A ZERO BASED BUDGET BUSINESS PROPOSAL

Dr. Tauseefullah Akhund M.B.B.S, MPH (Sydney), (Australia)

 

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COST PROJECTION

 

(A): Fixed Cost

 

FIXED COSTS PER YEAR
Start Up Cost $105,000 per-bed x 18 = $1,890,000

(20 years life expectancy)

 

Building

9 Bedrooms @ 2 bed

3 Shower rooms (en-suite)

3 Toilets

Kitchen

Lounge

Laundry

TV/Tape

Computer

Kitchen utensil

Air conditioning & Heating system

Laundry machine

Sterilization

Accessibility

Wheelchair

Shower chair

Furniture

Bed

Nurse call system

Telephone

Hot water system

Fire Extinguisher

Electrical

Fitting

 

 

$ 94,500.00

 

Director of Nursing $ 55,000.00
Insurance $ 1,890.00
Trades $ 27,500.00
Cleaner $ 20,000.00
Clerical $ 33,000.00
RMR $ 3,500.00
Miscellaneous $ 1,500.00
Sub total $142,390.00
Total $236,890.00

 

 

(B): Variable Costs

 

VARIABLE COSTS PER HOUR PER WEEK PER YEAR
Personal Salaries & Wages

 

Permanent Assistant Nurse

 

     
2 Full time @ 8 hour morning weekday $11.86 $948.80 $49,337.60
2 Part time @ 8 hour morning weekend $16.13 $516.15 $26,839.65
1 Part time @ 4 hour morning weekday $12.50 $250.00 $13,000.00
1 Part time @ 4 hour morning weekend $17.00 $136.00 $7,072.00
2 Part time @ 4 hour evening weekday $13.65 $546.00 $28,392.00
2 Part time @ 4 hour evening weekend $18.56 $297.02 $15,445.25
 

Permanent Registered Nurse weekday

 

1 Full time @ 8 hour morning weekday

 

 

 

 

$20.75

 

 

 

$830.00

 

 

 

$43,160.00

1 Full time @ 8 hour evening weekday $21.65 $866.00 $45,032.00
1 Full time @ 8 hour night weekday $23.45 $938.00 $48,776.00
1 Part time @ 8 hour morning weekend $28.22 $451.52 $23,479.04
1 Part time @ 8 hour evening weekend $29.44 $471.10 $24,497.41
1 Part time @ 8 hour night weekend $31.89 $510.27 $26,534.14
 

Permanent Chef (qualified)

1 Full time weekday

 

 

 

$12.24

 

 

$489.60

 

 

$25,459.20

1 Part time weekend $16.65 $266.34 $13,849.80
Subtotal     $390,874.10
Fringe & Benefit     $27,361.19
Expenses Telephone, Electricity, Gas & Water     $3,650.00
Linen     $3,420.00
Meal     $137,970.00
Total     $563,275.29

 


 

OPPORTUNITIES FOR EARNED INCOME

 

The proposed Nursing Home’s life expectancy target is 20-years and the Nursing Home break-even is in five years, therefore the coming next five years are the opportunities for earned income. The estimates income for five years is: 15 years x 365 days x $92.94 x 18 residents = $9,159,237. If the Nursing Home can stand longer then the opportunities for earned income will increase as well, so we can say this is the best opportunity to earn income as well as to help the aged peoples. We can increase the income of Nursing Home by applying these three strategies in future,

By increasing the fee for the services provided,

By increasing the volume of services provided, or

By decreasing either or both of the fixed or variable costs of providing the services.

 

BREAK-EVEN ANALYSIS

 

Variable cost per resident-day = $563,275.29 / 365 days / 18 residents = $85.73.

Charge per resident-day = $92.94.

 

Contribution margin per resident-day = revenue – variable costs

                                                            = $92.94 – $85.73 = $7.21.

 

Fixed costs p.a. = $236,890

 

Break-even units (resident-day) =                                             Fixed costs

                                                                                                                                               

                                                            Selling price per unit – Variable cost per unit

                                                (Charge per resident-day) – (Variable cost per resident-day)

 

                                                = 236,890 / 92.94 – 85.73

                        = 32,856 resident-days (approximately five years for 18 residents per day)

 

Break-even value =                                                                  Fixed costs

                                                ________________________________________________

                                                            Variable costs per unit (per resident-day)

                                                ________________________________________________

                                                            1- Selling price per unit (charge per resident-day)

 

= 236,890 / [1— (85.73 / 92.94)]

= $3,053,613.95.

 

 

BREAK-EVEN GRAPH

 

 

Break Even Graph Table

 

 

 

Resident-day 0 8200 16400 24600 32800 41000 49200 57400
Fixed Costs 236890 236890 236890 236890 236890 236890 236890 236890
Total Costs 236890 939876 1642862 2345848 3048834 3751820 4454806 5157792
Total Revenue 0 762108 1524216 2286324 3048432 3810540 4572648 5334756

 

CONCLUSION

 The conclusion is very clear that New South Wales need more Nursing Homes, so this is the best opportunity to earn income by building Nursing Home, a care place to help and takes good care of older people. To achieve a goal it is important to manage the daily activities of Nursing Home by evaluation, monitoring and take corrections. The proposed Nursing Home promises the investors to earn big return from their investments with helping the community by providing Nursing Home to take care of older peoples.

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REFERENCES

 

Courtney, M. (1997), Financial Management in Health Services, Sydney: MacLennan and Petty.

 

Life expectancy continues to increase – ABS, Australian Bureau of Statistics (2001),

http://www.abs.gov.au/ausstats/abs@.nsf/dddcf05472f88677ca2568b5007b8615/543c8451189fa8ebca2568a90013636b!OpenDocument

 

Residential aged care in Australia 1999–00 a statistical overview, Australian Institute of Health and Welfare (2001), Canberra.

 

Cost of Nursing Home and Hostel Care Services, Coopers and Scott (1985), Canberra: Department of Community Services.

 

Report On The Construction Costs Of Residential Aged Care Facilities Prepared For Uniting Care Aging & Disability Service NSW, Hanna Newman Associates Pty. Ltd. (2001), New South Wales, Australia.

 

Aged Care Act 1997,  http://scaleplus.law.gov.au/html/pasteact/2/3051/pdf/AgedCare97.pdfz

 

Population by age and sex, Australian States and Territories, Cat. No 3201.0. Canberra, Australian Bureau of Statistics (2000).

 

Classification Principles 1997, Minister for Family Services, Principles under subsection 96-1 (1) of the Aged Care Act 1997.

http://frli.law.gov.au/s97.vts?action=View&VdkVgwKey=1998B00255&Collection=FRLI&ViewTemplate=frliview.hts

 

Raising the Standard: Resident Centered Nursing Home Regulation in Australia, Housing and community Services Aged and Community Care Division (1993), Department of Health, Canberra, Australia.

 

The Reliability and Validity of Nursing Home Standards, Housing and community

Services Aged and Community Care Division (1993), Department of Health, Canberra, Australia.

 

Sadler. P, (2001) Thousands Wait Months For Nursing Homes, Sydney Morning Herald,

http://www.smh.com.au/news/specials/natl/ballot01/0109/14/ne ws 1.html

 

Home and Community Care Program Unit Costs, Housing and community Services Aged and Community Care Division (1993), Department of Health, Canberra, Australia.

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