You have the following potential income ( per client ):
New client $ 80 + $ 20 ( medicine )
Follow-up client $ 60 +$ 20 ( medicine )
Your break-even point is calculated as :
Weekly expenses gross = $ 210 + ($ 700 / 52 ) = $ 210 + $ 14
Gross new client income = $ 80 + $ 20
Gross Follow-up client income = $ 60 + $ 20
Break-even for new clients = $ 224 /$ 100
Break-even for follow-up clients = $ 224 /$ 80
= $ 224
= $ 100
= $ 80
= 3 clients ( rounded up )
= 3 clients ( rounded up )
Example 2 . You wish to determine how many clients ( new clients or follow-up clients ) you need to see per week to generate a gross income of $ 52,000 per annum . Again , assume each client receives medicines at an average profit of $ 20 . Disregard the cost of medicines .
You have the following expenses :
Rent Marketing expenses
Miscellaneous ( phone , stationery etc )
Insurances Professional memberships Income
$ 150 per week $ 30 per week $ 30 per week
$ 400 per annum $ 300 per annum $ 52,000 per annum
Your break-even point with a $ 52,000 per annum income is calculated as :
New clients = ($ 1000 + $ 224 )/$ 100
Follow-up clients = ($ 1000 + $ 224 )/$ 80 =
= 13 clients / week ( rounded up )
= 16 clients / week ( rounded up )
Given the current rate of inflation , if you want to ensure that your clinic remains economically viable but you don ’ t want to increase your fees , an alternative may be to focus on increasing your client intake . To do this you ’ ll need to determine how many more clients you ’ ll need to see over and above the number that you ’ re currently seeing to cover your expenses and provide you with a reasonable income . Using Example 2 above and a
6.1 % inflation rate , to accommodate the increase in your expenses you ’ d need to see one extra client per week ( 13 x 1.061 = 14 , rounded up ).
How price sensitive are our clients ?
The thought of increasing one ’ s fees can be a significant source of anxiety , but is that anxiety warranted ? Someone once said that a business essentially consists of three elements - product , service and price , and that it was unwise to attempt to be the best in all three areas . It ’ s clearly apparent that for many industries , such as grocery and other industries dealing in consumer goods , competitive pricing is an important factor in their financial success . However , for those businesses providing healthcare services , as far as clients or potential clients are concerned , it ’ s usually the case that price is subordinate to :
• The perception of a high quality of customer service
• The perception of effective clinical outcomes
• The perceived quality of your competitive advantages ( anything that ’ s unique about you or your practice that makes it uniquely attractive to potential clients ) over those of other potential competitors .
There are numerous examples of natural healthcare clinics around Australia that operate very successfully while charging some of the highest consultation fees in the country . In most cases the prices of our products or services are only important when all other things , that is , the non-clinical aspects of the services that we provide ( parking access , quality of communications , etc ), clinical outcomes and competitive advantages , are perceived as being equal to those provided by others .
The preference for quality and service over price was highlighted in the results of two recent surveys , conducted by Word-of-Mouth Online , of 1800
Australians for their reasons for buying products or services . Across these surveys 87 % of respondents said that perceived expertise and quality of work were the main reasons that they ' d seek the services of a massage practitioner , and 81 % said that good communication and friendly service were the most important factors . One of the main discoveries here was that quality , rather than price , was the primary driver for loyalty to the practice .
Setting your fee level
If you decide to change your fees , what level should they be set at ? It should be kept in mind that there are dangers in setting your fees too low . It ’ s fairly well known that a significant section of the population tends to associate a low price with a poor-quality product , and it ’ s been found that clients who secure your services on the basis of the price you charge will be loyal to the price , not to you . It may seem tempting to win potential clients over on the basis of offering consultations and / or medicines at the lowest price in the local area , but in the long term , for a small business this strategy isn ’ t sustainable . Lower prices mean the clinic receives a lower income which inevitably means that the quality of service remains low because you ’ re unable to fund a higher level of service .
Those who charge high fees may find that clients feel that there ’ s a certain aura of prestige associated with a high fee structure , and it ’ s been noted in several areas of commerce that loyalty to a brand , product or service provider is higher at the higher-price end of the market . Some clients may have the impression that the higher the fee , the more effective the service . An article from the online journal Neurology in January 2015 reported a study in which people with Parkinson ' s disease were given the same fake drug . One group was told that the drug cost $ 100 per dose , and another group were told that the drug cost $ 1500 per dose . The group given the more expensive version of the " drug " had a superior clinical response to it . It ' s also been the experience of a number of healthcare providers that if you create
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