You can tell whether marketing is working by comparing what each channel costs with the members it brings in. That takes two habits: recording marketing spend on its own lines by channel, and asking every new member how they found you.
Set a budget you can carry
There's no right percentage for every practice. I'd start from cash. Decide what you can spend each month without dropping below your cash floor, and treat it as a test budget for 90 days. Start with your cash runway if you haven't set a floor.
Record it by channel
If every marketing cost lands in one account called advertising, you can see the total but not what's working. Ask your bookkeeper to split it into a few lines, for example:
- Online ads.
- Events and sponsorships.
- Printed materials and mailers.
- Referral gifts or credits.
- Outside help, like a designer or agency.
Ask how they found you
Add one required question to your sign-up form: how did you hear about us? Keep the choices short and match them to your spending lines. Without this, you're guessing.
Do the math by channel
Divide each channel's spend by the new members it brought in over the same period.
In a made-up example, you spent $600 on online ads last quarter and got 4 members, which is $150 each. You spent $200 on two community events and got 5 members, which is $40 each. Both may be worth it. The events are the better deal so far.
Then compare each cost with what a member is worth. A channel that costs less than a member brings in over time is working. One that costs more needs a change or a stop.
Give it time, but not forever
Some marketing takes months to show results, especially local events and word of mouth. I'd set a review date before you start, like 90 days, and decide then whether to keep going, change it or stop.
Watch for members who leave fast
A channel can bring in members cheaply and still lose money if those members leave in two months. Once a quarter, check how long members from each channel stay. A promotion that brings in deal seekers can look good at sign-up and poor six months later. This post covers measuring churn.
What I'd do this week
- List every marketing cost from the last 3 months and group it by channel.
- Ask your bookkeeper to give each channel its own expense line.
- Add the how-did-you-hear question to your sign-up form.
- Pick a review date for each channel you're paying for.
Common questions
What percentage of revenue should I spend on marketing?
It depends on your stage and cash. A new practice building a panel may spend more than a full one. Start with a budget your cash can carry and measure it.
What if members don't remember how they found us?
Keep the question short with clear choices. Some answers will be fuzzy, and that's fine. The pattern over a quarter is what matters.
Is my own time marketing?
It's a real cost, even if it isn't on the P&L. Note the hours you spend on each channel so you can weigh them too.
Want marketing on its own lines every month?
We reconcile every account every month and send your P&L and Balance Sheet by the 15th, so decisions like this start from real numbers. If that's what you need, apply to work with us.