The Reintegrate Consultation Firm is a non-profit organization that provides counseling consultancy and assistance to retired military veterans via phone, online chats, email, and real face-to-face group sessions. The company strives to address the problem of abandoned post-military service members in the state of Virginia. The recent research and statistics suggest that many veterans suffer from a strong depression and post-trauma stress disorder, as well as refuse to resume a normal social life. Thus, they do not socialize, work, have relationships, and often engage in substance or alcohol abuse. A growing rate of suicides in veterans suggests that this population needs proactive external assistance for sustaining mental health and subsequent social readjustment. They require help from the side of the community, as their reintegration is only possible with the active participation of people. The following paper provides a project proposal for the startup initiative of a non-profit company, Reintegrate Consultation Firm.
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The organization plans to operate within the state of Virginia, in such locations as Norfolk, Virginia Beach, Chesapeake, and Hampton. It also intends to raise public awareness on the issue since the present situation is entirely a result of societal ignorance. This paper is a project proposal that covers the most important elements of the startup of such business initiative. It explains the rationale for starting the business, SMART objectives and succession planning, managerial issues, evaluation, and financial projections. In such a way, Reintegrate Psychotherapy presents its startup project. However, certain issues regarding the context of the proposal, as well as the initiative as a whole, should be considered with more details.
The project proposal includes projections and recommendations regarding the planning of the startup initiative for the Reintegrate Consultation Firm. Clear objectives, deadlines, and budget are forecasted and may moderately deviate from an actual performance of the initiative implementation. Still, the main purpose of the project proposal is to acknowledge potential investors such as business sponsors, social movements, governmental agencies, and local communities about intentions of the organization. Consequently, this paper is a direct encouragement for these entities to participate and estimate the value of a non-profit initiative. Reintegrate Psychotherapy is a socially transparent organization; thus, all schedules, plans, and decisions regarding its business sustainability should be clearly outlined. The proposal contains information concerning the issue, as well as a justification for a particular decision, choice of model, or allocation of funds that are to be collected prior to the implementation of the startup initiative. Also, the paper outlines actions planned for a long run and rationale for the use of innovations.
Thus, the Reintegrate Consultation Firm is expected to be not only a strong community leader but also a top innovative non-profit business in the state of Virginia. The company aims to address the issue by raising the public awareness, providing primary mental health assistance, ensuring social reintegration, and creating a digital community. The latter aspect is fundamental for the entire initiative since such a community will be able to unite all representatives of the target population within the state. Nowadays, social media and information technologies are a powerful trend; thus, utilizing this marketing and strategic means is a sound solution to the problem targeted by Reintegrate Psychotherapy. All in all, the Reintegrate Consultation Firm presents its business proposal in order to outline its main objectives, roles, deadlines, funds, and rationale for the use of certain information technologies. Since the purpose of the proposal and its key points have been introduced, it is necessary to proceed to the next section.
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Proposal Statement and the Case for Change
A non-profit psychotherapy counseling consulting service for veterans in the state of Virginia is supposed to provide help via phone, online chats, and face-to-face group discussions. Post-military service members are reported to develop strong in capability for resuming a normal social life. Braswell and Kushner (2010) provided such evidence and explanation for this phenomenon. The concept is called the fatalism of social integration. It is based on the following statistics: 26% of veterans commit suicides; 11.7% are unemployed; 20% suffer from the PTST; 7.1% are alcoholics or drug addicts (American Psychological Association, 2016). On the contrary, 40% of post-military service members consult mental health professionals (American Psychological Association, 2016).
In terms of the nature of social fatalism, it is an external outcome of internal depressive and aggressive states that cause self-destructive behaviors in post-military service members. Aggression arises as a result of the negative emotional experience of survival in combat and constant fear of death. Veterans are unable to express their aggressive feelings to the surrounding society as they respect its moral standards and feel a responsibility for the protection of these communities (Braswell & Kushner, 2010). As a result, veterans keep these negative emotions and feeling deep in their subconsciousness; thus, they lose a contact with society with time (Gewitz et al., 2010). Such a problem is commonly widespread in American veterans; therefore, it should be addressed in the state of Virginia, in which one of the most numerous populations of veterans lives (American Psychological Association, 2016). The Reintegrate Consultation Firm will take responsibility for addressing the primary mental health problems of veterans, reintegrating them back to a normal social life, and raising a strong public awareness regarding the issue. The organization will perform in the segment of the non-profit business; therefore, raising funds and sponsorship will require an active participation of local communities.
