Building a financial model for a primary care clinic is key to tracking finances and planning growth. It helps owners make smart decisions on operations, budgets, and investments. How to build a primary care clinic financial model? This guide covers the steps to create a solid model. The model focuses on metrics like total patients, average monthly visits, patients per clinic, and patient spending.
We have also built a direct Primary Care Clinic Financial Model Template for Founders and Entrepreneurs to use. Just input your assumptions, and our model does the rest! It’s a complete 3-way financial model with an Income Statement, Balance Sheet, Cash Flow Statement, clinic-specific metrics, ratios, and more.
What is a Primary Care Clinic Financial Model?
A financial model serves as a structured representation of the clinic’s expected financial performance over a defined period, typically three to five years. It includes projections for revenue, expenses, cash flow, and key performance indicators (KPIs) that provide insights into the clinic’s operational efficiency and profitability.
Key Components of a Financial Model for a Primary Care Clinic
- Revenue Projections: Estimates of income from patient visits, consultations, and other services.
- Operating Expenses: Costs associated with running the clinic, including salaries, rent, utilities, and supplies.
- Capital Expenditures (CapEx): Investments in equipment, facilities, and technology.
- Cash Flow Analysis: Assessment of cash inflows and outflows over time.
- Key Performance Indicators (KPIs): Metrics that help assess financial health and operational efficiency.
Important Metrics to Include
- Total Patients Treated: The total number of patients seen by the clinic over a specified period.
- Average Monthly Patients Treated: The average number of patients treated per month.
- Average Monthly Patients per Clinic: The average number of patients treated per clinic location.
- Average Patient Spend: The average revenue generated from each patient visit.
How to Build a Primary Care Clinic Financial Model?
Step 1: Define Your Assumptions
Start by outlining the key assumptions that will drive your financial model. These should include:
- Clinic Locations: The number of clinics you plan to operate.
- Patient Volume: Expected patient volume based on market research.
- Average Patient Spend: The average amount spent per patient visit.
- Operating Costs: Fixed and variable costs associated with running the clinic.
Example Assumptions
- Number of Clinics: 2
- Average Monthly Patients per Clinic: 300
- Total Patients Treated Annually: 7,200 (2 clinics × 300 patients × 12 months)
- Average Patient Spend: $150
- Fixed Monthly Operating Costs per Clinic: $10,000
- Variable Costs per Patient: $30
Step 2: Structure Your Model
Organize your financial model in a spreadsheet for clarity and ease of use. Common sections to include are:
- Input Assumptions: A dedicated section for all key metrics.
- Revenue Projections: Detailed forecasts of revenue from patient visits.
- Operating Expenses: Breakdown of all operating costs.
- Cash Flow Statement: Summary of cash inflows and outflows.
- Key Performance Metrics: Summary of important financial ratios and metrics.
Step 3: Create the Input Assumptions Sheet
Set up an input assumptions sheet in your spreadsheet where all key metrics are clearly defined. This sheet will serve as the foundation of your model, making it easy to update and adjust assumptions without affecting the overall structure.
