5 Key Financial Metric Telemedicine Founders Should Track
In a dynamic industry as Telemedicine, tracking the right metrics can have a huge impact in the survival of the business. While there are numerous financial indicators to consider, these five stand out as critical for telemedicine ventures looking to scale sustainably and attract investor interest.
1. Customer Acquisition Costs (CAC)
CAC = Total sales & marketing expenses / Number of New Patient Acquired
CAC tells you how efficient your team is when acquiring new patients. A high CAC can quickly drain your runway. By tracking this metric, you can optimize your marketing strategies and ensure you are not overspending to bring in new patients.
Pro Tip: Segment your CAC by patient type or acquisition channel to identify your most cost-effective growth strategies.
2. Lifetime Value (LTV)
LTV = (Average Revenue per Patient per Visit × Average Number of Visits per Year × Average Patient Lifespan) - Cost to Serve
LTV predicts the total revenue a business can expect from a single patient account throughout their relationship with your telemedicine platform.
Understanding LTV helps you determine how much you can afford to spend on patient acquisition and retention. It's also a key indicator of long-term business health.
Pro tip: Focus on strategies to increase LTV, such as expanding services or improving patient engagement, to drive sustainable growth.
3. Gross Margin
Gross Margin = (Revenue - Cost of Services) / Revenue × 100
A healthy gross margin is essential for covering operating expenses and eventually reaching profitability. It's also a key metric investors use to assess your business model's viability.
Pro tip: Regularly review your cost structure, including provider compensation and technology costs, to maintain strong margins as you scale.
4. Burn Rate and Runway
Monthly Burn Rate = Starting Cash Balance - Ending Cash Balance
Runway = Current Cash Balance / Monthly Burn Rate
Burn rate is the rate at which a company is losing money, while runway is how long the company can continue operating before it runs out of cash.
These metrics are critical for cash flow management and help determine when you need to raise additional funding.
Pro tip: Create multiple runway scenarios based on different growth projections to ensure you're always prepared for various outcomes.
5. Patient Retention Rate
Patient Retention Rate = (Number of Patients at End of Period - New Patients Acquired During Period) / Number of Patients at Start of Period × 100
This metric measures the percentage of patients who continue to use your telemedicine services over time.
High retention rates indicate patient satisfaction and can significantly impact your LTV and overall growth trajectory.
Pro tip: Analyze retention rates across different patient segments and service lines to identify areas for improvement and inform product development.
By consistently tracking and analyzing these five key metrics, telemedicine startups can gain valuable insights into their financial health, operational efficiency, and growth potential. Remember, the goal isn't just to collect data, but to use these insights to make informed decisions that drive your business forward.
As you grow, you may need to expand your financial metrics toolkit, but mastering these fundamentals will set a strong foundation for your telemedicine venture's success. What metrics are you tracking at the moment?
Elevate offers fractional CFO services specialized in the Telemedicine industry. We work closely with you to optimize your financials and create strategies that will move your company towards your goals. Chat with us today!
