Business Planning

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Business Planning
CCI Major Capital Project Seminar

• Tony Skapinsky, Project Consultant, CA
• Amy Harbaugh, Senior Director, Project
  Consulting, MD
• Capital Link
• October 26, 2005
• San Francisco, CA

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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

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(No Transcript)
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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

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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

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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?

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Begin with the Basics
Dont assume that the reader knows

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

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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

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Contents of a Business Plan

• Executive Summary
• History and Operations
• Market Description Analysis
• Management Governance
• Proposed Capital Project
• Financial Operations Projections
• Conclusion

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Executive Summary

• State amount and type of financing request
• Summarize nature of project
• Provide synopsis of centers history
  operations, leading to statement of projects
  rationale
• Sum up benefits of project

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History and Operations
Where to get information
Content

• Mission / Organizational Background
• Operation Description
• Programs and Services
• Facilities

• Annual Reports
• General PR Materials
• Grant Proposals
• Required Reporting

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Market Description
Where to get information
Content

• 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

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Market Planning for the Future

• Examine demographic trends
• Examine market trends
• Location and transportation issues
• Identify centers strategic advantages
• Collaborations / community support

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Sample Format Health Center Market Data
Geographic Area
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Sample Format Health Center Market Data
Income Status
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Sample Format Health Center Market Data
Racial and Ethnic Characteristics
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Sample Format Health Center Market Data
Racial and Ethnic Characteristics
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Sample Format Health Center Market Data
Age Demographics
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Management Governance
Content
Where to get information

• Overview of Organizational Structure and Control
• Board of Directors
• Staff Experience Qualifications

• Board of Directors list and backgrounds
• Resumes
• Organizational charts

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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)?

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The Capital Project
Content
Where to get information

• 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

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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

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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!
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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

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Project Budgeting
Budgeting Defining Project Costs
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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
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Project Budget vs.Sources and Uses of Funds
Project Budget
Sources 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

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Assess your Financial Situation Capital Link can
Help!

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Financial Operations Projections
Content
Where to get information

• 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

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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!

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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

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Patient Revenue Projections
Show 3 years actuals and 3-5 years projections
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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

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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

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Staffing Salary Projections
Show 3 years actuals and 3-5 years projections
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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

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Pulling the Projections Together
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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

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Final Thoughts on Business Planning

• Committing your plans to writing helps
• hone and clarify ideas
• build a common understanding of the
  organizations 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 youre doing
  and where youre going!

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Conclusion

• Recap important points
• Explain importance of capital project
• Highlight strengths

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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!

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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

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Incorporate Business Planning into your Overall
Planning Process
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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 [phone] fax[phone] tskapi
nsky_at_caplink.org sslezak_at_caplink.org Amy
Harbaugh Senior Director, Project
Consulting Capital Link 7200 Wisconsin Ave.,
Suite 210, Bethesda, MD 02116 phone [phone]
fax [phone] aharbaugh_at_caplink.org