group home for veterans financial plan

Financial Plan Explanation
Current Business Model
This project is for starting a group home for veterans. The group home will be paid for by a mix of government payers (VA, Medicare, Medicaid), and private payer. The group home is going to have a premium service offering, so that veterans feel like they are treated with respect. The reality is that many veterans receive substandard care, when their families can afford to give them the best possible care. It is our mission to ensure that veterans are afforded the opportunity to enjoy a standard of care that befits their service to America.
The group home model works on the principle that the veterans who live in the home will share some facilities (Leonard, 2017), including access to medical care. The home staff will take care of many of their day-to-day living needs, but the patients will be able to live in a semi-autonomous manner. The end result of this model is that a team of highly qualified caregivers will be able to look after our veterans and give them the care and attention, and high standards of service, that they have earned.
Capital Expenditures
The proposal is to start a group home for veterans, so there is significant upfront cost. It is estimated that $18 million will be required to acquire and fit a facility. Other startup costs are more of the ongoing variety. These capital expenditures will be used to secure a building, retrofit it for the group home, and then to equip it with medical equipment, computers, furniture and other capital expenses.
The plan calls for the initial startup to take place in 2019. From that point, there will be some maintenance associated with capital expenditures, but otherwise most costs will be limited to operating costs.

Contingency Plans
The group home has a few different things from which unexpected expenditures might arise. To ensure that it is able to meet such unexpected spending, the group home proposes to set aside a contingency fund equalling 20% of total revenue. This amount is actually a substantial amount of the projected profits for these first three years. This contingency will be the operating contingency. It will be used for things like insurance claims, legal actions and other ad hoc, unforeseeable expenses that would otherwise threaten the solvency and liquidity of the group home.
Another contingency plan is in place for the construction of the facility. There is high risk of cost overruns in such a construction, so the company has set aside a $2 million line of credit with a local bank, to tap into in case there is an issue with the construction. The line of credit will be secured against the land on which the building sits. The final contingency plan is for insurance, which will cover a range of different potential issues, from natural disasters to fire to malpractice. The cost of insurance has been built into "overhead expenses".
Budget Summary & Assumptions
The veterans group home is expected to be completed and opened in 2019. There is substantial pent-up demand for this type of service, according to our research, and as a result the home is expected to operate at capacity almost immediately. As a result, the initial revenues are expected to be $30 million, and these are expected to grow as the facility increases fees and capacity over the next couple of years.
In the budget, the expenditures are recorded as a percentage of revenue, which is common practice with a new business where the numbers must be estimated. Salaries are expected to be around 28% of revenue, utilities 7%, overhead 11%, and other expenses should account for around 2%. With these figures, the facility should be profitable. It is worth noting that the expenditures, while not 100% fixed, are largely fixed, and therefore if revenue falls short of expectations, the company will see a reduction in profitability. Interest expense is related to the debt that has helped to finance the construction, and tax revenue is directly related to the operating income.

Return on Investment
The return on investment is the net income divided by the total investment (Investopedia, 2018). The current projections should an ROI of 6.01% in 2019, 6.226% in 2020, and 6.66% in 2021. This is based on the initial starting investment of $18 million, plus additional growth in the company in the subsequent years. Net income is projected to grow at a faster rate than the capital expenditures, so ROI will increase slowly over the three-year period.
Impact of Internal Resources
The impact of internal resources is expected to be significant, and financial capabilities plays a key role in that. First, the business model is designed around providing a premium group home experience. Significant resources will need to be deployed in order for that to happen. The group home for veterans will therefore need to be able to attract the right talent, and be able to equip the facility in order to deliver on the promise.
The impact of financial capabilities is also critical to the ability of the veterans group home to execute on its business model. The resources needed to excel, to be a differentiated provider in this business, are substantial, so without the money to acquire the needed resources, the entire group home may not succeed. Furthermore, the contingency plan holds that a line of credit for $2 million should be accessible for capital expenditures, and a further operating line of credit starting at $600,000 should be available for operating expenses. If for some reason, such as credit problems, these lines of credit become unavailable, that could put the group home at risk, should there be an occurrence that causes the home to need to tap into the contingency fund.
Implementation
The implementation of the financial plan is dependent on management to access, in particular, the human and financial resources. While medical equipment is another important resources, as are permits, insurance and those sorts of things, a group home functions on the basis of having great people, and access to money to run the business. Thus, it is unlikely that the plan could be implemented without adequate internal resources and access to financial resources.
Strategy to Increase Volume
At a group home, the only way to increase volume is to build more rooms/beds. Thus, there is no short-term plan to do this. Growth in the first couple of years will be the result of filling in unused capacity from the opening, and increasing the rates charged. If the business proves to be successful, and there is a business case for it, a loan might be taken out to build a new wing and expand the group home, as this would be the only way to increase sales volume at such a facility.
Appendix A: Three Year Budget
Financial Plan
2019
2020
2021
Revenue
3000000
3300000
3696000
Salaries Expense
840000
924000
1034880
Utilities
210000
231000
258720
Overhead Expense
330000
363000
40656
Other Expenses
60000
66000
73920
Operating Profit
1560000
1716000
1921920
Interest Exp
120000
132000
147840
Tax Expense
358800
394680
442042
Net Income
1081200
1189320
1332038
ROI
6.01%
6.26%
6.66%
Total Investment
18000000
19000000
20000000
Contingency
600000
660000
739200
References
1st Commercial (2015) Is a bank line of credit smart in a recession? 1st Commercial Credit. Retrieved December 1, 2018 from https://www.1stcommercialcredit.com/blog/category/factoring/is-a-bank-line-of-credit-smart-in-a-recession/
Investopedia (2018) Return on investment. Investopedia. Retrieved December 1, 2018 from https://www.investopedia.com/terms/r/returnoninvestment.asp
Leonard, K. (2017) How to open a group home. Houston Chronicle Retrieved December 1, 2018 from https://smallbusiness.chron.com/open-group-home-15256.html
Marquis, A. (2018) Examples of project cost assumptions. Houston Chronicle. Retrieved December 1, 2018 from https://smallbusiness.chron.com/examples-project-cost-assumptions-36270.html
Wasserman, E. (2018) How to write the financial section of a business plan. Inc Magazine. Retrieved December 1, 2018 from https://www.inc.com/guides/business-plan-financial-section.html