Vintage Home & Residential Care depends on occupancy in order to be profitable. Total costs outweigh total revenue if there are only three seniors occupying the facility. All sales and marketing goals are focused on getting the facility to its highest possible occupancy level. Vintage Home has two beds available at this time due to current living conditions. As of right now, Founder and CEO Alice Smith lives in one of the 2 bed rooms, while her aunt lives in another. This limits Vintage’s capacity to three total guests for the first year of operation. In year two, Vintage will be positioned to take on two new guests, which will make the business profitable.
Vintage expects to have sales of $12,300 per month during the first year based on the assumption that there will be 3 guests living at the facility. This figure rises to $19,500 per month in year two due to addition of 2 new guests. Also, an additional $2,000 is added to each of the monthly figures when a new guest is admitted to the facility due to a one time pre-admission fee.
Total costs from employee payroll will be $5,580 per month in year 1. Total other expenses are $492 per month and these costs include a groundskeeper, bookkeeper, and handyman. Total expenses for the operation of the facility are $13,531 per month.
Because of the slow growth that will take place over the first two years of operation, Vintage will realize a loss of $14,028 in the first year. As new guests move in, profitability is reached and Vintage will make a profit of $8,116 in the second year. In year 3, Vintage’s net profit will increase to $26,776. Vintage will be profitable as long as there is an average of at least 4 paying guests. The key to increasing net profits is to increase total capacity for the home.
In order to begin operations at Vintage, a total cash infusion of $45,000 will be needed. Vintage is seeking these funds in the form of an equity investment. Vintage is currently owned entirely by Alice Smith.
STARTUP EXPENSES AND ASSUMPTIONS
PROFIT AND LOSS STATEMENT