Bright House

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Financial Plan

As our Break-even Analysis (below) shows, Bright House would need 13 residents per month to break-even at current funding levels. We intend, of course, to do better than this.

7.1 Important Assumptions

A "full" elder care facility is generally 90% to 95% full. Our non-standard model allows us to forecast for full occupancy in the main building, since turnover rates for assisted living residents are expected to be quite low (1-2 per year, at most). The skilled nursing facility, on the other hand, requires a certain number of empty beds to offer the flexibility needed to accommodate shorter stays. We therefore are projecting reaching "capacity" of our eleven-bed facility at 10 full beds.

Our resident monthly prices are based on the current Medicare nursing-hours-per-resident-day rates for our kind of services. Medicare patients are billed at roughly $135/day for nursing care, not including the cost of any medication to be administered by our staff. Our private patients are billed at a slightly higher rate to account for the low Medicare reimbursement rate, but also to pay for the extra benefits they receive as part of living at Bright House. Our rates are roughly 2/3 of our nearest competitors, the difference being made up for in donations, and savings gained through staff retention and the use of highly trained, flexible, Elder Assistants.

The small size of our facility allows us a cost savings on maintenance and grounds.

One other important assumption concerns payables: We have assumed collection days of 60, which averages our private residents' monthly up-front payment, and the typical 60-90 day reimbursement rate from Medicare.

7.2 Key Financial Indicators

We will be closely watching two things:

  • Private Resident capacity
  • Medicare Billing payment rates and collection days

 

Funding Forecast
Year 1 Year 2 Year 3
Units
Assisted Living Main Residents 150 150 150
Medicare Residents - Skilled Nursing Facility 94 96 98
Other 0 0 0
Total Units 244 246 248
Unit Prices Year 1 Year 2 Year 3
Assisted Living Main Residents $3,200.00 $3,200.00 $3,200.00
Medicare Residents - Skilled Nursing Facility $4,050.00 $4,050.00 $4,050.00
Other $0.00 $0.00 $0.00
Funding
Assisted Living Main Residents $480,000 $480,000 $480,000
Medicare Residents - Skilled Nursing Facility $380,700 $388,800 $396,900
Other $0 $0 $0
Total Funding $860,700 $868,800 $876,900
Direct Unit Costs Year 1 Year 2 Year 3
Assisted Living Main Residents $0.00 $0.00 $0.00
Medicare Residents - Skilled Nursing Facility $810.00 $931.50 $931.50
Other $0.00 $0.00 $0.00
Direct Cost of Funding
Assisted Living Main Residents $0 $0 $0
Medicare Residents - Skilled Nursing Facility $76,140 $89,424 $91,287
Other $0 $0 $0
Subtotal Direct Cost of Funding $76,140 $89,424 $91,287

7.3 Projected Surplus or Deficit

The projected surplus and deficit follows, below.

Surplus and Deficit
Year 1 Year 2 Year 3
Funding $860,700 $868,800 $876,900
Direct Cost $76,140 $89,424 $91,287
Medical/Clinical Payroll $217,125 $242,500 $245,000
Non-reusable Medical Equipment $4,800 $5,000 $5,000
#NAME? $0 $0 $0
Total Direct Cost $298,065 $336,924 $341,287
Gross Surplus $562,635 $531,876 $535,613
Gross Surplus % 65.37% 61.22% 61.08%
Operating Expenses
Caretaking Expenses
Caretaking Payroll $221,520 $223,000 $255,000
Groceries $16,800 $18,000 $20,000
Cleaning Supplies $1,200 $1,200 $1,300
Other Caretaking Expenses $0 $0 $0
Total Caretaking Expenses $239,520 $242,200 $276,300
Caretaking % 27.83% 27.88% 31.51%
Administrative Expenses
Administrative Payroll $98,400 $99,000 $100,000
Other Expense Account Name $0 $0 $0
Depreciation $1,200 $1,500 $1,800
Property Taxes $12,000 $13,000 $14,000
Utilities $24,000 $25,000 $26,000
Insurance $14,400 $15,000 $15,000
Payroll Taxes $82,717 $86,925 $92,325
Grounds and Building Upkeep $4,800 $5,000 $5,000
Other $0 $0 $0
Total Administrative Expenses $237,517 $245,425 $254,125
Administrative % 27.60% 28.25% 28.98%
Fundraising Expenses:
Fundraising Payroll $14,400 $15,000 $15,500
Brochures, Marketing $800 $1,000 $500
Fundraising Expenses $0 $0 $0
Total Fundraising Expenses $15,200 $16,000 $16,000
Fundraising % 1.77% 1.84% 1.82%
Total Operating Expenses $492,237 $503,625 $546,425
Surplus Before Interest and Taxes $70,398 $28,251 ($10,812)
EBITDA $71,598 $29,751 ($9,012)
Interest Expense $20,479 $17,200 $13,450
Taxes Incurred $0 $0 $0
Net Surplus $49,919 $11,051 ($24,262)
Net Surplus/Funding 5.80% 1.27% -2.77%

7.4 Break-even Analysis

The following Break-even Analysis table shows that with our forecasted operating expenses, including personnel, we need to serve 13 residents to cover costs. We plan to reach this fairly conservative goal by the second month of operations (see the Resident Forecast, above).

Break-even Analysis
Monthly Units Break-even 13
Monthly Revenue Break-even $45,001
Assumptions:
Average Per-Unit Revenue $3,527.46
Average Per-Unit Variable Cost $312.05
Estimated Monthly Fixed Cost $41,020

7.5 Projected Cash Flow

Our projected Cash Flow follows. Of special note are plans to sell off two back acres at the far south end of the property in July to local developers who have approached us about planning two large, single-family residences. (Developers' sketches included in appendix.)

