How Much Should You Invest In Marketing To Grow Your Revenues

In having dozens of calls with dentists every week, one of the most critical topics of the call and sometimes for the dentist the most painful is…

“How Much Should I Invest To Grow My Dental Practice Revenues?”

Most dentists focus on their clinical skills, and that is quite frankly the correct approach, but if you own your practice, you are also a business owner and have to make wise decisions on who to hire, the location of your practice, how many operatories, equipment and lastly how much to invest to grow your revenues, which can be a very difficult number to come up with, but I want to shed some light on it based on some very credible sources. This will be an eye-opener for you, but you must know these numbers and accept them as a cost of doing business.

Small Business Assocation (SBA)

The SBA is probably one of the most used resources for small business owners in the US. They are there to help you grow your business, as well as keep it operating. They counsel business owners on everything including how much to invest in marketing to be successful.

Look at the above numbers from an image I took right off the SBA website. I can tell you over 90% or more of the calls I have with dentists, they are not investing even close to this number, and then they wonder why they are not getting the number of new patients each month they want. And yet, your competitor who is dominating your city is investing that much and that is why they are winning and you are not.

How Much To Acquire A New Dental Patient?

As a business owner it’s really important you know all your numbers. If you don’t, you’ll be blindly running your dental business. Learning your cost to acquire a new dental patient will be an important number to know to then come up with a marketing budget to hit those new patient goals.

These numbers are a good place to start:

  • Cost Per Acquisition (CPA) – $150 – $300 per dental patient
  • In year one, a new patient spend averages $700-$1250
  • Average dental patient stays with a practice for 7-10 years
  • Average Patients spend – $653 per year (ADA average – 2016)
  • A new patient will generate at least $4500 in revenue (excluding referrals) in their lifetime with a practice.

Knowing a more successful dental business has higher numbers across the board, it is quite feasible to have a CPA of $300-$500, and still be profitable the first year with that patient.

When you say you want 20-30 new patients per month, remember the above numbers to set realistic expectations. 20 new patients on the extreme low end would be a marketing investment of $3,000 per month. Just scale the number up to the number of new patients you want per month. For the 20 new patient number on the more conservative end will cost $300 per new patient or $6,000 a month for marketing and advertising. On the high-end for higher-value procedures like dental implants, cosmetic dentistry, Invisalign the CPA could be as high as $500 per new patient.

Think Like An Investor

If you can break even on the front end when you acquire a new patient but know within the first year you are already profiting, you should be open to doing that all-day-every-day.

This should really open your eyes to how a business really runs and the investment for marketing to grow your dental business. The majority of dentists I speak to on the phone do not have any idea of these research-based numbers.

Entrepreneur Magazine

I know how busy you are but this magazine should be a staple for you to read during your leisure time. Being a dentist who owns their practice, you are an entrepreneur and need to think like one. In this article, they mention a research firm surveyed 500 small businesses of varying sizes and stages. Their findings should be viewed by every dentist wanting to grow their practice.

  • In the first year, marketing represented, on average, 7 percent of their total costs.
  • Alternately, they wished they had attributed 28 percent of their total costs to marketing.
  • From years one to four, marketing up ticked up slightly, to 13 percent of total costs.
  • They wished they had spent nearly double that amount, or 25 percent.
  • From years five to nine, marketing spend decreased significantly, to 5 percent, of total costs.
  • They wished they had spent more than three times that, or 16 percent.

The above numbers are a nice addition to the SBA numbers, and really should give you an idea of how much to invest in your practice to grow, and more importantly be competitive in your area.

Let’s Look At The Numbers

A practice doing $800,000 in gross revenues based on the SBA should invest on the low end (7% of gross revenues) $56,000 per year, or $4666 per month. And on the high end, again based on the SBA finding should be 10% of gross revenues, which is $80,000 a year or $6,666 a month. On the extreme low end (do not expect much growth or a big ROI) you’d be $2333 per month which is only 3% of gross revenues. At this low of investment percentage, your expectations should be realistically much lower depending on how many competing dentists you have in your city. You’d be looking at only one campaign such as Facebook, Google Adwords, Google Maps Marketing.

A practice doing $1,000,000 in gross revenues based on the SBA should invest on the low end (7% of gross revenues) $70,000 per year, or $5833 per month. And on the high end, again based on the SBA finding should be 10% of gross revenues, which is $100,000 a year or $8333 a month. On the extreme low end (do not expect much growth or a big ROI) you’d be $2916 per month which is only 3% of gross revenues. At this low of investment percentage, your expectations should be realistically much lower depending on how many competing dentists you have in your city.

A practice doing $1,500,000 in gross revenues based on the SBA should invest on the low end (7% of gross revenues) $105,000 per year, or $8750 per month. And on the high end, again based on the SBA finding should be 10% of gross revenues, which is $150,000 a year or $12,500 a month. On the extreme low end (do not expect much growth or a big ROI) you’d be $4375 per month which is only 3% of gross revenues. At this low of investment percentage, your expectations should be realistically much lower depending on how many competing dentists you have in your city.

A practice doing $2,000,000 in gross revenues based on the SBA should invest on the low end (7% of gross revenues) $140,000 per year, or $11,666 per month. And on the high end, again based on the SBA finding should be 10% of gross revenues, which is $200,000 a year or $16,666 a month. On the extreme low end (do not expect much growth or a big ROI) you’d be $5833 per month which is only 3% of gross revenues. At this low of investment percentage, your expectations should be realistically much lower depending on how many competing dentists you have in your city.

I have had hundreds of calls with dentists who are willing to invest $2,000 a month and want 30 new patients every month. This is not a realistic expectation given the competitiveness of the market of dentistry and the cost of advertising on platforms like google, facebook, youtube and even Instagram. If you are in a city of 100,000 population, the American Dental Association says there will be 60-80 or more competing dentists. Every one of them is competing to get that one person to come into their office.

I want to take the line from one of the most celebrated (and wealthiest) CEO’s in our country, Jeff Bezo’s of Amazon.

“The business willing to spend the most to acquire a customer wins!”

$2,000 a month for marketing will not get you the results you are looking for and you will be quite disappointed.

These numbers will most likely shock you, but should give you an idea of what investment to make to be competitive and grow your revenues. If you don’t follow what the Small Business Association states, you will be left behind your competitors who are doing this. Even if you cut those numbers down a bit, pull out your calculator and see what they come up to, but also remember lower expectations from that decrease in marketing investment.

The word I want you to focus on is INVEST!

You are investing in your business. You are investing a portion of your revenue with a marketing agency you trust and will partner with to collaborate together resulting in a positive ROI and a growth trajectory that will set you and your family up for the future.

Next Step

If you want to take your practice to the next level, let’s get on a call and we’ll do a market analysis and give you steps and strategies to grow your revenues. I have 20 years of digital marketing under my belt, and have been an entrepreneur my entire adult life. Contact Us Today.

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