Let’s see how good your math is today. Prizes go to anyone who gets the right answer!

Math never was my favorite subject in school, but I got by with passing grades at least.

Well, there was that one time I made a D with Mr. Drill Sergent Teacher in college Algebra! But, I retook it later with a different teacher and got an A.

Anyways, enough about my report card. Let’s see if you can do some business math…

Nothing complicated of course. I realize most of my readers are doctors and have other skills sets.

Hang with me here and you’ll see there’s a very important marketing lesson that goes along with this math problem.

The most important number in marketing is ROI (which stands for Return On Investment.) According to Investopedia.com the technical definition is:

A performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. To calculate ROI, the benefit (return) of an investment is divided by the cost of the investment; the result is expressed as a percentage or a ratio.

It’s the money you make back, the return, on what you originally invested. So if you put $1 into marketing and make back $7. That’s a 7:1 ROI, also expressed 700%

This is an excellent return. You made $6 that you did not have when you started. All the big box stores would love to have that kind of return on their merchandise.

Let me make the example a little more complicated.

Let’s say you want to start an egg business. But, you need to invest in getting chickens first, before you can have any eggs to sell. Your first step is to hire a chicken catcher (work with me here, it’s an example!) You find a highly recommended chicken catcher for the nice sum of $100.

You ask Mr. Chickengetter (heretofore known as CG) how many chickens he can catch for you. He says he’s not sure, as those buggers are pretty fast. But he’ll do his best. Tomorrow he comes back with 9 chickens. Now it’s time for the egg laying to begin!

Within the first month these fine chickens produce 300 organic, free-range eggs to sell to Whole Foods, who pays you $700 for them.

Wow, this makes you feel really good about your business.

Let’s throw in a little twist. Let’s say all your chickens burn up in a horrible fire after 30 days (hey, stuff happens)!

You’ve now got to go back to Mr. CG and have him catch you some more chickens. But on your way to meet him, you strike up a conversation with another farmer down the road, Mr. Poach.

He informs you that he never pays more than $5 for a new chicken, never, ever! Even though Mr. Poach’s farm is looking pretty shabby, you thank him for his good advice and go on your way.

You then hire Mr. CG for $200 this time and tell him you need a lot of chickens to restart your business. He brings back 18 chickens. You do a quick calculation in your head, while thinking about your previous conversation you had with Mr. Poach. You just paid a whopping $11.11 per chicken! You feel completely duped.

Doesn’t Mr. CG understand how tight money is after the fire? If he really cared, he would have brought back more chickens. At least 50, or maybe 70 chickens.

After giving Mr. CG a piece of your mind for charging you so much per chicken, you go back home and start producing those wonderful eggs.

After 30 days, you have about 600 eggs, which you sell to Whole Foods for $1400.

How depressing this chicken business is.  Last month you felt good about your business ,but this month you only got 18 chickens from Mr. CG. If only he could have brought you 80 or 90 chickens, you could be feeling good right now. You think to yourself, “maybe the money’s in turkey farming.”

What’s the moral of the story?

It doesn’t matter how you feel about the number of chickens you get, it’s the amount of eggs they produce that matters!

In both scenarios, the return is exactly the same, 7:1 or 700%. In both cases you put in $1 and got $7 back. It doesn’t matter how much the chickens cost, because that’s not part of the ROI formula!

How many investors on Wall Street would be ecstatic about buying stocks for $1 and selling them for $7?

Now for the true test of your arithmetic prowess. Here’s a real life example I got in email form.

“I just ran my first ad. We got 6 calls to schedule and 5 came in. I’ve already done one report and he paid $995 today. If he keeps his treatment recommendations he’ll pay an additional $500 to finish his care. 5 NP’s from a $1000 cost to run the ad is not a very good return, don’t you agree?”

Be one of the first 10 comments to get all of the following questions right and I’ll give you a free video for improving your website ranking on Google.

1. Assuming all 5 patients finish the care plan of $1495 each, what will this doctor’s ROI be?

2. Would you be happy with these results?

3. Multiple choice, choose only one:

Would you:

A. Run the chiropractor’s ad again.

B. Not run the ad again because it only brought in 5 new patients.

C. Not run the ad again because it lost you money.

How do you know if you’re marketing is working?

Many would say the answer is “by the number of new patients” or “by the number of phone calls.”

While these are both good signs that help you to determine if an ad is successful or not, they are not the right way to measure success in marketing.

Let me show you how measuring your return on the number of new patients only can mislead you. Here’s an example of a conversation I once had:

Doc: Dr. Beck, I only got 5 new patients from the ad I ran. I consider this a failure!

Me: How much did the ad cost you to run?

Doc: $500

Me: Did all 5 patients start care? And how much is your average case fee (or lifetime value)?

Doc: $1,800

Me: So you made $9,000 from an ad that cost you only $500 and you consider that a failure?

I know as chiropractors we get all wrapped up in talking about the number of new patients we get from certain marketing campaigns. It is an important stat to keep. But successful business know that it’s your return on investment (ROI) that really matters.

That’s ROI for the whole practice and specifically for each ad we run.

So how do you figure the ROI? Let me show you by using some real numbers. Here’s an email I just received from one of my Decompression Marketing Elite clients:

Hello doc,

Stats update from first EM ad ran as insert; collections in my hand. Ready for this? lol!

