Insider Circle
Practice Marketing Tips
The Difference Between Investment vs. Expense in Your Marketing
“Can I afford this expense?” Every practice owner will likely ask themselves this question at some point. No business is immune to financial pain and sometimes tightening the belt is very wise. But how do you know where to spend and not spend? As a practice owner, this is where it becomes VITAL to understand the difference between investments and expenses. A growth-minded practice owner avoids the temptation to view everything as an expense. Let’s face it. Practice Owners are in a perfect “financial storm” of low reimbursements, Medicare cuts, and inflation, because today’s healthcare system doesn’t value you or what you do. It continually makes cuts that eat into your profits and threatens the existence of private practices. “This mindset is one of the biggest downfalls of businesses in general. If everything is viewed as an expense, then decisions are based not on a growth model but rather a survival model. Those who start a business wanting only to survive are sabotaging their ability to make decisions that will grow and sustain their businesses.” (Entrepreneur.com) What is your goal as a practice owner? Do you want your practice to run more efficiently so you can work fewer hours? Do you want to create enough value to eventually sell at a high profit? The right investment both creates freedom now and raises your worth, stability, and profit margins down the road. But when you have the right marketing budget, you’ll be less stressed about your practice finances. Marketing creates revenue, but figuring out the right budget is a stressful challenge. You don’t want to overspend compared to your cash flow… but underspending can also cause your return to be not worth the investment. EASY 2-STEP MARKETING BUDGET CALCULATOR: A few of the biggest items in the investment category are People, Training, Physical Location, and Marketing. That said, each one of those can be expenses if not done correctly. When it’s time to make a decision, consider these key differences between investments and expenses... So, both as a practice owner and now for Practice Promotions, this is what I find to work best: The U.S. Small Business Administration recommends 7-8% of total revenue be spent on marketing. I’ve also heard smarter people than me say “5% to keep your business running, 10% to grow your business.”
INVESTMENTS IMPROVE A BUSINESS, EXPENSES JUST KEEP IT GOING.
Some expenses are necessary to keep your practice running. The electric bill, cleaning, equipment repairs… these are necessary but don’t improve your income. Investments do improve your income – but there’s one catch. Underspending on something that should be an investment can turn that thing into an expense that just keeps the business going without improvement. What do I mean? FrogDog says it this way: 1. Set up a spreadsheet with current revenue & expected over the next 3 months. “As a general rule of thumb, companies should spend about 5% of their total revenue on marketing to maintain their current position. Companies looking to grow should budget a higher percentage – usually around 10%.” If you want to grow you need to INVEST in marketing – spending enough to improve your patient flow and income. Investing too little turns marketing into an expense – costing you money instead of making it back. (The U.S. Small Business Administration recommends a similar tactic: 7-8% of the budget for companies with less than $5 Million revenue.) So, which is it? Here are the conclusions of Entrepeneur.com’s research: “Areas that are considered an investment by companies that understand a growth model vs a survival model are: image and marketing, training and development, technology, physical location, and hiring.” Remember, budgeting is NEVER about guesswork . You can be confident in your marketing spend with this simple formula! Calculate your marketing budget right now. Are you underspending? And if so, how else can you invest in your marketing? When you’re confident in your marketing spend, you’ll be less stressed about finances. Statistically, underspending is MUCH more common for PT clinics than overspending. And that can be super deadly! Marketing is the oxygen of your practice. If you’re underspending, you’re cutting off your own air supply! But the beauty of this system is you don’t have to have a huge budget , you just have to plan the right percentage. 2. For each month, calculate 7-10% of total revenue depending on if your goal is to grow aggressively or you are trying to stay about the same. 3. Repeat this process every quarter.
INVESTMENTS PROVIDE A RETURN. EXPENSES DRAIN RESOURCES.
MARKETING BUDGET EXAMPLE
PracticePromotions.Net/PPC SCAN THE QR CODE OR VISIT PracticePromotions.Net/PPC SCAN THE QR CODE OR VISIT You didn’t start a practice to struggle. You did it because you’re a growth-minded PT with a passion! Physical therapy is an industry built to help people live better – and that should include you. When you have the RIGHT marketing budget, you’ll be stressed about finances. So look at your budget. Make sure you’re not underspending on your marketing investment and crippling your own growth! MONTH 1 MONTH 2 MONTH 3 $83,000 $83,000 $83,000 8% 8% 8% $6,640 $6,640 $6,640
This one sounds straightforward. After all, we talk about investments in terms of ROI, but ask about expenses “can I afford this?” But understandably, it can be easier said than done when it’s time to make the investment. This is where planning comes into place. Planning takes away a lot worry and gives you time to make carefully researched decisions. Let’s say a clinic averages just over $83,000 per month ($ 1 million annually) and is trying to achieve a moderate growth level. Their marketing budget would look like this each month: EXAMPLE Percentage
Expected Revenue:
Marketing Budget:
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