I often get asked during consultations on how to price services. The answer is difficult to answer because there are so many factors to consider. What is paramount though is that you price your services just underneath what the competition is pricing theirs. Yes, undercut them. I have found in my business career that when you undercut the competition, you will get busy very fast. So how do you determine what you should be charging?
It is very important you charge reasonable rates first and foremost. Prices for a particular service throughout the country will vary, but usually they will be within a similar range. To figure out the price of a service, you need to determine the following 3 things:
- How much disposable income is there in your region?
- What is the estimated size of your target market?
- What is the competition charging?
The most important question to answer is what your competition is charging. The socioeconomic status of your region is important but there are always people who have disposable income in any given area. As I have stated before, my men’s health clinic is very profitable and it is located in one of the poorest counties in the country! People have money to spend, therefore you need to guesstimate how large your target market is.
During the business planning phase of your business and once you have chosen your niched practice skill, you need to figure out what the competition is charging. This is the most critical element in determining the price of your services. You do this by calling them and acting like you’re a potential patient. Pick the receptionists brain. They will usually tell you everything you want to know about their prices.
Once you call all the competition in your area, you need to call other places within the region or even other states. This will give you a good ballpark figure on what other practices are charging. After you collect about 8 different prices, you need to average them out. You will be amazed at how expensive some places are and how reasonable others are. What do you do at this point? Price it cheaper than the closest one to you.
When I started my medical cannabis clinic, I called all the clinics in the region and undercut everyone by $25-$50. When I did this, word got out quick and I stole the market within 6 months. Other clinics despised me but so what. What are they going to do? Within 1 year, every clinic brought their prices down further but I still underpriced them.
Remember, some money is better than no money! As long as you are making a profit, who cares.
I did the same thing with my men’s health clinic. I undercut the regional competition. By charging reasonable prices I was able to tap into the middle-class market. This expanded my business considerably but my target market was still higher socioeconomic men.
When you are trying to figure out what the price of your services will be, just undercut what the competition is doing. As long as what you are doing is still profitable and worth your time, it is worthwhile to pursue. By charging cheaper prices, your patient volume will be higher, thus it will offset the cheaper prices. A high volume, cheap service will do well. On the other hand, a high priced, low volume clinic does well too. Therefore, you need to determine what you want.
I believe that a high volume and low-cost practice is more profitable in the long run, but it requires much more work because you are seeing more patients. If you don’t want to work hard, then be a high priced and low volume clinic. You can still make a lot of money but not as much as the low priced and high volume one. So my recommendation is to be the cheaper place is town!