First of all, the organization is going to provide the target population with quality service of the mental health counseling and consultation so that veterans can reintegrate into the society. The second aim of the Reintegrate Consultation Firm is to create a digital community of veterans, which will unite the target population within the state of Virginia and represent veterans as an independent and sound social body, which should not be ignored. It will promote a view that veterans need not only some financial support from the government but also the basic social integration (Gewitz et al., 2010). In such a way, post-military service members in Virginia will be involved in the social life of the community and will not feel abandoned any longer. The second aim is a consequent rise in the public awareness on the issue. Fundraising, as well as a range of public presentations and social advertising, is expected to boost a public movement in support of the retired military service members. The organization expects the community to take some actions and engage in resolving the problem. In the long run, the Reintegrate Consultation Firm plans to expand its activity into other states and gain nation-wide social effects. However, initial issues for the startup should be given an account.
Proposal Goals and SMART Objectives
The first goal of the proposal is the establishment of sufficient funds and institutional presence for the development of a startup. A common practice suggests that non-profit organizations usually settle their startups within six months. Reintegrate Psychotherapy is planning to gain $500, 000 for its startup expenses via fundraising; such goal can be justified by its measurability and evident attainability. To be more specific, the firm intends to make a startup capital within three months, so it is also an attainable objective. Funds collected will cover startup expenses, in particular, the preliminary advertising and marketing campaign. A strong social presence is important to any non-profit business, so the next goal of Reintegrate Psychotherapy is to gain and service 1,000 customers in the first two months of performance. In the long run, the Reintegrate Consultation Firm plans to utilize an information technologies system for forecasting customer demand, customer retention, and optimize basic business procedures. These objectives are attainable, but minor corrections in terms or budget may be required. Raising funds should take the lowest margin for the subsequent budgeting because the collection of funds and sponsorship at a startup stage are not determined by any tangible performance, as investors should be simply convinced that the initiative will be successful.
A rationale for the information system use in the non-profit business environment is quite obvious. Lawler, Moller, and Salloum (2014) suggest that the attachment of customer data to the business intelligence drastically enhances the marketing performance and operational excellence of a company. Therefore, the Reintegrate Consultation Firm relies on this innovation. Nowadays, information technologies are developing into a vital element of the strategic performance, but their strong presence in the non-profit sector is hardly observed. The organization should adequately realize both costs and benefits of the IT implementation for its business purposes.
In terms of such long-term projections, the firm plans to implement mHealth application for increasing the productivity of the customer communication and open access for customers, who need to undergo the entire course of counseling. The application renders a high scalability and general accessibility of information; thus, it can become an effective platform for an intended digital community (Lawler et al., 2014). The retention and attraction of customers are much effective in the digital space, as it presupposes a rather narrow selection of a particularly interested population. The firm considers its innovative leadership one of its main competitive advantages; thus, the development of its custom IT infrastructure is a long-run goal (Lawler et al., 2014). Beyond a doubt, information technologies are an important tool, especially for sustaining the company’s leadership in the market and attracting customers. Nonetheless, it is a significant change for any entity in the organizational, strategic, and financial sense; thus, its planning and adequate timing are of paramount importance.
The implementation of information technologies is not recommended at early stages of the initiative, as the firm needs to make its primary working capital and gain financial liquidity. The deployment of IT is an expensive initiative, and it should take place when the basic elements of the business performance are patched up (Grant, 2016). The application of mHealth is evidently an effective technology, but the organization needs to investigate and scan the local market and overall business environment, as the application works only with specific data that are attached to a certain location (Grant, 2016). The Reintegrate Consultation Firm intends to create a strong digital community; thus, the use of information technologies is mandatory in such a case. Still, the basic strategic and managerial issues should be resolved first.
