The first year of practice ownership is a financial marathon. Cash flows out faster than it comes in, unexpected expenses emerge constantly, and revenue takes time to build. This guide provides a realistic framework for financial planning that helps new optometry practice owners survive year one and set up for year-two success.
For the complete picture on launching your practice, see our guide on starting an optometric practice.
The Financial Reality of Year One
Understanding typical first-year economics helps set realistic expectations.
Revenue Ramp-Up Timeline
New practices do not hit full revenue immediately. A typical ramp:
| Month | Patients/Day | Monthly Revenue | Cumulative Revenue |
|---|---|---|---|
| 1-2 | 3-5 | $15,000-25,000 | $30,000-50,000 |
| 3-4 | 6-10 | $30,000-50,000 | $90,000-150,000 |
| 5-6 | 10-15 | $50,000-75,000 | $190,000-300,000 |
| 7-9 | 12-18 | $60,000-90,000 | $370,000-570,000 |
| 10-12 | 15-22 | $75,000-110,000 | $595,000-900,000 |
Year one total: $500,000-$900,000 depending on location, marketing, and execution.
These figures assume a general private practice model. Specialty practices, cold starts in competitive markets, or acquisitions will vary significantly.
The Cash Flow Gap
The challenge: expenses start at full levels while revenue builds gradually.
Fixed monthly expenses start immediately:
- Rent: $4,000-8,000
- Staff payroll: $8,000-15,000
- Loan payments: $3,000-8,000
- Insurance: $800-1,500
- Utilities and services: $1,000-2,000
Total monthly fixed costs: $17,000-35,000
In months 1-3, revenue rarely covers fixed costs. This creates a cash gap that must be funded.
Cash reserve requirement: Most practices need 6-9 months of operating expenses in reserve. For a practice with $25,000 monthly fixed costs, that means $150,000-225,000 in accessible capital.
Building Your First-Year Budget
Startup Costs Budget
Before opening, expect significant one-time expenses:
| Category | Budget Range | Notes |
|---|---|---|
| Equipment | $80,000-180,000 | See our equipment guide |
| Build-out | $30,000-100,000 | Depends on space condition |
| Initial inventory | $20,000-50,000 | Frames, contact lenses |
| Technology setup | $5,000-15,000 | EHR, PMS, phone systems |
| Legal and professional | $5,000-15,000 | Entity formation, lease review |
| Licenses and permits | $2,000-5,000 | State specific |
| Marketing launch | $5,000-15,000 | Website, initial advertising |
| Working capital | $50,000-100,000 | Cash for operations |
Total startup capital needed: $200,000-480,000
This is why most new practices use SBA loans, equipment financing, or combination of debt sources.
Monthly Operating Budget Template
Build a detailed monthly budget before opening:
Revenue projections:
- Professional services (exams): ________
- Contact lens sales: ________
- Spectacle sales: ________
- Other: ________
- Total projected revenue: ________
Cost of goods sold:
- Frames and lenses: ________ (target 30-35% of optical revenue)
- Contact lenses: ________ (target 60-65% of CL revenue)
- Lab fees: ________
- Total COGS: ________
Operating expenses:
- Rent and occupancy: ________
- Payroll and benefits: ________
- Equipment loan payments: ________
- Insurance (malpractice, liability): ________
- Marketing: ________
- Technology and software: ________
- Office supplies: ________
- Utilities: ________
- Professional services: ________
- Miscellaneous: ________
- Total operating expenses: ________
Net operating income: Revenue - COGS - Operating expenses = ________
Month-by-Month Projections
Create 12-month projections with three scenarios:
Conservative scenario: Slower patient build, higher expenses. Use this for planning reserves.
Expected scenario: Reasonable growth based on market research and marketing plan.
Optimistic scenario: Faster growth, better margins. Do not plan spending based on this.
When projections differ from reality, adjust quickly.
Managing Cash Flow
Cash flow management keeps practices alive during the ramp-up.
Cash Flow Principles
Principle 1: Cash is not profit. You can be profitable on paper while running out of cash. A patient seen today generates revenue, but insurance payment arrives in 30-45 days.
Principle 2: Receivables are not cash. Insurance claims pending are not available to pay bills.
Principle 3: Inventory ties up cash. Frames on display cannot pay rent.
Cash Flow Monitoring
Track these metrics weekly:
Cash position: Actual bank balance.
Accounts receivable: What is owed to you, aged by time (current, 30 days, 60 days, 90+ days).
Accounts payable: What you owe others and when due.
Burn rate: How fast cash declines in a month when revenue is low.
Runway: At current burn rate, how many months until cash runs out.
Cash Flow Improvement Tactics
Speed up collections:
- Submit claims same day
- Follow up on denials within 48 hours
- Collect patient responsibility at time of service
- Offer payment plans for large balances
Manage payables strategically:
- Pay bills on due date, not early
- Negotiate extended terms with vendors
- Use credit cards for float (pay in full monthly)
- Prioritize payments that affect credit or operations
Control inventory:
- Start with lean frame inventory, expand as sales prove demand
- Use consignment arrangements where available
- Monitor inventory turns, liquidate slow movers
Flex expenses when needed:
- Reduce marketing during cash crunches (temporarily)
- Delay non-essential purchases
- Consider temporary staff reductions as last resort
Revenue Optimization Strategies
Improving revenue accelerates the path to profitability.
