The dilemma of spending money to make more money

For people with any corporate experience, particularly those with an understanding of management accounts, the concept of cost of sales is given for granted.  When you run a business you (should) know that in order to sell you must spend some money.  Cost of sales might include the cost of purchasing a product or service, the cost of distribution and cost of marketing and advertising for that product or service.

When we consider this concept within private practice we can mention, among cost of sales the hire of a venue to supply your therapies and the direct cost of advertising.  Most people in private practice would love to have a queue of clients waiting in front of their door but, most of them, don’t have it.

I was chatting with one of our therapist earlier this week and she was complaining, despite having a fully booked schedule, about the cost of her online advertisement.  I was curious so I asked how much the advertising costs was and how much income the advertising was generating.  The answer was respectively £240 and £2400 per month, while working one day per week.  My immediate answer was that I would love to play a game where I get £10 every time I spend £1.

From her point of view a 10% direct cost of sales was too high and she would love to earn the same amount of money without spending a penny; fair enough, but unreasonable.  So I explained that with adequate marketing and the correct image she could probably raise her prices by £5 or £10 per session and further increase her profits.  By the end of it she was satisfied that having a medium-high net income, without costs, would be great but it’s just no practically possible and agreed with me that she is in a good position from a business point of view.

2 thoughts on “The dilemma of spending money to make more money

  1. The best type of advertising is word of mouth any therapies I have paid for have been via this method as the saying goes ‘you are only as good as your last job’. This is never truer than in the world of physical or psychological therapies as how do you know from an advert if any therapist is any good. This type of advertising is completely free, giving a great massage or helping conquer anxiety etc is all about customer testimonial

    My advise would be to focus on asking for customers feedback, testimonial and recommendation to others they know. What you give out will help reap rewards.

    • Thanks for your comment Delia; I am also a big believer in word of mouth and, I wrote in a previous article, it can be very powerful once you have worked with a few hundred people. In my experience most people are not active and keen marketers and will rarely go our of their way to advertise you even if they had an amazing service. What I learnt by working with hundreds of practitioners you need to have a mix of marketing tools which you adjust to your needs and your clientele. At the beginning, when you are new and nobody knows you, paid for advertisement is the quickest way to generate leads; later, by offering amazing service and asking for referrals, you start generating word of mouth business but it might take months.

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