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Project Business Plan

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Project Business Plan Powered By Docstoc
					CCI: Major Capital Project Seminar


              Business Planning


          Tony Skapinsky, Project Consultant, CA
    Amy Harbaugh, Senior Director, Project Consulting, MD
                       Capital Link
                     October 26, 2005
                    San Francisco, CA
The Business Plan
   Business Plan Document vs. Business Planning Process


   • Business Plan Document is the culmination
     of the Business Planning Process.
   • Business Planning Process
       –   Strategic Planning
       –   Market Analysis
       –   Space Planning Analysis
       –   Project Budgeting
       –   Financial Forecast
 Strategic Planning Activities
As a process, strategic planning involves
• Assessing external environment
• Assessing internal capacity
• Developing a vision for the future
• Developing future goals and objectives
• Participative process involving staff and
  Board
The Business Plan
   Business Plan Document vs. Strategic Plan Document

   • Strategic Plan Document
       – Tells where the health center wants to go


   • Business Plan Document
       – Tells how the health center is going to get there
Developing a Business Plan

Start from the beginning by asking yourself a few questions…


• What is the purpose of the business plan?

• Who is the audience?

• What messages do you want to get across?
Begin with the Basics

Don’t assume that the reader knows:

• what a health clinic is and how it differs
  from other health care providers;
• how you’re funded;
• what it means to be a Section 330, FQHC,
  Rural Health Center, CCI clinic, etc.;
• what the MediCal policies are in CA.
Developing a Business Plan

Therefore, help the reader by:

•   Providing health center overview
•   Presenting information clearly
•   Not using acronyms
•   Thoughtfully presenting information to
    avoid overloading reader
Contents of a Business Plan
•   Executive Summary
•   History and Operations
•   Market Description & Analysis
•   Management & Governance
•   Proposed Capital Project
•   Financial Operations & Projections
•   Conclusion
     Executive Summary


• State amount and type of financing request
• Summarize nature of project
• Provide synopsis of center’s history &
  operations, leading to statement of project’s
  rationale
• Sum up benefits of project
     History and Operations

 Content                      Where to get information
• Mission /               •    Annual Reports
  Organizational          •    General PR Materials
  Background              •    Grant Proposals
• Operation Description   •    Required Reporting
• Programs and Services
• Facilities
 Market Description

 Content                 Where to get information
• Demographics of        • Strategic Plan
  Market Area            • Required Reporting -
• Demographics of          UDS, HPSA
  Patient Base           • Patient Data
• Competition            • Census data, state data
• Market Environment       sources
• Market Opportunities   • Marketplace data from
                           PCA
Market: Planning for the Future
•   Examine demographic trends
•   Examine market trends
•   Location and transportation issues
•   Identify center’s strategic advantages
•   Collaborations / community support
Sample Format: Health Center Market Data
                 Geographic Area

    Zip Code   Primary Service   Health Center   Market Share
               Area Population
                                   Patients
    12122           7,965            4,709          59.1%
    12125          12,111            3,740          30.9%
    12124          18,909            3,879          20.5%
    12121           9,873            787            8.0%
    Total          48,858           13,115          26.8%
Sample Format: Health Center Market Data

                             Income Status

                                      Population in                    Estimated
                                                        Patients in
                                     Primary Service     PSA &          Center
          Income Status
                                     Area (PSA) & %                     Market
                                         of Total       % of Total
                                                                         Share
At or below poverty level             11,142 (23%)      4,985 (38%)      45%
100% to 200 % of poverty level        18,503 (38%)      5,770 (44%)      31%
Greater than 200% of poverty level    19,213 (39%)      2,360 (18%)      12%
Total                                 48,858 (100%)    13,115 (100%)     27%
Sample Format: Health Center Market Data
               Racial and Ethnic Characteristics

                                   Population in                       Estimated
                                  Primary Service   Patients in PSA   Health Center
      Race/National Origin
                                   Area (PSA) &      & % of Total     Market Share
                                    % of Total
 American Indian/Alaskan Native     317 (<1%)           1 (0%)             0%
 Asian                               824 (2%)          79 (<1%)           10%
 Black, not Hispanic origin        28,554 (58%)      9,679 (74%)          34%
 Hispanic                           4,965 (10%)      1,351 (10%)          27%
 White                             11,289 (23%)        511 (4%)            5%
 Other/Unknown                      2,909 (6%)       1,494 (11%)          51%
 Total                            48,858 (100%)     13,115 (100%)         27%
Sample Format: Health Center Market Data
         Racial and Ethnic Characteristics

