In tough economic times, a lot of day-to-day business comes down to monitoring costs. We agonise over price hikes, swap one product for another, and cut what we think we can do without. As part of the process, we inevitably end up comparing products and services to find the best (or cheapest) option. We all make multiple value judgements every day.
In his book Alchemy, behavioural economist Rory Sutherland shares the story of the ‘doorman fallacy’. In this scenario, we delve into the role of a doorman at a premium hotel. If we reduce the doorman’s job to “opening doors”, couldn’t he be swapped for an automatic door? It’s a move that could save around £40,000 in wages every year, making it seem like the obvious choice – only, it’s not the correct one. This is because a doorman doesn’t just open the door; he also offers a sense of security, acts as an enquiry point, and makes the all-important first impression. Keeping the doorman won’t help with cost cutting, but it will help with raising the top line. Ultimately, many guests will choose the hotel – and be happy to pay more for a room – because of him.
When you’re offering a premium service, the key to success therefore lies in your customers – or for dental practices, patients – seeing the value in what you do. You need to communicate that what you’re offering is different to other options, so that people know they’re not comparing like for like. If a private practice is exactly the same as an NHS practice, no patient will choose to pay for the service. After all, if this is a service that’s offered free, it might be considered to be worth nothing.
Communicating the value of your private practice lies in the overall experience – from the speed you reply to emails and the way you answer the telephone, to the environment in your waiting room and how you make the customer feel. This all highlights that what patients are getting is different, and better.
But what happens when costs rise in your practice? As with Sutherland’s doorman fallacy, cost cutting might seem the obvious option, but it isn’t. By all means, do keep an eye on your overheads and renegotiate contracts where you can, but the best outcome by far will be from saving tax, not cutting costs. And this is where a tax specialist like Hive can help.
In the same way that a barista coffee is different to an instant, we’re not your average accountant. Sure, you could pay a run-of-the-mill accountant to file your tax return and tick the essential boxes – but this is by no means the same thing as working with tax experts. Of course, our team will handle all those things, but we also do a lot more besides. It’s these strategic services that make all the difference financially; we commonly save £50,000 in the first year when we start working with a new practice. This means helping with everything from setting tax-efficient directors’ salaries and managing expenses to proactively planning your tax for the next 12 months. And, if you’re thinking of selling your practice, we can help get it in the strongest possible position beforehand, and ensure you’re selling with the right tax structure, with hundreds of thousands more additional benefits.
If, like us, you’re offering something different, it pays to know your worth. Though cutting your costs or your prices might lead to a short-term fix, we want to see practices thrive, rather than survive. If you’d like our help improving your tax position, just get in touch to set up an initial call.
