1. Financial Analysis for the New Practice Dr. Patrick Bodnar

2. Introduction Many small businesses face unexpected challenges due to underfunding Underfunding can occur when the proper financial estimates of a practice are not calculated Need a realistic financial understanding of what it costs to start a practice and what it costs to run a practice

3. Introduction To properly estimate funding needs for the new practice it is necessary to analyze: –Project Costs –Operating Budget –Break-Even Point –Financial Projections

4. Project Costs The financial resources necessary to start a practice Need to consider: –Equipment / Service –Office / Supplies –Inventory –Build Out –Deposits –Licenses –Professional services –Marketing / Advertising –6 to 12 months of operating expenses

5. Calculating Costs on Equipment / Service Equipment purchases –Healthcare and Office –Ex: Adjusting table, resistance equipment, electric modalities, x-ray equipment… Classes and certifications Reusable and disposable supplies for e / s –Ex: face paper, ultrasound gel, electrodes, refrigerant spray, film, gowns, development chemicals, surface sanitizer…

6. Calculating Costs on Office / Supplies Any items needed to support your operation –Ex: Copy paper, brochures, forms, pens, pencils, calculators, hole punch, logo design, letter head, business cards … Furnishing purchases –Ex: Signage, office furniture, computers, phones, fax machine, printers, copier, plants…

7. Calculating Costs on Inventory Items for sale –Ex: Topical analgesic, hot/cold packs, pillows, supports, braces, nutrition, electrodes, homeopathy / herbal therapy, exercise balls, resistance kits…

8. Calculating Costs on Buildout Construction work or repairs to office space Customized improvements –Ex: Cabinetry, counters, storage, water lines…

9. Calculating Costs on Deposits What front money is required –Ex: Rent deposits, initial lease payments and deposits, phone, water and sewage, electricity, gas…

10. Calculating Costs on Licenses Chiropractic license –Exam fee and required travel Assumed name certificates Facility registration X-ray registration

11. Calculating Costs on Professional Services Attorney fees for contracts Accountant fees on financial reports and business materials Engineer reports on x-ray equipment Architect design on floor plan

12. Calculating Costs on Marketing / Advertising Determine costs of your initial advertising programs based on analysis of your market – targeting, defining needs / service development, sourcing, and connecting

13. What is an Operating Budget? An annual estimate of the total value of resources required for the performance of your mission Broken down monthly Includes estimated revenue and expenses organized by categories

14. Revenue Money coming in –NP Cash Collections –EP Cash Collections –Insurance Collections –Supply Sales –Equipment Sales –Nutrition Sales

15. Expense Money going out –Staff Wages FICA Professional Development Misc. Expense –Financial Bank Fees Credit Card Processing

16. Expense –Office Rent Office Supplies Office Equipment Healthcare Equipment Healthcare Supplies Equipment Maintenance Telephone Gas/Electric Water/Sewage Insurance Patient Education Material

17. Expense –Advertising/Marketing Print Cable Directories Care Class Web –Printing/Graphic Artist –Postage –Travel –Cost of Goods Sold

19. Break-Even Point Analysis of the level (volume) of sales/service at which a project's revenues equal its expenses. The point where money in equals the cost to do business.

20. Break-Even Point Need to know: –Monthly Operating Budget –Average Patient Collections Want to know: –How many patient visits needed each month to pay operating costs.

21. Break-Even Point Equation Estimated or current yearly operating budget / Average patient collections per visit / number of business weeks per year –$216,000/yr / $100.00 = 2160 pv’s/yr –2160 / 45 wks = 48 pv’s/wk

22. Break-Even Point –$216,000/yr / $75.00 = 2,880 pv’s/yr –2880 / 45 wks = 64 pv’s/wk –$216,000/yr / $50.00 = 4,320 pv’s/yr –4320 / 45 wks = 96 pv’s/wk –$216,000/yr / $25.00 = 8,640 pv’s/yr –8640 / 45 wks = 192 pv’s/wk

23. Break-Even Point –$216,000/yr / $17.00 = 12,706 pv’s/yr –12,706 / 45 wks = 282 pv’s/wk

24. Financial Projections Estimate of future financial performance Remember, there is no such thing as a sure thing. This estimate should have room for error As a new clinic, demonstrate how you anticipate growth will occur