Vanity Metrics vs. Actionable Metrics
Why your PVA doesn't mean anything and what to measure instead.
How can you tell if you run a successful chiropractic practice? What stats do you measure and are they actionable?
Patient visits per week (PV)?
Number of families in care?
Google Reviews?
Results?
Patient Visit Average (PVA)?
Social media followers?
Conversions?
Number of spouses at the doctor’s report?
Evaluating a successful chiropractic practice must be based on standard key performance indicators (KPIs), not fantasy chiropractic vanity metrics.
Chiropractors claim to be entrepreneurs but routinely use the wrong metrics to evaluate their businesses. Instead of actionable metrics like net operating income (NOI) or profitability, they prefer vanity metrics such as patient visit averages or weekly visit counts.
While vanity metrics are great for sharing stories at seminars, when selling your practice, nobody cares about your fake PVA.
If your business isn’t profitable, who cares how many people walk through the door every week? Yet, it still amazes me how chiropractors measure their success this way.
I’ve sold three chiropractic practices in my career: two of my own and one where I helped broker the deal. The bank never asked about my PVA, they only cared about income vs. expenses and business assets.
Do banks know something about evaluating the value of a chiropractic practice that we don’t? No, they just follow standard KPIs for a small, service-based business. They understand that there is nothing truly unique about this type of small business.
If you're not tracking these standard KPIs for a small business (under $5 million gross per year), you'll miss vital insights and struggle to sell without knowing the true value.
Even if you don't plan to sell your business soon, these KPIs are better than vanity metrics because they can inform your business decisions and identify potential roadblocks.
What NOT to Track (Vanity Metrics):
PV - Patient visits per day/week/month
You’re a busy chiropractor seeing over 200 PV per week. Congratulations! You are busy. Very busy. The average chiropractor sees less than half that many. So, you're busy. But, how many unique encounters does this represent? Is it one person 200 times or 200 people once a week? Also, this says nothing about profitability.
PVA - Patient Visit Average before attrition
The number of visits divided by the number of new patients in a given time frame helps determine how many times you'll see a patient before they quit. It's a starting point, but it can only identify a retention problem, not the cause. Many chiropractors calculate this differently: Who's a patient? What's the time frame? Why are they quitting?
NP - New Patients per day/week/month
Instead of tracking new patients, track where they came from. New patients from marketing and Groupon are different than direct referrals. One has a high cost of acquisition, and the other is free.
Conversions - New patients to Active patients
I’ve had a 100% conversion rate since the early 2000s. Most of my patients do not get adjusted on the same day as their chiropractic examination. I prepare a report of findings and discuss it with them on their next visit. Everyone should start care. If not, you probably scared them away. If you value this vanity metric, maybe consider a career in sales instead.
What to Track - Key Performance Indicators (KPIs):
NOI - Net Operating Income
How much money did you make after expenses and before taxes? This is important for demonstrating the profitability of your business to a bank or buyer.
Overhead %
Your business expenses divided by your gross income as a percentage. For example: If your gross was $200K last year and your overhead was $100K, you have a 50% overhead. In my opinion, this should be a maximum of 50%. The lower the better. This number can help you decide if you need to cut expenses or raise your fees.
My first practice ran at an 18-20% overhead for over a decade. I paid down school debt and saved/invested a large chunk every month. My second satellite practice in a small town ran at a 2% overhead (yes, you read that correctly). I’ll write about that office in the future.
CR - Churn Rate
The number of patients that went inactive last month (in our office this includes anyone who has not had an appointment in the last 3 months) minus the number of new patients. Churn is bad. Your churn rate should be negative every month. A growing business should have a progressively larger base of active patients than those who quit. If not, you are losing more patients than gaining, which is a business death spiral.
Knowing your churn rate can help identify if your practice has a new patient problem, a retention problem, or both.
Missed and Cancelled %
Divide the number of visits for the month by the missed and cancelled visits to get a percentage, representing lost income. Anything over 15% monthly could indicate a front desk communication issue.
To succeed in your chiropractic practice, prioritize key performance indicators (KPIs) over vanity metrics to gain insights on financial health, patient retention, and operational efficiency.
Regularly tracking and analyzing these KPIs will help you make informed decisions, and enhance the performance and sustainability of your practice.
At the next chiropractic seminar you attend, flex your churn rate instead of your PVA.