By: Jamie Davis, CVPM
Intentional pricing, instead of guessing, is a critical part of today’s veterinary practice.
A good pricing strategy is one of the most powerful levers in practice, and also the most misunderstood. We often price based on gut instinct, peer recommendations or across-the-board percentage increases. This may feel easy, but these methods rarely create sustainable profitability or align with the realities of an individual hospital. A strong pricing strategy involves methods that charge appropriately, consistently, and strategically to support quality medicine, team sustainability, and long-term practice goals.
What makes a healthy pricing strategy?
First and foremost, we need the throw out the ‘one size fits all’ approach to pricing. We also need to start using benchmarks and recommendations as a tool instead of the law. The three characteristics of a healthy pricing strategy are that it is customizable, consistent, and scalable. A customizable strategy embraces your practice’s unique qualities and goals. Variances in cost structures, caseloads, and client expectations need to be recognized and utilized. A consistent pricing strategy is clear and repeatable. This means we don’t have to reinvent this process every year or with each new product or service. A scalable strategy is one that can adjust with the changing staffing, services and industry flux. It becomes a system that stabilizes rather than stress.
Start with the end in mind
What is the end of pricing? It’s profit! Instead of asking the questions “What should we charge?” we need to ask, “What do we need to earn to support our goals?” Profit should not be the left-over crumbs, but the results of intentional planning. Pricing strategies are often one of the needs sitting in the gap when we are not making profit targets.
Metrics you’ll need:
- Revenue and expense trends over time
- Current EBITDA (earnings before interest, taxes, depreciation and amortization)
- Target EBITDA
- Operating Costs – COGS (cost of goods sold), facility costs, staffing costs
These are critical because it is the total picture of the practice needs, not one siloed category. Everything in your financial health should work together.
Understanding what you are selling
We don’t use a one-size-fits-all approach because not all goods are the same, and not all services are the same. We start with two big differentiators, the shopped and non-shopped. Shopped goods and services are preventive care, common diagnostics, and basic care with high price visibility. Non-shopped goods and services consist of our professional expertise, medical decision-making and interpretation, time sensitive needs and specialized and emergency offerings. This is an area where we often undervalue our time, skill, complexity, and responsibility.
Common pricing approaches
The healthiest pricing strategies blend multiple methods.
Cost-based pricing – ensures expenses are covered and profit goals are met. This method creates a financial floor.
Value-based pricing – reflection of what clients perceive the service to be worth. Value-based components like convenience, trust in the medical team, reduced stress, and improved outcomes can be utilized.
Competition-informed pricing – you’ll need to not only define your market competition, but also your target market. The purpose of this is not to price match or set your prices in the middle (not the cheapest, not the most expensive) but to be aware of the market and compare your service level and experience to leverage that for an appropriate pricing strategy.
Psychological and structured pricing involves the use of tiered service options and bundling. This helps clients understand value while supporting revenue consistency. This is very effective when value intersects with high competition.
Pricing is a communication strategy
A large barrier to effective pricing is the fear of client pushbacks and confusion on prices. To be a practice that prices things well, you’ll also need to:
- Train teams to speak confidently about value
- Not apologize for fees
- Explain the why and the what, not just the cost
- Stay consistent across owners, doctors and all support team members
Where do you start?
Use this guide to move pricing from a stressful task into an intentional, well designed, repeatable process.
- Define your current EBITDA and set your target
- Know your true costs byutilizing break-even numbers and operational costs
- Separate shopped vs. non-shopped items
- Apply the right pricing method
- Review structure of fee pricing, bundles, unused products and services
- Train the team to communicate value
- Make pricing a standing process with a minimum of an annual review.
A healthy pricing strategy doesn’t chase the cheapest fee or quickest fix. Instead, it supports quality medicine, sustainable teams, and long-term practice health. When pricing becomes intentional, it stops being the problem and starts being part of the solution.
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