Starting a Business with a Clear Financial Plan
A great business usually starts with a great idea. However, it takes more than ideas to get a profitable business off the ground. A business financial plan is a key tool in working through the details of your vision and turning it into a true roadmap for your business.
Often, dental and medspa clients come to us as their vision is starting to take shape. For instance, in the final days before launch, they’re working through the final details of their new space, it’s time to put a team in place, and expenses are accumulating as quickly as the questions are:
- How many employees can I afford to hire?
- What expenses fit into my budget?
- What are my long term financial goals?
In short, creating a business financial plan, specifically a 24 month proforma, can show a new business owner how all these costs fit into their overall financial picture.
Start by Creating Your Business Plan and Proforma:
Your proforma becomes your financial roadmap guiding strategic decisions like hiring, purchasing, and scaling your business. Subsequently, preparing a proforma (also known as a forecast or budget) requires thinking through every financial aspect of the business.
Thinking through your proforma means asking and answering a lot of questions. To estimate your potential revenue, for example, you’ll need to answer:
How many patients do you expect to walk through the door in the first month? The seventh month? The seventeenth? Moreover, in considering the services you plan to offer, how much can we expect the average patient to spend?
A good place to start is by answering these questions:
How many patients will walk through my door?
- What is my marketing plan?
- How will I obtain new patients?
- What does my ramp up look like?
- Do I have an existing patient base to consider?
- How many patients can I expect my providers to see each day?
- How many days will they work?
- What will my hours be?
- What about my space?
- Can it accommodate this level of patient volume?
What will my revenue per patient be?
- What services do I plan to offer?
- How will I market these services?
- Will I accept insurance?
- What is my price point for each service?
- Will I sell products?
- Will any specialized equipment be required for these services?
From this exercise, details will emerge to help you think through various aspects of a more formal business plan, including the marketing plan, sales strategy, unique differentiators, provider bios, and more.
Map Your Expenses:
The second part of developing a proforma is mapping out the expenses. So we work with clients to break these into two categories:
- Pre-opening or Start Up Costs
- Ongoing Expenses
Estimate Start Up Costs:
These are the costs you’ll incur prior to opening the business, which you’ll often look to finance with a bank or an investor. And you can gain clarity around these costs as you consider the following elements of your business:
- Choosing and designing your space: Market analysis to understand competition in the area and identify the best location; legal fees in reviewing your lease; construction costs for buildout, permitting, architect fees, designing fees; rental terms.
- Working through your IT, supplies, furniture, and equipment needs: Practice Management software, telephone, computers, equipment, initial supply order, furniture.
- Marketing and Branding: Website development costs, branding costs, marketing plan, strategy for ongoing advertising or marketing.
- Professional services: Attorneys, accountants, consultants – you’ll need a team to support this endeavor.
- Payroll: When will you hire your first employees? Usually there is some payroll to consider prior to your opening date.
Consider Ongoing Expenses:
Once you’ve defined your start up costs, consider your business’s ongoing expenses. Some expenses will be the same each month, like rent and IT. Others, like supplies, will vary as your revenue does. And as your revenue increases, these costs will go up. Thus, business owners need to plan for them according to revenue expectations.
At this stage, you can map out your employee costs and consider your future hiring needs. When will you need to hire an office manager? When will you need additional front desk team members or producers? By aligning your staffing needs with your revenue goals, you can ensure affordability.
Using Your Proforma to Inform Financial Decisions:
Now that you’ve determined pre-opening and ongoing expenses, you can begin to project potential gaps between revenue and costs in the early months. With careful planning, we can ensure you have financing to cover not only the pre-opening costs, but also your working capital needs until you become profitable. Ensuring you have enough funds to make it through the early months will relieve a significant amount of stress. Opening a business is stressful enough – let’s ensure the financial part is covered.
It’s OK to Ask for Help:
Surrounding yourself with a great team is critical to ensuring the successful launch of a new business. Skytale Group is a partner in developing your proforma or business financial plan. Contact us to tell us about your business vision or to learn about financial and strategic advising.
Skytale Group is a full-service strategic, financial, and M&A advisory firm based in Plano, TX. Skytale offers tailored and comprehensive strategic guidance to medical practices and professional service businesses looking to thrive, grow, sell, or understand the value of their businesses. Skytale’s highly experienced team relies on vast knowledge of dental, medical, and other industries they serve to guide clients in making decisions that move their businesses forward. Obsessed with details and efficiency, Skytale analyzes financial statements, systems, and operations to help clients elevate every aspect of their businesses. As big picture visionaries, Skytale strategically positions clients for future growth. Learn more about Skytale Group at skytalegroup.com.