Handbook of Concierge Medical Practice Design

179

Chapter 16

Financial Forecasts

and Budgets

Generally, physicians are the type of people either fascinated with numbers

or daunted by them. Many small business owners are in these two camps.

The numbers in financial reports reflect past decisions but are not the deci-

sions themselves. They are the effect of the decisions. If you can forecast

how much money you will make each month in medical services, concierge

membership fees, and product sales (if any), you will be able to produce

a budget that tells you how much you will be able to spend on rent, staff

salaries and your own salary, equipment, and other business expenses for

your practice.

Here’s a budget challenge for new marketers and trade shows: If you mar-

ket your concierge practice by exhibiting at a home show or wellness event,

most people allocate the money to pay for a stand, but every stand has dec-

orations, backdrops, posters, materials, and giveaways. There are also fees

for setup because union members are the only ones permitted to drayage in

some states. (Drayage is the transportation of things over a short distance.

At conferences, drayage is the charge for the labor required to receive, store,

and deliver freight to your boothor exhibit location, remove, store, and

return empty containers, remove shipments from booths anddeliver to the

loading area of exhibit hall, where they will be loaded on common carrier

trucks.) There are lots of rules associated with conference sponsorship and

booth rentals, and each one of them seems to have an associated cost, all in

addition to the booth or stand rental. They can unravel a marketing budget

quickly if you aren’t careful.

180 ◾ Handbook of Concierge Medical Practice Design

Another budget monster is marketing mailings. We are so used to the

free sending of emails. To send to people who don’t have computers or

use them like a lifeline, design for print is very different than design for

the web. Printing costs vary by source and the time line, and then there’s the

postage and the sorting service, and the mailing service. If you use stock

photographs, there’s the license based on the type of use you will have for

the photographs.

So often, transition consultants want to send two or three mailings to

your existing 3,000–4,000 patients. The postage for those mailings is often

more than a letter. At present, first class letter mailings are $0.49, so a mail-

ing to your patients will include the costs of design and layout, composi-

tion, printing, envelopes, stuffing, sorting, and postage. Each mailing could

cost you $3,500. Even if you captured all 300–600 patients for a concierge

membership max, what is the cost per conversion? Many of the consultants

I’ve spoken with want to design three mailings, and send them out to all

4,000 patients. That’s a commitment of $10,500 for three mailings. I know

a few doctors who have agreed to do it, and their return on investment

(without the payment to the consultant for the brilliant idea) was three to

four membership purchases, total. Sorry, but I can come up with many other

ways to spend $10,500 to attract fewer than five customers. That’s a customer

cost of over $2,000 per customer. No wonder their conversion estimates are

in the $250,000 range.

It’s difficult to create a real budget when you don’t have all the facts. But

start thinking about your marketing budget because that will be a tough

challenge in the beginning until you learn what works.

Exercise 1: Marketing Budget

Monthly

1st Year

Total

1st Year

Monthly

2nd Year

Total

2nd Year

Monthly

3rd Year

Total

3rd Year

Professional

Assistance

Consultants

Ad Agencies

Direct Mail

Specialists

Financial Forecasts and Budgets ◾ 181

Monthly

1st Year

Total

1st Year

Monthly

2nd Year

Total

2nd Year

Monthly

3rd Year

Total

3rd Year

Graphics Design

Brochures/ Leaflets

Signs/ Billboards

Displays

Samples/ Giveaways

Media Advertising

Print

TV

Radio

Online

Video

Other Media

Phone Directories

Advertising

Tchotchkes

Direct Mail

Website

Development,

Programming

Maintenance/

hosting

App licenses

Artwork licenses

Software &

modules

Trade Shows

Fees & Drayage

Travel

continued

182 ◾ Handbook of Concierge Medical Practice Design

Monthly

1st Year

Total

1st Year

Monthly

2nd Year

Total

2nd Year

Monthly

3rd Year

Total

3rd Year

Shipping

Exhibits & Signage

Promo Tchotchkes

Door prizes

Public Relations

Materials

Informal Marketing

and Networking

Membership/

Meetings

Entertainments

Other

Grand Totals

Another worksheet you’ll need to become familiar with is the Profit and

Loss Projection. Let’s have a look.

Exercise 2: Profit and Loss Projection

Item

Months →

Add Columns

for Each Month Ahead

INCOME

Gross Sales

(−) Paid Out Commissions for Marketing (if any—don’t

forget managed care write- offs)

(−) Returns & Allowances (if any)

NET SALES

(−) Cost of Goods Sold (if any)