When I’m working with a client for the first time I know the question of “How much should I spend?” will come up. Of course the answer will always be “that depends,” but I want to at least provide some information on how to determine your marketing budget no matter what size practice you have.  If you’re starting a new practice from the ground up the best thing to do is use the majority of your working capital towards marketing, consult a marketing professional and find someone who doesn’t use templates to do your website.

Tip #1: Understanding your operating expenses will help you determine your marketing budget.

If you have properly set up your practice you have someone assigned to the role of Chief Operations Officer (COO). You may have assigned this role to yourself.

Many “marketing experts” will tell you that your marketing is an investment. They would be right, but from a practical standpoint you may be spending now and not seeing a significant return for months down the road. So how do you make sure you’re marketing budget turns into an investment and not an expense?

It’s important to evaluate your marketing budget at the same time you’re determining your operation expenses. If you’re a dental office and you are looking to improve your office with new digital technology, make sure you don’t overdo it. Most people make the mistake of determining their operation expenses and then decide to leave what’s left over for marketing.  The best way to avoid this is to determine your goals for the year and plan accordingly. If it’s more new patients, than more money needs to go towards marketing. If it’s increasing current patient spend, than more should be spent on improving your office, products, and service offerings.

Tip #2: Determine a method that best suites your needs

  1. Percentage of revenue: If you really have anxiety over establishing a budget this might be a good place to start. In this method your marketing budget is based on a percentage of revenue. Revenue goes up, your marketing budget goes up. So what is a good percentage? This really has a lot of factors and is primarily determined by an marketing professional based on the type of business you have. Some small businesses will spend 50% when they open. A good rule of thumb is to stick around 10-15%. If you designate too low of a percentage it’s best to keep the money for cash flow than try to stretch limited funds too far.
  2. Set amount: Determine what you can afford for the next quarter, six months, or year. Once you have determined what that number is you can place your buys in advance. Purchasing advertising in advance usually will help in obtaining larger discounts on your media buys.
  3. Competitive spending: Do a little research and determine what your top competitors are spending on marketing. You at least want to be above average in your spending. This method’s main drawback is you have to assume your competitors have the right pricing. If you respect them and believe they have put together a great business then this method could be useful.
  4. Marketing plan goals: If you have put together a solid marketing plan use this method to determine what amount it is going to take to reach the goals of the plan. If you are looking to increase revenue by 15%, how much should be spent in marketing to reach that goal. So how do you determine this?

Tip # 3: Do the math

If you have some historical data here is a way to figure out how to increase your revenue by 15%.

New Revenue Goals/Average Patient Expenditure(APE)= Total New Patients Needed- multiplied by the Patient Acquisition Cost (PAC)= increase in marketing budget.

For example: If a cosmetic dentist wants to increase revenue from $1.5 million to $2 million here is what that looks like- $500,000 (new revenue)/ $1250 (APE based on historical data)= 400 new patients needed X $200 (PAC based on current marketing spent to acquire a patient)= $80,000 increase in next years’ marketing spend.

Tip #4: Always keep a contingency fund

It’s imperative to keep some monies set aside for promotional opportunities that may be too good to pass up. If all the sudden a magazine you have always wanted to be in has space available at 50% off, you would have a great opportunity to try it out at a highly discounted rate.

If you need help determining what method or what amount to spend, contact me at bshaver@dentalinbound.com

Ben Shaver
Lead Strategist & Consultant

Ben Shaver is a dental marketing consultant for Dental Inbound. He works with practices of all sizes.

His main focus is to develop strategies that provide congruency between traditional media sources and new media platforms.

You can email him at bshaver@dentalinbound.com