How To Set Prices For Osteopathy Treatment and Increase Them Ethically
- Alan Zaia M.Ost
- February 4, 2022
- Business, Coaching, Practice Management
Table of contents
About Alan Zaia M.Ost
Ethical osteopathy business and marketing advice delivered in a British accent. You’ll find me running, at the beach or inside our courses helping osteopaths create their perfect work-life balance.
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Pricing for new and existing osteopathic clinics
Answering common questions about pricing
At Osteohustle, we find that new clinic owners struggle with how to price an osteopathic treatment and often base it on local competition alone. Meanwhile, existing clinic owners debate the best times to increase their prices, how it affects current patients and how much to raise them. While ensuring the clinic is making a profit is essential for new and existing osteopathic practices. This article will share our experiences helping osteopaths set and increase their prices.
If you’ve ever asked yourself the following questions, you’ll find help in this article.
- How do I price an osteopathic treatment?
- How often should I increase my prices as an osteopath?
- When should I raise my prices?
- How do I price a new treatment in my clinic?
Our stance about money in osteopathy
It’s important to us for our words to have context. We want to make it crystal clear that at Osteohustle, ethics always comes first. So know that everything we talk about comes from a place of love. A place where we can discuss money, business, and profits respectfully, where we all learn and grow together.
If you’d like to join our community, where we share our experiences about everything business and marketing in osteopathy, join our free Facebook community: The Osteopathy Marketing University. It’s only for osteopaths, so come and join the discussion. We’d love to hear your point of view.
Yes, there will be jargon
We believe it’s important to use business terminology so you can translate non-osteopathy-friendly business and marketing articles. However, we’ll provide brief osteo-friendly explanations and links to excellent definitions throughout.
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A guide for how to price an osteopathic treatment
Use this as a guide in setting osteopathy treatment prices and increasing them ethically.
Knowing how to price your services will help you generate positive cash flow (where more money comes into the clinic than out) and have a healthy business throughout your businesses life.
There are no hard and fast rules when pricing osteopathic treatments and other services. As the owner of your business, in theory, you could put whatever price you wanted on the services you provide. However, following this framework will ensure that you don’t underprice your services.
As a business owner, it’s your responsibility to make sure you can pay yourself, your staff, and your bills. Moreover, it’s essential to create a profitable business so you can continue to help patients for a long time to come. In a sentence, correctly pricing your services allows you to invest in growing your business and achieving your ideal work-life balance.
Osteohustle’s 5-steps to smart pricing:
- An educated estimate of costs
- Add a profit margin
- Compared with local competitors
- Create an educated price
- Review price every quarter
1. An educated estimate of costs
The cost per treatment for osteopaths is how much it costs your business to perform a treatment. But not to be confused with how much you charge a patient for treatment. Therefore, it’s essential to understand how to estimate the costs involved in delivering a treatment as accurately as possible to make sure you’re covering your expenses.
Consider researching and guesstimating your expenses, including:
- Getting quotes from service providers and companies:
- Example: Gas, electricity, water.
- Doing research online to find prices of items/services you intend to buy:
- Example: Practice management systems, exercise prescription software
- List known fixed costs.
- Example: wage, student loans, PPE, insurance, registration, rent, website hosting.
- Set a maximum budget for significant items.
- Example: Your marketing budget should be between 7-8% of the total (expected) revenue.
Once you have a list of expenses and their associated costs, take the annual expenses and divide them by 12 to get a monthly cost. Having this figure will give you a good idea about how many patient’s you’ll need to treat to break even, thus setting your prices accordingly to hit that target.
Throughout this framework, we’ll use our imaginary business called The Redwood Osteopathic clinic.
For The Redwood Osteopathic Clinic, our costs are as follows:
- The cost to provide a new patient treatment = $85.
- The cost to provide a return patient treatment = $80.