Professional Services Revenue
Exam fee optimization:
- Research local market rates
- Do not undercut established practices
- Charge appropriately for specialized services
- Review and adjust fees annually
Service mix expansion:
- Medical optometry (if licensed and competent)
- Specialty contact lenses
- Dry eye treatment
- Myopia management
- Co-management agreements
Optical Revenue
Optical often determines practice profitability.
Capture rate focus:
- Target 65%+ capture rate
- See our intake guide for improving capture
- Staff training on optical sales
- Frame selection for your patient demographic
Average sale improvement:
- Premium lens options education
- Second-pair programs
- Sunwear promotion
- Protection plans
Margin management:
- Target 60-65% gross margin on optical
- Negotiate vendor terms
- Monitor lab costs
- Consider in-house edging as volume grows
Contact Lens Revenue
Contact lenses offer recurring revenue potential:
- Annual supply incentives
- Subscription/auto-ship programs
- Specialty lens fitting fees
- Follow-up exam bundling
Expense Control
Controlling expenses without compromising quality requires discipline.
Staff Costs
Payroll is typically the largest expense. Manage carefully:
- Right-size staffing for current volume, not projected volume
- Cross-train for flexibility
- Use part-time staff during ramp-up
- Add hours before adding headcount
Marketing Spend
Marketing is essential but easy to overspend:
First-year marketing budget: 8-12% of revenue initially, declining to 3-5% as practice establishes.
Prioritize measurable tactics:
- Google Business Profile optimization (free)
- Website and local SEO (moderate cost, long-term value)
- Google Ads for immediate patient generation (variable cost, trackable)
- Community involvement (low cost, relationship building)
Avoid:
- Long-term advertising contracts
- Expensive brand campaigns before you have patients to serve
- Marketing that cannot be tracked
Vendor Negotiation
New practices have less leverage, but still negotiate:
- Ask for new practice discounts
- Request extended payment terms
- Compare multiple vendors before committing
- Review costs quarterly
Financial Milestones
Track progress against these benchmarks:
Month 3 Milestones
- Seeing 8+ patients per day consistently
- Cash flow still negative but within projections
- Insurance credentialing complete
- Claims being paid within 30 days
Month 6 Milestones
- Seeing 12+ patients per day
- Cash flow approaching break-even
- Capture rate above 50%
- No aging receivables over 90 days
Month 9 Milestones
- Seeing 15+ patients per day
- Cash flow positive (before owner compensation)
- Optical revenue growing monthly
- Beginning to rebuild reserves
Month 12 Milestones
- Seeing 18+ patients per day
- Taking reasonable owner draws
- 3 months operating reserves rebuilt
- Clear path to profitability year two
Missing milestones is not failure. It signals need for adjustment. Identify the constraint and address it.
Working With Financial Professionals
You need professional support:
Accountant/CPA
Services needed:
- Monthly bookkeeping (can be outsourced)
- Quarterly financial review
- Tax planning
- Payroll processing
Selection criteria:
- Healthcare practice experience
- Optometry clients ideally
- Responsive communication
- Reasonable fees for practice size
Cost: $300-800/month for bookkeeping and basic services, plus tax preparation.
Financial Advisor
As income grows, consider:
- Student loan optimization
- Retirement planning
- Insurance needs analysis
- Investment strategy
Banker
Build relationship with a business banker:
- Operating line of credit for cash flow flexibility
- Equipment financing
- Future expansion capital
- General financial advice
Common First-Year Financial Mistakes
Mistake 1: Undercapitalization
Starting with too little reserve capital creates crisis mode. Secure adequate funding before opening.
Mistake 2: Hiring Too Fast
Adding staff before volume justifies the cost burns cash. Hire when you need capacity, not when you hope for growth.
Mistake 3: Premium Equipment Before Revenue
Buying top-tier equipment day one depletes capital. Start with reliable mid-range equipment. Upgrade as revenue supports it.
Mistake 4: Ignoring Cash Flow
Profitable practices can fail if cash runs out. Monitor cash weekly. React quickly to negative trends.
Mistake 5: No Financial Tracking
Flying blind leads to surprises. Implement basic accounting from day one. Review financials monthly at minimum.
Mistake 6: Owner Draws Too Early
Taking money out before the practice stabilizes jeopardizes survival. Live lean during year one. Build the practice first.
Planning for Year Two
As year one ends, plan for year two:
Financial review:
- How did actual results compare to projections?
- What drove variances?
- What would you do differently?
Budget update:
- Adjust based on actual experience
- Set realistic growth targets
- Plan capital expenditures
Strategic decisions:
- Is current location adequate?
- Do you need additional staff?
- Are there service line expansion opportunities?
- Is marketing working?
Year two should be the year of profitability and stability, setting up year three and beyond for growth and owner wealth building.
Next Steps
Financial planning is one component of launching a successful practice. For guidance on equipment, staffing, location, and operations, review our comprehensive Starting an Optometric Practice 101 guide.
Last Updated: January 2026
Sources: SBA - Manage Your Finances, Review of Optometric Business
Need help managing patient calls during your crucial first year? Schedule a consultation to learn how MyBCAT supports new optometry practices with professional call handling.
