How To Set Your Medical Billing Marketing Budget
One of the most common scenarios I encounter when consulting with medical billing companies is troubling but predictable: they want significant growth yet have allocated zero dollars to their medical billing marketing budget. This disconnect between growth ambitions and marketing investment is a fundamental problem that needs addressing.
The First Rule of Medical Billing Marketing Budget
The most important principle of your medical billing marketing budget is simple: it should be something, not nothing. While this might seem obvious, countless revenue cycle management companies claim they want substantial growth while maintaining a non-existent marketing budget.
This reluctance to invest often stems from past disappointments—failed campaigns, underperforming agencies, or initiatives that didn’t deliver promised results. However, as the saying goes, you can’t achieve a return on investment without making an investment in the first place.
Two Approaches to Setting Your Medical Billing Marketing Budget
There are two primary methodologies for establishing your medical billing marketing budget:
1. Starting with a Fixed Budget
This approach begins with a predetermined spending amount (e.g., $50,000 annually) and then calculates expected growth based on that investment.
2. Starting with Growth Targets (Recommended)
The more effective approach starts with your growth objectives and works backward to determine the necessary medical billing marketing budget to achieve them.
The Growth-Based Calculation Method
To determine your optimal medical billing marketing budget using the growth-based method:
Step 1: Define Your Annual Revenue Growth Target
Begin with your annual growth goal expressed in dollars. Whether it’s $500,000 or $5 million, start with a clear, annualized revenue target.
Step 2: Determine Your Average Client Value
Calculate the average annual revenue of your typical new client. Consider:
- Historical average client size
- Recent client acquisition trends (if you’re moving upmarket)
- Realistic projections for future clients
For example, if your average new client generates $250,000 in annual revenue, use this figure.
Step 3: Calculate Required New Clients
Divide your growth target by your average client value to determine how many new clients you need.
Example: $5,000,000 (growth target) ÷ $250,000 (average client value) = 20 new clients needed
At this stage, assess whether your operations can support this client acquisition rate. Can you effectively onboard 20 new clients (roughly two per month) of this size? Consider working capital, project planning, and staffing requirements.
For guidance on scaling your operations to support growth, see our article on improving medical billing performance KPIs.
Step 4: Apply the Customer Acquisition Cost Multiplier
Multiply your required new clients by your average customer acquisition cost (CAC). While CAC varies based on factors like specialty, market competitiveness, and client size, a reliable rule of thumb exists.
According to Healthcare Success, larger healthcare clients typically cost 3-5 times more to acquire than smaller ones due to longer sales cycles, more complex decision-making processes, and higher competitive intensity.
The 10X Rule for Medical Billing Marketing Budget
For planning purposes, a simplified approach to medical billing marketing budget calculations uses the “10X Rule”:
Your annual revenue growth should be approximately 10 times your marketing investment.
This isn’t a precise ROI calculation (which would consider contribution margins, retention rates, and lifetime value), but it provides a reasonable benchmark for most medical billing companies.
Using our example:
- Growth target: $5,000,000
- Expected marketing investment using 10X rule: $500,000
The Healthcare Financial Management Association notes that successful healthcare organizations typically allocate 5-12% of their targeted growth to marketing activities, which aligns with this 10X principle.
Refining Your Medical Billing Marketing Budget
This calculation provides a starting point, but you should refine your medical billing marketing budget based on:
- Channel selection: Different marketing channels offer varying efficiency and ROI
- Target market specificity: Highly targeted campaigns often yield better results with less investment
- Marketing strategy: A comprehensive strategy with proper RCM marketing positioning can improve conversion rates and reduce acquisition costs
Warning Signs in Marketing Performance
If your marketing efforts aren’t generating approximately 10X return, something is likely wrong with your approach. I’ve seen medical billing companies waste $500,000 on campaigns that generated only $500,000 in new revenue—a 1X return that signals fundamental problems with strategy, execution, or both.
Conclusion
Setting an effective medical billing marketing budget requires working backward from growth targets rather than arbitrarily allocating funds. By using the calculation method outlined above and applying the 10X rule, you can create a realistic budget that supports your growth objectives.
Remember: successful growth requires real investment. While the exact numbers may vary based on your specific circumstances, the principles remain consistent—determine how many clients you need, understand the cost to acquire them, and budget accordingly.
