In the world of practice finance today, things aren't what they used to be. In the new economy, the most valuable assets have gone from solid to soft, from tangible to intangible. Instead of office and equipment, practices today compete for ideas and relationships. Assets come in the form of knowledge and people. These kinds ot" assets are soft and squishy. and number crunchers and bean counters hate them. How do you assign a dollar value to your professional network? How do you decide whether to finance a new marketing project, when its only assets are an idea and a relationship? Hard questions about soft assets are driving chiropractic professionals to develop new measurements, new reporting forms, new tools and techniques for evaluating the success of their practices' marketing efforts based on intangibles. When evaluating the value of a marketing campaign, it is important to look beyond the short term and at the potential value created over the lifetime of the relationships generated. It is essential that you learn to assess the core drivers of value in any marketing program you seek to undertake. To find those core drivers, sort the components of your marketing programs into two "buckets": financial and relationship-building. To evaluate the financial component. I recommend that you reach back to two trusted tools in the financial management tool kit: return on investment (ROI). and cost of sales (COS). An analysis of patient and business partner loyalty provides additional valuable illumina- i tion on the overall long-1 term effectiveness of your j marketing projects. j i Return on Investment The first financial mea-sure, marketing ROI, j determines the dollar I return on the money you j spend to acquire new j patients. It's easy to calculate the costs and returns of your marketing projects. Simply tally all of the expenses involved in deploying your marketing project. Include the cost of all of the supplies used for the project including, for example, printing, postage, telephone, etc. Divide this number into the total dollars generated (collected) by the project, and you will end up with the ROI of your project. For example, a marketing project that cost $300.00 to deploy, which generated $2,100.00 in revenue for your practice, has an ROI of 7:1. The minimum acceptable ROI for a marketing project is 3:1, meaning 3 dollars generated for every one dollar spent on deploying the project. Cost of Sales The second financial measure, the cost of sales (COS), simply calculates the increased costs created by servicing the new patients generated by a i marketing project. COS typically rises | insignificantly with the addition of! each new patient in most practices. In \ fact, most practices could greatly increase their current patient loads without significantly increasing the COS to deliver services to those new patients. If a marketing project results in your having to increase your staff, their hours, your office space, or equipment, then the cost of sales should be taken into consideration when evaluating your marketing project. The size of your target-market should also be considered when undertaking a marketing project. One of the more humorous television commercials today shows a group of internet start-ups gathered around their computer screen as they anxiously await their first e-business sale. As the first sale registers on their website, amazement leads to elation, which rapidly turns into anxiety, when the volume of sales rapidly overwhelms their ability to fulfill the orders generated. In a similar scenario, one of our chiropractic clients had to double the size of his existing facility when it could no longer meet the capacity needs of his marketing program. He is now in the process of increasing the size of his new facility again! When undertaking a new marketing project, it is important to assess the demands that the potential increase in new patients will place upon your staff, patient flow and physical plant. But, using the tools of ROI and COS as a part of your assessment is very different from using them as your entire measurement of marketing success. Granted. I still recommend that you reduce every marketing project to the revenue streams it produces: How much will come in and when? And. I also recommend using these cash-flow analyses to calculate the value of your marketing tools. However, repetition is a key component of successful marketing. And how will you know to repeat a marketing project that resulted in a less than stellar return on investment on the first go around? I suggest that you use these very traditional tools in very nontraditional ways, by adapting ROI and COS to the intangibles of the new economy—share of patient loyalty and share of partner loyalty. Share of Patient Loyalty The purpose of marketing is not to create a new patient, but to make and keep a loyal patient. Most practices spend 809r of their marketing dollars on acquiring new patients, and then do a lousy job of keeping them satisfied. You know that you can translate each new patient into greater revenues by keeping him or her satisfied. But how much revenue? What is the value of an excellent patient relationship? You should develop hard data on the average value of each new patient to your practice. This figure is called your case average (CA) and is calculated by multiplying the number of visits that the average new patient comes to your practice by the average dollar value of each office visit. To determine your CA. first calculate your patient visit average (PVA) by dividing the number of new patients seen in your practice in any given month into the total number of office visits seen durinc the same month. For example. 30 new patients divided into 1000 office visits results in a PVA of 33. This means that the average new patient will stay with your practice for 33 visits. Now determine your office visit average (OVA) by dividing the total services rendered in your practice during the same month by the total number of office visits seen during that month. For example. S50.000 in services rendered divided by 1000 office visits results in an OVA of $50.00. Finally, multiply the PVA by the OVA and, voila, the result is your CA—the average value of a new patient to your practice. To conclude our example, 33 (PVA) times S50.00 (OVA) equals $1,650 (CA). Assuming that the practice has not increased the value of each visit, the higher the case fee, the more successful the practice is at creating patient loyalty. Listen closely if you are not satisfied with your current case average and share of patient loyalty. Did you hear that? It's the sound of your patients trying to help you do a better job for them—and, in the process, to help you build a more successful practice. But you can"t learn what your patients want, if you don't listen to them. Your patients have higher expectations and more choices than ever. Which means that you have to listen more closely than ever. Chiropractic is not a religion: it's a service industry. Yet, as doctors, chiropractors often block themselves off from getting the information that they most need to serve their patients. Your patients are the experts when it comes to how you can best meet their needs. Take time to listen to them, and you will find your patient retention and referrals—in other words, your share of patient loyalty—increase! Ultimately, listening well is more than just listening. It's about showing and telling—showing your patients what's possible and. then, encouraging them to tell you what's compelling. One Is the Loneliest Number The healthcare marketplace moves too fast for even the largest practices to do it on their own: If the word "overwhelmed" comes to mind, the next word ought to be '"alliance". Winning practices have learned to embrace partnerships in marketing. When several professionals or businesses sponsor a marketing event, it creates more interest for people who might not be curious enough to seek out your practice alone, but who are drawn to the energy of several businesses or professionals working in cooperation. Take the time to consider if your marketing project promotes deeper relationships between world-class business partners for your practice. What relationships were left untapped from the project, and how can you most effectively expand upon them in the future? Indeed, building robust relationships with your patients and business partners is the best hedge against adversity. Community is about more than internet bulletin boards and chat rooms. It's about creating new kinds of relationships. Practices that form such communities will be best equipped to weather any downturn in the economy. If your relationships with your patients and business partners are emotional, rather than simply transactional. then people will be more likely to visit you when the economy slows down. As the financial manager of your practice, you should ask yourself every day. "Am I creating something that can survive adversity?" Soft Analysis of Hard Numbers Another all-important criterion should be considered: The most powerful lesson to learn, as the financial manager of your practice, is the importance of developing a soft analysis of your hard numbers to measure value. Long-term value still rises and falls on cash flow. And. cash flow rises and falls on revenue. But revenue comes from a lot of intangibles these days. A full-tilt push to market your practice requires you to develop scenarios that, as much as possible, predict which revenue streams will pay off in the long run. In today's competitive marketplace, the winners are going to be those practices that understand and master this innovative model for directing the strategic investment of their marketing energy and dollars. As President of Breakthrough Coaching, LLC, Dr. Mark Sanna coaches chiropractors throughout the country to help them achieve personal and professional success. He has lectured to chiropractic audiences nationally and internationally. As a practicing chiropractor. Dr. Sanna has helped more than 100,000 people gain and enhance their health. A second-generation chiropractor, he believes that the future of chiropractic depends upon a commitment to the principles of chiropractic, ethical and effective public relations, and sound business procedures. Dr. Sanna can he reached at Breakthrough Coaching, LLC, by calling 1-800-?-ADVICE. O
