Unit IIA Business Plan Fundamentals and Financials Unit II Version 1

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Unit II Business Plans and the Financial Aspects of Rehabilitation Facilities : 

Unit II Business Plans and the Financial Aspects of Rehabilitation Facilities

Business Planning 101 : 

Business Planning 101 The process of establishing measurable objectives and action plans to accomplish short-term and long-term goals.

Guidelines for Effective Planning : 

Guidelines for Effective Planning Establish plans that are specific, realistic and measurable. Communicate plans consistently with those above and those below you. Assign clear responsibilities for planned activities. Troubleshoot plans prior to implementation. Avoid under or over-planning. Planning should ultimately be designed around the business’s mission and vision. THE PLAN

Strategic Planning: Mission and Vision Statements : 

Strategic Planning: Mission and Vision Statements Mission Statement: a setting forth of an organization’s or department’s purpose. The overall frame of reference for the organization Definition of its products Definition of its services

A Mission Statement Answers: : 

A Mission Statement Answers: Why does the organization exist? What functions does the organization perform? For whom does the organization perform these functions or who are the primary beneficiaries? How does the organization go about filling these functions? IN 50 WORDS OR LESS

Example: Coastal Breeze Therapy Center’s Mission Statement : 

Our mission is to provide all patients and clients with the best possible therapy services in a supportive and instructive atmosphere to best enable them to achieve their personal goals. We will strive to ensure high quality therapy and cost effective outcomes for those we help by: Developing strong evidence-based quality services Making available a positive and supportive environment for all clients. Treating all individuals as we would like to be treated. Example: Coastal Breeze Therapy Center’s Mission Statement

Strategic Planning: Mission and Vision Statements : 

Strategic Planning: Mission and Vision Statements Vision Statement: a vivid idealized showcasing of the organization’s view of the future “The Ideal Organization” “The Ideal World” A good vision statement can inspire loyalty, hard work and innovation,

A Vision Statement Answers: : 

A Vision Statement Answers: Why was the therapy business/clinic/department started? When the therapy organization, clinic, or department is no longer around, what does it want to leave behind? What is the organization, clinic, department really providing for their patients/clients beyond products and services? If the organization/department/clinic could be everything it dreamed of, what would it be?

Example: Vision Statement : 

Example: Vision Statement “Coastal Breeze Therapy Center will be a leader in providing autonomous physical and occupational therapy services. We will demonstrate leadership and develop associations within the North San Diego area medical communities through innovative practice, education and research, exceptional quality of care, professionalism, and through socio-economic accountability.”

Planning to Bring Your Vision into Reality : 

Planning to Bring Your Vision into Reality DEVELOPING A STRATEGIC PLAN SWOT Analysis

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THREATS What are the negative economic trends that could effect therapy? What are the negative political and social trends that could impact therapy services or reimbursement? Who are the competitors and how could they impact your business?Wher are you vulnerable? STRENGTHS What do you do well (in therapy skills, marketing, operations, management)? What are your assets? What are your core competencies? Where are you getting referrals? What experience do you have? WEAKNESSES What would your or do you need (customer service, marketing, accounting, planning, skill certifications)? Where do you lack resources? What are your personal limitations that hinder potential success? OPPORTUNITIES What new needs of clients/patients could you meet? What are the economic trends that benefit you? What are the emerging political and social opportunities? What are the technological breakthroughs? What niches in therapy have your competitors missed? SWOT: COASTAL BREEZE REHABILITATION CENTER

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THREATS Salaries have not stayed competitive for the North SD county area: may lose staff New rehab clinic opening in town. Changes in Medicare and Blue Cross reimbursement rates Changes in health care reform. Changes in national and local economic outlook.s STRENGTHS Highly skilled and stable staff Strong clinic leadership Effective working relationships with other departments Established reputation with medical community Established relationships and reputations within the local community WEAKNESSES Lack of experiences in areas of new program development Set in our ways and less flexible than we should be Inadequate space and equipment to increase patient volume OPPORTUNITIES New referral sources and new specialty areas we are not currently involved in Invitation by Univ. of St. Aug. to establish a collaborative relationship on program development and research Population aging with increased baby boomers needing our services SWOT: COASTAL BREEZE REHABILITATION CENTER

