Business Briefs: The Perils of Discounting

You might be tempted to offer discounting for veterinary services in some situations, but don't discount your profit away!
stethoscope money
veterinary discounting can erode profits

Everyone loves to buy things on sale, but professional services are different from buying a cashmere sweater or a new fishing rod. Veterinary practices may effectively use small discounts to drive client behavior that increases the practice’s revenue or efficiency or decreases its seasonality. In general, however, discounting of veterinary services is to be avoided. Here’s why.

Profit is what is left after expenses are subtracted from revenue. Every service that is provided has expenses attached. The expenses may include the veterinarian and staff wages for scheduling and performing the service, the equipment and medications needed for the service, the vehicle expenses for ambulatory work, and the share of overhead for keeping the practice operating (licenses, insurance, cell phones, etc.). Consider this: When revenue is increased by raising prices, expenses stay the same, so profit rises. When revenue falls by giving discounts, expenses stay the same, and profit falls. For owners, giving a discount is like taking cash out of their wallet and handing it to a client. For associates, giving discounts often affects their compensation, because typically their pay is associated directly or indirectly with their revenue production. 

Veterinary Discounting Scenarios

Frequently, practices give discounts to clients who have some special status: They own many horses, have high visibility in the sport, or are a trainer that controls a barn of potential clients. It isn’t uncommon for a trainer or farm manager to negotiate veterinary services at no charge or a very steep discount for their own personal horses in return for delivering their clients’ horses for full-price services. If the practice’s profit margin on services is not robust, or the trainer has more than 1-2 horses or they need lots of services, there will be no benefit, only possible harm, from this arrangement. 

For example, imagine you have a trainer that uses $5,000 of your services annually, and you give these services gratis. If you value your time at $250/hour, you must now work 20 additional hours to make up the amount of this discount. If you used medical supplies and pharmaceuticals, or employed a technician in providing those services, the situation is even more costly to you. If you have a client that spends $10,000 a year and you give them a 10% discount, you now must work four extra hours to make up the revenue. The calculation is Volume x Discount = Amount of revenue lost. Divide this by your charge per hour to calculate the number of additional work hours needed to equal your non-discounted revenue. 

Planned vs. Unplanned Veterinary Discounting

Planned discounting is a marketing strategy to drive revenue. However, unplanned discounting can cause a serious erosion of profit. For many veterinarians, it is very hard to control the urge to offer a discount during emotional situations where they feel compassion and the desire to help clients and patients they care about. Typically, discounts are given when clients are not even expecting one. Sometimes a veterinarian’s immediate reaction to a complaint is to offer a discount, when compassionate listening and validation may be all the client really needs. Remember that a practice will not remain viable if it does not make a profit. Veterinarians must have empathy, but there is no requirement that they support their clients’ expensive hobbies. 

Compassionate Discounting

Planning for compassionate discounting can take the form of a named fund that clients can donate to, or a certain dollar figure in a practice’s budget that each veterinarian may use for helping a client or patient in need each year.  Because veterinarians typically come to their careers through love for animals, having some mechanism for providing compassionate care is essential for feeding their souls. Other planned discounts can drive business and cash flow during slow seasons. For example, you may waive farm calls for routine dental services performed during winter months in order to decrease the craziness of the spring schedule.

While not all discounts are perilous, many are. If you desire more time for your personal life, more compensation, and more work satisfaction, know your worth, charge fees that reflect it, and don’t discount your profit away.

Disclaimer from sponsor: This content is subject to change without notice and offered for informational use only. You are urged to consult with your individual business, financial, legal, tax and/or other medical providers with respect to any information presented. Synchrony and any of its affiliates, including CareCredit, (collectively, “Synchrony”) makes no representations or warranties regarding this content and accept no liability for any loss or harm arising from the use of the information provided. All statements and opinions in the article are the sole opinions of the author. Your receipt of this material constitutes your acceptance of these terms and conditions.

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