OM Ep. 178 - Are You Undercharging? How Pricing Strategy Impacts Your Bottom Line with Carl Stoddard

Carl Stoddard

Hi, I'm Carl Stoddard, doctor CFO. Today in this podcast, we're going to talk about pricing and profits and some ideas on how to move you into a higher pricing model and some simple things that you can do to increase your profit.

Dean Steinman

Well, everybody out there on podcast land, it's Dean Steinmann and guess what.

We are back with another podcast for guess who you and where. It's now almost March already. If you could believe that twenty twenty five springs right around the corner. I can't wait.

It's been a long, cold, lonely winner, as the Beatles said, so now it's time to hopefully spring will come soon and with that comes turnal optimism, baseball, nice weather. So all good. And you know we're also now gonna talk a little bit about bottom line and pricing via practice. And I've got a special guest with me today who is going to going to go over you know, different ways to position your practice and how and how to price it there.

And I've got call started with me. Carlo is the founder of doctor CFO and Carl welcome man. How are you doing today.

Carl Stoddard

I'm doing fantastic. Thanks so much for having me on your show, Dan, I really appreciate appreciate it.

Dean Steinman

My pleasure. So let's back up. Tell us a little bit about Carl.

What's who you are and what you do?

Carl Stoddard

Okay, Well, I found a doctor CFO back in two thousand and ninety ten. Basically what we are as a fractional CFO service for doctors and Dennis. Maybe a little bit before that, I was doing a similar type of business for actually a big, you know, fortune five hundred semiconductor company, and I just thought that what we do there would have value in the doctor dentist world as well, and so I started doing on the side and then it kind of turned into a full time thing. So I have an accounting degree from Ido State University.

I have an NBA from Arizona State University. I also have a lot of music education in my background, so you'll see a lot of the stuff I do. Maybe it's a little bit different or creative. I would say that's because of the music the musician in me.

So I'd love to do that full time, but you know, it's hard to make money doing that.

Dean Steinman

You know, Unfortunately, I can't carry a tune, but I would love to. You know, I'm playing I been playing music my whole life, and I'm tone deaf. I can't sing for anything, but I would love to.

You know, nothing better than a couple of bourbons and getting up in karaoke. So you know that's I love that. So let's kind of jump into it. So for a practice, but you know, if the don't practice, what is there is basically the right way for them to figure out how to price themselves for their services.

Carl Stoddard

Well, it kind of depends. So like if you're so, dental is interesting for a couple of reasons. Number one is if they accept insurance, then the price is pretty much already set for them, right, so it's not a matter of a price on an individual line item, So there's not maybe not a lot of negotiation in that. Especially if you're like a pediatric dental place, then you're you're getting the rate that they decide to give you in the state, that's the rate you're getting.

And then there's a lot of auditing as well, so they kind of do what's called the chart audit, and so you're kind of limited in what you can do, okay, and so now if we go to more general dentistry, then they. Have a little bit more flexibility. So I would say, one thing that's a little bit different between a dentist and say a doctor, is a dentist sells more than a doctor. Right now, I think that's going to change.

But at the moment, a dentist is selling because they you know, the person that they're working with may have an insurance package that says, okay, we'll give you two thousand dollars a year per person, but most dental stuff costs a lot more than two thousand dollars a year. Right, You get a couple, a couple of crowns, maybe a couple implants like you're going to be way more than that, and as you get older, your teeth start falling apart, and so you need more and more of that kind of stuff done. Right. So, I think that the way that the dentists really a prices themselves is.

By by offering more and more services. Okay, okay, maybe not necessarily the price on a specific thing, but they offer more and more services to that to that particular patient. Now you see within this world, you see some dentists go into it like a pure cosmetic thing. So I haven't got plenty right now, he does huge cases.

He might do you know that in the different quadrants, and it might cost four thousand dollars or fifty thousand dollars to get your whole mouth redone. Right, Not everybody can afford that. Not everybody wants to afford that, I would say in his business though, there's a lot of risk on. The cost side as well.

So, but the cosmetic dentistry, if you want to be a pure pricing person, it would have to be in the cosmetic dentistry world. But then there's but then dentistry kind of reminds me a lot of like this spaw environment. Because people get fillers like boattox and that kind of stuff. There is kind of a market price.

So if somebody wants to get botox, they're going to go and look at what everybody else charges for boatox. So it's hard to charge more for that particular boatox item. So the way you differentiate, you can might could charge a little bit more. Like if you're a both a dermatologist doing botox, you could charge a little bit more.

Right, So if you're a dentist that has upgraded their client tele and can move into cash pricing. That would be that would be a way to do it. So you're so, I have a thought for you. Just a second, I'm gonna pull something up here.

