Ask Our Experts: How Much Should You Budget for Marketing?
Question: How much should the marketing plan represent in the budget as a percentage of revenue?
The typical figure to budget for marketing is 5% of gross (or 3%-7%), but this depends on specialty and gross practice collections goal (not current revenue).
For example, Plastic Surgeons and Lasik (ophthalmologists) or any type of practice that is “purely elective” may need to spend 10-19% of their gross revenues on marketing. This is particularly true if the practice faces significant competition, if you are in a large metropolitan area, or if you are doing a lot of external marketing.
The other factor that has to be taken into account is where you are in the process: Have you been marketing, or are you just starting your marketing? Look at it like starting a new practice or a totally new location, where the first year you need to invest in marketing infrastructure, brand, UVP, essence, look, logo, material, just as when opening a new practice you need to build out, decorate, buy computers, hire staff, etc.
So you may spend an average of 5% year after year, but your first year budget may need to be higher to develop the marketing infrastructure.
The last piece to consider is the practice outliers. For example, if your revenue is greater than $4 million, you may only need 2-3%, but unfortunately if your practice is only $400,000, you may need 10%. This is simply based on having enough mass or momentum to your marketing when you are just starting.
So in the case of a new practice with limited revenue, I would plan on spending up to 20% to get things going and reach your desired revenue.
Marketing expert Jonathan Vidal, Senior Director, Consulting Services, for Practice Builders, answered this question. Mr. Vidal is a former senior director of marketing for Endocare, Inc., a medical device company, and a former director of marketing for Circon-ACMI, the largest producer of medical endoscopes.