How to raise your fees and not lose patients



Charging more money to keep up with costs is a big headache for vets who otherwise may be caught in a bind of undercharging, writes Rachel Smith

It is no secret that owning a pet is costly—and that many pet owners blanch at the bill they receive after bringing their four-legged friend in for medical or surgical treatment. What they do not see is the flip side: the minefield many vets face when trying to set prices that are fair, cover their expenses, take into account inflation and deliver a profit.

It is particularly tough given there are no standard fees or guidelines set by the Australian Veterinary Association (AVA), leaving vets to figure it out for themselves. Do you charge high and make more, perhaps attracting clients who are not sensitive to price increases, or keep prices down to get more people in the door and hope to stay profitable by sheer turnover? And what do you do if you suspect you are undercharging?

US-based vet practice management consultant Fritz Wood’s advice is to take action and correct the mistake immediately—even if some clients vanish and others complain. “With fees, you’re never stuck,” he says.

That said, many vets clearly feel that way, or at least, grapple with the right way to set or raise prices.

Dr Dave Neck, who owns the small but busy Cottesloe Vet practice in Perth, is one of them. “I’m a practice owner and a fairly experienced vet and I still struggle with these decisions—most vets do,” he admits. “It’s something that often comes down to trial and error because while vets enter vet school to fix animals, we end up making business decisions about setting prices that we’re probably poorly qualified to make in many ways.”

The opposition many vets face to their ‘expensive’ fees—or why they charge ‘so much’ for such a ‘quick’ procedure—does not help, adds Dani Bliim, training quality and communications manager at the Small Animal Specialist Hospital in Sydney. “There’s an expectation that because we have public hospitals then our vets should be the same, but we’re a business like any other.”

Price rises and losing clients—is it a myth?

Losing a chunk of your client base because you have mistakenly set fees too high is a worry for any vet, but according to Wood, it shouldn’t be. “Multiple studies in the US have shown that veterinary fees are inelastic, so fears of lost clients are overblown. For example, a five per cent fee increase will not result in five per cent of clients exiting. Therefore, fee increases result in greater net income.”

That has been the experience for Dr Neck, who instigated an across-the-board price rise when other vets and pet stores moved into the neighbourhood, affecting his traffic.

“It was just after the GFC and I’d not put my prices up for two years—I made the decision not to while the economy was slow in WA,” he remembers. “Was that clever? Possibly not… a lot of vets follow the model of little and often, putting up their prices by one quarter to one per cent every three months, while others put it up by CPI every 12 months, for example. But not one person said, ‘Oh, prices have gone up’ and that was a 10 per cent price increase.”

“High quality veterinary care is expensive; that’s a fact wherever the practice is located. If your fees aren’t aligned with the value delivered, you have trouble ahead.”—Fritz Wood

What about when it comes to desexing? While Mrs Mabel can go and get Fluffy desexed for free or at discounted rates at the RSPCA or Cat Protection Society, many pet owners still want their vet to do it, making it a hard price to set. “It’s not fair to compare those charges to other fees because vets heavily discount desexing to avoid unwanted pets,” explains Dr Neck. “And people are paying for a personalised service. So what you charge is really part and parcel of the demographics you’re aiming for and how altruistic you are as a vet.”

How to raise your fees

So, it is time to put up your prices. But do you raise fees across the board, or for certain treatments? Bliim says most vets will cherry-pick which fees to raise. “Small increments on certain charges can be raised to increase revenue. For instance, a dispensing fee increase that would affect all clients, or adding in a theatre fee for particular surgeries,” she suggests.

Wood agrees that vets have latitude to raise ‘shopped’ fees annually—for physical exams, fecal tests, heartworm tests and core vaccines—simply to keep pace with the cost of doing business. “‘Non-shopped’ fees, which typically include laboratory, radiology, anesthesia, hospitalisation and surgery, are different,” he explains. “These fees might be increased more than inflation and more than once a year. It’s instructive to compare your expenses from year to year. For example, if your total expenses in 2015 were $1,000,000 and in 2016 they were $1,060,000, your personal inflation rate was six per cent. If your fees don’t increase by at least as much, you’ve volunteered for a pay cut!”

That said, fee rises must correlate to the level of client service you are offering, with consumers always comparing the value received to the value given. It is when they do not feel that they are getting good service that they will look more closely at the fees and perhaps decide to go to another vet, says Woods. “So while fees must rise continuously—as do practice expenses—so must the level of client service.”

What should you take into account when setting fees?

Pricing will depend on the demographic of where your practice is situated, and the type of clients you want to attract, says Bliim. “Not only is the clientele’s income important, but the type of patients you will see. For instance, west of Sydney this will generally be larger dogs and in the inner city, smaller dogs and cats, which also influences what type of services are offered—from grooming to puppy classes, obesity clinics and so on.”

While pricing obviously has to be competitive, you also have to be careful deciding what level of service to offer and which type of clientele you want to attract—so do you want to add preventative medicine options or extras for more affluent clients, or just basic necessities for those who might not have thousands to spend? “Offering gold class type services in the wrong area would be career suicide,” adds Bliim.

But then, business owners should not sell themselves short even if they are operating in less affluent areas, says Woods. “High-quality veterinary care is expensive; that’s a fact wherever the practice is located. If your fees aren’t aligned with the value delivered, you have trouble ahead.”


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