Friends with benefits: When discounts get out of hand
In 1999, Dr. Jack Carlson left a large, well-respected small-animal practice and opened his own Carlson Animal Clinic. He respected the restrictive covenant he’d signed with his old employer and opened a facility more than five miles away from his old practice.
He opened his doors with only two clients—himself and his wife. He worked long hours, made many sacrifices and ended up with a thriving three-doctor practice providing cutting-edge veterinary care. His initial efforts to build his new practice involved networking, a bit of moonlighting and some discounting. Now, 10 years later, some of his early practice-building gestures were become problems.
Initially, as a civic gesture, he gave a discount to police, firefighters and military personnel. He also gave discounts to close personal friends and relatives as well as staff members. Most recently, he was approached by a senior citizen group and agreed to a 10 percent discount for its members.
During Dr. Carlson's recent meeting with his accountant, his yearly reconciliation revealed an unacceptably high number of dollars attributed to courtesy discounts. It seems that many clients receiving discounts had asked that their adult children and extended family receive the same courtesy. Dr. Carlson had a true dilemma on his hands. Disallowing certain discounts was not going to make those clients happy. His accountant had made it quite clear, however, that revenue was not keeping pace and either fees had to be raised or courtesy discounts curtailed.
Police, fire and military discounts were untouchable, Dr. Carlson thought. So he hoped his friends and relatives would understand a decrease in their discount rates in view of the pressing economic climate. For staff discounts he took an innovative approach; he offered pet insurance for staff pets and billed his normal fees to his team.
Finally, he had to wrestle with those senior discounts. His decision ultimately was to discontinue this courtesy with a note of apology and an offer to assist specific individuals when a true hardship arose.
Reflecting back on his years building his hospital’s client base, Dr. Carlson felt that he was paying the piper. Early discounts offered as a practice builder had ultimately come back to haunt him. He rationalized his change in discount policy by telling himself he was entitled to a fair fee for his services, and he hoped his more stringent discount policy wouldn’t hurt his bottom line too much.
Maybe he’d made a mistake in his early lean years of practice or maybe he simply was adjusting (as all small businesses do) to economic pressures. He took a deep breath, implemented his new policies and hoped for the best.
What do you think? Did Dr. Carlson make the right decisions early on and now?
Clients respect and understand a reasonable fee for a satisfactory veterinary medical service. That said, discounted services fall into three categories: charity, courtesy and client incentive.
We all discount services at times. But these discounts must be well-considered or they’ll begin to hurt the bottom line. Dr. Carlson initially used fee discounting as a practice-building incentive, and in the midst of his other veterinary management duties, these discounts got out of hand.
I believe Dr. Carlson should have tactfully stopped his incentive discounts. Charity discounts within reason are acceptable as long as the practice owner selects the charity and is not coerced into offering them. Finally, it’s rewarding to discount immediate family, because it's nice to helped loved ones when you can.
In the end, there are no easy answers—so don't minimize your decision to discount. The wisest strategy you can employ is to factor your discount services into your overhead as a budget item. This will keep the bottom line in check while allowing your practice to monetarily assist pet owners of your choice.