Careful research can help predict revenues
Formula helps calculate impact of new clients
Question: In preparing business forecasts for facility administrators, I need to know how much business our program might expect from each client during the coming year. If the company has been on board for a while, I can look to past experience for a good idea of how much business they will send our way. But what if I’ve just signed the company on as a client or just hope to sign them on soon? Is there a reliable way to predict how much business and revenue the client will generate for our program?
Answer: Some research and a few basic calculations will provide a good estimate of how much business and revenue you could reasonably expect, says Virginia Lepping, RN, MBA, COHN, executive vice president of Providence Occupational Health Services in Granite City, IL. Keep in mind, though, that the result will be only an estimate, and that estimate will be only as reliable as the figures you use to reach it.
Lepping’s program uses this simple formula to predict future revenue from a client:
E x I x C = R
First, take the number of employees at the company (E), and multiply by the expected incident rate in percent (I). At Providence, past experience has shown that 30% is a good incident rate to use for most clients, though that number can be changed by several factors. A 30% incident rate means that for every 100 employees, there will be 30 visits a year to the occupational health program. Those include repeat visits by the same employee, so it does not indicate visits by 30 of every 100 employees. The figure includes all types of treatment and testing.
The incident rate can be affected significantly by factors such as whether the client is in a service industry, light industry, or heavy industry. If the company is similar to many of your other occupational health clients, you can assume that the incident rate will be similar. You may want to adjust the figure up or down in consideration of particular risks found or not found at that company, the effectiveness of safety programs, and other factors that will require some research.
Then multiply by the average cost per visit (C). This is a figure that is unique to each occupational health program. To determine your average cost per visit, divide your program’s average total revenue per year by the average total number of visits. That provides an average cost per visit that includes all types of treatment and testing. Your program’s average cost per visit may vary significantly from that of other occupational health programs, especially when comparing independent and hospital-based programs.
The end result is the estimated revenue for one year from the client.
Consider this example: The number of employees (E) at the company is 500. The incident rate (I) of 30% seems consistent with your program’s experience with similar clients. Your program’s average cost per visit is $65. So 500 employees (E) x 30% incident rate (I) x $65 average cost per visit = $9,750 estimated revenue (R) in one year from this client.
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