In the world of dental marketing, one question we often hear from dentists is, "Are my digital ads worth the investment?" The good news is, this is a question that's relatively easy to answer. While it can take a few months for new campaigns to gain traction, once you have 3-6 months of data to analyze, you can have a fairly accurate picture of the effectiveness of your campaign.

In this article, we will explain how to calculate your ad campaign’s Cost per New Patient Acquisition (CPA) and Return on Ad Spend (ROAS). Once you have this information, your digital ads can become a simple math game that gives you the ability to control & predict the flow of new patients and revenue into your practice.

We know, you didn’t become a dentist to do math… but hey, you’re smart and the math is pretty simple! We even made an ROAS calculator spreadsheet to help you out.

Let’s get started!

To calculate your CPA and ROAS, you’ll need a few key pieces of information:

1. Total Ad Spend

As you likely guessed, this is the amount you are spending on ads each month. 😄

2. New Patients from Ads

Next, you will need to identify how many new patients you gain each month as a result of these ads. If your practice is already tracking the referral source of new patients, you’ll already know this number. I’d recommend using a few months of data and calculating an average.

If you’re not tracking the source of your new patients, get to it! Here are some tips:

• Make sure your front desk staff asks every new patient how they heard about you. Typically, patients will say they “found you on Google” if they discover your practice from one of your Google ads.
• To aid in identifying calls that originate from your ad campaigns, your marketing agency (hopefully us! 😉) can provide call tracking with “whisper messages” that tell your front desk staff what campaign the call originated from right after they answer the phone.
• Once you have confirmed a patient’s referral source, you can log this in your practice management software and generate a monthly report to see where new patients are coming from.

3. Average Patient Revenue

Finally, you need to determine how much money an average new patient spends in their first year and over their lifetime at your dental practice. It can be helpful to know both numbers so you can have a good medium-term and long-term perspective on the value of each patient who joins your practice.

💡 The ADA reported in 2016 that the average practice sees $653 in annual revenue per patient. Most practices keep patients for 7-10 years, putting the average lifetime value of a patient in the $4,570-$6,530 range.

Industry benchmarks are a great place to start, but it’s better to take a look at your own practice’s numbers. You may be able to find this information in your practice management or analytics systems. If not, you can estimate your one-year revenue per patient by dividing your total annual revenue by the number of patients you served.

Total Annual Production ÷ Patients Served = Average Patient Revenue

Keep in mind that number will be a low-end estimate, since most of the higher-value treatment is likely to come from new patients. This is especially true if you are a specialist who provides a high-value procedure towards the beginning of the patient relationship.

Cost per New Patient Acquisition (CPA)

This number will tell you, on average, how much money it costs to bring a new patient into your practice from your digital ads.

To calculate your CPA, simply divide your Total Ad Spend by the number of New Patients from Ads. For example, if you spent $1,000 on ads and gained an average of 5 new patients per month, your CPA would be $200 per new patient. Here’s the formula:

Total Ad Spend ÷ New Patients from Ads = CPA

💡 It typically costs between $150-300 to acquire a new general dentistry patient via Google Ads.

If you find that your CPA is outside of the dental industry averages, this is likely due to one of the following factors:

• The competitiveness of your local market. – Is the dentist-to-person ratio high in your area? Are a lot of other dentists advertising on Google, too? Both of those things drive-up the cost per click (CPC).
• The optimization of your ad campaign. – Is your geographic targeting too wide or narrow? Are you wasting money on irrelevant clicks? Both of those things result in wasted ad spend.
• The quality of your ads and website landing page. – Do your ads speak to the needs of your potential new patients? Does your website or landing page reflect the quality and experience of your practice? If not, you may experience a lower conversion rate.
• The service being advertised. – It’s typically much more expensive (3-5x more, according to our data) to acquire a patient for a specialty service than for general dentistry. While this may still make sense for high-value treatments, it’s typically more cost-effective to advertise for general dentistry and offer more advanced treatments upon exam.

Return on Ad Spend (ROAS)

In simplest terms, ROAS is a ratio that says, “For every dollar I spend on ads, I receive X dollars in return.” Calculating your ROAS is simple! Just divide your Average Patient Revenue by your Cost per Acquisition (CPA).

Average Patient Revenue ÷ CPA = ROAS

Continuing the example from above, let’s say the average new patient at our practice spends the industry-standard $653 per year. With their $200 CPA, the practice ROAS is 3.26x, meaning that practice is seeing a 326% return on their ad investment in year #1. Not too shabby!

Now, let's zoom out to look at the bigger picture and examine the lifetime ROAS of those patients. If the average lifetime value of a patient at this practice is $4,500, they can expect a 22.5x return on their ad spend investment over the next 7 years. Holy ROAS, Batman!

Playing the Numbers Game

This is where things get fun! Now that you know how much it costs to acquire a new patient and how much revenue each patient brings into your practice, you can use these numbers to engineer an ideal situation for your business.

Scenario 1: Hitting a Revenue Target

You can use your ROAS number to calculate how much you should spend on ads to reach your revenue goal.

(Desired Annual Revenue Increase ÷ ROAS) ÷ 12 = Monthly Ad Budget

Let’s say our example practice is setting a goal to add $100,000 to their practice collections over the next year. To learn how much they should spend to reach that goal, they’d simply divide the revenue gain they want ($100,000) by their first-year ROAS ($3.26). This results in an annual ad budget of $30,675 (roughly $2,550 per month).

Scenario 2: Hitting a New Patient Target

If you’d like to hit a new patient goal, the math is just as easy! Simply divide the number of patients you want to add to your practice by the CPA!

Monthly New Patient Increase x CPA = Monthly Ad Budget

If our example practice wants to add 10 new patients per month, they’d simply multiply that number by their $200 CPA. That would result in a monthly ad budget of $2,000.

Let’s do this!

Now that you know how to calculate the CPA and ROAS of your ad campaigns, you have a better understanding of the full value that digital ads bring to your practice. Not only that, you also know how to “play the game” – using those numbers to your advantage to grow your practice as slowly or aggressively as you’d like. Don’t forget, we have a handy dandy ROAS Calculator spreadsheet that can help with your calculations.

And remember, we’re always here to help. Our digital ad experts are ready to build engaging and authentic ads that capture people’s attention. And our designers and developers can’t wait to create a web experience that shares your story in a beautiful and creative way.