Most dentists wonder what they should spend on advertising relative to their gross revenue. First of all, recognize that advertising is the fuel for your practice, not just now but in the future. Advertising gets you patients who hopefully will continue to spend with the practice for many years, and who also will refer their friends and family.
To me, ad spending breaks down into three tiers:
When you are starting up, you should probably set aside a significant amount of money to build a patient base (since you can’t build word-of-mouth from nobody). For a new practice, I would say this is in the range of $75,000 to $100,000 in the first 18-24 months.
Once you have established a flow of new patients, my rule of thumb for a mid-range practice is to spend 5% of the gross revenue on advertising. This would include Yellow Pages, newsletters, websites and keywords, referral services, direct mail and other ads. The mix really depends on the area you operate in and what works best for you. I would keep this rate up until you reach a point where you are booked out a month or longer and can’t fit new patients in. Then it’s time to find an associate or back off on some of the advertising.
Once you break past the $1 million mark, most practices I know spend around 10% of their income on advertising. The reasons for this are twofold: First, you are obviously cranking along in your practice, and presenting very well (and need new patients because once you’ve restored the mouths of all your existing patients, eventually all you will be doing is prophys). And second, your profitability is higher at this level because you’ve covered your fixed costs so you can afford to put more money into practice growth.
No matter what you do, track the results of all your advertising. Be assiduous in gathering a source for every single patient, and run reports that tell you what’s working. Many dentists misjudge their advertising because their benchmark for what a new patient should cost them is the cheapest cost per referral they ever paid. That’s not realistic. Expect to pay $100 to $200 in advertising to get a new patient. More than that’s a bit too pricey, but remember — it’s not what that new patient spends on the first visit that’s important, it’s what he or she will spend over the life of the practice.