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How to Calculate the Average Lifetime Value of Your Dental Patients


Do you know the average lifetime value of your patients?

The average lifetime value (ALV) is the total amount of revenue you and your practice can expect to earn from any individual who becomes a patient—simple enough, right?

The higher the ALV, the more money your practice can expect to earn over a given timeframe, and the more effectively your practice can plan for growth.
But most importantly, the higher the average lifetime value of your patients, the more money your practice should invest in marketing and advertising in the pursuit of new patients (for practices focused on growth, 15% of gross revenue should be devoted to marketing). This last point is of particular importance given that marketing is largely responsible for leading revenue growth in American dental practices.

How to calculate ALV

To calculate ALV, you need to know three things:

  1. How much revenue your practice earns per patient, per year
  2. How many years each patient remains with your practice, on average
  3. How many total new patients each person refers to your practice on average

When you know the numbers behind these three variables, you can use the basic formula below:

[Average revenue per patient per year] x [Average number of years an individual remains a patient] + [Referral value] = Average Lifetime Value

To make this example as simple as possible, assume the average patient visits your office twice per year and the average patient remains with your practice for a period of 10 years. Also assume the average patient is in ideal dental health, and will therefore only require routine cleaning (valued at $100 per cleaning). Finally, let's also assume an average patient refers two friends or family members to your practice over time.

Average revenue earned per patient per year = $200 ($100 per cleaning x 2 cleanings per year)

Average number of years an individual remains a patient = 10 years

Average value per patient = $2,000

When we add referral value to this equation, it would look like this:

($200 x 10) + (2 x ($200 x 10)) = $6,000

Although you can start with general averages, it’s wise to separate this base into patient groups later on. These patient groups can be divided by their stage of life (children, young adults, adults, seniors, etc.) and the dental work most commonly associated with their age demographic. Doing this will add greater accuracy to your patient revenue projections.

Why ALV is so important to your practice

Knowing the ALV of your average patient helps you make better decisions for your practice, determine a reliable marketing budget (12-20% of gross revenue), and more importantly, it becomes the motivation to attract and retain more patients.

For example...

If your practice gained new patients for a $90 acquisition cost and were only getting back $10 in net revenue ($100 service charge - $90 acquisition cost) it may seem like an unfavorable return at first glance, but after accounting for the patient’s TLPV, your initial return of $10 becomes nearly $6,000.

And the reverse is also true. Fail to retain a client you spent $90 to attract and you’ll see a $5,900 value walk right out the door—and likely forever.

This means the way you attract, acquire, and retain prospective patients is critically important to the long-term growth of your practice.

Here’s how to get better at all three.

How to improve your patient experience

As insurance reimbursements decline across the industry, time is becoming more important than ever.

You need to get your patients in and out quickly. However, this doesn’t mean you can afford to sacrifice the quality of your work or patient care; you need to do great work, fast, and still maintain a positive patient experience.

This can feel like a tough ask when you’re inundated with a busy schedule and shifting priorities, but it is possible. Just remember...

The patient experience begins online…

  • Utilize traffic-generating marketing practices such as pay-per-click advertising, social media marketing, and search engine optimization
  • Claim and consolidate your online business listings on popular directories like Yelp, Google My Business, and Facebook
  • Ensure your website is attractive and organized, and accurately reflects the quality of your practice and services; this will build the authority and trust to inspire an appointment

Once the patient steps into your office...

  • Watch wait times and bring them into a chair as soon as possible
  • Keep them engaged by gentle and friendly hygienist staff until you’re ready to see them
  • Exchange some banter (use their first name) and communicate in an encouraging way while they’re with you
  • Thoroughly explain their dental care needs, treatment options, and services performed, and take time to answer any questions they have
  • Set up their next appointment at the reception desk before they leave, and if you’re confident you’ve provided quality service, ask them to leave you a review

After the patient has left, you will want to have a plan in place for continual communication:

  • Send your patients special offers via traditional mail and email
  • Send emails and/or texts to remind your patients of their next appointment
  • Create various types of digital content that offer both existing and prospective patients helpful tips about maintaining optimal dental health

If you can provide quality work and a positive experience, it’ll mean happier patients for years.

Happier patients create referrals, and when your patients have families of their own under a single dental plan, a positive impression can mean picking up the whole family.

The final takeaway

When it comes to patient acquisition and the ALV they represent, every patient you attract and provide a positive experience is an investment for the future.

This investment can yield a significant ROI over time; the kind of return that could allow your practice to expand, hire more staff, and multiply your revenue.

If you’d like to learn how to attract more patients to your practice, contact Scorpion today!

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