#2: Consider your long-term strategy and positioning in the market.
Avoid setting billing rates based on present conditions alone; instead, set them based on a clearly defined long-term strategy.
Your positioning strategy will shape not only your prices, but also the ways you advertise yourself to the community and communicate your value to referral sources. Your pricing will be much easier to determine if you understand what your unique differentiator is.
Here are some common positioning strategies, and the ways that they would dictate your pricing:
1. The lowest-cost agency.
It’s good for consumers to have a low-cost option; that said, we generally caution agencies to avoid competing on price. It forces you into a low-margin position and attracts clients who want the cheapest caregivers, not necessarily the right caregivers.
2. The service differentiator
This is a common strategy and is often the most realistic path to take because it provides the most options. Generally, this would entail providing some kind of specialization (advanced dementia care, a program focused on the social determinants of health, etc.), and either offering that as a higher-priced value add-on to your basic services or making that your core service and charging a higher price than more generic competitors.
3. The premier provider
This can be a viable strategy to simply provide the best service in the area, advertise yourself as such, and charge the highest rates.
However, this is easier said than done; every agency tells referral sources that they’re the best. To successfully brand yourself as the premier provider, you’ll need to put in the work both to become the best and have the social proof (testimonials, satisfaction scores, awards, online reviews) to back it up.
Note that these are also heavily dependent on your payer sources; the strategies above are probably most relevant to agencies relying on private pay clients. If you’re relying on other payer sources, your pricing and margins might play by a different set of rules.
Whether you choose one of these three strategies or another strategy entirely, you can’t set a long-term approach to pricing until you have a clear picture of how you’ll position your agency to referral sources and what you want your value to be long-term.