With everyone hoping that this year will be a better year than last year – even if last year was a great year for you – it’s important that you base your measurement of success on the right factors.
If you want to get a clear idea of how well your practice is doing, here are seven key factors you should be tracking. This will not only help you see how you are doing, it will help you identify the best opportunities to make big leaps in profit.
#1: Number of new patients each month
The first thing you need to measure is the number of new patients you are bringing in every month. This is crucial because you always need to be feeding the funnel with new patients. Your patient base is one of your most valuable assets and the key to your success is a steady flow of patients coming in your door then staying and building a relationship with your practice.
One of the major benefits of bringing in new patents is that you’ll find the people who are newer to your patient base are going to be more responsive to your offers. If someone has been with your practice for ten years and you’ve never sent them a patient newsletter or asked for a referral – even though they’ve been a good patient who comes in every six months – they’re not likely to respond to your new offers.
On the other hand, someone who joined your practice more recently – after you started sending out newsletters – has always been asked for referrals and is more likely to respond.
So, the new blood in your practice is very, very important. While it’s important to put a lot of effort into marketing to existing patients, you need to keep getting new blood into your practice.
The first key to measure is how many new patients are you are bringing in a month and what’s your goal?
#2: Cost of acquiring a new patient
The second thing you need to know is what it costs you to acquire that new patient. This is also called cost of acquisition. Acquiring a client/patient is usually viewed as an expense but you need to shift your thinking to start seeing that new patient as an asset to you.
A lot of people look for the cheapest way to acquire new patients. But this is not the best place to be cheap. The way you dominate a market is to be able to spend more than your competition on acquiring patients. It might cost $50 or $150 to acquire a new patient. But if that patient is worth $500.00 in the first six months or $1,500 in the first year, what is that person worth to you?
If you count how many referrals they send to you and how much they spend with you on their own or their family’s care, they could easily be worth between $3,000 and $5,500 in a three to five year period.
Sometimes the value is higher and other times lower. But where else in the world can you spend $50 to $150 on acquiring an asset that can bring you back $500 to $1,500 in less than a year?
That’s a 7 to 10 times return on investment within a 12 month period. You can’t get that anywhere else. So, when you’re in the growth mode, you should be investing as much as you can in growing your existing practice. Once you know the cost of acquisition, you understand how much money you’ll need to get to your new patient goal.
Then, as we’ll cover in a moment, when you start bumping up the referrals, the cost of acquisition gets cut in half. To start measuring your cost of acquisition, simply total your marketing expenses over the last month or three months. Then just divide that figure by the number of new patients.
So, if you brought in 50 new patients and spent $1,000, that’s 1,000 divided by 50 or just $20 per new patient. If that’s your cost of acquisition, you can be a lot more aggressive on a referral rewards program or sending out offers to your existing patient base. You could be a lot more aggressive with some other strategies. $20 per new patient is low, and I would suggest you’re either not marketing aggressively enough or you’ve got a great referral program going on.
As well as looking at the average cost of acquiring a patient, you should look at cost of acquisition by source. You need to know if it costs more via direct mail or the internet so you want to know the cost for each method.
#3: Referral Ratio
Many doctors say they’re getting a lot of referrals but often they don’t know exactly how many or they’ll say they’re getting about 10 a month, for example. Now, 10 a month might sound great to some and it might not be great to others so you need to figure it out from your own perspective.
If you’ve got 1,000 active patients and you’re getting 5 referrals a month, you’re looking at 60 referrals a year from an active patient base of 1,000.
That’s a 6% referral ratio. That’s not very good but can easily be improved. For example, here are some quick ideas that you can apply right away for improving the referral ratio.
- Have a ‘Care to Share’ program in your office.
- Send out a patient newsletter monthly.
- Hold at least one patient appreciation event a year.
So, start by measuring your referral ratio. If you’re at 6% now, set a goal with the team to get to 15% or 20%. You’ll notice that new patient flow and cost of acquisition get affected positively by what we do with the referral ratio.
#4: Conversion Ratio
Your conversion ratio is the proportion of the patients who come in that accept treatment. If it’s 50%, for example, that suggests your new patient experience is not working properly.
Your system should identify the problem for the patient, agitate the problem and then your team should adequately educate the patient so that you just wrap up the presentation and see how the patient wants to proceed. If case presentation is done properly, 80 to 90% of patients should be accepting some kind of treatment.
When you present cases using the terms ‘mandatory’, ‘elective’ and ‘cosmetic’, patients can start moving forward without needing to have the whole $5,000 case up front.
#5: Sale-to-cash Cycle
The next key factor you need to track is your “sale to cash cycle.” When you are doing a lot of marketing, you can be hitting your acquisition goals but the problem is that your overall cost of acquisition is going way up. Even if it’s only $50 to acquire a patient, if you double the amount of new patients, you could be spending an extra $6,000 a month acquiring new patients.
So clearly you need to know your referral ratio and your conversion ratio. But you also need to know your sale to cash cycle. This is the amount of time it takes between that person coming in as a new patient and you having positive cash flow in the bank.
If you’re spending $12,000 in marketing and its taking 60 days to get that money in your bank account, you go negative $12,000. If you do that two months in a row, you are negative $24,000. Then, what happens if it’s a 90 day cycle? What if it’s one of those cycles where you have a really bad conversion ratio and low case acceptance?
You’re left hoping that in six months you’re going to have enough money in the bank. So you need to look at how much money you are putting in the bank after six months with every new patient who walks through your door.
For example, in July of every year, pull up all the clients you received in January. Have someone open up every person’s file and find out how much treatment was planned and how much cash was actually paid. Then just create it as an Excel sheet with name, cash and treatment plan. You can do the same in January for new patients from the previous July.
This tells you how much money is actually in the bank account based on what was planned. Many business owners inflate these numbers unless they are actually holding themselves accountable.
#6: Percentage of Patients Keeping Six-Month Appointment
Another important metric is the number of patients keeping their six month (or 12 month) appointment. This is important as it will show you the reality of how patients are responding to you. It’s about accountability. It measures how well you’re doing at the front desk and how you’re doing at getting patients back in.
#7: Daily Production
Last but not least, you should be tracking how much each area of your practice is producing per month and per day. You SHOULD do this for general treatment. This can be a great leverage point for your practice. If this is working well, it opens up a lot of opportunities. You should also be tracking how much you are producing per hour and how much each doctor & associate in your practice is producing per hour. It’s really important for you to understand what your own time’s worth. And when you know what your other doctors (if any) are producing, you can look at what you need to do to bump their numbers up.
So, that gives you the seven key metrics you should be tracking in 2019. The key to all these metrics is that just making 5% or 10% improvements in a few of them leads to monumental overall growth in your practice. By knowing exactly what to measure and how to improve the results, you could make sure this is your best year yet.