By Jeff Russell, Author of Secrets to a Successful Practice & Executive Director of the IAPAM
As you know, you can’t just buy a new car and not perform routine maintenance on the car like replacing the oil and window washer fluid. If you did, the engine would cease up and the car would die. Well, the same thing will happen in a medical practice. If you don’t watch your most important gauges things will start to blow up. Therefore, it’s important you have a solid tracking system in place to ensure all the parts of the practice are operating smoothly.
Another thing to keep in mind is that you may want to keep some numbers to yourself, but others you should communicate to your team members. Everyone wants to know the score. This helps you, and it helps them feel part of the success of the practice. A win-win for everyone!
What do I Track?
I have found, after many years running a practice, that I like to categorize metrics into four categories: Team, Marketing, Patients, and Financials. You can typically get all the numbers you need from your financial statements (i.e. Income Statement) and your EMR (Electronic Medical Records) system. Here is a summary of what I like to track:
- Core values
- Monthly marketing spend
- Cost to acquire a patient
- ROI (return on investment) for each of the marketing initiatives you have going on
- Top five patients with largest spend per month
- Top twenty-five patients sorted by lifetime spend
- Lifetime Value of a Patient
- Net profit
- Gross revenue
- Monthly operating expenses
- Marketing expense percentage
Tracking Your Team
You need to establish a consistent meeting rhythm with your team. If you start to drop off your meetings, you will find that your team will start to lose focus and start slowly going in a slightly different direction. It may start with some team members coming in late, not smiling as much, lower patient satisfaction ratings, the practice starts to become untidy. These are all warning signs that things are not as they should be in the practice.
Use each meeting as an opportunity to review the practice’s core values, yearly and quarterly goals, and where you’re at on that day. To really help motivate your team, they need to know the score.
Tracking Your Marketing
You will have patients come and go—some will move away, others may need solutions you don’t provide. You always want to be growing your practice, and as we discussed earlier, marketing is how you bring patients in. Therefore, you want to have a mechanism for tracking your marketing efforts.
Marketing can easily turn into a black hole of spending, since many marketing tactics are very hard to quantify an ROI (return on your investment). The ROI is very important. If you don’t receive a more profitable business to offset what you spent on a particular marketing initiative or campaign, then you are losing money, and that is just bad business.
The key point I want you to understand is that you need to track the amount you spend on a marketing campaign and connect it to the profit of that procedure, not the revenue. If you spent $5,000 on an ad in a glossy lifestyle magazine promoting cosmetic injectables and you get ten patients paying an average of $500 each for their treatments, you are not even—you actually lost money seeing those patients. Why? Because you typically give half of what you charge to the drug company to buy their injectable product. In that example, your actual profit on those ten patients is only $2,500 (10 x $250 injectable cost), not $5,000.
Marketing Metrics to Track
- Monthly Marketing Spend
- Cost to Acquire a Patient
- ROI (Return On Investment) Marketing Spend
Tracking Your Patients
It is sometimes tough getting patient data. Your electronic medical records system is the best place to look, and it will probably include several pre-configured patient reports. I like to keep it very simple; I want a monthly report of the Top Five patients who spent the most in the practice, as well as a listing of the Top Twenty-Five patients who’ve spent the most money since they’ve become patients. Remember the 80/20 Rule? The Top Twenty-Five are my top 20%, so I want to know who they are. As well, the monthly Top Five will help me to see what is happening in the practice and who my rising stars are. These rising stars could be headed to the Top Twenty-Five list.
From the Top Twenty-Five, you can see another metric I like to track, and that is the Lifetime Value of a Patient (LVP). A patient may only come in for a $500 procedure, but if they like the results and your practice, they will keep coming back. It’s not uncommon for the LVP to be $10-$20,000. These are your biggest fans, and you need to know who they are!
Tracking Your Financials
I know most of you probably had your eyes to glaze over during financial accounting class in college—if you even took it! However, you can’t just depend on your team for information. You need to link the money coming in and out to the performance of the practice. This is also where practice embezzlement occurs. I’m sure you’ve all heard of practices where thousands of dollars went missing over the years. This happened because the owner or practice manager was not watching the numbers.
Don’t worry, you don’t need to be an expert in financial statements, but you should know the basics. There are typically three financial statements you will want to be aware of.
- Income Statement, which compares your revenues and expenses to see if you are going to make any money. This is where you find your net income, gross income (bottom line), and profit.
- Cash Flow Statement, which shows you how much money you have in the bank.
- Balance Sheet, which compares what you own to what you owe. This statement is reviewed annually and doesn’t contain much unless you have significant assets like machinery or a building.
The numbers I like to keep track of every month are Net Profit, Gross Income/Revenue, Monthly Operating Expenses, and the Marketing Expense. If you’re unfamiliar with the terminology used in financial statements, Investopedia has a handy dictionary you can refer to.
Now that we have a listing of the numbers to track, I need a place to track them! Some people use a simple Excel spreadsheet and then post the public numbers either online or in the practice for everyone to see. If your practice uses team communication software like Slack or Microsoft Teams, these are good tools to post them so everyone can see them and also react to them. With those tools, anyone can add comments and emoji’s (i.e. happy face, sad face).
Here is a simple dashboard created in Microsoft Excel:
If you are ready to grow your practice or are preparing to start your first practice, check out the IAPAM’s Practice Startup Workshop.
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