This page is designed as a supplement to the blog on pricing veterinary dentistry found on our blog page.
Pricing Veterinary Dentistry With a Dedicated Surgery Team
For those of you that have a dedicated surgery team on a day, here is one way to look at your expenses.
Calculating Costs
Let’s take the amount of money that your surgery team costs you per hour and add to that their share of the practices fixed expenses per hour. If our goal is a 25% margin in addition to any production paid to your surgery doctor then the formula for your breakeven point at 25% profitability is:
The sum of the Salary of the Sx Team Per Hour + Their Share of Fixed Expenses Per Hour times the number of hours they are in surgery divided by 1- the sum of 0.25 plus doctor production pay as a decimal or:
((S+F) H)/ 1-(P+0.25)
Where:
S= Salary of sx team per hour*
F= The surgery team’s portion of the practice’s fixed expenses per hour**
H= Number of hours dedicated to surgery
P= Percent production paid to doctors as a decimal
Let’s use an example: Smile Bright Veterinary has a dedicated inpatient team scheduled from 8am to 4pm or 8 hours. The team consists of a doctor, a licensed tech, and two assistants. The total annual payroll for the four employees is 240K or 118 dollars for every hour that they work. The practice incurs fixed expense at the rate of 210 dollars per hour (of which the surgery team must cover 1/3 or $70) and the doctor is paid 20% of her production. How much money must the surgery team generate in the time that they are working for their efforts to produce a 25% margin on their revenue?
((S+F) H)/ (1-(P+0.25))
((118 + 70)*8)/ 1-(0.45)=
2624/.55= $2734.54
Let’s check our math: We incur a total of $70 + $118 per hour for 8 hours or $1504 dollars. We also incur 20% production expense on our gross receipts of $2734.54 or an expense of $546. $1504 + $547 = $2051. The formula for margin is Price=Price-Cost/Price. ($2734.54-$2051)/ $2734.54 = 0.2499 or 25% margin.
And now it starts to gets good. If the Smile Bright Team can make their goal of $2734.54 in four hours of surgery time, they have roughly an additional 3 hours that could be used for procedures before they have to get ready for the evening discharges. At this point, the only additional expense the practice incurs is the doctor production of 20%.
To be responsible, we’ll figure the team’s wages into our price for the dentistry, but even with this ‘just-to-be-safe-padding’ we can afford to provide the stage one dentistry for a cost of 215 dollars and still be at least 25% profitable.
Here’s how it looks in formula form:
($118*3)/(1-0.45)= 354/.55=$643.63 or $ 215 for each of the three dentals.
Determining what your expenses are and what your financial goals need to be in order to be profitable is liberating and empowering. It gives you the chance to work unambiguously with your team to formulate goals and prices for your daily services including dentistry. You’ll be more confident when you talk to clients about the cost of your services and you’ll feel better about recommending dentistry for the price that you charge. But best of all, you and your team will be able to work together to offer your clients pricing for preventative dentistry that is both appealing and profitable. AND we didn’t discount in order to do it! Hurray!!!