longevity
•    You must be confident in talking about and taking pride in what you can deliver
•    You have to value your patients and put their needs first.

A value-based system?

If you are wedded to providing items of service a widget-based fee system then you are delivering ‘items of treatment’ rather than a value-based system.
If you place no premium on the skills needed to provide and restore an implant, to successfully negotiate four canals in a molar tooth or to treat a frightened child or phobic adult then you are behaving as a government would treat you.
The successful practices know what’s desirable to their patients in terms of worth, merit and importance because they have made sure that their patients understand the value of dentistry. They are well within their comfort zone when it comes to expecting, discussing and asking for the fees that they deserve.

The bottom line. Ensure that what you provide is desirable, that way your patients will both want and value it.

Alun Rees is The Dental Business Coach. An experienced dental practice owner who changed career he now works as a coach, consultant, troubleshooter, analyst, speaker, writer and broadcaster. He brings the wisdom gained from his and others’ successes to help his clients achieve the rewards their work and dedication deserve.