I think this will kind of answer your question more generally. I don't know if I'm allowed to share on my screen, but.

Dean Steinman

It's available on here. If not, we could always put a link up afterwards.

Carl Stoddard

Okay. So basically we have this little model, okay, And so I'm gonna use my hands to visualize, so when a dentist starts out, they might see they'll just take like your brand new dentists. You're just gonna take. Whoever, right, You're just gonna take whoever.

So you're gonna take the insurance patients. You're gonna take the government insurance patients. They don't pay very well. Well, hopefully over time you need to you need to start filling your schedule with let you know you first you get your schedule full, and then the second phase would be Okay, now we're going to replace.

Our bad payers with our better payers. So like we're gonna replace our government insurance, Medicare and Medicaid with you know, the blue crosses, the you know the better, the better insurance in there. Okay, So within insurres they're not all created equal. So then you want to start replacing the poorer insurans with the better insurers.

And then eventually you want to move in from from to self pay. Once you move into the self paid world, now you have a lot more control over your pricing. Okay, and you have the ability to price differently.

Dean Steinman

But what do you do there? Do you like, you know, say, for example, just use basic you know, aligners and visalign what have you? And a authodor store or a dentist is now offering aligners.

Really just feel like a dart against the wall to find like how much to charge? Do they try to you know, do they do market research? Like what would you suggest somebody to do?

Carl Stoddard

In order? They do market research in their area. So they need to have somebody maybe be a silent shopper. They need to go find out, you know, maybe their top four or five competitors in their area find out. Now, these guys might even share their price if you're friends with them, right, they might say, yeah, I'm offering this service.

And if you're far enough away from that person, say an hour or two, if you're in a group, they're going to share their prices. So if you're part of a group that talks, they'll share their prices. And so you should be able to get those prices by talking to people in the group to kind of get you know, with the high rate and maybe the middle rate and the low rate is and then but it's more than just the price, right, It's like, well, what do you like to get that price with? How do you differentiate yourself to deserve more of the price. So so in this little in this little thing that we have, when you're kind of the high end price, you need to you know, everybody needs.

To look the part. So like if I go into like a Walmart, let's say, and I'm going to buy a bicycle, I don't expect the person anybody in Walmart to be able to tell me about that bicycle, right, But if I go into the bike store, I expect everybody in that bike store to at least be a little bit smart about the bicycles all the right. So when I go into a dental practice or orthopractice I and it's a high end one, right, I'm going to expect everybody to look the part. And I'm going to expect everybody to be knowledgeable about all of the major services that they offer.

And the reason why they need to be knowledgeable is because they're actually part of the sales process. They're actually helping either set up the sell or close the cell. Right, they're either going to set it up or they're going to close it. But you go to a lot of offices, and this is the problem with turnover, where you get somebody that's new, they're not going to help set up or close the cell, right, Okay, So it's it's it's really salesmanship is how you increase your price, I think, and how you set the mood of going after higher, higher end clients.

Okay. So when you start going after highering clients, it's like the marketing to hire end clients is so different than lower end clients because it's more directed because where do they shop, where do they eat. Who are their friends? What do they do? Right? So you need to get into that that venue with those people. And so if you're saying, Okay, I'm a dentist, I can see two thousand patients and I want to move into this high end, Okay, then you need to find out where those two thousand patients are and you need to slowly start building your clientele for those two thousand patients and they have friends, you can do referrals, but I think, you know, before you start changing your prices, you kind of got to like set your clientele up.

And then the other thing too is you got to do like a lot of you got to like, you know, I'm going to go back to a music analogy. You can't just be like an ordinary pianist. You got to be a fantastic pianist. Right.

So if you're a dentist, it's not just an ordinary dentist. You got to be the best dentist, right the Michelangelo, if you will, of a dentist free And so if you're that good and people will see the difference, they will pay you whatever price they want, you know, because you're moving into a higher and higher end, a higher and higher end clientele all the time. So that's kind of the goal. Not every dentist is going to be able to do it.

It's just going to be one or two in a market that's going to capture that high end. In my opinion,

Dean Steinman

So if you give somebody advice and they're starting, you know they're moving into a new area of new practice, and you get to compare apples and apples, not apples and oranges. So say they're offering.

You know, in Visiligne. Aligners, would you consult with somebody and would you have them come in at the lower end, the middle or the high end as their pricing. Say, they do the research and they see somebody in the market's on there for four thousand, somebody's on there for seven thousand. Where would you tell them as a new practice to come in.

