E543 | Why You Shouldn't Add A Membership

Today is another tactical Thursday episode, and my hope is that it stops you from wasting time on something that ends up being unsuccessful. We all love the idea of recurring revenue in our practices, but I am here to tell you maybe a membership program is not the best idea in this model. I'll tell you why. Enjoy! 

• Pros and cons of this model
• What is the lifetime value of your clients
• What you should do

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Podcast Transcript

Danny: So I was having a conversation with one of our staff members about documentation and he had come over from a in-network practice that he was working at and he was talking about just how long it would take him to document and click through and the workflow and how, just how time consuming it was and how much easier it's been with the software that we use, which is PT everywhere.

And I know for us, we're very aware of. Sort of time leaks within our staff and our own schedules. And it's just one of the worst things you can do is just waste time on things when you could be doing them more efficiently. One thing for us is we have to document. It's something we need to do and you need to do it as efficiently as you possibly can because that's where you're gonna save a lot of your time.

We were seeing our staff members save upwards of an hour a day as far as cleaning up his documentation, making it more efficient. What if you got an hour of your day back just from documentation? What if all of your staff did the same thing? Highly recommend you take a look at PT everywhere.

It's been a huge time saver for us and really has made a big difference in our efficiency of our practice. You can check 'em [email protected]. I think you're gonna really like what they have to offer. So here's the question. How do physical therapists like us who don't wanna see 30 patients a day, who don't wanna work home health and have real student loans create a career and life for ourselves that we've always dreamed about?

This is the question, and this podcast is the answer. My name's Danny Matte, and welcome to the PT Entrepreneur Podcast.

What's going on guys? Doc Danny here with the PT Entrepreneur Podcast, and today we got a short tactical one for you. Hopefully this helps you. Hopefully it stops you from spending some time on something that we're seeing people honestly just try to add to their practice, but really in most cases, unsuccessfully Let me dive into this one, and this has to do with memberships.

So we all love the idea of recurring revenue. We talk about it a lot. It's a super important part of a business. Any business really. And if you start looking at practices like this, it's not that common to see recurring revenue built into traditional physical therapy or medical models. There's definitely a lot of things that are being tested and headway that's being made in this area.

But one of the areas that I think is very appealing to business owners, to practice owners is the idea of a recurring monthly membership for some sort of program like low ticket. Let's call it $25 a month program. And I know because I have tested this myself and what I wanna share with you is the pros and cons of this and why I feel like it's such a challenge to add to this business model.

And where I see people waste a lot of time. A few years ago we started a Leverage program. So a blanket program that we basically gave access to people that were coming in to see us on a monthly basis. And we sold it as a one-off, or people could join this and they could get programming that they could follow.

So we did a launch and we had a decent number of people on email list a couple thousand people on an email list, right? So we launched this and as we launch it we did. Okay. We actually started out with a decent number of people on it. We probably, we had about $1,500 a month in revenue that we were able to initiate the first month that we started this this program.

And I thought, damn, we're onto something. We're gonna crush it. Cuz I figured, all right, we can just add $1,500 a month. No one will ever leave. Hey, in 10 months we're gonna be making like $15,000 a month off of this one program. And it'll be awesome, right? And yeah, that would be awesome. The challenge is there's something called churn and churn is basically how long people stay before they leave a recurring charge, right?

So this happens with software, with apps, all kinds of stuff, right? You might be, you might have an app that's I don't know, helping you with your golf swing or something, and you decide after a month or two you're bored of it, and then you cancel. And normally with fitness, which is what this would be considered, fitness or Self-care, whatever.

The numbers on this is interesting. The average time that somebody sticks around for this type of a program is gonna be anywhere between three and six months, six months if you're doing a good job. Three months if if you're just, if you're average. Okay? So if you think about it, let's talk about lifetime value for a second.

Let's say this costs $25 a month. And to make my math easy, the average time somebody sticks around is four months. That means that the lifetime value of that client for this program is $100. All right? A hundred dollars. And as that person drops, you have to find another person to come in so that your revenue is just.

The same. So it just stays the same. It doesn't go down. If you want to go up, you have to add more people than are leading per month. So you technically actually have to add even more people. So let's say you add, 10 people a month, but you lose 15, now you're minus five every single month. If you add 15 and you lose 10, you're plus five, but you're not adding 15, you're adding a net five.