Business Plan = Blueprint and Road Map : 

Fundamental and Foundational Document of any Business, (including rehab facilities) Rehab Agency Out-patient Clinic Community Hospital Home Health Care Agency Private Practice Hand Clinic Pediatric Therapy Group Ergonomic Consulting Firm Business Plan = Blueprint and Road Map You don’t have one…NEXT! May I help with a loan? May I see your business plan

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Health Care Documentation Standard of Practice Components: Evaluation Diagnosis Prognosis Number of visits and factors that may modify the number of visits. Reexamination Outcomes Episodes of care Discharge Plan Business Plan Documentation Standards of the Industry Evaluation of What the Business is Determine the Business Potential Determination of External and Internal Factors that influence success Outcome Measurements Operations Marketing Financials Reevaluation and Modification Comparisons

Objectives of a Business Plan : 

Objectives of a Business Plan Describes the fundamentals of your business concept Defines the vision, mission, objectives and LT goals Establishes an action plan and the time for completion Defines business operations and mechanisms for growth Provides a financial picture of the business Provides to yourself, lenders, investors, management that the business is organized, is directional, and can achieve financial success!

Step 1 In The Writing Of A Business Plan : 

Step 1 In The Writing Of A Business Plan Angels “The Bank of Mom and Dad” Personal connection (friend, relative) Informal Investor Lending Institutions Venture Capitalists Strangers

Basics for a Rehab Facility’s Business Plan : 

Basics for a Rehab Facility’s Business Plan Maximum 30-50 pages Factual Clear and Concise Include the potential weakness and threats to success as well as strengths and opportunities. Easy to understand to a non-medical reader Exclude confidential or proprietary information

Components of the Rehab Facility Business Plan : 

Components of the Rehab Facility Business Plan Executive Summary Company Analysis Industry Analysis Analysis of Customers Competitive Analysis Marketing Plan Operations/Design/Development Plans Financial Plan Appendix Coastal Breeze Therapy Text page 51

Prepare Before You Write : 

Prepare Before You Write Determine your audience. Start with a basic outline. Identify what you want in each section & what you want to emphasize. Determine how far into the future you want the plan to extend. Identify your sources of information & the difficulty accumulating the information.

1. Executive Summary : 

1. Executive Summary The First Chapter of the Business Plan 1-2 pages Summary of the highlights of the business plan List the main points of your business plan in the same order they appear in the main body of the business plan. (company description, mission statement, etc) Write a simple declarative sentence for each main points. Add supporting or explanatory sentences Avoid unnecessary technical material/medical jargon. The ES is the doorway to the rest of your plan. Get it right or your target readers will not go further than the executive summary

2. Company Analysis : 

2. Company Analysis Strategic Overview of the Business Business description and organization Products and services offered Business’s unique qualifications to serve its target market(s)

Business Structure, (legal structure) : 

Business Structure, (legal structure) Defining the business by tax, legal, and organizational structure: Complying with local, state, and federal laws Complying with health care laws Complying with professional regulations, (licensing boards)

Business Structures in Rehabilitation : 

Business Structures in Rehabilitation Sole Proprietorships Partnerships Joint Ventures Corporations Limited Liability Company (LLC) Comparisons: Page 34 Richmond and Powers

Sole Proprietorships : 

Sole Proprietorships A sole proprietor is someone who owns an unincorporated business by himself or herself. By default: Self-employed Consultant Independent contractor

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Partnerships : 

Partnerships The relationship existing between two or more persons who join to carry on a trade or business. Each person contributes money, property, labor or skill, and expects to share in the profits and losses of the business.

Types of Partnerships : 

Types of Partnerships General Partnership: partners are personally liable for operations and debts. Limited Partnership: have 1 or more general partners and 1 or more limited partners

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Joint Venture : 

Joint Venture Contractual agreement between 2 or more parties usually limited to a specific time or project dictated business enterprise. This is not a merger nor but usually a temporary partnership

Corporations (Professional and General) : 

Corporations (Professional and General) An entity with a legal existence that is separate and distinct from its owners A corporation is owned by its shareholders Each shareholder owns a percentage of the total equity of the corporation. To form a corporation, prospective shareholders exchange money, property, or both, for the corporation's capital stock.

