For any project to be successful, it needs financing. The finance for this project will come from both equity and debt capital. However, the bigger proportion of this will come from equity capital. The financial plan will further examine the below items in order to showcase how the project will be managed.
Fixed costs
Fixed costs represent the costs of operations that will not change over time. They remain constant irrespective of the level of activities that will be witnessed in the health facility (Vakhrushina et al., 2018). For instance, the amount of rent paid on the facility is a fixed cost that ought to be met thought the period when the hospital facility will remain in operation and house in the rented facility.
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Cost-benefit assessment
It is crucial to conduct a cost-benefit assessment for any project that is to be undertaken in order to determine whether the project is viable. Through the assessment, one can establish whether the project represents an opportunity through which one can recoup their investments (Stewart & Mueller, 2019). This will guide in making an informed decision accordingly.
Financial principles
As an investor, the project is guided mainly by two main financial principles. One of them is on the time value of money. In this regard, the project expects to create value for money that has been invested. In the near future, the amount that has been expected is expected to have grown and will be reflected in the equity value of the hospital facility (Armour et al., 2016). The facility expects that by offering high-quality services to its clients and by retaining its employees, then it will be possible to build on its reputation and thus increase its net worth in the market. The second financial principle that will be put into consideration regarding this project is the risk and reward. According to this principle, making a high-risk investment when the returns are small should be avoided since it represents a waste of resources. Though the investment in this project represents a huge amount, the potential for returns is also high. Therefore, the project is a worthy one to undertake.
Spreadsheet products
These represent data management software and applications that will be needed to help in the operations of the firm. The organization will install spreadsheet software in its operations to help in the management of patients’ data.
Personnel costs
These involve the costs of hiring employees to perform different tasks at the clinic.
Sunk costs
This represents costs that have been incurred on the project and have no implication in future decisions. For instance, an investor can spends $2 million to open a new medical facility in the neighborhood. However, after one year of operation, it proves that the project is unprofitable; a decision to close it ought to be reached. In this case, the investor should not be reluctant to decide since he had invested $2 million in the project (Nowicki, 2004). Since the reason for the establishment of the business is to make profits, then if it proves unprofitable, it ought to be dropped. In this case, the $2 million lost in this new project will be sunk costs.
Opportunity costs
In the operations of the medical facility, there would be some circumstances when the management will forgo some potential revenues as a result of rejecting an alternative. The cost of the forgone alternative is what represents opportunity costs (Nowicki, 2004). For instance, if the CEO of the medical facility has $1million to invest, and chooses to invest it in opening a new clinic in the neighborhood instead of investing in another opportunity like the purchase of government bonds, then the forgone alternative represents opportunity costs.
Breakeven costs
Refers to the amount of money at which the services of the medical facility will be offered to cater for the costs of providing the same (Vakhrushina et al., 2018).
Materials and labor: Identify both direct and variable costs associated with materials and labor needed.
Direct costs: labor and supplies
Variable costs: heating and cooling
Savings and profit: Identify savings and profit realized by project implementation to assign value.
The hospital facility intends to increase its net worth through the profits that it makes in its operation. The profits will be invested further as a way of risk diversification.
Financial/resource assumptions: Identify assumptions, such as expected availability of resources or labor, etc.
The project will be built on the following assumptions, including the availability of resources to finance the project, availability of labor and supplies, and availability of clients once the project is completed.
References
Armour, J., Awrey, D., Davies, P. L., Enriques, L., Gordon, J. N., Mayer, C. P., & Payne, J. (2016). Principles of financial regulation . Oxford University Press.
Nowicki, M. (2004). The financial management of hospitals and healthcare organizations . Chicago, IL: Health Administration Press.
Stewart, M. G., & Mueller, J. (2019). Security Risk and Cost-Benefit Assessment of Secondary Flight Deck Barriers.
Vakhrushina, M. A., Kostyukova, E. I., Tatarinova, M. N., Elchaninova, O. V., & Grishanova, S. V. (2018). Integrated management accounting in the financial management system. Research Journal of Pharmaceutical, Biological, and Chemical Sciences , 9 (3), 808-813.
