Are you hurting your practice by offering discounts?

Everyone loves a discount and your clients are surely no exception. But when it comes to the health of your practice, are you and your team members giving away too much? I've been looking at recent financial data for a number of practices and, indeed, veterinarians and team members alike are giving away a lot.

In the clinics I've been working with, the range for discounts has been around 4 percent to 6 percent of the practice's gross income. This probably doesn't sound like a great deal of money. But 4 percent of a $1.2 million dollar practice is $48,000, and that's not chump change. In fact, trimming discounts might save your practice the equivalent of one or two salaries a year.

Get a number

So take a moment now (yes, right now) to run a report on your practice management software to find out how much your practice has been discounting. To do this correctly, make sure you understand how your software accounts for discounts. Some programs show the total dollar amount given away to a certain class of clients, like senior citizens, military members, or clients with multiple pets. If your discounts are coded—meaning you have a specific line item called discount—you can run a sales report on this code alone. Most software lets you run a report that tells you where any services or products have been adjusted, so if you or one of your teammates charges $60 for a radiograph instead of $100, that will show up.

Depending on how you've decided to give your services away—and the profession as a whole gives away a lot—you may have to run more than one search on your software to discover the true total. Remember too that these reports only show what you enter into the system. Dont' forget to estimate the amount of all the other discounts or freebies your practice might be giving clients. Add this to the figures you get from your reports and you'll see how much money your practice is losing to discounts.

Identify the sources

Just what products and services are you discounting? There are the things that practices just plain give away: the hundreds of nail trims and anal gland expressions that we consider too inconsequential to add to the invoice. There are the discounts we give to the elderly, clients who rescue pets, clients with multiple pets, military members, police and firehouse dogs, and the practice's "frequent fliers." We discount spays and neuters so our prices will be competitive and, if the pet is rescued, we discount them twice more. We discount the patients that stay in the practice too long and run up too high of a bill, and we discount the patients that need too many radiographs taken, too many in-house laboratories performed, another catheter placed, and another E-collar strapped on because they chewed up the last one.

Discounting bugs me (in case you can't tell) for several reasons. For starters, if you and your staff give away money as if it's obligatory to do so, how will clients ever understand the value of the discount? Second, many practices don't pay attention to what they're discounting. Sometimes, this means we're giving away products or services at or below cost. Third, why does everyone in the practice get to decide if services and products should be discounted? I'm betting not everyone understands the practice's finances well enough to make those decisions. Fourth, do we ever track discounts and measure their success? Are they business-building tools or are we just being charitable? Finally, are teams discounting because they don't believe that what they do is worth the price?

Of course, all veterinary team members want to give back to our communities, and we want to build our businesses. But let's be thoughtful about the process. If we're not, we could discount someone right out of a job or discount the practice right out of business. Here's how to make discounting work for your clients and your practice.

Check the prices you charge. Do they cover your costs? Do they include an adequate markup? There are many tools out there to help practice managers with this. Some programs, including Fair Fees and Profit Solver, even do the math for you. Additionally, many veterinary accountants and economists have written how-to articles about building pricing calculators. Read these articles. Using the information published by the NCVEI is another great way to find out if your pricing is on the wall, if not the dartboard itself.

Take your prices to the team. Do team members see the value in the prices your practice charges for a service? Get everyone on your team on board with your pricing. Try holding a meeting where you discuss your prices frankly. You'll find the discussion can be a boon for ideas on how to improve your practice. I recently held a meeting where we introduced early-detection blood tests for patients under 7 years of age. I had determined what I thought was a fair price, but once I talked to my team, they recommended a much higher price. After this meeting, team members were able to make hearty recommendations for a service they believed in.

Track success. If your pricing is purposely discounted to attract additional business or retain clients, figure out whether it's working. Assign a staff member to make sure you're not just racking up goodwill. A simple way to do this is to run a report on the clients who have purchased the discounted service and another on how much revenue those clients subsequently brought to your practice. You may find that far too many of those clients that came for their first free exam never returned. But that doesn't necessarily mean you should stop offering the free exams. Instead, maybe you need a new initiative to improve your first impressions.

Talk up discounts. If you have a discount policy in place, make sure your clients know they're getting a deal—not to congratulate yourself but to demonstrate the legitimacy of your initial pricing. If your clients perceive discounts as routine, they'll expect more—and mistrust your original pricing.

Examine how services are grouped. For example, some diagnostic tests always come with an exam charge, a blood-collection fee, a medical-waste charge, or all of the above. Don't look at the individual price for these services; understand what their total looks like on the finished invoice. Managers, this is the number that your team members will be explaining to clients, so make sure you're comfortable with it.

Some of you will put this article down and still offer discounts. You're not going to do it out of spite; you're going to do it because you feel it's the best way to make a client happy. And I'm not going to give you lip about it. But can I offer you two additional steps to take before you push the discount button? First, ask yourself if the discount satisfies your practice's mission statement. Second, ask a supervisor for his or her thoughts on the matter. The input may insulate you against the potentially rash actions of your oversized (but admirable) heart.

Ultimately, you and your teammates should be able to confidently look your clients in the eye when you discuss recommendations and pricing. Your clients rely on your expertise, so you must believe your practice offers a high level of care and believe that it's worth what you charge.

Bash Halow, CVPM, LVT, is the owner of Halow Consulting in New York City and Wyalusing, Pa.