Understanding and Building KPI’s Into Your Clinic, with Chris Arnold

If You Don’t Measure it, You Can’t Improve it – Understanding KPIs

When I first started in the hearing industry, I joined my father who was very set in his ways when it came to anything involving the business.

Everything was kept in various notebooks, all written in pencil. There was a stock book to manage hearing aids coming in and when they were fit, the schedule, payroll, etc. While studying in college and working with him, I slowly started working on digitalizing everything which really opened my eyes on how the business was actually performing.

It took a long time, but I became very good friends with Excel and can now easily tell you things like our current revenue, units sold, average sale price, conversion rates, manufacturer product mix, and more.

Does everyone need to know this? No, not at all. I just really like stats and charts. However, below I will point out what stats you should keep track of, how to keep track of them, and how to fix them if they need to be improved. I suggest tracking these important statistics monthly, quarterly, and annually.

Important Key Performance Indicators (KPIs) for Your Practice

Effectiveness Rate vs Conversion Rate

What is it?

Many hearing health clinics keep track of their conversion rate. Some may call it a ‘tested not sold rate’ or a ‘closing rate’. They’re all the same thing. Basically, you take the number of patients you sold to and divide it by the number of opportunities in a given time. I like to define opportunities as any patient that has hearing loss and is eligible to purchase hearing aids. However, I think effectiveness ratio is a better measurement as it combines conversion rate as well as binaural rate (did they purchase one or two hearing aids).

How do I track it?

Take the total amount of hearing aids sold and divide by the number of opportunities in the given period of time.

Eg. 35 hearing aids sold divided by 29 opportunities gives you a rounded rate of 1.2

Where should I set a benchmark?

Ideally 1.2 to 1.3 is the benchmark you want to set. That equates to roughly a 60% conversion rate and a binaural rate around 90%

How do I fix it if I’m not there?

The answer to this question most owners know already; improve your closing rate. Simple answer, but not a simple task. However, there are plenty of resources for guidance in that.

Average Sale Price (ASP)

What is it?

Self explanatory, but the average selling price per hearing aid unit.

How do I track it?

Take the total amount of your hearing aid sales and divide it by the number of hearing aid units sold in the same time.

Eg. $30,000 in hearing aid sales divided by 12 hearing units sold = an average sale price of $2,500

Where should I set a benchmark?

This is completely based on your business. You need to figure out how much in revenue you must make to breakeven. Once you figured out that amount, reduce your estimated non-hearing aid revenue. With the left-over amount, you can divide that by how many hearing aids your predict to sell. There’s your benchmark ASP.

How do I fix it if I’m not there?

I could easily say ‘sell more expensive hearing aids’, but that’s only one answer. You may have to look at charging more for hearing aid related services, adding additional fees to the hearing aid sale, etc.

Return Rate

What is it?

The percentage of how much of your sales was returned to you.

How do I track it?

Take the amount of returned revenue and divide it by the amount of gross revenue.

Eg. $5,000 returned revenue divided by $120,000 in gross revenue = 4% return rate

Where should I set a benchmark?

Industry benchmark can differ depending where you are, but on average it’s 5%.

How do I fix it if I’m not there?

Review best practices and have an open discussion with your patients. Find a common thread on why patients are returning their hearing aids. Use that knowledge to improve and bring down your returns.

Opportunity to Hearing Test Rate

What is it?

A hidden problem that we don’t always see, is having too many non-income generating appointments. A big one are hearing tests that result in non-opportunities (eg. no hearing loss present). What this KPI does is shines a light on if we’re spending too much time on those appointments, rather than the ones that generate revenue.

How do I track it?

It is the number of opportunities (as defined earlier) divided by the number of overall hearing tests

Eg 18 opportunities divided by 29 overall hearing test gives you an opportunity rate of 62%

Where should I set a benchmark?

Again this can be completely based on your business. I took a look at all our appointments over the course of a few years and came up with an average of 60%. Therefore 3 out of every 5 hearing tests should be a sales opportunity.

How do I fix it if I’m not there?

You can start by looking at how appointments are booked and qualified. Talk to your staff in charge of booking appointments and see if there’s better ways to qualify the patients. Charging for a hearing test is another way to up the rate as it eliminates some of the less serious, and likely those with no hearing loss.

Now that you have the most important KPIs to track, you’ll likely realize that it takes a team approach to hit all the right benchmarks.

From booking the right appointments, to closing the sale, to reducing returns, involves everyone. But as the business owner, it is on you to make sure to know what to track and to look for trends, be it good or bad, and therefore know when and where to fix problems.

Chris Arnold
President & Owner
Arnold Hearing Centres

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