The financial plan for this turn key project is presented in detail in the following sections. There are three important factors in the financial plan:
There are several assumptions related to this turn key project.
The following table summarizes the general financial assumptions.
The following benchmark chart indicates our key financial indicators for the first three years of operation. We see significant growth during fiscal year 2001, as compared to the previous fiscal year. Units of service are projected to increase by approximately 75%. The growth during fiscal year 2001 is reasonable in that the existing pharmacology will continue with the pharmacology and three pharmacology/therapists will transfer to the pharmacology with their clients from a center that is closing in the community. A recent medical graduate psychiatrist will join our Center as of July 2000. We will recruit one to two pharmacology nurse specialists during the fiscal year 2001. The Center will double in size during its first fiscal year, as compared to its previous level of operation. During the second fiscal year the growth rate will be approximately 18%. During the third year of operation it will grow at a rate of 23%. This growth will be a result of securing contracts with local human service agencies. Although the rate of expected receipts remains the same during the next two years, it is expected to improve during the third year with new contracts, and experience and familiarity with the new billing system. A financial goal is to be debt-free by the end of the fourth year of operation.
Similiarly, collection days remains the same during the next three years. However, efforts will be made to improve this variable with the use of electronic billing.
As sales of services increase, operating costs will rise as well. Every effort will be made to contain these costs proportionately. There are no actual or projected significant increases evident. The variable costs will increase during the third year as we need to hire new staff for the projected contracts. The hiring will not be concluded until the contracts are signed so as to avoid any unnecessary spending.
The following chart and table summarize the Center's Break-even Analysis. These figures and assumptions are fairly well represented since they are based upon actual historical data. Cost control and production improvement will ensure profitability.
The following table shows the projected profit and loss statement. Projected sales increased from approximately $530,000 the first year of operation to more than $637,000 the second year and more than $842,000 the third year. The third year growth is a result of additional units of service gained through a contract with a local residential program.
The following chart and table summarize the Center's cash flow. The projections are a combination of short-term borrowing and Center receipts. Cash flow is obviously critical to the Center's success. The monthly cash flow, as shown in the table, generally improves from month to month. The chart and table reveal a positive cash flow as operations move beyond the seventh month and steadily continues thereafter.
The following table shows the projected balance sheet. The monthly estimates are included in the appendix.
The following table shows the projected business ratios as determined by the Standard Industry Classification (SIC) Index code 8063 for the mental health center industry.