2. Add a profit margin.
When considering how much to charge for your services, it’s essential to include a healthy profit margin. Maybe you’ve not heard of a profit margin before, but it’s the most important number in business. No business can survive for a significant amount of time without making a profit.
We often see osteopaths running their clinic at less than 5% profit before paying tax. As a rule of thumb, 5% is a low margin, 10% is a healthy margin, and 20% is a high margin.
Three factors occur when a clinic has a zero or low profit margin.
- Less money is available to cover the business if something goes wrong, therefore, the cost comes from the clinic owner’s pocket. For example, if a treatment couch breaks and needs replacing.
- You won’t have as much money to reinvest in the business, resulting in slow or minimal growth. For example, if you wanted to upgrade your current clinic or finance a move to a larger location.
- The clinic owner tends to use their wage to keep the practice going, and of course, we want to pay ourselves a decent wage while also growing the practice.
In our example for The Redwood Osteopathic Clinic, we’ll add 10% and 15% profit margins. Then, you’ll see us adjust this margin as we move throughout these 5 steps; this is just a starting point.
- Cost for a new = $85
- 85 X 1.10 = $93.50
- 85 X 1.15 = $97.75
- Cost for a return = $80
- 80 X 1.10 = $88
- 80 X 1.15 = $92
3. Compare against your local competitors.
We now have a price for new and returning patients based on our fixed and guesstimated expenses and have added our 10-20% profit margin. So it’s now good to check your pricing against your competitor’s pricing for two reasons.
- So you don’t price yourself out of patients (though you could argue that you could charge however much you think people would be willing to pay).
- So you don’t base your pricing solely on their prices, as your expenses may be vastly different from theirs.
You can also comfortably and ethically price your services higher than your competition if you have an outstanding brand, provide a service that’s exclusive to your area, a unique selling point and/or many years of experience. However, as we mentioned before, you are well within your right to price your services at whatever you wish.
- Add up the prices each competitor charges for an initial consultation and divide by the number of practices to get the average price of an initial consultation in the local area.
- For this example, let’s say the average initial consultation = $100
- Add up the prices each competitor charges for a return consultation and divide by the number of practices to get the average price of a return consultation in the local area.
- For this example, let’s say the average return consultation = $90
Now we know the average new and return prices of local practices, we have the option to match the local average, thus increasing our initial 10% profit margin prices of $93.50 and $88 to $100 (18% profit margin) and $90 (13% profit margin) respectively.
4. Create a price
Right! We now have a rock-solid foundation of information to create an educated first price. You know what your competitors are charging, what each treatment costs the business to provide, and you have an idea of how much profit each treatment will make.
It’s time to use this arsenal of knowledge, play around with different profit margins and compare them to your local competitors.
We know that The Redwood Osteopathic Clinic will charge $100 for a new patient and $90 for a return. So that gives us an 18% profit for each new patient treatment and 13% on each return visit.
5. What's next? Review every three months
Come back to this framework often. First, block out a recurring 30-minute slot every 3 months to use this framework to review your costs. Then, if they need to be adjusted, block out another hour or two to implement the price change.
Check if your local competitors have increased their prices, and refine your prices as your costs change over time.
When changing your prices, consider everywhere your prices may be listed, such as:
- Social media
- Website
- Blog
- Signage
- Posters
- Tri-fold leaflets
Consider emailing your patients to inform them of any change in prices. And of course, change them in your payment taking systems/invoices/online booking etc.
On average, you should expect only to change your prices once a year. However, it’s crucial to conduct a quarterly review so you can be aware of any changes and act smart if necessary. Set your mind to start pricing, or check your prices based on this framework, opposed to guesswork.
Build and refine your business with osteopaths
This article has covered a 5-step plan on how to price an osteopathic treatment and increase your prices. We help osteopaths plan, build and grow their dream careers with coaching that supports you for years to come. Our coaching process involves getting to know your business as well as you do so we can understand your vision and help you achieve your goals.
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