Pro Forma Part 1: Revenue Projections

“A Latin term, literally means “for the sake of form” or “as a matter of form.” In the world of investing, pro forma refers to a method by which financial results are calculated  This method of calculation places emphasis on present or projected figures.”

– Investopedia –


Your business loan proposal will consist of the following:

Today, we will go over how to generate your pro forma.

Pretty much, the pro forma is a simulated or make-believe financial statement. Since you will not have any hard data as a scratch startup practice, the next best thing is to provide estimated projections on your business plan as part of your loan application to banks.

The pro forma can be divided into two parts: projected revenue and operating expenses. In this post, we will go over how I calculated my revenue projections. You should present at least 2 years worth of data.

As ophthalmologists, our revenue comes from clinic visits, diagnostic tests, in-office procedures, operating room procedures, and possibly an optical shop. Clinic visits will ultimately drive revenue from the other 3 or 4 sources. In order to estimate clinic revenue, you first need to figure out how many patients you expect to see, and how much each patient encounter will bring.

Regardless of whether you join an established practice or start out on your own, expect your initial patient volume to be anemic. It is rare for anyone to enter a turnkey practice, seeing 20-30 patients a day right off the bat. It is not unusual for a new ophthalmologist to see only 3-5 patients a day as he or she builds a reputation and establishes a presence in the community. I expect my situation to be no different.

I wanted to avoid as much guess work as possible generating my projections. So, I referenced the first-year performance of a former resident at my program. I hand-counted the number of patients this ophthalmologist saw in her first 18 months of private practice, and calculated the average number of patient visits per day for each month.

Of course, I need to account for the differences between our practices. This doctor had joined an established private practice, with an overflow of patient volume, in a large, metropolitan area. She was fellowship-trained in a saturated subspecialty. The practice did not devote any special resources to marketing her new arrival, and she did not have a niche population.

In contrast, I will be a no-name, no-reputation ophthalmologist entering a saturated market with no subspecialty training. However, I will have an exclusive niche population, and plan to market aggressively. Nonetheless, I expect my ramp up to be significantly slower, for which I have arbitrarily revised my patient volume projections downward by 40%. I also assume that my growth rate will be slower as well, estimating that it would take 2 years to reach this doctor’s year one volume.

Now that I have an idea of my initial patient volume and growth rate, I need to figure out my work schedule. I plan to work 8 hours a day and 5.5 days per week, including Saturdays. One half day a week will be dedicated to surgery or administrative work. I’m going to take major holidays off, only because I don’t want to make my employee(s) work on these days. I still plan to be available through special arrangements or for emergencies though. All in all, I will probably average 20 to 21 work days per month.


Next, I need to calculate how much revenue each patient encounter will generate.

I assume that 70% of my patients will have Medicare and 30% will have private insurance. Usually, private insurance pays 110% to 130% of Medicare, depending on the location. Each state and county has a different Medicare fee schedule, which you can look up here. Using the information above, you can calculate the weighted reimbursement per patient encounter type. I made this calculation for 4 different levels of patient encounters: new patient comprehensive eye exam (92004), new patient limited eye exam (92002), established comprehensive eye exam (92014), established intermediate eye exam (92012).

I also broke down the percentage of each encounter type that I would see in a typical day, as listed below. I expect these percentages to change as my practice reaches a steady state. I derived these percentage changes partly from my attending’s first year statistics, and partly as a guesstimate from my personal experience during residency.


Year 1

Month/Comprehensive New%/Limited New%/Comprehensive Est.%/Intermediate Est.%

January-11 95% 0% 0% 5%

February-11 95% 1% 0% 4%

March-11 85% 5% 0% 10%

April-11 75% 5% 0% 20%

May-11 65% 10% 0% 25%

June-11 60% 15% 0% 25%

July-11 50% 13% 2% 35%

August-11 45% 12% 3% 40%

September-11 40% 16% 4% 40%

October-11 35% 15% 5% 45%

November-11 30% 15% 5% 50%

December-11 20% 15% 5% 60%

Year 2

Month/Comprehensive New%/Limited New%/Comprehensive Est.%/Intermediate Est.%

January-12 20% 10% 10% 60%

February-12 20% 10% 10% 60%

March-12 20% 10% 10% 60%

April-12 20% 12% 12% 56%

May-12 20% 12% 12% 56%

June-12 20% 12% 12% 56%

July-12 18% 15% 15% 52%

August-12 18% 15% 15% 52%

September-12 18% 15% 15% 52%

October-12 18% 15% 18% 49%

November-12 18% 15% 18% 49%

December-12 18% 15% 18% 49%

Finally, I deducted vacations from my clinic revenue projections. I will be taking 10 days of vacation in year 1, and 15 days in year 2. My vacation schedule will revolve around my employee(s)’. The only reason I’m taking vacation in the beginning is because I don’t want to deprive my employee(s) of this fringe benefit. If I end up hiring more than one employee, and the clinic has someone to man the front desk every day, I plan to defer my own vacation days for the first two or three years.

With all this information, you can calculate expected clinic revenue per any given period of time.

Once you have your clinic revenue projections down, you can estimate your revenue projections from procedures and diagnostic testing. Revising the ratios downward from my attending’s ratios once again, I estimated revenue for the most common procedures and tests as follows: cataract surgery (50 to 1), laser surgery (100 to 1), IOL master (50 to 1), OCT or visual field (20 to 1), and gonioscopy and pachymetry (25 to 1). I lumped gonioscopy and pachymetry into one group because I usually perform both concomitantly for glaucoma evaluation.

Once again, using these ratios and the same formula for estimating clinic revenue, I calculated my revenue projections for procedures and diagnostic testing. Combining clinic, procedure, and diagnostics revenue, you now have your total projected revenue stream for the next few years. I don’t plan on opening up an optical at this point, so I deferred these projections.

If you want to see how my estimates compared to my actual numbers in years one and two, read this post.

Next step is to figure out how much it costs to run a practice, which I will go over in Pro Forma Part 2: Operating Expense Projections.

2 thoughts on “Pro Forma Part 1: Revenue Projections

  1. This may be addressed in future posts, but when you mentioned here planning to defer vacation for a couple years, it ocurred to me I don’t understand how call in a small solo practice would work. Are you on call for your practice every day and night for those first couple years? Are you still on call every day now?


  2. Most of us typically take our own phone calls even when out of town. If something comes up, usually there is someone in town to help out. First of all, as a comprehensive ophthalmologist I don’t get many acute emergencies. Secondly, I’m friends with many specialists that can help cover. Most emergencies are retina, so if you are planning to go solo as a retina specialist find a colleague (usually another solo doc) to cover.

    As for deferring vacation, I did the exact opposite of Ho Sun. I figured my first year I wouldn’t see that many patients so it would be easier to take more vacation. I took six weeks (including two weeks of holidays) my first year solo. To me it makes sense to take more time off when you’re seeing five patients a day rather than 35 because you aren’t missing as much.

    The bottom line is going solo doesn’t mean you’re up all night answering calls, or that you never get to take vacation. I take more vacation than I did when I worked for my group, because I have complete control over my schedule, which is priceless.

    We’ll write more on this in a future post.


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