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  • Once you’ve finished the schematic design phase and you have a refined project cost estimate, it’s time to start putting together all the components of your business plan into a written document that can be used to solicit financing for the project Capital Link can assist with putting together your business plan
  • Talk about the fact that you need to do all this pre-work before you actually start to develop the facility design.
  • Once you’ve finished the schematic design phase and you have a refined project cost estimate, it’s time to start putting together all the components of your business plan into a written document that can be used to solicit financing for the project Capital Link can assist with putting together your business plan
  • Who are you serving now and how do they compare to your market as a whole? Geographic data: census tract, zip code Demographic and health status data: income, sex, race, ethnicity, language, age, disease prevalence, insurance status Competition where else do patients go for care: medical, dental, behavioral what’s the need for provider expansion in the market? can we limit unintended consequences (competition protocol)? Who could we/should we be serving 5 years from now?
  • changes in healthcare delivery or payor system, new employers locating in service area (or leaving), economic trends is Medicaid decreasing benefits and/or populations covered? how will state budget shortfalls affect your organization
  • Hard costs generally include site preparation, asbestos abatement and environmental remediation (if needed), facility construction, and construction contingency (typically 10% of construction costs). This is perhaps the most variable factor in cost estimating; health center management should seek estimates from local contractors with health center facility development experience. Capital Link generally uses a hard construction cost/SF of $125/SF-$150/SF for health center new construction in the absence of such local estimates.
  • Total project cost (excluding land acquisition) can be determined by multiplying hard construction costs by 1.43 (or 10/7). The preceding breakdown is based on aggregated data from a broad selection of health center construction projects with which Capital Link has been involved. Note that the line item estimates above include contingency costs at 10% for hard costs, and 5% for both soft and equipment costs. Soft costs include architectural and engineering fees, environmental assessment, appraisal, consultant services, permitting and legal fees, project financing costs, and closing costs, but do not include demolition and removal of existing facilities.
  • Have hand-outs with the slides which include a complete Project Budget Template.

Transcript

  • 1. Business Planning Tony Skapinsky, Project Consultant, CA Amy Harbaugh, Senior Director, Project Consulting, MD Capital Link October 26, 2005 San Francisco, CA CCI: Major Capital Project Seminar
  • 2. The Business Plan
    • 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
    Business Plan Document vs. Business Planning Process
  • 3.  
  • 4. 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
  • 5. The Business Plan
    • Strategic Plan Document
      • Tells where the health center wants to go
    • Business Plan Document
      • Tells how the health center is going to get there
    Business Plan Document vs. Strategic Plan Document
  • 6.
    • What is the purpose of the business plan?
    • Who is the audience?
    • What messages do you want to get across?
    Developing a Business Plan Start from the beginning by asking yourself a few questions…
  • 7. Begin with the Basics
    • 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.
    Don’t assume that the reader knows:
  • 8. Developing a Business Plan
    • Providing health center overview
    • Presenting information clearly
    • Not using acronyms
    • Thoughtfully presenting information to avoid overloading reader
    Therefore, help the reader by:
  • 9. Contents of a Business Plan
    • Executive Summary
    • History and Operations
    • Market Description & Analysis
    • Management & Governance
    • Proposed Capital Project
    • Financial Operations & Projections
    • Conclusion
  • 10. 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
  • 11. History and Operations
    • Mission / Organizational Background
    • Operation Description
    • Programs and Services
    • Facilities
    • Annual Reports
    • General PR Materials
    • Grant Proposals
    • Required Reporting
    Content Where to get information
  • 12. Market Description
    • Demographics of Market Area
    • Demographics of Patient Base
    • Competition
    • Market Environment
    • Market Opportunities
    • Strategic Plan
    • Required Reporting - UDS, HPSA
    • Patient Data
    • Census data, state data sources
    • Marketplace data from PCA
    Content Where to get information
  • 13. Market: Planning for the Future
    • Examine demographic trends
    • Examine market trends
    • Location and transportation issues
    • Identify center’s strategic advantages
    • Collaborations / community support
  • 14. Sample Format: Health Center Market Data Geographic Area
  • 15. Sample Format: Health Center Market Data Income Status
  • 16. Sample Format: Health Center Market Data Racial and Ethnic Characteristics
  • 17. Sample Format: Health Center Market Data Racial and Ethnic Characteristics
  • 18. Sample Format: Health Center Market Data Age Demographics
  • 19. Management & Governance
    • Overview of Organizational Structure and Control
    • Board of Directors
    • Staff Experience & Qualifications
    • Board of Directors list and backgrounds
    • Resumes
    • Organizational charts
    Content Where to get information
  • 20. 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)?
  • 21. The Capital Project
    • Project Description and Rationale
    • Project Budget
    • Sources & Uses of Funds
    • Development Team
    • Timeframe
    • Plan of Operation during Construction
    • Strategic Plan explains importance of project
    • Construction budget and timeframe from Architect & Engineer
    • Financing Source info for Sources & Uses
    Content Where to get information
  • 22. Project Cost Estimation
    • 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
    Steps for developing initial cost estimates for health center construction projects:
  • 23. 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!
  • 24. Project Budgeting
    • 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
    Budgeting and Defining Project Costs
  • 25. Project Budgeting Budgeting & Defining Project Costs
  • 26.
    • 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” Saving Money: Rule of “Tens”
  • 27. Project Budget vs. Sources and Uses of Funds
    • Shows costs of entire project
    • Provides Project Cost Components:
      • Hard Costs
      • Soft Costs
      • Equipment & Furniture Costs
    • Shows how project financed (sources) and how funds spent (uses)
      • Sources of Funds:
        • Grants, Loans, Cash
      • Uses of Funds:
        • Project Budget
    • Sources = Uses
    Project Budget Sources & Uses of Funds
  • 28. Assess your Financial Situation Capital Link can Help!
  • 29. Financial Operations & Projections
    • Narrative:
      • Historical & projected financial performance
      • Methodology & underlying assumptions
      • Impact of capital project
    • Numbers:
      • Spreadsheets showing historical & projected balance sheet, income statement, cash flow statement, & related backup
    • Audited financial statements
    • Statistical information (visits, users, reimbursement rates, staffing)
    • Assumptions about future performance
    Content Where to get information
  • 30. 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!
  • 31. Developing Financial Projections
    • 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
  • 32. Patient Revenue Projections Show 3 years actuals and 3-5 years projections
  • 33. Developing Financial Projections
    • 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
    GRANT REVENUE
  • 34. Building Financial Projections
    • 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
    SALARY AND RELATED EXPENSES
  • 35. Staffing & Salary Projections Show 3 years actuals and 3-5 years projections
  • 36. Financial Projections
    • 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
    OTHER EXPENSES
  • 37. Pulling the Projections Together
  • 38. Financial Projections
    • 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
    Remember...
  • 39. 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!
  • 40. Conclusion
    • Recap important points
    • Explain importance of capital project
    • Highlight strengths
  • 41. 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!
  • 42. 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
  • 43. Incorporate Business Planning into your Overall Planning Process
  • 44. 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 t [email_address] [email_address] Amy Harbaugh Senior Director, Project Consulting Capital Link 7200 Wisconsin Ave., Suite 210, Bethesda, MD 02116 phone: 301-347-0400 fax: 301-347-0459 [email_address]