What is working capital? How much do I need?

If you are presenting your business plan for your chiropractic practice startup, you may have had a banker ask you, “How much working capital do you estimate you will need?” Before you gulp and say, “huh?” here’s the deal on working capital. It’s simply the amount of money you need to borrow to cover your expenses until you have enough in sales to cover them.
For example, in the first month of practice, you might have expenses of $8,800 and you only have $5000 of sales. You’ll need $3,800 in working capital that month. Month 2, you might need $2,500; Month 3, you might need $3,100. Then in the 4th month and on, you don’t need anything to cover you. In total, you’ll need $9,400 in working capital.

The trick is to borrow enough. One way to estimate (this is a “worst case” estimate, so don’t panic), is to take 6 months of business expenses (not including any money you take out for personal expenses). In the case above, you would need $52,800. A lot of money! But it’s better to have too much and not need it, because if you run out of money, you’re out of the game.

Use the spreadsheets in Planning for Practice Success to estimate your working capital needs and other financial projections. Bankers love this stuff! You can buy the spreadsheets separately or with the book. Now, when you buy Planning for Practice Success, you receive a workbook to walk you through the process of putting together your business plan and starting you practice. Lots of great information, and all for one low price.