This is an estimated start-up budget for the marketing o f the proposed center. It is based on other local facilities start-up budget
Brochures $6,000
Graphic Design for Company Image $1,500
Advertising Development $1,000
Collateral and Give away $2,000
Stationary $1,500
Pre-opening M arketing Expenses $8,000
Total $20,000
Table 4A is an example o f a proforma (projected) marketing budget for a start-up business, for one year.
36
FINANCE
FINANCIAL PLAN
The start-up o f a new adult day center will occur in three phases: first, the construction and development phase; second, the pre-marketing and pre-opening phase; and finally, the ramp- up phase.
* C onstruction and Development - Exhibit 5 (page 45) shows a cost breakdown for the construction o f a new building to house the adult day center. The total cost is $850,000.
* Pre-Marketing and Pre-Opening - M arketing before the center opens will be crucial to the success o f the business. The director will work mainly with marketing while the building is under construction, promoting the concept o f adult day services in the community. The pre
marketing start up cost will be $20,000. The costs will include brochures for $12,000, graphic design for company image for $3,500, advertising development for $3,000, collateral and promotional gifts for $5,000, stationary for $1,500 and the pre-opening marketing expenses will be $10,000. Pre-opening budget will be necessary for business licensing and zoning charges, outside sign, purchase or initial payment o f vehicle, outside sign, fixtures, furniture and equipment. The total start-up costs will be about $985,000.
* Ram p-up- The ramp-up budget is the projected budget that will get the company through the second year o f operation. Ramp-up is a critical time in the start-up o f an adult day care facility.
The majority o f the losses will take place during the first year. The operating deficit reserve is estimated at $50,000 to cover the expenses for the first year o f business.
Exhibit 5 through 7 (pages 45-47) provide a detailed financial analysis of the adult day center start-up budget and a stabilized budget following the first year o f operation. The anticipated total project cost, including the operating deficit reserve with a contingency o f $985,500.
Sources of Financing
The owner o f the proposed adult day center is considering a conventional business loan and personal family funds to support the building o f the center. It is proposed that the family will come up with 20% o f the cash necessary and to guarantee the loan, receiving 45% o f the company ownership.
Financial Requirements
Exhibit 6 (page 46) provides a detailed financial budget for the start-up year. The chief operating officer is estimating that the center will not be at full capacity (40 clients) but is expecting to have a 5% vacancy rate each month. Employees consist o f four full times aides, 4.5 part time aides and a driver. Expenses for the start-up year include recreational programs, transportation, utilities, food services, and fixed expenses. The total expenses for the start-up year will be estimated at $306,000. This will assist in purchasing all FF&E, kitchen, emergency response and pre-opening equipment. The net operating income for the first year will be
estimated at $16, 135. Once the budget has stabilized, the expenses will increase to $341,000 due to the increase in the director’s salary. The net operating income for the year once the company stabilized will be estimated about $167, 962. (Exhibit 5, 6, 7, pages 45-47).
Sourcing
The largest cost associated with providing adult day services is the labor and the food cost. Combined, these expenses represent roughly 73% o f our total expenses operating at 95%
occupancy. These two expenses are mostly fixed. Adult day service is a service industry, and it is a labor-intensive industry. The adult day service must have some licensed medical staff people on staff during most o f the day.
Material and Production Requirements
Exhibit 5 (page 46) shows a cost breakdown for the construction estimate, the pre
marketing, operating deficit reserve, business licensing and zoning charges, outside sign, purchase o f a van for transportation, and FF&E. These necessary costs are important for the start-up o f the adult day center, will be estimated at $985,000.
Labor Requirements
Management Summary: Proposed number o f employees at 40 clients will be six full time employees and four and Vi part-time employees. The director will be in the only manager who will report directly to the chief operating officer, who is the founder and owner.
Structure
The structure o f the proposed adult day center will be a Limited Liability Company. This structure was chosen because it provides many desirable liability traits similar to a corporation while allowing the same favorable tax treatment enjoyed by partners in general and limited partnerships. An LLC also gives the owner the option o f being taxed as a corporation or as a partnership.
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