Shops closing down, businesses going bust, people losing their jobs and mad sales in practically every (surviving) shop. Welcome to the recession…

I was talking to a dentist the other day, who is a private practitioner in a posh part of London. Conversation turned to the current economic climate. "Yes," he said. "I’m offering heavy discounts on botox and teeth whitening at the moment." I asked him why to which he replied "Well – everyone’s doing it aren’t they? It’s expected."

Wrong.

First, a little example about your profit margin. Let’s say you provide a treatment for £300 which you know costs £175 to provide. Your margin is therefore £125. Simple.

You then decide to slash prices and offer a 25% discount. What’s your margin now? The new price is now £225 which means the new margin is £50. So did your margin go down by 25%? No – it went down by 75%. Shocked? Most people are.

Spiral price cutting never helped anyone. If done carefully, discounting can bring in extra revenue. This works best when you know people are coming to you purely because of the discount and that they wouldn’t have come without that. However, the best way to use discounting, is to give a discount on one treatment to get the patient in initially which then lead to other treatments that the patient also needs.

For example – rather than discounting treatments like teeth whitening, why not discount check-ups which may lead to teeth whitening?

The other point to remember is – there is no correct price to charge – it depends on the service you provide and the amount people are prepared to pay for it. Consider the cost of a sandwich. How much is a sandwich? Exactly – anything from the cheapest at the round the corner all day breakfast café to a more expensive one at an upmarket deli. Does that mean the deli should match the café’s price? No! Not if they are shifting their sandwiches as people are obviously happy with that price.

I often hear people say that they will have to start cutting costs. Inevitably the first costs that are cut are the ones which really aren’t costing that much, but which, when eliminated, cause a lot of grief. For example – switching to cheaper brands of coffee/tea at the surgery. Might save you a few pence every week but may cost more in terms of loss of morale.

The moral of the story, sit down and examine all of your costs. Think what will happen if you try and cut certain costs and don’t cut those which will be more trouble than they are worth.

A good starting place may be to start looking for cheaper service providers and a website like uswitch.com could help immensely.

When making cost comparisons with certain services, quality has also to be taken into account. Think of services like solicitors – you need someone experienced who is going to provide a good service. In terms of buying/selling a practice, a cheaper solicitor may cost you more in the long terms and also may not have your best interests protected. The same applies to accountants – a cheaper accountant may cost you more in the long terms if things are not done to your best advantage or you are left unprotected.

If you find that you are not as busy as you would hope use your time to build your business. Perhaps this might be a good time to liase with referring businesses like beauty salons, do a leaflet drop, or do your staff appraisals? That brings me on to….

You might be surprised at the ideas you can get from your staff. Sit everyone down and brainstorm ways to attract patients and generate revenues.

Remember – we are all in this together – try and stay positive but do remember that it does essentially boil down to survival of the fittest.

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This web-site was last updated on 19/07/2010

Specialist Dental Accountants for over 27 years.

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