   Distribution of Users of XYZ Health Center by Race/Ethnicity
                                   White,
                          Other Non-Hispanic
                     Asian 11%      4%
                      1%
               Hispanic
                 10%




                                        African American
                                               74%
  Sample Format: Health Center Market Data

                      Age Demographics

Relevant Age Groups   Primary Service Area   CHC Patients   Market Share
< 20 years of age            15,299             5,549          36.3%
Aged 20 – 34                 14,029             3,671          26.0%
Aged 35 – 44                 6,844              1,201          17.5%
Aged 45 – 54                 4,382               926           21.1%
Aged 55 – 64                 3,476               819           23.6%
Aged 65+                     4,828               949           19.7%
Total                        48,858             13,115         26.8%
Management & Governance
    Content                   Where to get information
  • Overview of             • Board of Directors list
    Organizational            and backgrounds
    Structure and Control   • Resumes
  • Board of Directors      • Organizational charts
  • Staff Experience &
    Qualifications
Management

 • Demonstrate stability in leadership and/or key
   skill sets that have been recently added

 • Demonstrate previous successes in project
   management for expansion

 • Show how your organizational chart will change
   with growth (e.g., centralized vs. local decision
   making)?
            The Capital Project
  Content                 Where to get information
• Project Description   • Strategic Plan explains
  and Rationale           importance of project
• Project Budget        • Construction budget
• Sources & Uses of       and timeframe from
  Funds                   Architect & Engineer
• Development Team      • Financing Source info
• Timeframe               for Sources & Uses
• Plan of Operation
  during Construction
Project Cost Estimation
  Steps for developing initial cost estimates for health center
  construction projects:
   • Step 1) Determine space need (SF)
   • Step 2) Determine the approximate hard
     construction cost/square foot (cost/SF)
   • Step 3) Determine total hard construction costs
     (estimated SF x cost/SF)
   • Step 4) “Gross up” hard costs amount to account
     for equipment and soft costs
   • Step 5) Estimate land/building acquisition costs
Project Cost Estimation
  Typical Breakdown of Project Costs for Health Centers:

   Hard Costs:                 70%
   Equipment:                  15%
   Soft Costs:                 15%

   Total Project Cost          100%

   + Land/Building Acquisition!
Project Budgeting
 Budgeting and Defining Project Costs

  • During the design phase, begin to identify
    all costs for the facility project
  • Refine the cost estimates at end of each
    design phase
  • Use a tool like the Capital Link Project
    Budget Template to help in this process
 Project Budgeting
                                                        "HEALTH CENTER NAME"

Budgeting & Defining                                 PRO PO SED PRO JECT BUDGET


Project Costs
     This sample budget is intended as a comprehensive checklist. Don’t worry! You will not need every item shown on the checklist! A
     detailed budget is useful, however, because it reminds you to consider services and expenses that are not necessarily apparent or
     anticipated but may be required. Some health centers use a detailed budget for internal planning purposes and a more consolidated
     budget for external presentations.


     Total Sq. Footage                                             0                               Total                      Cost/
                                                                                                   Costs                     Sq. Foot
     Real Estate Related Costs:
     Land Acquisition                                                  acres
     Acquisition of Existing Building                                  sq.ft.
            Total Real Estate Costs:


     Hard Costs:
     Site Preparation
     Construction/Renovation:
       Asbestos Abatement
       Environmental Remediation


     Construction of New Building                                      sq.ft.
     Rehab of Existing Building                                        sq.ft.
     Construction of Addition to Existing Building                     sq.ft.
     Ow ner “Not in Contract” Items
     Construction Contingency
            Total Hard Costs:
Saving Money: Rule of “Tens”

     A change that costs you $1 in Schematic Design
     Will cost $10 in Design Development
     Will cost $100 in Construction Documents
     Will cost $1,000 during Bid Negotiation
     Will cost $10,000 during Construction
     Will cost $100,000 after Construction


