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Let's Build a Budget!

By: Christopher Ellis

How to Prepare a Simple New Year Budget for your Practice

Let’s Build a Budget

While you’re ringing in the new year, I’m sure planning your budget is the last thing on your mind. However, there really is no time like the present to get your new year off on the right start with a road map for what’s to come.

While the thought of creating an annual budget may seem daunting or unappealing, you might be surprised to see how far a little bit of work can go when it comes to forecasting your performance next year. You can certainly hire an accountant or practice management consultant to create a detailed budget for your practice (in fact, we would strongly encourage you to do so), but at the end of the day, nobody knows your practice like you do so you should absolutely be involved in the process. So here are a few steps to help you get the ball rolling!

Step 1 - History Repeats Itself

Ideally, 2021 will look very different than 2020 (at least one can only hope). With that being said, looking at the prior year’s numbers is the best place to start when planning out your budget for the following year. So the first thing you should do is pull up your 2020 Profit and Loss Statement, broken out by month (it’s really important that you view this by month). Next, we suggest you look in your Practice Management software so you can pull your Patient Visit reports (also by month). Now there are a lot of details and reports you can (and should) look at when it comes to budget preparation, but we’ll show you how to get a “30,000-foot view” of your performance and use that as a launchpad to determine the next steps.

Our super simplified way to get started is to identify just three numbers by month: total patients seen, total revenue, and total expenses. This may seem overly simplified (and to be honest, it definitely is), but the beauty behind this super-high level breakdown is it actually shows you quite a bit more than you may think at first glance. Take those three numbers and drop them into a table like this:

Go ahead and calculate your Net Profit by subtracting expenses from total revenue by month, and take a step back to really observe your numbers. Which month earned you the most revenue? Which month did you see the most patients? Were these consistent with what you would have thought? Which month, if any, looks a bit off or significantly different from the rest? These are all good questions to ask yourself while reviewing your historical figures so you can better understand, at a high level, how you performed.

Chances are, reviewing your practice performance at this 30,000-foot view will prompt even more questions, but that’s great! For example, you might notice that your expenses were much higher in July vs. June, but you can’t remember why. Or perhaps you saw a significant dip in Total Patient Visits from one month to the next. You can now use this as a starting point to determine where to dig in next by examining your Financials or Practice Management Reports more closely for answers. Once you’ve had a chance to really observe and review your historicals, you’re ready for the next step.

Step 2 - Prepare Your Plan

Benjamin Franklin once said, “By failing to prepare, you are preparing to fail.” The good news is by completing Step 1, you have already begun the preparation phase so good job! Now that you have a good understanding of how you performed last year, let’s talk next year. For this step, we encourage you to start asking yourself questions about how you expect this year to look. Some example ‘primer’ questions include:

Are you trying to actively grow your practice, maintain your existing new patient

volume, or stop accepting new patients in the new calendar year?

Are there any big changes/investments you intend to make this year for your practice, such as purchasing new equipment, hiring a new associate, etc.?

If you’re planning on seeing more patients this year than last year, have you accounted for the additional expenses (i.e. marketing, supplies, staff, etc.) needed to accommodate for that growth?

Are you going on any vacations this year? If so, when? And for how long?

Those are just a few examples of things to consider when you’re thinking through the upcoming year. These types of priming questions will help get you in the mindset to start putting pen to paper and begin writing out your projections.

Now we get it, after the completely unexpected outcomes of 2020, there’s a lot of reasons to think we have no idea what to plan for in 2021. But don’t confuse budgeting with fortune-telling. Budgets can (and should) change when you have more information available so don’t worry about making sure everything looks 100% accurate from the get-go. Consider the process of budgeting just as important as the budget itself. By thinking through the possible changes you might expect in 2021, you’re already much better prepared to handle those changes.

I always recommend starting your budget by literally copying/pasting last year’s figures (by month) over to the following year. Then, you can adjust each field month by month by adding/subtracting, depending on your answers to those priming questions. Chances are, you’ll want to grow your practice next year so start off with a modest 5 – 10% increase in Revenue, by month, straight off the bat. It is worth noting, however, that in order to achieve that increase in revenue, there will likely be an increase in some of your expenses as well so just remember to take that into consideration.

At this point, you should continue going month by month and entering figures that seem to accomplish your goal yet still seem attainable. If you find yourself getting overwhelmed or concerned during this process, just take your best-educated guess and move on because the next step will really help legitimize your budget.

Step 3 - Rinse & Repeat.

Luckily, the last step of the budget process is also the easiest. You’ve reviewed last year’s numbers and you’ve written down your plan for the current year. What do you do now? Update the projected numbers in your budget with actual figures as they come in. In doing so, you’ll start to get a feel for how far off your projections might have been. Were you too optimistic about revenue? Did you end up seeing even more patients than you would have thought? The important part to note isn’t exactly how far off the numbers are off from your projection, but why are they off?

It’s ok to update your budget with new information – don’t think of it as a failure if your actual figures look different. Instead, you should think of your budget as a ‘living document’ in the sense that it is expected to change regularly over time. This doesn’t mean you have to go in and update everything daily, but be sure to adjust any significant changes on a semi-regular basis. This will not only make you significantly more in tune with your practice’s day-to-day numbers, but it will also make you much better at predicting your future performance. If you find that you were way off with your original projection for January, make sure you look at February and March and see if those might need to be updated/corrected or if they still seem attainable. Making these regular and periodic adjustments will become much easier with time, and you’ll be an expert budgeter before you know it!

Pro Tip: Make sure to keep a copy of your original budget for future reference. That way, when you update/delete your projected figures with actuals, you can still refer back to the original budget and see, as a whole, how close (or far off) you were from your initial plan.


Now, you have everything you need to get your annual budget in place. And if you’re hoping to grow your practice in 2021, don’t forget, DoctorLogic can help! It’s not enough to plan for an increase in revenue with no plan in place to obtain it so make sure you also plan to invest in the added resources (time, energy, marketing, etc.) to reach your new goal. Of course, you can always call DoctorLogic as we’ve already helped thousands of doctors across the country attract more patients and grow their practices with our best-in-class marketing solutions. If you want to grow your practice and don’t know where to start, give us a call. We’d certainly love to help.

If you’re interested in learning more about budgeting, be sure to check out our Digital Marketing and Technology Budget Guide.