So when we look at these lower ticket, Programs that are perceived to be more leveraged. The challenge with them is it comes down to volume and volume In these, in a low volume business, like a cash practice is a hard game to win, right? Cuz even, let's say you have 20 new patients in a month, and every single one of them.

Joins your program. That's about the only way you're gonna be able to make something like this stick. But they're, they are gonna leave after a few months. That's normal. That's normal per the industry. Maybe less if they know you really well. But if you take that in comparison to something as simple as like individualized programming where you're building a specific program for somebody, but you can charge 10, 15 times more because of that.

I would, I just wouldn't make that exchange in a low volume business. Even, one of our business partners has a. A very big online training company, and it is membership based, $25 a month, right? And I can tell you it is a very difficult business to run because the new volume that you need to bring in just to maintain is actually quite a lot.

So you either have to have a really big audience. On social media, or you have to be really good at running ads and spend money on ads and be able to be ROI positive. But the challenge is if your lifetime value is a hundred dollars for a client and it's costing you $50 to acquire a client. You're not making a whole lot of money off of those ads, so if you're wrong for a few months and your ads are off, you can literally spend all your profit just trying to get new people in because it's basically eating itself.

It's, it's churning over until you get to this equilibrium number, which is typically pretty low. So I've seen this now over and over again with clinicians that have tried to add this in. We've done the same thing and we didn't have a huge social media following. We didn't try to scale up ads with this really low ticket offer because I never really wanted to play that game.

I think that's a tough one to win with advertising. So for us, we actually phased this program out and we started to phase in individualized programming, which. We actually were able to bring up to more revenue much faster, and the churn on that is far lower. So if you're gonna start with something, I highly recommend that you go the route of.

One-to-one, like individualizing that with this business model versus a membership, and I know it sounds counterintuitive to everything that you hear on whatever other podcasts you listen to, but you gotta understand what they're probably talking about is a very different type of business model. Cuz you're adding this onto a cash practice, which is a low volume model.

There's not a lot of new people coming through it, but that's because you don't need a lot of people. That's actually one of the advantages of that type of business model. So as you're adding on these membership services, I recommend you start with some sort of recurring in person. Visit, that's probably the easiest place to start cuz people assign a lot of value to anything in person.

And then after that, some variation of individualized programming to bolt onto that or to do as a standalone because the turn on that is gonna be way, way lower because it's more of a high touch type of service. The higher touch the services, the more the more likely it is that they're gonna stay longer.

Just my 2 cents from what I'm seeing at this point. And even another business that I talked to just last week that was having the same problem, they spent all his time, energy, building this out and they did their launch and it was like not great, right? It was a handful of people and they realized, oh crap, that wasn't worth it, right?

So if you're thinking about it, I recommend start with the one-to-one, the higher touch the actual like individualized programming. And if you build a big audience or if you have somebody you can partner with that has a big audience or somebody that's great at ads and you don't mind playing a game that's like super thin margins, that's about the only way you're gonna win that you're gonna win that game.

And sure you can scale those. Like to huge businesses, no doubt. But again, you have to have one of two things in place. You're either an ads ninja with a big budget, or you have a massive social media following, and you can mobilize people to join one of these programs. If you don't have one of those two things, then play a different game Now.

Play a game that's gonna be longer lifetime value, bigger lifetime value with fewer people. It's an easier game to win and it bolts on to a cash practice really well. So guys, as always, thanks so much for listening. Catch you next week.

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Hey, real quick before you go, I just wanna say thank you so much for listening to this podcast, and I would love it if you got involved in the conversation. So this is a one-way channel. I'd love to hear back from you. I'd love to get you into the group that we have formed on Facebook. Our PT Entrepreneurs Facebook group has about 4,000 clinicians in there.

That are literally changing the face of our profession. I'd love for you to join the conversation, get connect with other clinicians all over the country.

I do live trainings in there with Yves Gege every single week, and we share resources that we don't share anywhere else outside of that group.So if you're serious about being a PT entrepreneur, a clinical rainmaker, head to that group. Get signed up. Go to facebook.com/groups/ptentrepreneur, or go to Facebook and just search for PT Entrepreneur. And we're gonna be the only group that pops up under that.