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The Truth Behind The Price

Katherine Dobbs, RVT, CVPM, PHR

Here’s the deal. You work in a veterinary practice. You make, let’s say, $14 per hour. You see clients and patients coming in, buying services and products, and leaving money behind. When you notice the price of some of those services and products, and the total on some of those clients’ invoices, you wonder, “Why do I make only $14 per hour?” If you work in emergency or specialty practice, this is even more pronounced because typically the client invoices are even higher.

You assume the practice owner is making a lot of money off these client visits. You may wonder why you’re not getting more of it. Over time, you may become disgruntled and not believe in those prices anymore. When you see clients who can’t afford your services or products, you become frustrated about the prices and wonder why they can’t be lowered to make veterinary care more affordable for clients who are going through a tough time financially. You end up feeling that the prices are too high and the compassion too low, and this shows in how you present services and products to potential buyers. Then they buy even less and your paycheck has no hope of getting bigger. What do you do now?

In my opinion, everyone working in the veterinary practice needs to understand the pricing of services and products. It’s the only way to prevent the vicious cycle outlined above. So this is going to be the briefest financial lesson you’ve ever learned, but it’s imperative to your success in this profession.

Let’s start with a product that costs the practice $10 to buy. The practice also pays an ordering cost, which is 15 percent to 20 percent of the purchase price and covers the time for someone to determine how much is needed, shop for the best price, request the purchase, meet with sales reps, account for backorders, receive and unpack items, and reconcile all the paperwork. If we look at the best-case scenario, our cost is now $12 for that item.

Then you add the holding cost, which is 10 percent to 15 percent of the purchase price and covers the property taxes on the held inventory, insurance on the value of the inventory, facility costs to protect the products, costs relating to theft, spoilage and expiration of items, pharmacy licensing fees and maintaining a safe work environment. With the best-case scenario, our item now costs $13.

Now we add the soft costs, which is the personnel-related costs of selling the inventory. This percentage is taken from the overall payroll for the practice staff, which is typically 20 percent to 25 percent. Again, best-case scenario, our item now costs $15.

So, we have to charge $15 for that $10 item just to break even. If we intend to make a profit off of it, and of course we must to stay in business, our profit goal should be 15 percent to 20 percent for a healthy, mature practice. If we charge the client $16.50, we’re covering all those considerations.

Services are even more difficult because you have to take into account all the items required for that service (think surgery, with gauze, catheter, anesthesia, equipment, etc.) plus add the overhead, which is the cost involved each minute to keep the practice open.

The point is, until or unless you understand what goes in when pricing products and services, you can’t understand how the practice determines your portion of the money coming in. You may think someone besides you is getting rich off these pet owners, but I can assure you, very few practice owners fall into that category. Instead, they are like us and get their greatest satisfaction from helping and healing animals.

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The Truth Behind The Price

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