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Revenue negotiations: Talking smart

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Aug 01, 2005
By dvm360.com staff

Negotiation skills were the most important factor for determining financial success of equine practitioners, according to the 2004 AVMA-Pfizer Business Practices Study conducted by Brakke Consulting Inc. The study measured competency in negotiating, and those who scored higher made an average of $31,000 more per year. "These doctors share some positive attributes, including the discretion to adjust pricing and the desire to win in a competitive situation," says Dr. James Guenther, MBA, CVPM, a consultant in Asheville, N.C., with Brakke Consulting Inc.

When it comes to charging, the willingness to charge less than competitors on occasion can create an opportunity for more business, and so can charging more when you feel you should be able to increase the price, says Dr. Guenther. "A good negotiation should result in more business or customer loyalty," he says.

But Dr. Guenther warns of the potential for bad negotiations, too. Ask yourself: Is there a good reason to offer a discount? "Only change prices if you feel that the value of the service changed," he says. For instance, circumstances sometimes influence the amount of time, equipment, and brain power needed. "But you should avoid letting other people influence your charges."

The key here: Don't second-guess your fees and convince yourself they should be lower. This is a bad negotiation, says Dr. Guenther. Anytime you do a service, you should be able to look the client in the eye and feel confident about the value you offer.

If you don't, and you regularly drop your fees, you're being taken advantage of—and you're taking income from your practice. You simply can't please everyone all of the time. "Eventually, this approach affects the level of service you're providing," says Dr. Guenther. "And, of course, it affects your income. You deserve an income that's commensurate with your education and your talent."

Got skills? How can you tell if you're habitually engaging in bad negotiations? "If you're serious about tracking your decisions on fees," says Dr. Guenther, "you should be able to compare your fee schedule to the actual charge." Look at an average month. How much revenue did you give away through fee negotiation? How much profit does that represent?

Dr. Guenther suggests trying to find common denominators in missed or reduced charges. For example, do you notice a pattern in a certain doctor's charges or on a particular client's invoices? And if so, why?

"Account for these situations before you make any other decisions about your fees," he recommends. "Often when practitioners feel like they're not making enough, their first inclination is to raise fees. But you may be letting money just walk out the door. You can feel confident about your fees and still need to be more assertive about standing behind them consistently."