  Most changes that occur during and after construction are
  based on late decisions (especially equipment selection)
  by the “client”
         Project Budget vs.
     Sources and Uses of Funds
  Project Budget             Sources & Uses of Funds
• Shows costs of entire      • Shows how project
  project                      financed (sources) and
• Provides Project Cost        how funds spent (uses)
  Components:                   – Sources of Funds:
                                   • Grants, Loans, Cash
   – Hard Costs
   – Soft Costs                 – Uses of Funds:
                                   • Project Budget
   – Equipment & Furniture
     Costs                   • Sources = Uses
Assess your Financial Situation
    Capital Link can Help!
Financial Operations & Projections

  Content                           Where to get information
• Narrative:                       • Audited financial
   – Historical & projected          statements
     financial performance
   – Methodology & underlying      • Statistical information
     assumptions
   – Impact of capital project
                                     (visits, users,
                                     reimbursement rates,
• Numbers:
   – Spreadsheets showing            staffing)
     historical & projected
     balance sheet, income
                                   • Assumptions about
     statement, cash flow            future performance
     statement, & related backup
Financial Projections
• Use historical experience as the baseline for
  projected performance
• Make reasonable assumptions about the future
• Divide task into sections - patient revenue, grant
  revenue, salary expenses, other expenses
• Incorporate changes resulting from new building
  project - volume, staffing, building expenses
• Capital Link has developed a tool called ForecasT
  to help!
Developing Financial Projections
              PATIENT REVENUE

• Use your knowledge of what is happening
  with each payor to develop projections
• Estimate Patient visits / users by payor
  category (Medicaid, Medicare, Commercl.)
• Estimate reimbursement rate by payor
• Multiply visits/user by reimbursement rate
  to get projected revenue by payor
Patient Revenue Projections
      Show 3 years actuals and 3-5 years projections
                                   HEALTH CENTER, INC.
                                        PATIENT VOLUME
                                        Actual Results                       Projected Results
                                            FY01                                   FY02
                                                        Visits /                           Visits /
      Payor                    Visits     Users          User        Visits     Users       User
      Fee-for-Service:
         Medicaid              22,979        5,858            3.92   23,196       5,917          3.92
         Medicare               6,236        1,597            3.90    7,122       1,826          3.90
         Self Pay               5,320        1,942            2.74    5,271       1,924          2.74
         Commercial             1,907          428            4.46    3,698         829          4.46
      Total Fee-for-Service:   36,442        9,825            3.71   39,287      10,496          0.23

      Capitation:
         CenterCare             1,056          213            4.96    1,112         224          4.96
      Total Capitation:         1,056          213            4.96    1,112         224          4.96

      Total Medical            37,498       10,038            3.74   40,399      10,721          3.77

                                        PATIENT REVENUE
                                        Actual Results                       Projected Results
                                            FY01                                   FY02
                               Rev/     Rev/User        Total        Rev/      Rev/User  Total
      Payor                    Visit     PM/PM         Revenue       Visit      PM/PM   Revenue
      Fee-for-Service:
         Medicaid                 $86                  $1,977,917       $88               $2,052,614
         Medicare                  71                     442,132        72                  516,274
         Self Pay                  20                     106,419        20                  105,430
         Commercial                46                      87,722        50                  184,900
      Total Fee-for-Service:                           $2,614,191                         $2,859,218

      Capitation:
         CenterCare                               35      89,460                     35      94,204
      Total Capitation:                                  $89,460                            $94,204

      Total Medical                                    $2,703,651                         $2,953,422
Developing Financial Projections
              GRANT REVENUE

• List historical grant resources and dollar
  levels
• List known future grant sources (330 grant,
  public health grants)
• Make sound and conservative assumptions
  about potential grant resources
Building Financial Projections
         SALARY AND RELATED EXPENSES

• List historical staffing (FTEs) and salary ($)
  levels by provider type
• Estimate staffing necessary to accommodate
  growth (consistent with new project)
• Incorporate appropriate salary increases
• Estimate fringe expense based on historical
  levels, incorporate any changes
Staffing & Salary Projections
       Show 3 years actuals and 3-5 years projections
                                        HEALTH CENTER, INC.
                                        EMPLOYMENT INFORMATION
                                          Historical and Projected


