The following is the financial plan for the Advanced Chiropractic Clinic.
The financial plan depends on Important Assumptions, most of which are shown in the following table as annual assumptions. The monthly assumptions are included in the appendix.
From the beginning, we recognize that collection on services provided are critical, but not a factor we can influence easily. At least we are planning on the problem, and dealing with it. Interest rates, tax rates, and personnel burden are based on conservative assumptions.
Moreover, the patient visits per month that we used are very conservative. Our visit average is approximately one third that of the national average.
The national average according to the "Fifth Annual Salary & Expense Survey of 2002" was 135 patient visits per month or 540 visits per month. Our forecast for year one is only an average of 165 visits per month and year three shows approximately 200 patient visits per month.
Again this is well below the national average, we expect our business to be meeting or exceeding the national averages by year three, but we wanted to show that the business plan is still viable at these low numbers.
The following chart and table summarize our Break-even Analysis. With fixed costs of $6,775 per month at the outset, our clinic will need to collect $6,775 of billings to cover our monthly costs.
Our average service charge collected will be $50, therefore we will need to have 136 patient visits per month (34 per week) to achieve a break-even point. We don't expect to reach break-even until six months into the business operation, at which point our patient base will have expanded and internal referrals will be increasing each month.
Our Projected Profit and Loss is shown on the following table, with sales increasing from $99K the first year to about $120K the third, and profits almost negligible for the start-up phase of this business. We show a break-even point after six months of business in December of 2003.
Our break-even point of sales per month is $7,395 or about 148 patient visits per month. Again this is about 1/4 the national average, but we would rather stay on the conservative side when forecasting, thus assuming little risk.
The projected net profit for the first three years is approximately $5,000/yr. These projections do not account for tax depreciation on equipment or deductions for a home office.
As with the break-even, we are projecting very conservatively regarding gross margin. Our client base should grow much faster than the projections. We prefer to project conservatively so that we make sure we have enough cash for unexplained costs.
The detailed monthly projections are included in the appendix.
Cash Flow projections are critical to our success. The monthly cash flow is shown in the illustration, with one bar representing the cash flow per month, and the other the monthly cash balance. The annual cash flow figures are included here and the more important detailed monthly numbers are included in the appendix.
The clinic's negative net cash flow in the initial start up phase (first six months) will be offset by a $15,000 line-of-credit obtained from the bank. This credit line will be used for any other expenditures that are not yet accounted for in this plan.
The Balance Sheet in the following table shows managed but sufficient growth of net worth, and a sufficiently healthy financial position by year three.
The net worth of the clinic remained negative in year one due to the $30,000 loan which appears as a liability on day one. The loan repayment is also shown in the monthly expense report. The monthly estimates are included in the appendix.