Critical First Step- Free Customizable New Practice Pro forma


If you’re starting a new practice or running into obstacles tracking the performance of your established practice, this proforma should be a huge help.  There are over 10 different tabs that cover the various aspects of income and expenses along with some helpful graphs that show you exactly how changes have a direct impact your bottomline.  The pro forma is completely customizable with formulas integrated throughout.

In this article we will outline the following: 

•What exactly is a pro forma?

•How can a pro forma help my practice succeed?

•Do banks require new practices to have a pro forma and budget?

Every new and established practice should be operated within a predefined framework of success.  If you don’t have a framework or goals, how exactly will you measure whether or not you’re actually successful.  It’s not enough to measure your success by your bank account.  Every successful practice operates on a foundation of wisdom and this wisdom starts with understanding how each patient and every expense effects your profitability.  Success isn’t entirely defined by profitability but without profit, you won’t be around long enough to effect change in other aspects of your practice or community.

This pro forma was created by one of our partners and given to us to help our new practices.  This document cost over $3,000 to create and would likely cost you about $5,000 to have your CPA build for you.  I’ve been told that we need to charge for this but one of our core values is to pave a way of success for practices with no strings attached.  If we have information or resources available that would help, we will always share.  Alright, so here is a breakdown of what you’ll be receiving and how you can use it.

What is a pro forma?

First off, let’s just give you a quick overview of what exactly a pro forma is. 

  1. A proforma is technically two words and is a latin term meaning “as a matter of form”. 
  2. In the financial world, you can think of it as a hypothetical financial roadmap for success.  A pro forma would have a minimum of 3 years of projections and with at least 3 revenue models.  These models would include your best and worst case scenarios.
  3. In lending, banks use your pro forma to gauge risk and ensure they’re lending to someone that has thought through the different scenarios.
  4. A pro forma is a critical part of a business plan.  Other elements of your business plan would be a marketing plan and market/location research.

You’re likely familiar or at least heard of a P&L statement which is nothing more than a statement of your financial standing at the end of a defined period.  In particular, it measures your income and expenses and gives you the cold hard facts about how you’re doing financially.  A proforma is not a P&L and is built and used prior to ever receiving your first P&L (which you should be receiving on a monthly basis regardless of how old or new your practice is) to give you a vision and plan for success.  You can think of it as a budget on steroids which means it’s a budget that includes income and anticipated income based on various factors.  It also includes anticipated expenses and how these expenses will affect your business depending on the revenue models.

why you need a pro forma?

  1. Do you want to use navigation or do you prefer using a compass?   Either method is pointless if you don’t have a destination.  A pro forma can show you the various points on the map where success can be found.
  2. Do you agree that success is difficult to achieve if it hasn’t been defined?  A pro forma will use data to outline a path to success for your new practice.
  3. If you’re in discussions with a lending institution, they will most likely request a pro forma prior to finalizing your loan.  As it relates to lending, your pro forma is the most critical part of your business plan.

The bottomline, you only need a pro forma if you would like to be successful as a new medical practice.  If that’s you, then you need one.  Measuring success by checking your bank account and ensuring you have enough to stay open and perhaps even pay you something is no way to run a business.  Your focus needs to be on the metrics that drive revenue into your bank account.  If someone asks you how many patients you need to see on a daily basis to breakeven, will you know the answer?  If they ask you for baseline and best-case expectations for profit are in your first and second year, how will you respond?  The point is, you cannot run a profitable business without understanding the metrics that create profit.  

Think of your pro forma as your very own detailed map to success.  You might say that it seems complicated but I’m sure that if you’re smart enough to go through medical school, you can figure out how to utilize a pro forma.  This pro forma in particular is designed with formulas which automates a lot of calculations for you.  Fields such as #of patients per day can be adjusted based on your expectations which is then used throughout the document to project profit.  It’s critical that you understand your fixed (rent, utilities, insurance etc) and variable(payroll, supplies, etc) expenses and what your profit looks like as these along with revenue moves around.  If you hire a new nurse practitioner, how many patients need to be seen each day to cover this expense?