Step 4: Calculate Revenue Projections
To forecast your revenue, focus primarily on patient visits:
- Monthly Revenue:
Monthly Revenue = Average Monthly Patients Treated × Average Patient Spend
- Annual Revenue:
Annual Revenue = Monthly Revenue × 12
Example Calculation
Assuming an average of 300 patients treated per month per clinic and an average patient spend of $150:
- Monthly Revenue per Clinic:
Monthly Revenue = 300 × 150 = $45,000
- Total Monthly Revenue for 2 Clinics:
Total Monthly Revenue = 45,000 × 2 = $90,000
- Annual Revenue:
Annual Revenue = 90,000 × 12 = $1,080,000
Step 5: Estimate Operating Expenses
Estimate your operating expenses, which can include both fixed and variable costs:
- Fixed Operating Costs:
- Salaries and wages
- Rent and utilities
- Insurance
- Administrative costs
- Variable Operating Costs:
Variable Costs = Variable Costs per Patient × Total Patients Treated
- Total Operating Expenses:
Total Operating Expenses = Fixed Costs + Variable Costs
Example Calculation
Assuming fixed monthly operating costs of $10,000 per clinic:
- Annual Fixed Operating Costs:
Annual Fixed Costs = 10,000 × 2 × 12 = $240,000
- Variable Operating Costs:
- Total Patients Treated Annually: 7,200
- Variable Costs:
Variable Costs = 30 × 7,200 = $216,000
- Total Annual Operating Expenses:
Total Operating Expenses = 240,000 + 216,000 = $456,000
Step 6: Calculate Gross Profit
Gross profit is calculated by subtracting total operating expenses from total revenue:
Gross Profit = Total Revenue − Total Operating Expenses
Example Calculation
- Annual Revenue: $1,080,000
- Total Operating Expenses: $456,000
Gross Profit = 1,080,000 − 456,000 = $624,000
Step 7: Cash Flow Analysis
A cash flow statement summarizes all cash inflows and outflows over a specific period, usually monthly. This helps you understand the liquidity of your clinic.
- Cash Inflows: Include all revenues from patient visits.
- Cash Outflows: Include all operating expenses and any capital expenditures.
Example Cash Flow Summary
| Month | Cash Inflows | Cash Outflows | Net Cash Flow |
|---|---|---|---|
| 1 | $90,000 | $38,000 | $52,000 |
| 2 | $90,000 | $38,000 | $52,000 |
| 3 | $90,000 | $38,000 | $52,000 |
| … | … | … | … |
| 12 | $90,000 | $38,000 | $52,000 |
Step 8: Capital Expenditures (CapEx)
If you plan to invest in capital expenditures, such as medical equipment, renovations, or technology, include these in your model.
- CapEx: List the expected capital expenditures and how they will be financed (e.g., loans, equity).
- Depreciation: Account for depreciation of fixed assets, impacting taxable income.
Example CapEx Calculation
Assuming a one-time capital expenditure of $50,000 for new equipment:
- Annual Depreciation (assuming a useful life of 10 years): Annual Depreciation = 50,000 / 10 = $5,000
Step 9: Perform Sensitivity Analysis
Conduct sensitivity analysis to understand how changes in key assumptions affect your financial projections. Test various scenarios, such as:
- Changes in patient volume.
- Variations in average patient spend.
- Adjustments in operating costs.
Step 10: Review and Refine Your Model
Once your initial model is complete, review it for accuracy and logical flow. Ensure that all calculations are correct and that inputs are clearly defined. Seek feedback from industry peers or financial advisors to identify areas for improvement.
Step 11: Use the Model for Decision-Making
Now that you have a comprehensive primary care business model, leverage it for decision-making. Whether considering new clinic locations, staffing adjustments, or service expansions, your model can provide valuable insights.
Example Scenarios for Decision-Making
- Expansion Analysis: Evaluate the financial implications of opening additional clinics.
- Cost Management: Identify areas for reducing variable costs or optimizing staffing.
- Revenue Growth: Assess the potential impact of increasing patient spend through additional services.
Final Thoughts!
So that is a step-by-step guide on how to build a Primary Care Clinic Financial Model from scratch. Building a financial model helps assess a clinic’s potential and sustainability. Define assumptions, structure the model, calculate revenues and expenses, and analyze key metrics. Update it regularly with real data for better accuracy. If you are looking for a ready-to-go Primary Care Clinic Financial Model Template then we’ve done the hard work for you! You can find the link here. This is perfect for any Founder to use to model out their Clinic with specific Clinic metrics included in the template too.
Here are some excellent articles you may find useful: Direct Primary Care: A Successful Financial Model for the Clinical Practice of Lifestyle Medicine, Financial Breakdown Of A Primary Care Clinic: How Much Money Does It Make and Unveiling the Pulse of a Medical Practice With Financial Analysis.
