Do you have a business plan? Maybe not. What should be included in this plan? What's the point? Do I even need a business plan?
The truth is you don't need a business plan. But it will go a long way in defining your success early on and will give you peace of mind. This article will provide you with a spreadsheet to get you started.
Fee Schedule
Let's start with the nitty gritty, the most important part that everyone is constantly thinking about: money.
You need a fee schedule. A fee schedule is a complete listing of costs for the services that you'll be providing. Since this is an ABA business, you'll be providing ABA services, primarily CPT codes from 97151 - 97158. It's possible that you're not familiar with these codes. I'll do my best to give you a crash course in this post and possibly expand on them in a later blog.
Where do you begin?
Start with your state's Medicaid rates. These rates should be publicly posted somewhere. Typically, Medicaid is one of the lowest paying funders. In some areas / states, using primarily Medicaid may not actually be enough money to fund your business. The rates they list may be way too low. Use these rates as a starting point for determining your own fee schedule. Here are the Medicaid rates for Louisiana.
Using the fee schedule for Louisiana Medicaid, let's look at the information provided. Notice the codes on the left hand column - these are the services that you will be providing. Here's a brief run down of each code:
97151 - Assessment (Typically provided by a BCBA or BCaBA or other qualified healthcare provider in 15 minute units. Funders will typically approve somewhere between 4-12 hours of assessment, depending on the funder. Report writing is bundled into this code.)
97153 - Direct treatment (Typically provided by a registered technician (or an RBT) in 15 minutes units. You'll have to determine if your client is a focused or comprehensive client. Comprehensive clients are typically between 25-40 hours per week, where as focused clients may vary. You'll like need between 5-8 hours of 97153 per day, or 20-32 units per day.)
97155 - Supervision / protocol modifications (Typically provided by a BCBA or BCaBA or other qualified healthcare provider in 15 minute units. Funders will typically approve about 10-30% of 97153 hours for this code. But this varies by funder.)
97156 - Parent guidance (Typically provided by a BCBA or BCaBA or other qualified healthcare provider in 15 minute units. There are typically no restrictions on this code.)
97158 - Group adaptive treatment (Typically provided by a BCBA or BCaBA or other qualified healthcare provider in 15 minute units. This code includes: social groups, adaptive behavior groups, dyads, triads, etc. in which the BCBA is providing treatment to a group. Groups can be no larger than 8 children. No technicians are required, but could be included. There is a technician version of this code (97154) that I did not include in this list.
Good, now I know the cheapest rates, how is that going to help me?
You now know a basic floor for your business. Can you afford a staff on this amount? If not, how much more would you need to increase your rates by? You're not sure - you don't know about your other expenses. You don't even have a building yet. Do you need a building? Maybe you should take the route of working in homes until you've secured enough money to afford added expense. Many people smarter than I am said you should save at least 6 months worth of payroll / expenses before you even consider paying yourself. I cut that down to 3, but I live a little closer to the edge. Let's talk about expenses.
What expenses can I expect?
Payroll - this is by far your biggest expense, and it always will be. You'll need to be competitive to get good technicians and BCBAs. You know what you were paid.
Health insurance, dental, paid time off (PTO), holidays, etc.
Presently, my payroll costs are about 50% of my total revenue, which is considered high.
Repeating fixed monthly costs: subscriptions (netflix), internet, cable, phone, workers compensation insurance, software costs, rentals (copy machine), business service fees, banking fees, payroll company fees, rent (3rd biggest expense), utilities (water, gas, energy), supplies (toilet paper, paper, snacks, etc).
3rd party billing company: you may choose to handle billing yourself (you will still need to pay an employee to do this, or you will have to do it yourself, regardless of the option, this is a major cost). The 3rd party company that I work with charges 6% of all billable income. This is my 2nd biggest expense.
Lawyers, accountants, CPAs, etc.
Furniture, toys, computers, chairs (we have like 84 flipping chairs!), tables, shelves, cubbies, gym equipment, rolling carts, picture cards, manipulatives, etc.
Repairs - sure, you're not concerned with this, but in my 3 years that I've been open I've had to do the following repairs: busted plumbing (2x), replaced torn gutters (thanks hurricane season), replaced air condition unit, replaced broken window, changed locks, etc.
Renovations - we needed to renovate some of the rooms to accommodate our clients. So far, we've sunk over 50,000 into the building. And there are plans for about 80,000 more.
So this is going to be really expensive. I'm going to be one of those businesses that closes in the first year, aren't I?
According to the United States Bureau of Labor Statistics, approximately 20% of US small businesses will fail within the first year, and typically by the fifth year, at least 50% will have failed. Only 1/3 small businesses will survive after 10 years.
That's pretty daunting. But you're here and you're trying not to be a statistic. So let's prepare.
One of the first things I did was devise a Profit Loss estimate based on Medicaid rates.
Here's a free download of the spreadsheet that will help you get started with calculating your breakeven point.
