If you’re like me, you hate giving away any more of your hard-earned money than you have to. That’s why I try to check pricing on my personal auto and home insurance each year. But sometimes I’m too busy or just forget. The times I don’t get around to it are the times I get whacked with a 5%, 10%, sometimes 20% increase.
I don’t get angry often, but feeling like I’m getting gouged gets me worked up. After all, who needs that money more, billion-dollar insurance companies or me?
The same is true for your dental practice. Most of you are attentive to your spending. But what do you do when vendor costs escalate in double digits?
The market
Inflation is real, and vendors are raising prices more aggressively than before. Let’s take a look at a few essential services.
Phones
Verizon Business lines that meet certain conditions started seeing a new “economic adjustment charge” beginning in June. AT&T added a similar fee. Combined, it’s expected that they will take in an additional $100 million per month or $1.2 billion in just the next year.1
Merchant services
Visa Chief Financial Officer Vasant Prabhu said on an earnings call that inflation had been a net positive for the company. Visa and Mastercard increased swipe fees, or credit card transaction fees, at the end of April. And according to the Retail Industry Leaders Association (RILA), the swipe fee changes will result in $475 million in annual increases.2,3
Waste
One of the largest waste companies in the US increased rates to one small company by 32%. For just one trash bin, this raised the annual price by $1,500.
Cable and internet
As one example, Comcast Xfinity’s 2022 price increases effective January 1 for cable TV and internet ranged from +10% to +27%. Worse, this was before 2022 inflation! Here's a breakdown:
- Internet services +10% to 27%. Beware, some telco’s device limitations are deceiving.
- Broadcast TV fees +20%. Note: these channels are free with an over-the-air antenna.
- Basic TV services +12%. Beware of programming changes and the pricing bait-and-switch.4
How does this affect your bottom line?
With all that’s going on in your practice every day, it’s easy to prioritize other things. Here's a look at the cost to a practice with $10,000 of expenses in these areas of doing nothing versus being proactive and fighting for a new base rate.
As you can see in scenario 1, your expenses will more than double in just five years with a 15% increase each year.
So, for every $10,000 you spend, you will be spending more than $20,000 on the same services in the fifth year. Cumulatively, that’s more than $27,000 if you do nothing.
But if you successfully renegotiate your rates and get a 25% reduction next year and get increases capped at 5%, you would actually pay less in each of the next five years than you pay in 2022, as shown in scenario 2. Over the course of the five years, that’s a reduction of more than $8,000!
So, doing nothing will cost you $27,000, and intervention may save you $8,000. That’s a $35,000 difference on a $10,000 expense.
How can you get to this difference?
- Check for billing errors. Take a careful look at your billing statements. Compare them to a year ago. What increases do you see? Are there inconsistencies from bill to bill? If you’re not paying attention, you will be spending money you don’t have to.
- Right-size your services. If you’re like most businesses, you spent a lot of time thinking about your fundamental systems when you set up your office but haven’t spent much time since. Reestablish your business needs before you renegotiate with vendors.
- Ask for quotes. Identify a few vendors that deliver the right-sized services you need and ask them for a quote on your business. Include your current vendor. Let them know you’re doing an assessment and want to see their best pricing and service package.
- Read the fine print. Many vendors have standard escalation clauses, early termination fees, etc. You’re in a negotiation—push back on these.
- Select your vendor and go! Once you determine your path forward, continue to pay close attention to every line in the billing statement. Make sure you are getting the deal you negotiated.
Help is available
If this sounds like too much work for your office, but you hate giving away all that money, I can help. With 100 expense management experts in our home office, we’ll provide a risk-free analysis of your expenses. On average, we help businesses reduce their costs by 28%. and we’re just an email or phone call away.
Editor's note: This article appeared in the March 2023 print edition of Dental Economics magazine. Dentists in North America are eligible for a complimentary print subscription. Sign up here.
References
1. T-Mobile’s carrier callout takes aim at AT&T and Verizon; Offers $1,000 to customers facing price hikes + future hijinks. T-Mobile. Published May 31, 2022. Accessed October 25, 2022. https://www.t-mobile.com/news/offers/takes-aim-at-att-and-verizon-price-hikes
2. Poonkulli T, McCarthy C, Ackary M. Card networks’ swipe fee changes could raise prices for consumers. Bankrate. Published May 3, 2022. Accessed October 25, 2022. https://www.bankrate.com/finance/credit-cards/consumer-impact-of-credit-card-swipe-fees/
3. Buck L. Swipe fees drive up inflation and “consumers ultimately pay the price.” National Retail Federation. Published May 17, 2022. Accessed October 25, 2022. https://nrf.com/blog/swipe-fees-drive-inflation-and-consumers-ultimately-pay-price
4. Comcast Xfinity 2022 price increases. Streamwise Solutions. Accessed October 25, 2022. https://getstreamwise.com/comcast-xfinity-2022-price-increases/
