CSAT TA Package. Building a Business Plan for Provider Sustainability

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1 Since the recent economic downturn, sustaining grant-funded treatment providers has become a major public health concern. This Technical Assistance (TA) Package was developed by the Center for Substance Abuse Treatment (CSAT) to provide guidance to program leaders like you for creating a business plan that ensures your grant is sustainable for all funding years. What is in this Guide? This guide will provide substance abuse treatment program staff with instructions about creating a business plan to: Provide organization and structure for your grant Set goals and objectives Measure progress toward goals and objectives We provide examples using a hypothetical grantee, Sano House, to illustrate ways in which Project Directors can create a business plan that organizes and sets goals for their grant to guarantee its sustainability in the future. Sano House is a recovery support program that provides services for men and women with cooccurring substance abuse and mental health disorders. Sano House receives funding from the CSAT Recovery-Oriented System of Care (ROSC) program and from county and state agencies. It provides peer mentoring services, housing support, and employment and educational assistance. Sano House Create Business Plan Provide Structure Set Goals Measure Progress Why Do Business Planning? Business planning is important because you are managing a business. To be successful and ensure your grant s sustainability, you must create a plan and know how to execute that plan. One of the purposes of a business plan is to improve the effectiveness of the organization without significantly changing its direction. Services grantees such as you are similar to small business owners. Both take on risks of new ventures and accept full responsibility for the outcome. The current economic climate and anticipated changes of health care reform and parity will require grantees like you to be more business savvy than ever before. Now is the time for you to come to terms with any conflict you might have about being a clinician and a business person. Consider the following: This is your livelihood. Being successful in this field will demand your program s ability to maintain and execute a business plan. Although your grant may set high goals to serve the community, it will not be sustainable without a working knowledge of standard business practices. Financial sustainability. If your income does not exceed your expenses, you will go out of business. Although this is a simple economic concept, a business plan will ensure that your grant is on the track to financial success.

2 What is Sustainability? Sustainability is a proactive approach designed to ensure long-term viability and program integrity by optimizing resource needs and managing resources while not compromising profitability. At Sano House, the Program Director noticed that although its intake and follow-up rates are good, the program seems to have lost focus regarding its main service: peer mentoring. A new program opened nearby offering services similar to Sano House. The Program Director is worried that Sano House may lose referrals if it does not regain its focus on peer mentoring. With fewer clients, the Program Director realizes that the grant s sustainability is in jeopardy. What Will Business Planning Do For You? Grant managers can easily focus on short-term and immediate program issues and lose sight of ultimate program objectives. A business plan helps to view your grant from a new perspective. A business plan describes program goals and objectives and defines the steps required to achieve them. A business plan measures your grant s progress toward the objectives and controls the activities related to achieving them. A business plan acts as an effective short-term management tool, provides a guidepost for your employees, and becomes your business résumé. Since business planning helps reduce risks, you can use your business plan to negotiate with vendors or reassure creditors, boards, or other stakeholders interested in your grant s success. Since some grantees believe that they can keep track of everything without the need to write it down, a business plan has the added value of: Providing the structure of a written plan, which increases the likelihood that you will consider all relevant factors and that nothing important will slip through the cracks Becoming a blueprint for your business against which you can adjust operations to achieve your goals and increase chances for success Acting as a modeling tool that forces you to consider and evaluate the various factors that affect your organization so you can better address situations that arise as conditions change Providing an operations timetable to help you coordinate the diverse activities required to manage a grant Becoming a starting point for future planning The Program Director at Sano House decided that the program needs a business plan to ensure that it remains sustainable. Creating one will help the grantee set realistic and measurable goals, market its grant to the community, and monitor progress toward improvements on a set timeline. 2

3 Five Components of a Business Plan There are five essential components of an executable business plan. These components have been developed and refined over the years in the business community. You don t have to reinvent the wheel! A business plan should be short-term, focused, implementable, and measurable. Business Plan Essentials The next several pages describe the five essential components of a business plan: Executive summary Marketing plan and analysis Financial plan and analysis Operations and implementation Goals/objectives/action plan Section 1: Executive Summary Develop an Executive Summary that accurately describes your grant s overall objectives. Clearly describe the community needs that your grant is designed to address. Explain why people in the community need your services. Describe the characteristics of your potential clients. Depict the organization of your program, including your management team and recruiting efforts. Section 2: Marketing Plan and Analysis This will be the largest section of your business plan. Provide a welldeveloped marketing plan and analysis that demonstrate to your shareholders that you have done your homework and that you are serious about providing services to the community. In this section, provide information regarding the company situation, the environment, and the target market, as well as an industry and competitive analysis, a SWOT analysis, and a marketing strategy. Company Situation. Develop a Company Situation section in which you provide a clear and detailed description of the following: What your grant will provide the community An explanation of your contracts The number of clients you expect to serve Your market share The quality of your services Any additional information that will sell your grant to the reader of your business plan 3