                                               Actual Results                Projected Results
                                                       FY01                            FY02
                    Service Provider:       FTEs          Salaries          FTEs          Salaries
            Physician                           6.28          $691,340          6.63          $750,755
            Midlevel (PA, NP)                   4.29           233,572          4.97           278,713
            Nurses (RN, LPN)                   15.87           618,997        20.15            809,513
            Dental Providers                    1.12            50,549          1.12            52,065
            Provider Support*                  60.18          1,183,223       62.04           1,256,387
            Administration                     10.77           501,336        10.00            479,458
            Other                               5.55           125,470          5.00           116,427
            Total FTEs/Salaries               104.06      $3,404,487         109.91       $3,743,319
            Fringe Benefit Expense                             657,839                         598,931
            TOTAL                             104.06      $4,062,326         109.91       $4,342,250


                                            SALARY GROWTH
                                                                             Projected Results
                                                       FY01                            FY02
                    Service Provider:     Sala / FTE     % growth         Sala / FTE     % growth
            Physician                      $110,086              2.00%     $113,389              3.00%
            Midlevel (PA, NP)                 54,446             1.88%       56,079              3.00%
            Nurses (RN, LPN)                  39,004             4.68%       40,174              3.00%
            Dental Providers                  45,133             3.93%       46,487              3.00%
            Provider Support*                 19,661             3.11%       20,251              3.00%
            Administration                    46,549             3.91%       47,946              3.00%
            Other                             22,607             3.01%       23,285              3.00%
            Average Salary / FTE             $32,717             7.70%      $34,058              4.10%
            Fringe Exp/Tot Salary                               16.19%                          13.79%
Financial Projections
              OTHER EXPENSES


• Certain expenses will grow with volume
  (supplies)
• Other expense projections will be based
  upon expectations for inflation and other
  factors
• Incorporate new building related expenses
  (interest, depreciation, utilities, security,
  maintenance) into projections
   Pulling the Projections Together
                                             HEALTH CENTER, INC.
                                         STATEMENT OF ACTIVITIES
                                        HISTORICAL AND PROJECTED
                                        Audited Results                                                                                                                           Projected Results
      FISCAL YEAR               FY99         FY00       FY01                                                                                                               FY02         FY03

Net Patient Service Revenue     2,228,021      2,837,999                                                                                                       2,703,651   2,998,422   4,366,989
Total Grants & Contracts          611,022      1,224,509                                                                                                       1,909,010   2,225,617   2,532,913
Donated Goods & Services          109,418        110,167                                                                                                         105,199     111,600     113,000
Other Operating Revenue           205,930        229,754                                                                                                         284,743     239,838     214,400
  TOTAL OPER REV                3,154,391      4,402,429                                                                                                       5,002,603   5,575,477   7,227,301

Salaries & Related Expense       2,135,739     2,963,085                                                                                                       3,404,487   3,743,319   4,915,019
Fringes & Payroll Taxes            453,680       507,327                                                                                                         657,839     598,931     786,403
Supplies                           140,727       152,256                                                                                                         147,388     152,898     250,774
Insurance                           70,536        40,076                                                                                                          18,517      25,750      50,223
                                                                                   HEALTH CENTER, INC.
                                                                                 STATEMENT OF ACTIVITIES
                                                                                HISTORICAL AND PROJECTED
                                                                                    Audited Results          Projected Results
                                                      FISCAL YEAR              FY97      FY98       FY99 FY00      FY01       FY02

                                                Net Patient Service Revenue   2,228,021   2,837,999   2,703,651   2,998,422   4,366,989   4,730,580
                                                Total Grants & Contracts        611,022   1,224,509   1,909,010   2,225,617   2,532,913   2,417,205
                                                Donated Goods & Services        109,418     110,167     105,199     111,600     113,000     113,000
                                                Other Operating Revenue         205,930     229,754     284,743     239,838     214,400     213,400
                                                  TOTAL OPER REV              3,154,391   4,402,429   5,002,603   5,575,477   7,227,301   7,474,185

