So far in this five-part series, we’ve reviewed various aspects of a new long-term care-related business venture. We’ve looked at the types of care that can be provided, the various business models and staffing requirements. Today, we’ll explore the all-important question of required capital. Unfortunately, it’s a question we really can’t answer with any degree of certainty.
First, we suggest that you explore the marketplace to determine the range for the common expenditures of your preferred business model, and then familiarize yourself with the financial schedules in AHCA’s licensure application (for home health agencies and nurse registries). Based on your projected expenses (salaries, rent, insurance, taxes, etc.) and expected revenue from all sources, the schedules will provide you with the minimum capital required by the State of Florida. Remember that a CPA must certify HHA financials, so even if you prepare the preliminary schedules yourself, it’s a good idea to ask your accountant to review your work so you can accurately plan your capital requirements. The licensure application for HHAs and NRs cannot be submitted without this information.
Remember that proving to the State your financial ability to operate is paramount. The State has specific formulas and targets so it would be a huge mistake to under-estimate this step. If the projections look unrealistic, your application may be denied or deferred. The bigger issue, however, is that improper projections can make a start-up agency appear financially sound “on paper” but unable to maintain financing until the agency is operational and generating revenue. We always counsel clients to maintain a very lean operation, and minimize expenses as much as possible. Although this sounds intuitive, you would be surprised at how many clients go “all out” only to get in a bind when licensure, accreditation and referrals take longer than initially modeled.
Homemaker/Companion Services do not require financial projections; however, a good business venture can be crippled by insufficient capital so we recommend that you work with your CPA to ensure you’re properly funded.
Tomorrow, we’ll examine the last piece of the long-term care business puzzle: finding patients. See you then!