The information that you will need to get started:
Rates per code (you may not know these yet - in the spreadsheet, we use Louisiana Medicaid rates because those are posted publicly.)
General client types (we break them down by full time, part time, limited hours or social group, though you may have more variations - this is not supposed to be an exact science, but guesswork to calculate if you will breakeven or profit. You will need to determine what these client types look like for you, and enter the hours into the spreadsheet.)
Number of clients (guesstimate how many you expect to have during the first 6 months - you will obviously grow, but this will give you an idea of how much money you will make per month and how much your expenses will be monthly.)
Employees (you'll need to know how many, how much they make, and how much their insurance costs will be - if you provide insurance, that is.)
3rd Party Billing Company (if you're using a 3rd party billing company, you will need to list what percentage of revenue they will take as a fee / or if it's a flat monthly fee.)
Fixed costs (you will need to know what you fixed costs will be, such as utilities, rent, subscriptions, insurance, rentals, etc.)
If you have the information, you will be able to enter into the spreadsheet and determine if you can breakeven or profit with your given model. You may need to lower salaries, you may need to rethink your schedule and client hours, etc. This spreadsheet will tell you all of that information. What it won't prepare you for, however, is how long you will have to wait to get paid.
Most insurances take between 30 - 90 days from the date submitted to actually pay you for the services that you've rendered. How do you survive in the meantime?
If you have to cover your $10,000 / month in expenses for 3 months without receiving any revenue in the meantime, can you survive as a business? Have you saved $30,000 for an event like this? Are your credit cards already maxed out? Those first 6 months were the most stressful part of opening my business.
Here are some things that absolutely saved me.
Take out a loan and don't use any revenue for bills. I took out a 100k loan to start the business. At least 30% went towards furnishing and renovating the space. About 10% went to reoccurring expenses. The remaining 60% went towards payroll. I used my home as collateral (do not recommend this, it's just what I decided), and opened a Home Equity Line of Credit. This allowed me to use the 100K however I wanted for the next 10 years, only worrying about paying a variable interest amount monthly (which I later locked in at an incredibly low rate during Covid-19) until having to make payments on a 30 year mortgage.
During those first 6 months, even as checks and deposits were rolling in, I didn't use any of that money. I only used the HELOC, until there wasn't a penny left.
Once the HELOC was depleted, I began to use my own money to pay my expenses.
Don't pay yourself. Do not write yourself a check. Do not add yourself to the payroll. Go absolutely as long as you can without taking any profits. You need those for your expenses. You're not good at this yet - you may make billing mistakes and set yourself back - what if you can't afford payroll? Don't pay yourself. Get a new credit card with 0% APR for a year and use that. You're going to pay it back soon, just try to avoid interest.
Once you've saved up AT LEAST 3 months of expenses, you can start to pay off your personal credit cards.
Start making small payments on your loan (if you took one). In my case, I started to pay off my HELOC immediately in case I needed that money later.
Use your business credit card for all expenses not related to payroll. Pay off your monthly balance as often as you can without compromising your 3 month Easter egg that we discussed before. If you can't pay off your card without compromising the Easter egg, then don't do it. You're going to make enough money one day soon that this won't be a worry. But right now, you need to cover your payroll.
Run payroll monthly. Your employees will absolutely hate this at first. But this was a complete life saver. Why? As I mentioned before, most insurance companies take 3-90 days to actually pay you. If some of those companies pay you in that 30 day window, then you may not ever have to worry about your payroll expenses because the money is rolling in before you have to make that monthly payment. Sure, the payroll will be much higher once a month, but this will likely save you time and allow you to better plan ahead for the next month.
Set Goals
Once you've set up your Profit Loss (Calculating Breakeven) spreadsheet, and you're in the green, start planning and setting goals. Some useful goals and timelines to establish:
Start date to begin services by
X amount of clients by 3rd month
X amount of clients by 6th month
X amount of clients by 12th month
Save 3 months worth of payroll
Save 6 months worth of payroll
Begin paying loan by X month
Begin paying credit cards regularly by X month
Begin paying myself by X month
Add another BCBA by X month / year
Add another stream of income by X month / year
Upgrade equipment or furniture, renovate room / area by X month
Move from home based to center based by X month / year
By establishing these goals for yourself, you'll have multiple indicators for success. Remember that your success isn't defined only by how much money you make. Success could be meaningful changes in your clients, a growing healthy business where staff members are happy, reaching milestones as a BCBA and a business owner, etc.
Recap
Set up a fee schedule. Most payers are not going to pay you the amount on your fee schedule, but you will need to negotiate rates and to get set up with commercial insurance companies.
Familiarize yourself with the CPT codes.
Familiarize yourself with Medicaid rates for those codes.
Gather and plan for expenses.
Download our "Calculating Breakeven" spreadsheet and define your potential client groups.
Begin planning for the first 6 months and see if your plan can be successful.
Set goals for yourself for the upcoming year and beyond.
Find measures for success.