Should new dentist keep dental marketing campaign?

Question:

A selling dentist has an expensive marketing campaign to attract new patients. It’s successful, but the buying dentist is nervous about the monthly expense. How should a buying dentist determine if he or she should keep that marketing going?

KATE WILLEFORD, CPA

Do you know how much money you spend to attract each new patient? If not, I highly recommend you calculate it for each type of marketing approach you use. To calculate, you need to (1) determine exactly where each patient is coming from (referrals, magazines, billboards, TV ads) and how many new patients are being attracted by each source; (2) calculate the dollar amount you or the prior owner spent on that type of marketing and divide it by the number of new patients. (This average cost per new patient will help you decide whether or not to keep that marketing approach); and (3) track the referral source every day. I find that the front desk team often believes patients come from a marketing approach other than the correct source. Require the front office team to track the new-patient sources in your software.

Cash flow projection

Do you know by what dollar amount your collections would decline if you dropped the marketing dollars spent on, for example, magazine ads? Before you quit a marketing program, make sure you project the effect it could have on your revenue. Do not simply look at the expense side of the equation. New patients typically cost up to $195 to bring in the door. This is a small price to pay if your rate of return is 10 times your investment (assuming a typical patient is worth a minimum of $2,000 a year).