My email box and social media feeds have been inundated with MARKETING promotions for dentistry. SEO, Social Media, Authority, CRM Systems and more opportunities are being hawked to CURE what ails your practice.
MORE NEW PATIENTS
Some people focus SO much on getting NEW patients that they forget about the ones they already have!
I recently heard some words of wisdom from one of my mentors, Dan Kennedy in an interview he gave our group. He theorized that the relationship that you HAD with your patients prior to Covid has, in some form, been broken.
He therefore maintains that you have to be willing to spend, at least as much to get them back as you would to get a “virgin” patient into your office.
That means that you first have to know some numbers.
I can hear the sighs and moans, the questions and the grunts.
I HATE NUMBERS!
The Cost Of Patient Acquisition or COPA is just one of the KPI’s ALL businesses must know. The other we’ll talk about is LPV, or Lifetime Patient Value.
Most dentists have gotten used to NOT knowing their numbers. Maybe they know their Gross collections. Few know much more and most dentists’ eyes begin to glaze over at the mere mention of numbers.
“I went into dentistry to help people not to run a business”; That’s what I’ve heard more often that I can count.
Want to really help more people?
Well, you can’t do it if you’re bankrupt.
Such an attitude might have even worked in a bygone era. Since 2008 and particularly after the Covid Pause, such a laissez-faire attitude towards numbers is no longer possible. That is, if you want to stay in business.
WHY, and what’s so important about knowing the Cost Of Patient Acquisition and the Lifetime Patient Value (LPV)?
Because, without these 2 KPI’s, you have no idea how much money to spend on marketing or how profitable the marketing is. Knowing your Return On Investment (ROI) for any outlay of time, effort or money is a key to efficient use of each of these limited resources. Indeed, so many practices treat time, effort and money as unlimited resources. This was foolish behavior prior to Covid. It can be deadly now.
The Lifetime Patient Value (LPV) is the amount of money generated from YOUR average patient. It includes initial as well as follow up treatment.
Let’s say that you’re a Dental Sleep Medicine only practice. You charge $3,500 for a case but you accept less by participating in Medicare and some insurance, so your average fee per case is $2,400. And, you charge for follow-ups and new appliances, which could bring in another $2,600 over an average patient lifetime of 5-years but the efficiency rate is only 20%. So, that would add another $520 to the LPV, equaling (2400+520) $2,920 LPV.
Your Cost Of Patient Acquisition is defined as; How much do YOU have to spend to get a patient to start giving you money.
Want to figure it out? Add up ALL the year’s costs of both internal and external marketing (including the costs of companies or employees that are tasked with implementing the various programs). That figure, let’s use $35,000 as an example is divided by the number of appliances made (again, this is for a Dental Sleep Only practice).
So, if one spent $35,000 and made 250 appliances last year, the cost of a Dental Sleep Patient’s acquisition in this practice would be $140.
There’s another more sobering way to figure this. If your fee for an appliance is $3,500 and insurance write-offs average $1,100, some would consider this to be included in the true Cost of Patient Acquisition, as you’re willing to give away $1,100 to gain such an insurance patient. This is, in my mind, a great way to look at the actual value of treatment being given away, assuming that the $3,500 fee truly represents what YOU value the treatment at, based on YOUR practice’s level of service and costs.
Some would argue that they are willing to give up $1,100 to make $2,400. Sounds like a good deal to more than double your money!
That is, until you start taking other costs of doing business into consideration. What about the lab fee? What about your PPE (Production Pre Employee)?
In short, what’s the PROFIT from each patient?
Please note I am NOT talking about a butt in a chair. Until a person exchanges a financial instrument with you (insurance, credit card, cash) they are only a prospect. They become a patient, for the sake of financial calculations, once they promise you money or turn over their insurance.
Prior to a patient accepting financial responsibility for treatment, they are considered a LEAD or PROSPECT.
Yes, you can and should know the cost of lead acquisition (COLA) as well.
OK, that’s enough, you’re eyes are shut, you’ve not put your appliance in, so you’ve been snoring.
Want to wake up to the real costs of doing business?
Schedule a free, 20-minute consultation at: https://practiceperfectsystems.com
Without knowing the true Profit per patient, how can you know how much to allocate to Patient Acquisition?
Would you spend $1,100 to make a profit of $50?
And yet, YOU might just be doing something as financially ruinous, if you don’t know your numbers.
Back to spending money to fix broken relationships as Dan Kennedy posits all relationships post-covid are. How much are you willing to spend to get people back?
It should be at least as much as you’ve traditionally spent on COPA. And, the greater the LPV, and the greater your profit per patient, the more you can afford to spend.
Another Dan Kennedyism is; “THE BUSINESS THAT CAN SPEND THE MOST TO ACQUIRE A CUSTOMER-WINS.”
That’s not a license to spend freely. It’s an admonition to increase your profit margins so that you CAN spend more than your competition.
“CAN” does NOT mean SHOULD!
CAN YOU INCREASE YOUR PROFIT MARGINS?
The point I’m trying to make is that ONE can no longer sit back and just DO DENTISTRY. One has to know the numbers and spend money and other resources wiser than ever during these challenging times.
Who knows? Things might get better. They might not!
Either way, YOU should be prepared and armed with the numbers YOU need to make correct business decisions.
We would love to help you. Schedule your free, 20-minute consultation at: https://practiceperfectsystems.com
To everyone’s excellent health, safety and success,
Michael, Laurie and the PPS team