How to create a financial forecast for a veterinary clinic?
Creating a financial forecast for your veterinary clinic, and ensuring it stays up to date, is the only way to maintain visibility on future cash flows.
This might sound complex, but with the right guidance and tools, creating an accurate financial forecast for your veterinary clinic is not that hard.
In this guide, we'll cover everything from the main goal of a financial projection, the data you need as input, to the tables that compose it, and the tools that can help you build a forecast efficiently.
Without further ado, let us begin!
Why create and maintain a financial forecast for a veterinary clinic?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your veterinary clinic and ensure that it can be financially viable in the years to come.
A financial plan for a veterinary clinic enables you to look at your business in detail - from income to operating costs and investments - to evaluate its expected profitability and future cash flows.
This gives you the visibility needed to plan future investments and expansion with confidence.
And, when your trading environment gets tougher, having an up to date veterinary clinic forecast enables you to detect potential upcoming financing shortfalls in advance, enabling you to make adjustments or secure financing before you run out of cash.
It’s also important to remember that your veterinary clinic's financial forecast will be essential when looking for financing. You can be 100% certain that banks and investors will ask to see your numbers, so make sure they’re set out accurately and attractively.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
What information is used as input to build a veterinary clinic financial forecast?
A veterinary clinic's financial forecast needs to be built on the right foundation: your assumptions.
The data required to create your assumptions will depend on whether you are a new or existing veterinary clinic.
If you are creating (or updating) the forecast of an existing veterinary clinic, then your main inputs will be historical accounting data and operating metrics, and your team’s view on what to expect for the next three to five years.
If you are building financial projections for a new veterinary clinic startup, you will need to rely on market research to form your go-to-market strategy and derive your sales forecast.
For a new venture, you will also need an itemised list of resources needed for the veterinary clinic to operate, along with a list of equipment required to launch the venture (more on that below).
Now that you understand what is needed, let’s have a look at what elements will make up your veterinary clinic's financial forecast.
The sales forecast for a veterinary clinic
From experience, it is usually best to start creating your veterinary clinic financial forecast by your sales forecast.
To create an accurate sales forecast for your veterinary clinic, you will have to rely on the data collected in your market research, or if you're running an existing veterinary clinic, the historical data of the business, to estimate two key variables:
- The average price
- The number of monthly transactions
To get there, you will need to consider the following factors:
- Seasonal demand: The number of monthly transactions at your veterinary clinic may be affected by the seasons. For example, the summer months tend to be busier with more pet owners taking their pets for check-ups and vacations, while the winter months may see a decrease in visits.
- Demographics of the area: The average price of services at your veterinary clinic may be influenced by the demographics of the area you are located in. For instance, if your clinic is located in a wealthy neighborhood, you may be able to charge higher prices for your services compared to a clinic in a lower-income area.
- Competition: The presence of other veterinary clinics in your area can also impact your average price and number of monthly transactions. If there are many other clinics offering similar services, you may need to adjust your prices to stay competitive and attract more clients.
- Economic conditions: Economic factors such as inflation, unemployment rates, and consumer confidence can also affect your business. During times of economic downturn, pet owners may cut back on non-essential expenses, which could result in a decrease in the average price and number of monthly transactions at your clinic.
- Changes in technology: Advancements in technology can also impact your business. For example, the introduction of new equipment or treatments may allow you to offer more specialized services at a higher price, attracting more clients and increasing your average price. On the other hand, if your competitors are investing in new technology, you may need to do the same to stay competitive, which could also affect your prices and transactions.
Once you have an idea of what your future sales will look like, it will be time to work on your overhead budget. Let’s see what this entails.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
The operating expenses for a veterinary clinic
The next step is to estimate the costs you’ll have to incur to operate your veterinary clinic.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your veterinary clinic's operating expenses should normally include the following items:
This list is not exhaustive by any means, and will need to be tailored to your veterinary clinic's specific circumstances.
What investments are needed to start or grow a veterinary clinic?
Creating and expanding a veterinary clinic also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a veterinary clinic could include elements such as:
- Medical Equipment: This includes items such as X-ray machines, ultrasound machines, surgical equipment, and anesthesia machines. These are essential for providing medical care to animals and can be a significant expense for a veterinary clinic.
- Facility Renovations: As a veterinary clinic grows and expands, it may need to make renovations to its facility to accommodate more patients or new services. This could include building new exam rooms, adding kennel space, or updating the reception area.
- Computer Systems: A modern veterinary clinic relies heavily on computer systems for managing patient records, scheduling appointments, and processing payments. Investing in high-quality computers, servers, and software is necessary for efficient operations.
- Furniture and Fixtures: Comfortable and functional furniture is important for both the staff and patients of a veterinary clinic. This could include exam tables, waiting room chairs, and office desks. Fixtures such as shelving and cabinets are also necessary for storage and organization.
- Diagnostic Tools: Veterinary clinics often need to invest in diagnostic tools such as blood analyzers, microscopes, and thermometers. These tools are used to diagnose and treat various health conditions in animals.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your veterinary clinic.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
The financing plan of your veterinary clinic
The next step in the creation of your financial forecast for your veterinary clinic is to think about how you might finance your business.
You will have to assess how much capital will come from shareholders (equity) and how much can be secured through banks.
Bank loans will have to be modelled so that you can separate the interest expenses from the repayments of principal, and include all this data in your forecast.
Issuing share capital and obtaining a bank loan are two of the most common ways that entrepreneurs finance their businesses.
What tables compose the financial plan for a veterinary clinic?
Now let's have a look at the main output tables of your veterinary clinic's financial forecast.