Types of Corporations: S and C : 

Types of Corporations: S and C Differences are based on how they are taxed C Corporations: Corporations pay taxes on any net income. Individual shareholders pay income taxes only on what was paid to them by the corporation. S Corporations: Corporation does not pay any taxes Income taxes paid via shareholder’s personal tax returns

Benefits to Incorporation : 

Benefits to Incorporation Protection of your personal assets (for example, your family's home) in the face of a lawsuit or business debt. Otherwise, you would be held personally liable. Your business can go on without you. This means that your business can continue even after you die or decide to step down and retire. This is a major advantage if you want to pass your business on to others. Incorporating can lower your taxes. If you are a sole proprietor, the self-employment tax can be pretty hefty—15%of every single dollar you make this is avoided by incorporating. It is also easier to write off business expenses.

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Limited Liability Company* : 

Limited Liability Company* A hybrid business entity having characteristics of both a corporation and a partnership. Some personal liability protection Taxed as either corporation, partnership, or sole-proprietorship Operational flexibility of a partnership or sole proprietorship. * Disallowed for PTs and OTs in California

Deciding on a Business Structure? : 

Deciding on a Business Structure? What business structures are allowed: By your state? By the state PT/OT licensing boards? Number of owners of the business? What is the suspected level of risk? Taxation? Use/Consult: Health Care Lawyer Accountant http://www.ptb.ca.gov/laws_regs/practice.shtml

Company Analysis: The Business Concept : 

Company Analysis: The Business Concept Business Description Mission & Vision Statements Management Organizational chart Description of key personnel Description of systems, (billing, records) Location Products and Services Financial Status Legal Status Long term Goals and Exit Plan

3. Industry Analysis : 

3. Industry Analysis Description of the specific industry (PT/OT) Size of the market your business will operate in Statistics Trends for the industry as a whole (Rehab, PT, OT) and within specific areas Growth potential What other entities are you competing with i.e. massage therapists, ATCs, OTs Online retail industries, gyms, etc.

4. Analysis of Clients/Patients : 

4. Analysis of Clients/Patients Description of the needs of the target market, (patients/clients) Specific patient/client identification Quantity of patients that fit within your target market What is the potential reimbursement of these patients for your services? How does your business satisfy the needs of this target market, (patients/clients)? Cost vs. quality Convenience

5. Analysis of Competition : 

5. Analysis of Competition Identify direct competition Strengths Weaknesses How will you compete with them? Identify indirect competition Strengths Weaknesses How will you compete with them?

Business Plan Sections 1-5*** : 

Business Plan Sections 1-5*** Critical: Sections 6-9 may not be read by investors, lenders etc. Objectives of 1-5: Provides the background on the full business opportunity. Provides the market research that supports the business potential.

6. Marketing Plan : 

Describes the business’s desired strategic position. Provides detailed descriptions of the products and services. Provides descriptions of the desired image Describes the promotional strategies 6. Marketing Plan

Objectives of a Rehab Facility Marketing Plan : 

Objectives of a Rehab Facility Marketing Plan Create awareness of your services to patients, clients, and referral sources. Persuade patients, clients, and referral sources to select you versus your competitors. Communicate the benefits of your services to patients, clients, and referral sources. To establish target market allegiance. To increase profitability

Types of Promotional Strategies : 

Types of Promotional Strategies Public Relations Open houses, news releases, article writing, health fairs, trade shows and demos, sponsorships, volunteering. Personal Marketing Direct meetings with referral sources Patient communications Advertising Business cards, brochures, stationary, Rx pads, Online web sites, flyers, etc.

7. Operations/Design/Development Plans : 

7. Operations/Design/Development Plans Describe the physical location, facilities, and equipment. Kinds of employees needed Inventory requirements. What functions will be required to run the business? How will quality be controlled? What milestones must be reached before the business can be started?

