14 Nov 2014  •  Practice Management  •  4min read By  • Ashley Latter

Do You Know Your Numbers?

Ashley Latter explains why it’s important to make sure you know your costs when it comes to your pricing structure.

Have you ever been in the situation where you’ve been quoting a patient and, before you’ve realised what you’re doing, you’ve offered them a discount without them asking? Have you ever carried out a basic procedure free of charge because it only takes a couple of minutes to complete? Do you find it difficult talking to your patients about money?

If any of the above situations sound familiar to you, I recommend you read on to see what impact you could be having on your practice.


Let me put things into perspective…

For example, your practice lists the price of a filling at £130, but when a patient has a filling you only charge them £100 – that’s a substantial reduction of 23%, which the patient didn’t even request!

If you were to do this over a space of, say, five years, you could be costing your practice around £50,000!

That’s a staggering amount of money. But, even more worryingly, the dentists that tend to do this on lower cost treatments such as fillings, tend to also be discounting other treatments too, and they are mainly the more highly-priced treatments.

The 10% rule

The 10% rule is one I refer to quite often as it highlights the harm that regular discounts can do to a business. What does a 10% reduction in price do to your margins? Most dentists believe that it will equate to a 10% reduction in profits but the reality is actually much worse.

For example, for every £100 of sales, if your costs are £65, it leaves a gross margin of £35. If you were to consistently reduce your prices by 10% it would mean your sales are now reduced to £90, while your costs will remain unchanged. Your gross margin will then become £25.

This means that, in effect, your profits will have been reduced by a staggering 29%! So, in this case, a 10% reduction in price is equal to a 29% reduction in profit.

This demonstrates that even the smallest difference in cost can have a dramatic impact on profit. Despite an increase in their overheads, many dentists are fearful that any increase in price would risk losing their patients altogether, but in actual fact, by not increasing prices to keep in line with rising costs, it can, in time, lead to the extremes of bankruptcy!

Making a difference

In the past, I’ve heard from a couple of dentists that, because of the credit crunch, didn’t want to increase their prices, so they hadn’t for a number of years.

What these dentists didn’t bear in mind was that, during this time, their costs would increase significantly, which meant that the only way to stay in business would be to take a pay decrease and working incredibly long hours with very little time off – needless to say this left them feeling miserable.

This scenario could have been avoided if they had considered a small increase in their prices, making a significant difference to their bottom line, self-worth and the time they were able to take off to invest in the practice.

This is why it’s key to make sure that you regularly review your price structure ─ if you don’t, it can have a serious impact on your bottom line. So, remember:

  • Stop reducing the prices of your treatment in your head ─ make sure the price that’s in your head is the same that comes out of your mouth
  • If you do give a discount then tell your patient
  • Know your numbers ─ make sure you get a handle on your costs.

To read more articles from Ashley and other top dentistry consultants, why not head over to our Resource Library.

Interested by what Ashley has to say? You may be interested in taking a look at his book ‘You are Worth it ─ How to communicate your fees with confidence & achieve the income your services deserve’ or heading over to his website.


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