Erich H. Mattei, MBA, with Kyle Dearing, Owner, Modoc Family Optometry, in Alturas, CA. Mattei says independent ODs should create a pro forma to decide whether cold-starting or purchasing a practice makes the most sense.
Financials of cold-starting vs. purchasing an optometry practice
By Erich H. Mattei, MBA
April 2, 2025
“How much will it cost to cold-start or purchase a successful practice, and how will I pay for it?”
This is the top financial question we receive from emerging practice owners and optometry students.
This article outlines the steps to create a successful financial pro forma for starting or purchasing a practice, using examples from Akrinos clients—one who cold-started their business in November 2022 and another who purchased their practice in May 2023.
As of March 2025, both businesses are thriving!
Navigating Financial Forecasting: Your Pro Forma
A financial pro forma is more than just numbers; it’s your financial guide for your practice journey. Starting or buying a business without a solid financial pro forma is risky—over 80 percent of small business failures are due to cash flow issues. A strong financial pro forma helps outline your financial future, informs key decisions, and is essential for securing financing.
Here’s how a financial pro forma supports your business:
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Financial Planning: Maps out startup or acquisition costs, ongoing expenses and expected revenue—crucial for sustainability and growth.
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Revenue Projections: Forecasts patient numbers, average revenue per patient and identifies additional income sources, giving you a clear picture of potential earnings.
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Expense Estimation: Breaks down fixed costs like rent and salaries, as well as variable expenses such as supplies and equipment maintenance.
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Cash Flow Analysis: Helps you understand when money comes in and goes out, ensuring you have funds available when needed.
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Investment Appeal: Demonstrates the viability of your practice and your understanding of its financial details to investors and lenders.
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Risk Appraisal: Presents various financial scenarios, helping you prepare for the unexpected and manage risks.
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Goal Setting: Establishes financial targets as benchmarks for performance, aiding in setting realistic goals.
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Strategic Choices: Assists in making informed decisions about marketing, hiring and growth strategies by forecasting financial outcomes.
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Loan Proposals: A pro forma is often required by lenders to evaluate your business plan and associated risks.
A financial pro forma is not just paperwork; it’s a strategic tool that validates your business idea, helps secure funding and serves as a financial blueprint for your practice. It should evolve with your business, providing ongoing insights into your financial health and guiding strategic decisions.
Let’s dive into the details of the financial pro forma for cold-starting versus purchasing an eyecare practice.
Your Capital Investment: Cold-Starting vs. Purchasing Financials
The capital investment is the foundation of your practice’s launch, covering all essential expenses to get your cold-start or practice purchase underway. This includes costs for build-out, equipment, inventory, infrastructure, acquisition, working capital and other foundational expenses. It’s vital that your capital investment reflects the level of care you aim to provide, whether it’s primary, medical, or specialized eyecare, shaping the patient experience you envision.
Capital Investment Checklist
Physical Office Setup
- Deposit: Include the initial security deposit for your chosen location.
- Rent: Account for rental costs, whether monthly or annually, including triple net and CAM.
- Build-out: Plan for customizing your space to fit operational needs, including interior design, furnishings and fixtures.
Professional Services
- Consultancy: Set aside funds for legal, accounting, business and design services. Cover costs for legal practice setup, routine accounting and consultancy fees.
Clinic Essentials
- Equipment: Create a list and budget for all clinical equipment needed for quality eye care, from examination chairs to advanced diagnostic tools.
Optical Inventory
- Frame Selection: Invest in a diverse stock of eyeglass frames and contact lenses suited to your local market.
- Optical Equipment: Include tools and machinery for optical services, such as lens edgers and display units.
Infrastructure & Technology
- Software Systems: Budget for necessary technology, like practice management software, EHR systems and communication tools to ensure smooth operations.
Operational Liquidity
- Working Capital: Calculate the working capital needed to sustain your practice in its early stages, ensuring you can cover all operational costs before becoming profitable.
Remember, careful planning and proactive budget management are essential for successfully starting or purchasing and growing your eye care practice.
By paying close attention to these capital investment areas, you’ll establish a strong financial foundation that supports your practice’s vision and long-term success.
Read another article by Erich H. Mattei, MBA here.
