4S Summit

The Key to Succeeding in Business: Systems and Knowing Your Numbers!

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One of my favorite sayings and a critical component I teach to all of my medical practice consulting clients and in my proprietary “7 Fundamentals to a 7-Figure Practice” training is “Inspect what you expect.” 

 

If you DON’T have systems, processes & procedures, and a way to track your business analytics, or you don’t know your numbers, or even what numbers you should be tracking, then you are setting yourself up for failure. 

 

Even if you DO have the best practice management software in place with a comprehensive dashboard that is integrated and updated hourly, it ONLY WORKS  if you’re using it to your advantage, running reports regularly (weekly, monthly, quarterly, and yearly), and reviewing the right Key Performance Indicators (KPIs).

 

No matter what stage your medical practice is in, there are so many business decisions you need to make. The bottom line is without knowing your numbers, you cannot scale, you cannot make informed decisions and you cannot course correct. 

 

I have worked with hundreds of medical practices, and I have found that most do not know which metrics to use and are not using KPIs at all. 

 

I have seen practices spend thousands of dollars in marketing efforts without tracking what is actually working and converting. Without knowing how many leads your marketing dollars are generating and how many of those leads are converting into clients, you are literally throwing money down the drain.

Critical Numbers and Common Benchmarks

Critical Numbers and Common Benchmarks

When I work with my clients one-on-one or when they attend one of my live sales trainings or complete my online course, we take a deep dive in what baseline KPIs are needed and how to figure out the calculations 

Here are some of the most critical KPIs to measure:

  • Net Profit
  • Revenue Per Hour
  • Average revenue per invoice
  • Revenue per provider and procedure 
  • Conversions Rates (phone, web, consults)
  • Operational – staff capacity and productivity
  • Lead acquisition cost – what is converting and how much is it costing 

Here are some common benchmarks to keep in mind:

  • High-performance medical practices should run at a 70% capacity. If you are getting close to 65-70%, you need to hire someone else.
  • Rent should be no more than 4% of total expenses
  • Costs of goods should be 30-40%, Injectables can be as high as 50% of expenses
  • Payroll under 30% of expenses
  • Marketing 10% of total revenue 

The best time to plant a tree was 20 years ago. The second-best time is now.John D. Rockefeller

Expert Advice and Best Practices on Reports/KPIs

Here is some advice and a list of suggested best practices from my colleague, Senior Practice Analyst Randy Torban of Symplast: 

KPIs should be viewed by the day, week, month, quarter, and year, and comparisons should be made year over year. Going back 3 years helps with trends – which in turn helps with forecasting.

The KPIs medical practices, med spas and aesthetic clinics should focus on can be determined by how long the “business has been in business.”

For example:

 A new business (opened 0-12 months) should be focused on:

  • Total Revenue
  • Revenue by Provider
  • Revenue by Lead Source
  • Total Leads
  • Total Appointments Booked
  • Total Appointments by service
  • Total number of Cancellations
  • Global Conversion Rate
  • Total Expenses
  • Total Profit
  • An existing business (1-3 years) can focus on:
  • Customer Acquisition Cost
  • Marketing ROI
  • Staff Capacity
  • Gross Profit
  • Profit by service
  • Profit by provider
  • Avg. invoice
  • New vs. existing patient ratio
  • Percentage of returning patients
  • Lead to Patient Conversion rate
  • An established business (3-5 years) should look at:
  • Natural Growth rate vs. Actual
  • Forecast vs. Actual
  • Marketing ROI per Channel
  • Goals completion Progress
  • Machinery Capacity
  • Avg. revenue by provider
  • Payroll expense ratio
  • Cost of goods sold (Cogs) ratio
  • Avg. Time from first contact to service
  • New initiatives ROI

Critical Financial Numbers You Must Know

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In order to maximize the profitability and success of your office, you need to take an accurate and realistic snapshot of where you are by the numbers.

  • Do you know your return on investment for every procedure and treatment you offer?
  • What percent of patient leads do you retain?

Patient retention is directly linked to how well your front office staff listens, engages and responds. Read more about the LAER model I developed for staff training here.

In order to become a top performing practice, every working part of your office—the staff, systems, processes and protocols—must be performing at optimal speed. Be diligent and organized in your record keeping. Take a quarterly snapshot of your office. If you know where you are, you can make a sustainable plan for future optimization and growth.


HERE ARE THE KEY NUMBERS YOU NEED TO KNOW:

Budget

  • Start-up costs – Property, building, equipment, technology, staff and marketing all go into start-up costs.
  • Payroll – When your business is off the ground, payroll makes up a large part of your bottom line. Know how much you pay your personnel, in wages, taxes/insurance and bonuses throughout the year.
  • Equipment – This includes initial cost, maintenance and materials required to run, update and optimize equipment.
  • Marketing – Any expense targeted towards attracting new patients falls into this category, from pamphlets to website development and networking events.

ROI = (Gain – Cost) / Cost

  • Procedures – Know how much every procedure costs you to perform, including supplies, time, and personnel involved. Your potential gain per procedure is based on these expenses.
  • Technology – Know how much a piece of new equipment costs to acquire and maintain. You’ll need to include maintenance and supply costs in your ROI calculations for every piece of equipment in your office.
  • Marketing – Knowing your ROI on marketing strategies allows you to quantitatively measure how successful a specific marketing tactic is. Know how your patients found your office and why they return—online marketing, networking at the right events, etc. Read more about how to calculate your marketing ROI in this article from Forbes.
  • Website position – Know the numbers behind your website—how many people visit the site per day, what page they go to and stay on, what your bounce rate is, and modify from there.

Rates

  • Conversion/Close rate – How many prospective patients do you “land”? How many are retained as long-term patients?
  • No show/cancellation rate – On average, how many patients make an appointment and don’t show? Or cancel in advance?

New patient rate – The number of new patients you bring in per month, or year.

The best time to plant a tree was 20 years ago. The second-best time is now.John D. Rockefeller

Room Revenue Assumptions

  • Number of rooms – Total number of procedure rooms
  • Hours of operation – How many days are you open?
  • Average treatment price – Taking an average of all procedures offered, what is your average price?
  • Average length of procedure – On average, how long do your procedures take? This includes operating preparation.
  • Treatments per day – How many treatments do you complete per day? Are any days busier than others?
  • Revenue/hour – Based on the numbers above, what is your average revenue per hour?

Goals

  • New patients – Set a goal for number of new patients retained per quarter. Using the LAER model I developed, you can train your staff to engage, respond to and retain patients.
  • Revenue – Based on where you are, what is your projected revenue? Set your revenue goals and make the necessary changes (processes, protocols, staff) to get there.
  • Revenue/hour – To reach your revenue goals, how much do you need to generate per hour? Avg room should do between $600-$1000 per hour.
  • Price strategy (vs. competitors) – Based on your current and desired revenue, and keeping competitor pricing in mind, develop an informed and realistic price strategy.