How much do I charge?
One of the most important decisions you will have to make when running your practice is how much money to charge for your services. If you do a poor job setting your prices (either too low or too high), your business will not grow as fast as it can, or even worse, it could fail completely.
Before you start your Physical Therapy practice, make sure you do research and set prices that will keep you profitable. You don't have the luxury of regular pricing reviews that larger firms have, so you will have to do a lot of guessing.
When determining your prices, you need to make sure you charge a price that will allow you to turn a profit. You have to charge comparable prices to other practices near you if you wish to be successful.
The difference between cost and value
To increase your profitability, you need to make the distinction between cost and value.
- Cost is the monetary amount it takes to produce the product you sell
- Price is how much you receive when you sell the product or service
- Value is what the customer perceives the product or service to be worth
Take this example...
For a Physical Therapist to travel to someone's house to give them assessment, it costs them $2 for transportation, $2 for supplies, and $0 labor cost (as it is their own time). The actual value to the patient, though, is much more than $4. The patient would probably be willing to pay upwards of $80 for this service, so that is how much the Physical Therapist should charge.
How to build a pricing strategy
To choose prices effectively, you have to be aware of what your competitors are charging. Give local practices around you a call and get a quote to see how their prices compare with yours.
Unless you have a good reason, you should try and keep your prices within the range of your local competitors. If you overcharge, no one will book appointments with you, and if you undercharge you won't be able to make a profit.
The perceived value of your product is extremely important. For example, if you charge more than others, you are perceived as being premium quality. This is a double edged sword - it could attract higher class patients, but it could also deter people who don't have that much money.
It is usually a good idea to determine discounts on a case by case basis. If someone has to come see you 3 times a week, it is fair to charge them the same amount as someone who comes once a month? Try and base prices on individual people.
Raising or lowering prices
At some point in the life of your business, you will need to adjust your prices. It is important to plan ahead and understand the effects this will have on your business. Ask yourself:
- What effect will the price change have on the volume of sales?
- What will the effect be on the profit per sale?
Increasing prices can improve your profitability even though your sales volume may drop.
If you are increasing your prices, always explain to your customers why you are doing it. You can use the price change as an opportunity to re-emphasise the benefits you offer. A good explanation can also strengthen your relationship with a customer.
Lowering prices is something you should generally avoid doing. People associate low prices with poor quality, and that is that last thing you want your practice to be labeled as.
You should focus on making more money instead of cutting prices. Buying decisions are rarely made on price alone anymore. They are a combination of price, but more so the benefits you offer.
Sell the benefits not the features
Nobody buys based solely on price any more. People want to know what benefit they are getting out of the product they buy. They will pay extra for something that has extra perceived value.
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