4 Since Sano House is a CSAT-funded grant, the Program Director decides to use the CSAT-GPRA website to identify and describe the program s client characteristics. This information can help to determine which clients Sano House should target in the upcoming years of the grant. To obtain this information, the Program Director generates a Demographics Report. As noted in Table 1, Sano House served far more women than men during the past year. Table 1: Gender of Clients Served at Sano House: Past Year Gender Percent Male 34.6% Female 65.4% Next, the Program Director wants to examine and document how the grant is performing on the outcomes for which the grant offers key services to clients: employment and educational assistance and housing support. To do so, the Program Director generates a 6-month Follow-up Change Report. As shown in Table 2, the report indicates that Sano House staff needs additional training on finding employment/education and housing opportunities in the community. Table 2: Outcome Performance at Sano House Outcome Rate of Change from Intake to 6-Month Follow-up Employment/Education -10.6% Stability in Housing 0.5% Sano House advertises peer mentoring as one of the main services offered to clients. The Program Director wants to determine the percentage of clients that actually receive that service. To do so, the Program Director generates a Frequency Report on Services Received. As shown in Table 3, nearly 25% of Sano House clients do not receive peer mentoring. This information suggests that Sano House may need to market its peer mentoring services more strongly. Table 3: Recovery Support Services Received by Clients at Sano House Services Received Percent Receiving Services at Discharge Peer Coaching or Mentoring 75.4% Housing Support 50.1% Alcohol- and Drug-Free Social Activities 2.6% Information and Referral 80.9% Environment. Develop an Environment section that helps to provide context. Within this section, describe such issues as the following: Legal/regulatory issues (e.g., Fraud Enforcement Recovery Act) Economic issues (e.g., Recession or Stimulus funding) Social issues (e.g., aging of the Baby Boomer generation) Technological issues (e.g., electronic health records) Governmental/legislative/policy issues (e.g., health care reform, behavioral health parity) 4

5 Target Market. Provide critical information about current and potential customers and stakeholders. Include information such as the following: Who are my customers? Describe demographics, geographics, and psychographics, such as lifestyle. What do clients want or need from this grant? Who are the decision makers? What are the specific subpopulations you may want to target and their needs? How do you want your clients to view your services relative to other programs in the area? What is Marketing? Marketing is defined as the process of planning and executing the conception, pricing, promotion, and distribution of goods and/or services to create exchanges that satisfy individual and organizational objectives. After collecting the data on its grant, the Sano House Program Director realizes that the program should include more men within its target market. In addition, all clients need better employment/educational assistance and housing support than the grant is currently providing. Furthermore, one quarter of their clients do not receive peer mentoring, which is the main focus of the grant. Industry and Competitive Analysis. Provide an analysis about treatment providers in your region. Provide information such as the following: What kind of providers are in your region? What clients do they serve? What services do they provide? Are their services similar to or different from your services? What is their range of services, sizes, rates, strengths, and weaknesses? SWOT Analysis. Provide a SWOT analysis to examine your program s strengths, weaknesses, opportunities, and threats to achieving your objectives. Describe the following: Strengths. What are the strengths of your grant? Weaknesses. What are the weaknesses of your grant? Opportunities. What are the opportunities for your grant to grow? Threats. What are the possible threats to your grant s success? Marketing Strategy. Provide critical information about your marketing strategy: What are your key factors for success? What are your goals in terms of market share, expenses, new clients, quality of services, and reputation? In what areas do you want to improve or grow? What is your Sustainable Competitive Advantage? In other words, what are your assets and skills that will prompt clients to choose your grant and services over the long term? In addition, your grant will need to differentiate itself from other service providers in the community by offering unique services to your clients. What are those differentiators? 5

6 Another recovery service provider has opened near Sano House. The Program Director recognizes that Sano House needs to differentiate itself from the new provider to maintain its client base. The new provider offers services through trained counselors with higher education or certification. With this information, the Program Director decides to market Sano House as a provider that offers peer mentoring from program alumni. The marketing plan goal is to recruit more male than female alumni to participate in community outreach to find future male clients. At the same time, all program alumni will participate in training programs to increase their knowledge about employment/education and housing opportunities in the community. Section 3: Financial Plan and Analysis Develop a financial plan demonstrating that your staff are as committed to the grant s success as a reader of a business plan would expect. All pertinent financial information should be included in this section: Annual income projections A break-even worksheet Projected cash flow Section 4: Operations and Implementation Describe the organization structure of your program, including the management team. Include résumés and biographical sketches of key management staff. Illustrate staffing projections over the life of the program. How Do I Execute My Business Plan? Assess the Baseline. Before an organization can figure out where it needs to go, it needs to know where it is. Identify Best Opportunities. Not every opportunity for improvement will be possible to achieve. Choose the best opportunities for success and include those in your business plan. Plan Implementation Steps. Once you develop your broad goals, formalize how you will achieve those goals and describe the steps needed to achieve them. Set Deadlines. Develop a framework by assigning a deadline by which each implementation step will occur. Keep Revisiting It. The most valuable business plans are those that evolve and are continually revisited and revised. Section 5: Goals/Objectives/Action Plan Summarize your overall goals and specific objectives. List proposed activities that will help achieve your goals and assign an appropriate staff member to lead this activity. Create a timeline with targeted completion dates. Sano House has decided that its main goal is to market the grant as a premier provider of peer mentoring for persons with co-occurring disorders. The Program Director will implement Double Trouble in Recovery, which is an evidence-based practice developed to allow peer facilitators to work with clients. All staff, including peer mentors, will also receive training from staff at the local community college on how to find employment and educational opportunities in the community. A Housing and Urban Development employee, who is an alumna of Sano House, has volunteered to give a seminar on housing support. 6