Operating Plan con’t. : 

Operating Plan con’t. Stage of Development What’s been done What needs to be done Risks to successful operation of the business Quality Control Measures Production Process The day to day details

Production Process : 

Production Process Hours and Days of Operation Required Size and Location of the Building Special needs Leasing/financing information Equipment Needs and Costs Leasing/financing information Any Needed Materials/Supplies “Production” Costs/unit

Objective of the Operating Plan : 

Objective of the Operating Plan Coastal Breeze Therapy Operations Equipment Daily Processes Quality Control Location & Facilities

8. Financial Plans: Dealing with Money $$$$ : 

8. Financial Plans: Dealing with Money $$$$ What information will you need in your business plan? The Basics: What will it cost to start and implement the business? Who or what will fund the start up? What are the funding possibilities? When will you need the money to start and operate the business?

8. Financial Plan : 


Start Up Costs : 

Start Up Costs

Operating Costs/Expenses : 

Operating Costs/Expenses

Operating Costs/Expenses : 

Operating Costs/Expenses


BALANCE SHEET A statement of an organization’s financial condition. A record of the therapy practice’s assets, liabilities, and the owners/stockholder’s equity for a given period of time. ASSETS - LIABILITIES NET WORTH OF BUSINESS (EQUITY)

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Cash Flow Projection (“Pro Forma Cash Flow Statement”) : 

Cash Flow Projection (“Pro Forma Cash Flow Statement”) Forecast of cash in and out of your business Realistic Consider delays in reimbursement as typical Cash Revenues Cash Disbursements Reconciliation of Cash Revenues to Cash Disbursements CASH FLOW IS THE LIFEBLOOD OF ANY BUSINESS

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Utilization of the Break Even Analysis within the “What If Scenarios” : 

Utilization of the Break Even Analysis within the “What If Scenarios” BREAK-EVEN-POINT: TOTAL REVENUE = TOTAL COSTS How many patients do you need to see per month to cover your business expenses? What if scenarios: (X # patients/day x 22 days/month = ?????)

Break Even Analysis : 

Break Even Analysis Start with your payor mix to determine the average reimbursement for therapy services. Example:

Break-Even Con’t. : 

Break-Even Con’t. Example: Expenses $10,000/month Average Reimbursement $88.00/patient visits Breakeven / Month: $10,000/88 = 144 patients/month How about the breakeven point per day? 21.75 working days in a month 144 / 21.75 = 6.6 patients per day Calculate the B. E. Point: if expenses = $12250/month, aver reimbursement was $85 per patient visit and you typically only worked 50 weeks per year.

Sources and Uses of Funds : 

Sources and Uses of Funds Sources of Funds Financing for Amfit equipment Steve Laslovich 50% $14225 Joanne Laslovich 50% $14225 Use of Funds Capital Expenditure Purchase of Amfit equipment $28,450

Income Statement (profit and loss statement) : 

Income Statement (profit and loss statement) Revenue for a month x 12 Expenses for a month x 12 Profit PROFIT/LOSS = REVENUE - EXPENSES THIS WOULD NOT BE INCLUDED IN A BUSINES PLAN FOR A BRAND NEW VENTURE. YOU WOULD INCLUDE THIS IF YOU ARE EXPANDING ON AN EXISTING BUSINESS A report on the financial performance of the organization

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*Gross Income or Revenue: Fees earned + DME sold *

9. Appendix : 

9. Appendix Include only compelling additional information. The plan should stand on its own without the appendix Letters of intent Endorsements Photos Market research results Other (owner resumes, references, brochures, business cards, business stationary, etc.)

Presentation & Distribution of Your Plan : 

Presentation & Distribution of Your Plan Should appear as good as your business Title Page Table of Contents The 9 sections just discussed Review/Review/Review Professionally Friends/Colleagues

Assignment : 

Assignment Propose an idea for either starting a new therapy clinic or creating an expansion on a clinic or department that is already in existence. Explain the idea with enough detail that the reader understands your proposal. Maximum ½ page …..so be concise. Bring this to the next class meeting, (due at the beginning of class—no late papers will be accepted).

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