The forecasted profit & loss statement
The profit & loss forecast gives you a clear picture of your business’ expected growth over the first three to five years, and whether it’s likely to be profitable or not.
A healthy veterinary clinic's P&L statement should show:
- Sales growing at (minimum) or above (better) inflation
- Stable (minimum) or expanding (better) profit margins
- A healthy level of net profitability
This will of course depend on the stage of your business: numbers for an established veterinary clinic will look different than for a startup.
The projected balance sheet
Your veterinary clinic's projected balance sheet provides a snapshot of your business’s financial position at year-end.
It is composed of three types of elements: assets, liabilities and equity:
- Assets: represent what the business possesses including cash, equipment, and accounts receivable (money owed by clients).
- Liabilities: represent funds advanced to the business by lenders and other creditors. They include accounts payable (money owed to suppliers), taxes payable and loans from banks and financial institutions.
- Equity: is the combination of what has been invested by the business owners and the cumulative profits and losses generated by the business to date (which are called retained earnings). Equity is a proxy for the value of the owner's stake in the business.
The cash flow forecast
Your veterinary clinic's cash flow forecast shows how much cash your business is expected to consume or generate in the years to come.
It is best practice to organise the cash flow forecast by nature to better explain where cash is used or generated by the veterinary clinic:
- Operating cash flow: shows how much cash is generated by the operating activities
- Investing cash flow: shows how much will be invested in capital expenditure to maintain or expand the business
- Financing cash flow: shows if the business is raising new capital or repaying financiers (debt repayment, dividends)
Keeping an eye on (and regularly updating) your veterinary clinic's cash flow forecast is key to ensuring that your business has sufficient liquidity to operate normally and to detect financing requirements as early as possible.
If you are trying to raise capital, you will normally be asked to provide a monthly cash flow forecast in your veterinary clinic's financial plan - so that banks or investors can assess seasonal variation and ensure your business is appropriately capitalised.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
Which tool should you use to create your veterinary clinic's financial forecast?
Creating your veterinary clinic's financial forecast may sound fairly daunting, but the good news is that there are several ways to go about it.
Using online financial projection software to build your veterinary clinic's forecast
The modern and easiest way to build a forecast is to use professional financial projection software such as the one we offer at The Business Plan Shop.
There are several advantages to using specialised software:
- You can easily create your financial forecast by letting the software take care of the financial calculations for you without errors
- You have access to complete financial forecast templates
- You get a complete financial forecast ready to be sent to your bank or investors
- You can easily track your actual financial performance against your financial forecast, and recalibrate your forecast as the year goes by
- You can create scenarios to stress test your forecast's main assumptions
- You can easily update your forecast as time goes by to maintain visibility on future cash flows
- You have a friendly support team on standby to assist you when you are stuck
- It’s cost-efficient and much cheaper than using an accountant or consultant (see below)
If you are interested in this type of solution, you can try our forecasting software for free by signing up here.
Hiring a financial consultant or chartered accountant
Hiring a consultant or chartered accountant is also an efficient way to get a professional veterinary clinic financial projection.
As you can imagine, this solution is much more expensive than using software. From experience, the creation of a simple financial forecast over three years (including a balance sheet, income statement, and cash flow statement) is likely to start around £700 or $1,000 excluding taxes.
The indicative estimate above, is for a small business, and a forecast done as a one-off. Using a financial consultant or accountant to track your actuals vs. forecast and to keep your financial forecast up to date on a monthly or quarterly basis will naturally cost a lot more.
If you choose this solution, make sure your service provider has first-hand experience in your industry, so that they may challenge your assumptions and offer insights (as opposed to just taking your figures at face value to create the forecast’s financial statements).
Why not use a spreadsheet such as Excel or Google Sheets to build your veterinary clinic's financial forecast?
You and your financial partners need numbers you can trust. Unless you have studied finance or accounting, creating a trustworthy and error-free veterinary clinic financial forecast on a spreadsheet is likely to prove challenging.
Financial modelling is very technical by nature and requires a solid grasp of accounting principles to be done without errors. This means that using spreadsheet software like Excel or Google Sheets to create accurate financial forecasts is out of reach for most business owners.
Creating forecasts in Excel is also inefficient nowadays:
- Software has advanced to the point where forecasting can be done much faster and more accurately than manually on a spreadsheet.
- With artificial intelligence, the software is capable of detecting mistakes and helping decision-making.
Spreadsheets are versatile tools but they are not tailor-made for reporting. Importing your veterinary clinic's accounting data in Excel to track actual vs. forecast is incredibly manual and tedious (and so is keeping forecasts up to date). It is much faster to use dedicated financial planning tools like The Business Plan Shop which are built specially for this.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
Use our financial forecast templates for inspiration
The Business Plan Shop has dozens of financial forecast examples available.
Our templates contain both a financial forecast and a written business plan which presents, in detail, the company, the team, the strategy, and the medium-term objectives.
Our templates are a great source of inspiration, whether you just want to see what a complete business plan looks like, or are looking for concrete examples of how you should model financial elements in your own forecast.
Takeaways
- A financial projection shows expected growth, profitability, and cash generation for your business over the next three to five years.
- Tracking actuals vs. forecast and keeping your financial forecast up-to-date is the only way to maintain visibility on future cash flows.
- Using financial forecasting software makes it easy to create and maintain up-to-date projections for your veterinary clinic.
You have reached the end of our guide. We hope you now have a better understanding of how to create a financial forecast for a veterinary clinic. Don't hesitate to contact our team if you have any questions or want to share your experience building forecasts!
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
Also on The Business Plan Shop
- Example of financial projections
- Example of financial forecast for business idea
- How to create a turnover forecast for a business?
Know someone who runs or wants to start a veterinary clinic? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