7 Essential Areas of Consideration for Your Business Plan Depending on your grant s characteristics, you may wish to consider the following: Referral and Feeder Networks. Include information on insurance provider panels, credentialing processes, and provider fee schedules. Even if established in the community, you must market to get referrals. Find your special role in the network. Sano House employees created flyers to distribute to local hospitals and clinics to emphasize its peer mentoring services. The marketing campaign goal was to increase referrals from other local programs. Strategic Collaborations. Collaborate with other providers, programs, and human service organizations. You can do this by teaming together and writing grants. The Sano House Program Director was introduced to a new recovery support provider Program Director. The Sano House Program Director described the program s goal to become known as a peer mentoring organization with the participation of alumni. Since the new provider does not offer this service, she offered to tell their program alumni about Sano House s efforts. This collaboration increased the number of peer mentors at Sano House. Services Offered. Do you offer a continuum of care through recovery support, prevention, outpatient, intensive outpatient, residential, or inpatient treatment? Or is your grant more focused on case management or evidence-based practices? Describe your services in detail. List any certifications, licensing, or accreditations you have for these services. Performance Outcomes. As a federally funded grant, you must demonstrate that your grant is focused on client performance outcomes. Demonstrate this using evidence-based practices, collecting pre- and post-outcome data, and indicating performance improvement with your data. Reimbursement/Billing. Reimbursements for capacity building and maintenance not linked to clients and services are vanishing. Thus, explain how staff are proficient in claims-based reimbursements. Describe how staff are trained in claims, coding, authorizations, billing types (electronic or manual), and billing staff (hired or outsourced). Explain that your grant has sufficient cash flow to support itself until payments are received, given a payment lag time. Charging a fee for service carries a high level of accountability with penalties for faulty billing, fraud, and abuse. Documentation. Provide descriptions of the ways in which your program accurately records services in the clients clinical records indicating proof of services provided. Describe ways that you train your staff to always document services in writing. Technology. Does your grant use electronic health records for collecting data? If so, note that you have tested the interoperability of your system with other systems to see if they work together properly, if appropriate. References Fryman, A. D. (2009, October). Building a business plan for provider sustainability. Presented at CSAT Strategic Planning for Providers to Improve Business Practices, Arlington, VA. Novak, S. P. (2009, October). Highlighting unique program aspects through data. Presented at CSAT Strategic Planning for Providers to Improve Business Practices, Arlington, VA. 7

8 Summary: A business plan helps to ensure a program s success and sustainability. A well-written business plan can provide organization and structure for your grant. It can help you to establish goals and objectives, measure progress toward those goals and objectives, and control activities related to achieving program objectives. Five Components of a Business Plan There are five essential components of an executable business plan. A business plan should be short-term, focused, implementable, and measurable. It should include the following five sections. Section 1: Executive Summary Section 2: Marketing Plan and Analysis Section 3: Financial Plan and Analysis Section 4: Operations and Implementation Section 5: Goals/Objectives/ Action Plan Describe your grant s objectives. Explain the need that you plan to meet in the community. List the reasons why people need your services and describe the characteristics of potential clients. Describe the program s organization, including the management team and recruiting efforts. Describe the company situation, the environment, and the target market. Provide an industry and competitive analysis, a SWOT analysis, and a marketing strategy. Run reports on client characteristics, outcomes, and services received. Demonstrate program staff commitment to success. Include key financial information such as annual income projections, a break-even worksheet, and projected cash flow. Describe the organization structure, including the management team. Provide résumés and biographical sketches of key management staff. Illustrate staffing projections over the life of the program. Describe your goals and objectives. List proposed activities that will help achieve your goals and assign an appropriate staff member to lead that activity. Provide a timeline with targeted completion dates. Additional Important Considerations Depending on your grant s characteristics, you may wish to consider adding the following information to your business plan: Referral and feeder networks information on insurance provider panels, credentialing, provider fee schedules, and marketing plans to obtain referrals Strategic collaborations with other providers, programs, and human service organizations Services offered a complete description of services provided by your program and a list of relevant certifications, licenses, or accreditations Performance outcomes using evidence-based practices and pre- and post-outcome data to demonstrate client performance outcome improvements Reimbursement/billing describing how staff are trained in claims, coding, authorizations, and billing and demonstrating that the grant has sufficient cash flow to support itself until payments are received Documentation illustrating how staff accurately record services provided in writing Technology noting that you have tested the interoperability of your electronic health records system with other systems, if appropriate 8