Carl Stoddard

Okay, that's a really good question. And so so I actually had a guy ask me this question a few years back. Okay, Now he happens to have a couple pediatric medicaid dental practices and so he's making money from those, and he says, Carl, I kind of maybe want to do something different, like a cash only practice and only go after the high end. How would I approach that? And I gave him an approach for that.

So, if you just want to go straight into the high end, it's going to be a slower process. I think it's long term a better process. But but you're gonna have to have some savings to do that, right. Otherwise, if you don't have money and you don't have savings, then you're gonna have to kind of chase like everybody else.

So then you're gonna have, you're gonna have to pay, You're gonna have to price yourself competitively. To be honest with you, and then as you get more experienced, then you can start kind of weeding out your your bad payers with your better payers and move up. And that might be a five or ten year process, depending on how good a marketer you are and how good of of kind of like your personal brand. If you will you know, I mean to be honest with you.

I mean this gets really this gets really about the doctor. Right. The more professional the doctor looks, the more professional they act, uh, They're going to attract a different client to them and and be able to charge more. So there's there is some charisma to this in my opinion, right, I mean it's it's it's showmanship.

And so the person that has the showmanship we'll be able to get into the market faster and be able to raise their prices. You see this with dermatologists all the time. Dentists I don't really necessarily see them try to to to do this. Now, there I have found actually an exception to this that is is unique in the market.

So I have found that sometimes if a dentist moves to like an underprivileged, underserved area, right, they can be they can do more with their pricing. If they move to an underserved area. They there might not be fancy restaurants, there might not be all that fancy lifestyle stuff. But if they move to an underserved rest area, they will have demand and they can charge more.

But but that's not top of mind. I've seen that with the numbers, because sometimes people move to the LAS think they're going to kill it. There's so much competition there. It's way harder than you think.

And your staff costs more and your rent costs more, and so it's harder. It's not easier, it's harder.

Dean Steinman

Right, all right, So now you know the scenario. So people are afraid to increase their pricing it's free, they're going to lose customers or what have you.

So what advice would you give somebody who is apprehensive about increasing their their costs because you know, people like I don't want to lose customers, and you know, and they're used to spending this. So what advice would you give somebody to embrace the thought that they have no choice but to the keep raising a bit.

Carl Stoddard

Yeah, okay, so we've had we've dealt with this question before, and so I have put together this pricing tool that helps people understand if they're making margin. On their whatever it is.

Okay, whatever it is, whether it's an implant, whether it's the invisil line, whether it's it doesn't matter what it is. And so in the pricing model you put in, you you put in your cost, okay, so that there might be a you know, the cost of the of the implant, the cost of material, and then you put in the labor associated if there's a machine involved. We did with the machine, and it will compute a margin, okay, And so the margin, and there's something I call it. I call it a pricing margin.

So I'm just going to use a general number. So let's say that your cost before you pay a doctor and all that stuff is fifty percent. Okay, So let's so that'll be our threshold is fifty percent. And I might say, well, I know that I need my margin to be at least sixty maybe seventy percent on each individual item, so that I have enough to cover that fifty percent, right, So I'm hoping I'm going to go for a bench mark of say sixty or seventy percent well, this this pricing model will help you compute all of the trees, if you will, in your in your forest, to see if you're actually making money on those.

And so what you'll find is sometimes you might have one that's forty percent okay, or thirty percent, and you're doing the market price on that. So say it's a visil line or whatever, and you're only making thirty percent on it, okay, Well that that's bad. And so you got a couple options. You can quit you in Visiligne in this example, you could raise your price, but if you raise your price, you might not get as many okay.

Or there's another option where I can take, say a visil line and something else that I invented or some other visilign plus okay, and I create a package. And so maybe a visil line's at thirty percent and this other thing maybe is at ninety percent, and then as they average together, I get vision lined up to say fifty percent, and I can live with that, okay. So so if you package things together and and and you're given the customer or the patient more than they originally asked for, and you've packaged it in a very unique creative way, I don't know. I don't know exactly what that is, you know, but that's how you increase your margin.

It's by packaging things together. Okay, you know, you because the because the market has a price on in visiligned, but they don't have a price on a Visilign plus. Well what's in visilign plus? I don't know. Well, I do all these extra things and that and it costs us much.

Dean Steinman

Okay, smart, And that's. How you look and that's you know. Something that we do in all the market is we come up with strategies for you too, come to think outside the box and to differentiate yourself and offer a full smile makeover instead of just offering one little piece ready to be to be able to come in and if somebody do get the fee the lined and then get in whitened and then do implants of veneers and be able to charge out twenty thousand dollars versus four thousand and five thousand. You know.

So yeah, you know,

Carl Stoddard

yeah, it's a complete concept. Now it's not just in visial line. It's like we're going to make you look beautiful again right with the teeth. And I think.