I ran in as 21,500 inserts in a free paper; printing cost $515.41 Distribution for inserts cost me $376.25 = total of $891.25 combined
15 day only offer of $35 expired 9-6-11;

Grand total= $17,490.00 collected with residual collections for multipal payment program option uncollected yet. Table is now filled for next 6.5 weeks!

27 new SD patients were scheduled
7 still remaining to be seen.
8 signed and paid in full

Now let’s do some math. I calculate marketing return on investment the quick and easy way. Take the total amount collection and divide it by the cost to run the ad. 20:1 ROI (19.6 rounded up) as of right now, just 2 days after the expiration date of the ad!

$17,940/$891 = 1962% ROI
or 20:1 Return

It goes without saying that not everyone will get these kinds of results. Some will do even better. Many will get a great return although it may not be this high.

But the point is this doctor has kept excellent records of his ad and is quickly able to figure ROI. He’ll need to re-figure the results later after ALL the money has come in. So in the end, it should be even higher than a a 20:1 ROI since 7 new patients have not yet come in and the residual payments have not all been collected.

What kind of returns are you getting from your chiropractic marketing? And if you aren’t measuring ROI, how do you know if your campaigns are successful or not?

Can you guess the two most important numbers to track for a chiropractic practice?

“How many ya seeing doc?” If you you’ve been to some of the hyped up chiropractic seminars, you might think it’s the number of weekly patient visits. After all, you’ve probably been asked this question more times than you’d like to hear.

What does the number of visits per week really tell you about anyone’s practice? It doesn’t tell you how many of those visits are free or discounted. It doesn’t tell you the doctors overhead. For all we know, he could be seeing 300 per week and barely paying the bills. Some gurus even teach that the question “how many you seeing?” actually should be answered with how many patient visits you “see in your head”. Which means make up any answer you want.

“How many new patients you seeing?” New patients are a very important number to track, but the number you see per month doesn’t always tell the whole story. If someone does a spinal screening and gets 30 new patients in for a free exam, is this equal to 30 referred new patients who paid full price? No. Therefore, the importance of new patient totals can vary depending on the quality.

“What are you collecting?” Indeed, the monthly amount collected is a critical number to know for your practice. One that many chiropractors would do good to focus on more. But still, what does this tell you about the “health” of someone’s practice. If someone collects $100,000 a month, you may think he’s a very wealthy doctor. But what you don’t know is that he spent $110,000 to make that $100k. What collections don’t take into account is the overhead a practice has: the rent, payroll, marketing costs, leases, taxes, etc.

“Okay, so what are the two most important numbers? Just tell me already!”

The #1 most important number to know for your practice is the net profit for your practice. Also referred to as the “profit margin”. Simply take the total amount collected and subtract your expenses (doctor’s salary is not counted as expense for this exercise.) Now what % of your gross collections each month is your net profit?

It doesn’t matter if you had 100 new patients last month…or see 1000′s of visits per week…or collected $236,000 last month…if you’re net profit sucks. How many slow months can you make it through with only a 10% or 20% profit margin?

Now granted, you may not want to tell everyone this magic number. But if someone was to ask you, you better know it to the penny for last month…even if you don’t say it out loud. I’ve consulted with too many chiropractors who tell me “we’ll, I think it’s about 50%”. I reply “you think?” Then they give me some excuse about their bookkeeper or account not doing the books yet. Look, we’re not talking about taxes or anything to do with the IRS. We are talking about the actual amount of money that goes into your pocket each month. If you don’t know this number, you’re truly flying blind.

The second most important number is your return on investment for your marketing or ROI for short.Your marketing ROI is just a measure of the profit margin on your marketing dollars. So if you spend $1 on marketing and get back $5, this is good. If you get back $10 or $15 this is excellent.If you aren’t tracking your ROI, you can’t say for certain how well an advertisement performed. Simply measuring the number of new patients that came in from an advertisement is not adequate in comparing ads either.

Let’s look at some actual case studies. Here’s part of an email I received a couple of weeks ago…

Dr.Beck, we put the ‘sciatic don’t live it’ insert on Monday to 2 zipcodes that went to 6,000 readers, we got 3 patients ,all over 80 years old, who all paid. we took in $4,500, which was a 18:1 return. I want to crawl, walk, then run , as I tested the waters, with your ad’s. So far we are pleased, and will put out same ad to more zip codes to a different area next week. Pleased to say each of our 80+ year old NP’s ,noticed improvement with chiropractic and are happier citizens and telling friends. Thanks for the blessings.

Based on the above case study, did this doctor do well or not? You could be  thinking “only 3 new patients, that sucks big time!” Or you could say “gosh Dr. Beck, $4500 isn’t that great. I mean that barely pays for my salary!”

But we are missing an important peice of this case study. How much did he actually spend to get that $4500 in his bank account? Here’s the part I left out…

…for a cost of only $250 for the ad…

Wow! For a cost of only $250, he made back $4500. That’s an 18 to 1 return…for every $1 spent he made back $18. Realize he said “will put out same ad to more zip codes to a different area next week.” He can now roll this out to other zipcodes and bring in quite a bit more than his salary. But if he was only tracking the number of new patients that came in — which was only 3 — he may throw in the towel and decide to never run another ad.

Always measure your marketing ROI. Measure it for each ad you run and the monthly total of all your marketing.