One area of practice that people lose focus on is their spending. Successful and wealthy business people not only concentrate on making money, but also on keeping a tight budget. A common question that doctors ask is, “How much should I spend on marketing?”
Well, there is the accounting answer of 14%, but this is actually the wrong question to be asking. What they should be asking is, “How much am I making on my marketing? What is my Return on Investment (ROI)?”
What’s the ROI?
Every project needs an ROI. Your ROI should be at least 2:1 in marketing. The break-even amount is about 1.5:1. Meaning for every dollar you spend on marketing, you need to make $1.50 to break even. This is because you need to include your time, you staff’s time and pay, and materials into the equation. So, a decent ROI is at least 2:1. If you are close to 2:1, the next thing you should do on the marketing effort that produced it is try to improve upon it. This can often be done by making small changes – for instance, changing a headline or subject line, changing the size of an ad, or by making a better offer with a deadline.
Why we LOVE the Internet
This is why the Internet is such a powerful tool today. The ROI on Internet marketing is absolutely amazing. If you see at least 10 new patients from the Internet per week, that comes to 40 patients a month. The average new patient brings in $450 (conservatively), so you are receiving $18,000 per month brought in from your Internet advertising, or $216,000 per year.
Let’s assume your direct costs for your Internet is $500 a month, which is an average if you are truly working on your Internet presence. Your ROI is 36:1. This is absolutely unbelievable, and could never have happened in the days of Yellow Page marketing.
What About Everything Else?
Marketing is only one aspect of making a budget. Other operating expenses include:
- Payroll – should be between 22-25% of the total expenses. This does not include ancillary staff, such as doctors, nurses, and physician assistants.
- Group Health
- Life Insurance
- Workmen’s Compensation
- Overhead Insurance – disability insurance that covers your overhead if you are disabled.
- Medical Supplies
- Office Supplies
- Lab Fees
- Licenses and Permits
- Office Cleaning
- Credit Card Expenses
- Automobile Expenses
- Continuing Education
- Repairs and Maintenance
- Accounting and Legal Fees
- Student Loans
Your main expense will always be payroll and medical supplies. The amount will differ depending on the type of office you have and the location. The key is to keep your overhead as close to 60% as possible; bringing it to 50% would be outstanding.
“Cash is King.” This is the Golden Rule of business and it is the most violated rule that we see in podiatry. To learn more about how you can manage your practice more effectively, contact Top Practices today.