How Much Income Do I Need To Get A Solid ROI On An Ad?
I get this question a lot.
For example, this from a ClearPath Society® Member:
My partner and I are arguing about ROIs and what we need to see from new patients, in real money deposited into the bank, to evaluate if a particular investment in marketing makes sense or not.
If we invest $1,000 in marketing our services and get 10 NPs [new patients], how much do we need to collect to break-even. And, what would be ideal for us to collect to make the campaign worthwhile?
Any input greatly appreciated.
Joe, great question and it’s one more dentists should be focused on asking.
Ok, so let’s say you do in fact, get 10 NPs.
How much do you need to produce to earn the $1,000 investment back?
If your overhead is 50% then you need $2,000 collectible production in some combination from those 10 NPs.
There are a dozen variations to this and you can get more scientific and CPA/Bean-Counter’ish. But, when it comes to bare knuckles and brass tacks, your overhead is the main factor in determining how much production you need to truly break even on your marketing and advertising expenses. (Not raw numbers of new patients – unless you know your first 30-days’ production on average, for a new pt)
To clarify, here’s a look at real results from a recent campaign for SofTouch™ Dental:
– The office invested $1,350 in 45,000 Free Standing Inserts (printed and delivered).
– The ad (FSI) resulted in, so far, well over 45 new patients. And, that’s just since April 27th.
– Of those 45, 5 won’t show. That leaves us with 40.
– Of those 40, we’re giving away a free comprehensive exam and digital x-rays. Minimal cost – which is for the most part really already included in my monthly overhead figures. I have to already have the office opened, staffed, stocked, and ready.
Our overhead, let’s peg at 80% just for fun. And, let’s say our average monthly income (not production, but actual money deposited into the bank) is $50,000.
80% of $50,000 is $40,000. We invested $1350 of our profits (monthly profits of $10,000). To get back our $1350, we need to produce an extra $7,000 from those 40 new patients.
If the average additional production (aside from the exam and x-rays) of those 40 new pts was just $300 each, you’d have $12,000 coming in on an investment of $1350.
If the average was far lower, say just $100 each in the first 30 days, you’d see production of $4,000. Still, a very, very nice ROI on a $1350 investment. One you should be happy to get (sort of ☺) at least until the rest of those folks get treatment done that trickles in over the next several years.
To “truly” break-even, all you’d need production-wise from those 40 new patients would be a total of about $6750 in production over and above the initial exam and x-rays. That 6 or 7 crowns. 2 sets of dentures. 2 or 3 implants. Your choice.
If you can’t recommend and sell $6750 in dentistry to 40 people, we’ve got a few other issues we need to work on, right?
What would I like to see my Members snag in ROI on their ads?
If you can routinely generate a 4 or 5:1 return on every dollar you invest in marketing, you’re going to come out smelling just fine.
If you invested $4,000 and got back $16,000 in collectible production, even after paying $12,800 in overhead (80%, which already includes your marketing expense of $4,000), you’re still going to clear, yes clear, $3,200.
And, keep in mind, most folks also calculate something akin to an annuity value you capture with new patients. If each is worth at least $500 a year for 5 years, that’s another $2,500 of value each, and after subtracting your overhead of 80%, you’re still making $100 a year, of $500 off of each patient if they only stuck around 5 years and only averaged $500 a year.