Hear and THere

r and There
By Batteryjac.com



A much discussed topic among dispensers lately is how to handle patients who have purchased hearing aids over the Internet. This is a whole new ballgame for the dispensing industry. We can anticipate that the quantity of hearing aids sold over the Internet will increase in the future rather than decrease. What is needed is a methodology to handle these technologically savvy, price conscious and informed individuals. Hopefully by treating them as a welcomed competitive user rather than as a pariah we can convert them into loyal patients of hearing aid dispensing practices.

The people who purchase hearing aids over the Internet generally will purchase aids that are technologically advanced and require programming to say nothing of those same purchasers who may need some rehabilitative consulting as well. These people know that they require service and know they have to pay for those services. The question is how to charge for initial programming, probable follow-ups and possible rehabilitative consultations when in the past we had all these costs as part of a “bundled” hearing aid price.

In order for us to come up with a pricing model we first have to derive a cost structure by segmenting those costs associated with fitting hearing aids by taking into account those cost associated with “running” the business and the costs of the individual doing the fitting and follow-up. This is not a very difficult process although it may take a little effort. Use your latest year end numbers as base for the analysis. The base can always be changed to reflect more current costs.

Overhead

The overhead costs that we want are those costs associated with running the business. We want to include both fixed overhead and variable overhead costs. The fixed overhead costs would include rent, depreciation, business taxes and the like. All those expenses that do not vary month to month are included here. Next we want to take those variable expenses associated with running the business such as telephone, non-dispensing personnel, postage, stationary,
utilities, etc, these are the expenses that may vary on a monthly basis. DO NOT INCLUDE ANY COSTS ASSOCIATED WITH THE DIRECT SALE OF HEARING AIDS. (MAILINGS, TELEMARKETING ETC.) What may have to be done here is to allocate some of the variable costs on a percentage basis between the sale of hearing aids and general business expenses. The purpose is to isolate those expenses NOT associated with the sale of hearing aids.

Profit

This number should come right from your operating statement. This is the pre-tax profit of the business after ALL expenses including those associated with hearing aids.

Fixed Costs + Variable Costs + Profit = Total “Operating” Overhead

To state this differently, these are those items which must be covered if the business is to survive and prosper.

Dispensing Costs
These are the direct costs associated with the dispensing of hearing aids. This number should reflect the total amount of compensation given to dispensers. Where a practice has two or more dispensers the number should be divided by the amount of the dispensing personnel to arrive at an average cost for ONE dispenser.

Now that we have extracted the necessary costs what do we do with them? What we want to come up with is an hourly number on which we can base a pricing model. Let’s plug in some numbers.

Fixed Costs………………….$20,000/52 Weeks
Variable Costs………………$15,000/52 Weeks
Profit………………………….$30,000/52 Weeks
Total “Overhead”……………$65,000/52 Weeks

“Overhead” per week………$ 1,250/40 hours =$31.25 per hour
Dispenser per week………$ 1,346/40 hours= $33.65 per hour

Total……………………………………………….. $64.90 per hour
Base Pricing

By using the above method of analysis it is possible to determine a per hour basis of “consulting” when it comes to the fitting, programming and possible rehabilitative consulting necessary to accommodate the Internet purchaser of hearing aids. What has to be borne in mind is that this pricing will reflect any particular dispenser’s costs. Remember that there are competitors who may have a different cost structure than yours. As with all pricing you have to be competitive.

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http://www.batteryjac.com

Please feel free to pass this information along to those who may be interested.