When it comes to your financial numbers – If you can’t measure it, you can’t manage it” said Peter Drucker, one of the most widely-known and influential thinkers on management whose work (including 25 books) is still studied and taught today.
But oftentimes, when you’re in private practice, you are juggling patient care with managing staff, with marketing efforts and then there’s actually doing the work of surgery and non-surgical procedures. That’s a lot.
Know Your Finacial Numbers for a Successful Practice
On top of that, you also need someone keeping the books so maybe you are trusting it to your accountant and/or bookkeeper since that’s their strength.
And, to keep it simple, you want to know the bottom line every month which is how much did we bring in? If the number is more than last month, and on an upswing, you’re happy.
But a lot of surgeons are surprised to learn that you can bring in a lot of revenues without actually turning a profit. How is that possible?
It happens when you don’t know your financial numbers.
- Maybe you’re making decisions based on bad information or incomplete information that skews your thinking.
- Or, maybe you have a leak in your processes that is costing you a fortune, but you don’t see it because it’s hidden in the numbers.
- Or worse, maybe someone is fiddling with the financial numbers and skimming your profits without your knowledge.
That’s why it’s essential you “know your financial numbers,” so you can pinpoint issues before they blow up into big problems.
You’ll also have peace of mind knowing you have a good handle on things, so embezzlement is not an option.
Just imagine how much better you will feel when you know important numbers that make the biggest difference. Here’s why…
Numbers help identify where your practice is leaking money.
When you run regular financial reports, you see how much you are spending on certain expenses and know to question the expenses when they appear higher than what you planned.
For example, you may notice how high your advertising expenses are. You can’t believe you are spending that much and react by cutting the budget.
However, if you know your financial numbers, you decide with logic if what you are spending is bringing in new patients and revenues.
If that expense is making you money, then it’s not an expense. It’s an investment in your practice’s growth.
The point is to look at the whole picture. There’s a cost/ benefit analysis to everything.
When you know your financial numbers, you know which procedures are making you the most profits
You can measure the profit margins on each procedure and know which are more profitable and where the weaknesses are in the ones with the lower margins.
Now, you know what price you need to charge to meet your expected profits or how much to pad the price if you include any type of discount or wiggle room when negotiating with patients.
And, when you know your financial numbers, you have a clear understanding of how much your practice needs to earn to meet your annual goals
When you understand how much revenue you need to bring in to make a profit, it helps with establishing goals. You will understand what revenue level your practice needs to achieve to breakeven, and you will know at the point you have achieved your breakeven for the year.
Here’s the best part…when you keep your numbers in check, it reduces your expenses because you brainstorm ways to work more efficiently to decrease labor costs, save on supplies and increase the lifetime value of each patient.
That’s how you add more profit to your bottom line.
Your financial numbers are telling you a story. Be sure it’s not a horror story, but a story with a happy ending.
To help, here are 4 financial numbers to measure and review regularly since they are the foundation of a cosmetic practice. And, solutions to better these numbers are also included:
Where do the best leads come from? How many do you need to generate and what actually generates them? If you don’t know this, it’s likely you will waste lots of money on things that are generating the wrong kinds of leads or potentially worse, abandoned a lead generation tactic that’s actually working so leave it alone. Of course, this means that you must be tracking what leads convert to procedures and which patients are most profitable. By the way, it’s much harder to increase the number of leads significantly and much easier to double or triple your lead conversion number once you start paying attention to it.
Percentage of leads converted
Do you know what percentage of your leads actually turn into cash paying patients?
The biggest resource killer of all practices is the chasing of leads that are not qualified, not educated about you, and not ready to appreciate the unique value you have to offer. When you start to measure this and discover how low your conversion rates actually are from initial phone call to a patient saying yes, you’ll want to fix it. It’s too painful otherwise when you see how much money you are losing.
Cost per patient acquisition
Every new cosmetic patient comes with a cost. By measuring that cost with some sort of value to your practice over time, you have a metric that can determine what you can actually afford to spend to acquire patients and go to work on lowering that cost while creating more accurate budget forecasts.
Look at all of your marketing/advertising expenses and compare it to your new patient revenues for that year. Do those numbers make sense? Through careful lead analysis, you can cut the cost per lead greatly by making better lead spending decisions.
Lifetime value of a cosmetic patient
In today’s ridiculously competitive marketplace, it’s much faster, easier and cheaper to KEEP current patients coming back for more, than it is to spend even more money attracting new patients to fix your attrition problem.
Retaining patients has become a main patient-attraction strategy. When you treat your patients well and stay in touch with them, you gain more revenues without spending more on advertising.
That means you attract new patients for free because your current patients are referring, reviewing and sharing you on social media.
Not sure about that? Look at your own financial numbers. Where are your new patients coming from? How many patients return and how many patients refer?
Please consider your audience. You cater to a very hungry crowd. Cosmetic patients care about their appearance. They care today and next month and next year and so on.
With minimal cost and effort, you keep them coming back for surgical and non-surgical procedures and treatments for years to come.
The bottom line here is that you deserve better, and so does your practice. When you know your business numbers, you make better decisions, avoid unnecessary surprises, and have peace of mind knowing you’re on track to reaching your goals.
I’ll leave you with another saying from Peter Drucker which is “What’s measured, improves” and that says it all.