People underestimate just the value of the teeth, you know when they just have those makeover shows and they change people from you know, had to toe right, but it was it was I always fold interesting that when they smiled, like you didn't look at anything else, You only looked at the smile, right, And that's the power of the smile. They're not selling they're not selling healthy teeth, They're selling a smile. They're selling something different,

Dean Steinman

Right, exactly. It's twenty with the practice.

And I go in and meet with the staff and we trained them. I say, what business that we en? What business are you win? And they're like, we're in no business. Worry this, You're in this file business. That's exactly right.

Your job is to change people's lives. And if you just walk down the street today, if you're in a busy you know, if you're in a busy town, busy area and you just look at somebody and just walking towards you, and if they're smiling and feeling better about themselves, you feel better about that person. You even know who they are. You just smile back because you see them happen.

So the more that somebody smiles, the more better they feel about themselves more and the better other people feel about them, you know, so you so think outside the box. Guys. I called one last bit. So if you give somebody who's listening to this one bit of advice is something to do today in order to potentially be more profitable or be able to increase that pricing.

What would you suggest they do today internally that can make a little bit of a difference for them.

Carl Stoddard

Well, I think the thing that they could do today is they need to price their I mean they need to go through like I mean I have obviously I have a pricing model they can use. But to be honest with you, if you go through the pricing model and you put in your top five or ten sellers, you will know if you're profitable on. Each one of those items.

Okay, so you need to know if you're profitable on your main items because you might find out. Like in dental, this might not be so obvious, but let's say that you have a hygenis doing the work. When you're going to have an assistant doing the work, your price is going to be the same, but your costs are surely. Going to be different, right, because you're not Annigenois.

Right, So if you can get somebody to do the work that doesn't cost as much. That's a way to increase your profitability as well. And let me add one more thing, because we're seeing this a lot, and so I'm going to kind of change it just to teeny bit. So I guess, to be honest with you, the one thing I'd probably do today is I would to increase profitability.

As I would I would start replacing staff with technology as much as possible and think about what do I really need to do to get this delivered, and how can I use technology to help me deliver the product and service. Because staff is just going to get more and more expensive. There's probably going to be less people to work in the future just because of the birth rates and all that kind of stuff. Technology, you're going to have to embrace technology and figure out how to leverage it.

You know, we have a small staff. I only have like three or four people, but we do two or three times the work that we did a few years ago just because we're using technology to help us so much. So I would say, use. Figure out a way to use technology in your practice before hiring someone.

That's a great way to save money.

Dean Steinman

Awesome, great, great tip. So well, thanks so much for joining. And I've got two more questions for you.

One one question is I'm going to give you a gift. I'm going to give you the ability to have dinner with anybody in history. Okay, who you're meeting?

Carl Stoddard

All right, that's a good question. Religiously, I might choose the Savior.

If I was going to be non religious, Well, that's a tough question. I might choose. Well, that's a good, good question. I mean, my gut tells me I want to talk to Beethovan or Boach or some mozart or something.

Dean Steinman

If you're gonna say music because you mentioned that before. so okay, Beeth kind of tough considering he was deaf there. so you have to learn sign language from there.

Carl Stoddard

Let's go with Boach. I think he was a great composer ever, so uh, there you go.

Dean Steinman

Good, And where you're gonna go?

Carl Stoddard

Where are we going to go? Probably the best steak place we can find, so.

Dean Steinman

Cool, good. AlRight, Carl. And if somebody wants to learn more, talk to you, learn about how you can help them. What's the best way for somebody to reach you?

Carl Stoddard

A couple of ways. One is obviously our website www.drcfo.com, or you can email me at carlc@carldrcfo. com and we're happy to talk to you

Dean Steinman

Great, Thanks so much. I appreciate it.

Guys. You have to know your numbers, plain as simple. Everybody watches Shark Tank. First thing I say is you know your numbers, and everybody's watched Shark Tank.

So you have to know what it is and how much it costs and realize to it, adapt to technology, adapt to change, and you know, figure out a differentiator. And if you could position yourself the right way in the market, you can charge more, plain and simple. Somebody, you know, why did somebody go into a portion dealership and drop one hundred and fifty grand when they could get a car for forty Okay, it's because of the way it's perceived and the results. So if you could show people that you have great results and your perception in the market, you could get more.

So Carl, thanks again for joining to appreciate it. Everybody in podcast land, thanks so much for listening. Thanks so much for all of your insight and questions following us on social media. Look forward to helping you learn more down the road.

Everybody out there and podcast land, thank you so much and don't forget smile, smile, smile, Bye everybody. Thanks Carl