                                                Salaries                      2,135,739   2,963,085   3,404,487   3,743,319   4,915,019   5,145,163




Administration & General            64,795
                                                Fringes & Payroll Taxes         453,680     507,327     657,839     598,931     786,403     823,226
                                                Supplies                        140,727     152,256     147,388     152,898     250,774     260,126




                                                  79,565                                                                                                         141,522     153,269     100,000
                                                Insurance                        70,536      40,076      18,517      25,750      50,223      51,729
                                                Administration & General         64,795      79,565     141,522     153,269     100,000     103,000
                                                Bad Debt Expense                 33,104     108,765      70,890     107,000     110,210     113,516
                                                Rent                            122,619     234,645     201,187     198,324     138,408     111,747
                                                Facility Oper & Main             34,929      72,232      84,128      81,556     131,956     135,915
                                                Depreciation                     33,154      53,547      83,120      87,927      90,565      93,282
                                                Depreciation on New Site                                                        137,592     137,592
                                                Interest Expense                    459       6,754       9,048      12,438     146,225     150,121
                                                Other Operating Expense          46,583      93,391      97,912     147,563     151,990     156,550
                                                   TOTAL OPER EXP             3,136,325   4,311,643   4,916,038   5,308,975   7,009,364   7,281,966

                                                CHGE IN NET ASSETS              18,066      90,786      86,565     266,502     217,938     192,219




Bad Debt Expense                    33,104       108,765                                                                                                          70,890     107,000     110,210
Rent                               122,619       234,645                                                                                                         201,187     198,324     138,408
Facility Operation & Maintenance    34,929        72,232                                                                                                          84,128      81,556     131,956
Depreciation                        33,154        53,547                                                                                                          83,120      87,927      90,565
Depreciation on New Site                                                                                                                                                                 137,592
Interest Expense                       459         6,754                                                                                                           9,048      12,438     146,225
Other Operating Expense             46,583        93,391                                                                                                          97,912     147,563     151,990
   TOTAL OPER EXP                3,136,325     4,311,643                                                                                                       4,916,038   5,308,975   7,009,364

CHANGE IN NET ASSETS               18,066                                                                                                             90,786     86,565     266,502      217,938
Financial Projections

    Remember...
•   Explain your assumptions in writing and translate your
    assumptions into numbers
•   Ideally, should include balance sheet, income statement,
    cash flow statement, and related detail
•   Important to make realistic projections - you may be held
    to them in the future
•   Be up-front about downturns in financial performance.
    Explain what health center is doing to remediate problems
•   Show three years of actual results, three - five years of
    projections
Final Thoughts on Business Planning:

• Committing your plans to writing helps:
   – hone and clarify ideas
   – build a common understanding of the organization’s
     goals and what it will take to succeed
   – establish performance targets by which to measure
     progress
   – identify areas that will need particular attention
   – convince funders that you know what you’re doing and
     where you’re going!
Conclusion

 • Recap important points
 • Explain importance of capital project
 • Highlight strengths
   The Fine Points

• Polish & accuracy is important!
• Offer to present business plan to respective
  audience. Health center is best able to tell
  convincing story.
• Provide names of people at health center
  who can be contacted with any questions.
• Good Luck!
   Capital Link Resources

• Business Plan Manual available to health
  centers for free
• Business Plan Spreadsheet Software
  Application (ForecasT) and Assistance in
  developing Business Plan available for a fee
Incorporate Business Planning into your Overall
              Planning Process
Contacting Capital Link
                      Tony Skapinsky
                        Steven Slezak
                     Project Consultants
                        Capital Link
                         979 Osos St.
              Suites B3 (Tony) and B4 (Steven)
                 San Luis Obispo, CA 93401
           phone: 805-544-2355 fax:805-544-7919
        tskapinsky@caplink.org sslezak@caplink.org

                       Amy Harbaugh
             Senior Director, Project Consulting
                        Capital Link
      7200 Wisconsin Ave., Suite 210, Bethesda, MD 02116
           phone: 301-347-0400 fax: 301-347-0459
                   aharbaugh@caplink.org

				
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Description: Project Business Plan document sample