The plumber's solution
Plumbers are ahead of the game. They learned years ago that to stay in business they needed to charge appropriately for people
(labor). When big discount stores started undercutting plumbers' prices for supplies and material sales, plumbers modified
their old sales model of hiding the true legitimate labor costs with a big markup on supplies.
These days, plumbers charge an equal or nominally increased fee for materials and unashamedly charge whatever the market will
bear for the plumbing job itself. After all, few people are adequate do-it-yourself plumbers. The plumbers' response to the
discount store incursion into their profession was this: Charge a lot more for labor.
Is plumbing really a commodity? No, it's not. It's a professional service only a few trained professionals do competently.
The veterinarian's dilemma
On the other hand, let's consider veterinary medicine. Although some consumers view it as a commodity (see "The 4-3-2-1 client
countdown" on page 32 for more), veterinary care is a licensed service few can do that requires years of training and education.
For years, veterinarians have charged for services the way plumbers did in the old days. That is, labor costs have been buried
in charges for materials (vaccinations, medications, food).
Now to be fair, some significant income is derived from labor: exams, consultations and surgical fees. These fees roughly
cover the base cost for paying professional veterinarians if these fees are high enough. What fees cover the payroll costs
for the rest of the staff? Well, none, except for the markup on materials.
In recent years, pet medications and other pet products have become easily available through the Internet. Unlike plumbers,
however, most veterinarians have just watched their sales of materials dwindle away with little response or plan for action.
If we truly believe that veterinary healthcare is a service and not a commodity, then my question for our profession is: Are
we finally willing to step up to the plate and charge adequately for people and charge nominally for materials?
Charging nominally for materials
A large markup on materials — sometimes 200 percent or more on items — has been the standard for years. Now remember, even
with these markups, many veterinarians have trouble paying their bills.
Why? Because we're using material sales to offset labor costs. Once you understand that, you have only one choice if you want
to continue to sell in this competitive environment: Lower your margin on materials and find other ways to charge for staff
costs. That's the plumber's answer. That solution is a long-term proposition because sales won't instantly pick up to offset
revenue. Therefore, and it is a big therefore, you must take the plunge.