Also of note are future fundraising plans: With the help of our Development Officer, we plan fundraising campaigns in years two and three of $35,000 and $40,000, respectively. These funds will contribute to our forecasted long-term loan payments, since we plan to pay off the principal ahead of schedule.

Our projected fundraising goals and anticipated expenses are conservative, including only a modest expected increase in income from residents in years two and three; yet, even at these levels, our plan maintains a healthy, positive cash balance throughout.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Funding $645,525 $651,600 $657,675
Cash from Receivables $173,236 $216,805 $218,830
Subtotal Cash from Operations $818,761 $868,405 $876,505
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $5,000 $0 $0
New Other Liabilities (interest-free) $0 $0 $0
New Long-term Liabilities $0 $0 $0
Sales of Other Current Assets $0 $0 $0
Sales of Long-term Assets $25,000 $0 $0
New Investment Received $0 $35,000 $40,000
Subtotal Cash Received $848,761 $903,405 $916,505
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $551,445 $579,500 $615,500
Bill Payments $237,601 $277,935 $283,575
Subtotal Spent on Operations $789,046 $857,435 $899,075
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $5,500 $0 $0
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $25,000 $35,000 $40,000
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $819,546 $892,435 $939,075
Net Cash Flow $29,215 $10,970 ($22,570)
Cash Balance $107,215 $118,186 $95,616

7.6 Projected Balance Sheet

Our Balance Sheet shows a continued high net worth, reflecting the value of our property, facility, and medical and communication assets.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $107,215 $118,186 $95,616
Accounts Receivable $41,939 $42,334 $42,729
Inventory $8,100 $9,513 $9,711
Other Current Assets $31,000 $31,000 $31,000
Total Current Assets $188,254 $201,033 $179,055
Long-term Assets
Long-term Assets $725,000 $725,000 $725,000
Accumulated Depreciation $1,200 $2,700 $4,500
Total Long-term Assets $723,800 $722,300 $720,500
Total Assets $912,054 $923,333 $899,555
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $22,635 $22,863 $23,347
Current Borrowing $4,500 $4,500 $4,500
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $27,135 $27,363 $27,847
Long-term Liabilities $185,000 $150,000 $110,000
Total Liabilities $212,135 $177,363 $137,847
Paid-in Capital $699,150 $734,150 $774,150
Accumulated Surplus/Deficit ($49,150) $769 $11,820
Surplus/Deficit $49,919 $11,051 ($24,262)
Total Capital $699,919 $745,970 $761,708
Total Liabilities and Capital $912,054 $923,333 $899,555
Net Worth $699,919 $745,970 $761,708

7.7 Standard Ratios

The Ratios table which follows shows how we differ in asset and income structure from other continuous care facilities.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Funding Growth 0.00% 0.94% 0.93% 1.62%
Percent of Total Assets
Accounts Receivable 4.60% 4.58% 4.75% 14.37%
Inventory 0.89% 1.03% 1.08% 0.55%
Other Current Assets 3.40% 3.36% 3.45% 36.74%
Total Current Assets 20.64% 21.77% 19.90% 51.66%
Long-term Assets 79.36% 78.23% 80.10% 48.34%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 2.98% 2.96% 3.10% 20.58%
Long-term Liabilities 20.28% 16.25% 12.23% 28.02%
Total Liabilities 23.26% 19.21% 15.32% 48.60%
Net Worth 76.74% 80.79% 84.68% 51.40%
Percent of Funding
Funding 100.00% 100.00% 100.00% 100.00%
Gross Surplus 65.37% 61.22% 61.08% 100.00%
Selling, General & Administrative Expenses 59.57% 59.95% 63.85% 80.78%
Advertising Expenses 1.95% 2.07% 2.28% 0.39%
Surplus Before Interest and Taxes 8.18% 3.25% -1.23% 2.77%
Main Ratios
Current 6.94 7.35 6.43 1.61
Quick 6.64 7.00 6.08 1.20
Total Debt to Total Assets 23.26% 19.21% 15.32% 54.58%
Pre-tax Return on Net Worth 7.13% 1.48% -3.19% 5.88%
Pre-tax Return on Assets 5.47% 1.20% -2.70% 12.94%
Additional Ratios Year 1 Year 2 Year 3
Net Surplus Margin 5.80% 1.27% -2.77% n.a
Return on Equity 7.13% 1.48% -3.19% n.a
Activity Ratios
Accounts Receivable Turnover 5.13 5.13 5.13 n.a
Collection Days 57 71 71 n.a
Inventory Turnover 11.82 10.15 9.50 n.a
Accounts Payable Turnover 11.50 12.17 12.17 n.a
Payment Days 27 30 30 n.a
Total Asset Turnover 0.94 0.94 0.97 n.a
Debt Ratios
Debt to Net Worth 0.30 0.24 0.18 n.a
Current Liab. to Liab. 0.13 0.15 0.20 n.a
Liquidity Ratios
Net Working Capital $161,119 $173,670 $151,208 n.a
Interest Coverage 3.44 1.64 -0.80 n.a
Additional Ratios
Assets to Funding 1.06 1.06 1.03 n.a
Current Debt/Total Assets 3% 3% 3% n.a
Acid Test 5.09 5.45 4.55 n.a
Funding/Net Worth 1.23 1.16 1.15 n.a
Dividend Payout 0.00 0.00 0.00 n.a