How to create a financial forecast for an optician?
Creating a financial forecast for your optician, 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 optician 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 an optician?
The financial projections for your optician act as a financial blueprint to guide its growth with confidence and ensure its long-term financial viability.
To create them, you will need to look at your business in detail - from sales to operating costs and investments - to assess how much profit it can generate in the years to come and what will be the associated cash flows.
During challenging market conditions, maintaining an up-to-date financial forecast enables early detection of potential financial shortfalls, allowing for timely adjustments or securing financing before facing a cash crisis.
Your optician's financial forecast will also prove invaluable when seeking financing. Banks and investors will undoubtedly request a thorough examination of your financial figures, making precision and presentation essential.
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 an optician financial forecast?
A optician's financial forecast is only as good as the inputs used to build it.
If you are creating (or updating) the forecast of an existing optician, then you mostly need your accounting information, key historical operating non-financial data, and your team’s input on what to expect for the coming years.
If you are building financial projections for an optician startup, you will need to have done your research and have a clear picture of your competitive environment and go-to-market strategy so that you can forecast sales accurately.
For a new venture, you will also need a precise list of the resources needed to keep the optician running on a day-to-day basis and a list of the equipment and expenditures required to start the business (more on that later).
Let's now take a closer look at the elements that make up your optician's financial forecast.
The sales forecast for an optician
From experience, it is usually best to start creating your optician financial forecast by your sales forecast.
To create an accurate sales forecast for your optician, you will have to rely on the data collected in your market research, or if you're running an existing optician, 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:
- Demographics: The average price and number of monthly transactions at your optician may be affected by the age and income level of your target demographic. For example, if your target demographic consists of older individuals with higher incomes, you may see an increase in average price due to a demand for higher-end products and services.
- Technological advancements: Technological advancements in the field of optometry may affect your average price and number of monthly transactions. For instance, the introduction of new, high-tech equipment may allow you to offer more advanced services at a higher price, thus increasing your average price.
- Competition: The presence of other opticians in the area may impact your average price and number of monthly transactions. If there is a lot of competition, you may need to lower your prices or offer promotions to attract customers, which could decrease your average price. On the other hand, if you are the only optician in the area, you may be able to charge higher prices and see an increase in your average price.
- Seasonal factors: Seasonal factors, such as increased demand for prescription sunglasses during the summer months, may affect your average price and number of monthly transactions. During peak seasons, you may be able to charge higher prices for certain products and services, leading to an increase in your average price.
- Healthcare regulations: Changes in healthcare regulations may also impact your average price and number of monthly transactions. For example, if there are changes to insurance coverage for certain services, this could affect the number of transactions and the average price you are able to charge for those services.
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.
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The operating expenses for an optician
The next step is to estimate the expenses needed to run your optician on a day-to-day basis.
These will vary based on the level of sales expected, and the location and size of your business.
But your optician's operating expenses should include the following items at a minimum:
- Staff costs: Includes salaries, benefits, and training for optometrists, opticians, and other staff members.
- Rent and utilities: Covers the cost of leasing the optician's office space and paying for utilities such as electricity, water, and internet.
- Inventory: This includes the cost of purchasing frames, lenses, contact lenses, and other optical products to be sold in the optician's office.
- Accountancy fees: You may need to hire an accountant to help you manage your finances, file taxes, and keep track of your expenses and income.
- Insurance costs: This includes liability insurance to protect your business in case of accidents or mistakes, as well as health insurance for your employees.
- Software licenses: Opticians often use specialized software for managing patient records, scheduling appointments, and ordering inventory. These software licenses may come at a cost.
- Marketing and advertising: You may need to spend money on marketing and advertising to attract new patients and promote your services.
- Equipment maintenance: This includes the cost of maintaining and repairing equipment such as eye exam machines, lens edgers, and other tools used in the optician's office.
- Supplies: These are the small, everyday items used in the office such as paper, pens, cleaning supplies, and office supplies.
- Professional fees: Opticians may need to pay for professional services such as legal advice, consulting, or training to improve their business.
- Taxes and licenses: This includes business taxes, licenses, and permits required to operate the optician's office.
- Banking fees: These are the fees associated with maintaining a business bank account, such as transaction fees, monthly fees, and ATM fees.
- Office supplies: This includes larger items used in the office, such as furniture, shelving, and display cases for frames.
- Training and education: Opticians may need to invest in ongoing training and education to stay up-to-date with the latest advancements in the industry.
- Business insurance: In addition to liability insurance, opticians may need to invest in business insurance to protect against property damage, theft, or other unexpected events.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small optician might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow an optician?
Creating and expanding an optician also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for an optician could include elements such as:
- Optical Equipment: This includes all the necessary equipment for conducting eye exams and fitting glasses or contact lenses, such as autorefractors, phoropters, and lensometers.
- Furniture and Fixtures: This includes items such as display cases, chairs, and desks for the waiting room and exam rooms.
- Computer Systems: A reliable computer system is essential for managing patient records, scheduling appointments, and ordering inventory. This may also include software for electronic health records and accounting.
- Store Renovations: As your optician business grows, you may need to make updates or renovations to your store to accommodate more customers or to create a better overall experience.
- Inventory: The cost of purchasing inventory, such as glasses, contact lenses, and cleaning solutions, is a significant capital expenditure for an optician business.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your optician.
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 optician
The next step in the creation of your financial forecast for your optician 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 an optician?
Now let's have a look at the main output tables of your optician's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your optician is likely to be in the years to come.
For your optician to be financially viable, your projected P&L should ideally show:
- Sales growing above inflation (the higher the better)
- Profit margins which are stable or expanding (the higher the better)
- A net profit at the end of each financial year (the higher the better)
This is for established opticians, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.
The projected balance sheet
Your optician'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 optician'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 optician:
- 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 optician'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 optician'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 optician's financial forecast?
Using the right tool or solution will make the creation of your optician's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial projection software to build your optician'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 optician 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 optician's financial forecast?
Creating an accurate and error-free optician financial forecast with a spreadsheet is very technical and requires a deep knowledge of accounting and an understanding of financial modelling.
Very few business owners are financially savvy enough to be able to build a forecast themselves on Excel without making mistakes.
Lenders and investors know this, which is why forecasts created on Excel by the business owner are often frowned upon.
Having numbers one can trust is key when it comes to financial forecasting and to that end using software is much safer.
Using financial forecasting software is also faster than using a spreadsheet, and, with the rise of artificial intelligence, software is also becoming smarter at helping us analyse the numbers to make smarter decisions.
Finally, like everything with spreadsheets, tracking actuals vs. forecasts and keeping your projections up to date as the year progresses is manual, tedious, and error-prone. Whereas financial projection software like The Business Plan Shop is built 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 optician.
You have reached the end of our guide. We hope you now have a better understanding of how to create a financial forecast for an optician. 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
- How to project revenues for a business?
- Financial forecast for a business idea
Know someone who runs or wants to start an optician? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
