Why Lifetime Value of Patients Matters!
Patient acquisition is critical for any aesthetics practice to grow their business. Building long-term patient retention strategies and nurturing your existing patients is equally as important and oftentimes easier as there is already the KNOW, LIKE, and TRUST factor established.
Understanding and tracking your metrics is fundamental to building a highly successful practice. We hear over and over again from our clients, “How can we grow our business and become more profitable?” It’s like an architect designing plans for a building–you have to have a very strong foundation in place, or the additional floors won’t be supported.
Did you know only 10% of aesthetic practices actually track their metrics? That means 90% don’t know things, such as:
- How much money does your patient spend on the 1st visit?
- Do they return to your practice?
- How often do they return?
- If not, why?
- Do they come back for the same procedure (for example, toxin injections) or another procedure you offer?
- What is that additional spend on product sales or other procedures?
- What is the average interval between procedures?
- The Lifetime Value of a surgical or non-surgical patient?
What is the Lifetime Value of a Patient?
Lifetime Value (LTV) is the present value of all future profits generated by a patient–or in other words, the average revenue that one patient brings into your practice for every visit spread out over several years. The bottom line, it’s a measure of what a patient is worth to your business.
How to Calculate LTV
In general, the simplest way to calculate LTV is to multiply the profit per treatment (you can do this with one of the financial optimization calculators within the ABACUS component within APX, my newly launched business intelligence and growth platform) with the estimated number of visits per treatment plan (there is a whole lesson on creating treatment plans in my sales training course in the TRAIN component of APX) with the estimated number of years they are likely to stay with your practice.
LTV = Profit Per Treatment x # of visits per treatment plan x # of estimated years they will stay in your practice.
When you calculate LTV, here are a few guidelines:
- Make sure you use profit per treatment instead of total revenue otherwise you may overvalue clients
- If you don’t have accurate data to use (a challenge many practices face), use reasonable numbers and you can re-evaluate as you go along. Using a general estimate of LTV is better than nothing, but the true value comes in when you can segment your patients according to demographics, purchasing behavior, and other characteristics so you can gain specific data and insight and then redirect your marketing efforts in a more targeted way.
I cannot stress enough the importance of having accurate data and learning how to use it to make informed business decisions. In the GAUGE component of APX, you can use competitive benchmarking data to compare your practice to the national, state, or local market and use those benchmarks as a guideline. In GAUGE, you also get access to Long Term Value Reports that provide valuable insights into the long-term value of a patient. There is an interactive demo and an LTV calculator that calculates the spending dynamics of a patient based on the first transaction in a practice.
Recalculate often. The products and services you offer will likely change over time. Your LTV will vary but it will allow you to make informed business decisions to grow your practice. Usually, once a month is a good rule of thumb to check and re-calculate your LTV.
Remember, my team and I are always here to help. The COMMUNITY component of APX gives you weekly live weekly coaching opportunities with me and my team as well as educational webinars. To learn more about APX, we invite you to book a demo here.