How to Determine If It’s Time to Renovate or Expand
Many providers are facing the challenge of outdated facilities with limited resources to fund upgrades. Have you been considering a construction or renovation project for your facility? If not, maybe it is time to evaluate your facility’s position in the market to determine if a renovation or expansion is right for your organization. Many organizations are diversifying services and looking for more revenue sources to enhance their viability, which means reviewing all aspects of your organization’s strategic plan. Below are some questions to help you assess your organization’s needs:
Renovation or Expansion Assessment
- Does your organization have a long-term business plan?
- Are you considering any major capital projects in the next four years? If yes, what are you considering? Can you afford it?
- Are you considering any expansion of services? Do they involve space considerations?
- How old is the physical structure of the building? Is it over 10 years old? To calculate the average age of the facility, divide the accumulated depreciation by the current depreciation expense.
- Does your organization have a capital budget that plans for the next 10 years?
- Does your organization have a funded depreciation or capital replacement reserve account?
- Are you receiving any licensure waivers due to the physical structure?
- Is your current capital cost (depreciation and interest expense) under $12 per day, per resident?
- Is your interest rate on long-term debt in excess of 7 percent?
- Have you considered vertical or horizontal acquisitions? If so, have you established performance/market criteria?
- Have you considered the sale of your business? If so, under what conditions would you consider a sale?
Plante & Moran has an eight-phase approach which is designed to guide you and, unlike other firms, Plante &Moran’s approach is not “build it and leave.” We’ll help you develop tools to monitor progress after the project is completed.
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