The goals suggested above are measurable, specific, attainable, realistic, and time-bound. One can argue that they can be more ambitious and strategic, especially from the perspective of the business performance. Nevertheless, the central aim of the Reintegrate Consultation Firm is to maintain its institutional presence as a credible and effective non-profit business entity in the state of Virginia. According to this viewpoint, the company is required to sustain the main constraints of its strategic and business performance: context sensitivity, commitment, measurability, and balancing (Grant, 2016). These components are crucial factors of a successful business startup, as long as Reintegrate Psychotherapy wants to position its business adequately from the initial stage of the development. In such a manner, the consideration of multiple perspectives and highly scalable sensitivity to external changes are vital in the preliminary stages of the business development (Grant, 2016). However, strategic planning should be designed in this period; otherwise, the company will not raise the second sum for its regular performance and covering operational expenses.
Alison and Kaye (2015) argued that a business initiative should be environmentally sensitive, build commitment, measure performance, and allocate available resources. Particular attention should be paid to building commitment. Nonprofit organizations value the commitment of their personnel much as it is the main source of motivation and operational excellence. Accordingly, the firm should provide employees with favorable conditions for the full job satisfaction, personal curiosity, and a feeling of self-fulfillment (Alison & Kaye, 2015). People, who work for non-profit organizations, are usually motivated by a need to make a change in the society. Henceforth, this need should be satisfied: the provision of a workplace, clear task outline, rewards, and cooperative atmosphere are the main steps to building a strong commitment.
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In line, the aforementioned pillars of strategic planning should be considered in every part of the startup plan of the Reintegrate Consultation Firm. Thus, the initiative needs to implement its startup plan for sustaining its business performance. This plan includes the following stages:
1. The evaluation of the business environment and collection of related information;
3. Institutional foundation;
4. Fundraising for the liquidity and making the primary working capital;
5. The proper distribution of resources;
6. The assessment and correction.
It is possible that in some stages, the company faces difficulties, challenges, and even planning fails; in such cases, it is reasonable that the initiative returns to the previous step for the evaluation and reconsideration of the further aims. Succession planning is an especially challenging pattern for the startup implementation in the non-profit segment, but its appliance is the most efficient approach in this regard. For example, Froelich, McKee, and Rathge (2011) suggest that nonprofit businesses with a succession planning pattern are capable of advancing their sustainability potential to the most optimized performance. Planning succession is not only a startup and strategic framework but also an extensive methodology for the organizational management and change. Managing the organizational behavior and culture is an integral element of any business, but non-profit organizations should pay more attention to the organizational management since their performance depends mainly on the workforce commitment (Froelich et al., 2011). In planning the training, organizational changes (especially the implementation of a new technology), or reconsideration of the workflow patterns can also be managed with the help of the succession planning. A gradual change in the organizational environment balances the performance and keeps workers generally satisfied with their working conditions. Reintegrate Psychotherapy will need to undergo some major changes as soon as it establishes its organizational presence; therefore, its organizational culture has to promote flexibility and innovation.
An organizational change via succession planning renders the strategic value, as well; thus, this aspect is worth a detailed discussion. Any organizational decisions do not have to be taken instantly rather they should align with the strategic orientation of the company. The improvement of the personnel performance should take sequential steps for the preparation and implementation of certain incentives or rewards (Froelich et al., 2011). As a result, a succession planning pattern can be utilized for multiple purposes; it is especially recommended for the use by the Reintegrate Consultation Firm. However, the succession planning implies a requirement for a profound executive leadership since the implementation of each step should be controlled by the board of executives (Froelich et al., 2011). A common practice also suggests that board members usually neglect low-profile operations and receive poor performance outcomes as a result. A startup phase is especially vulnerable in relation to the managerial misconduct; thus, the involvement of the executive leadership will serve a function of guidance, control, and evaluation (Froelich et al., 2011). This aspect is also valuable for the provision of particular behavioral patterns since non-profit organizations usually form their executive performance on the basis of commitment. Accordingly, the provision of an adequate pattern of the operational performance will epitomize standards for the implementation of a succession plan.
Taking into account suggestion regarding the succession planning, Reintegrate Psychotherapy will be established according to the pattern described in the article: each step should be approached independently and gradually. In such a way, it is necessary to refer to the aforementioned six-step plan and provide outline each stage. The first step is the environmental assessment and data collection. This procedure includes gathering any information about state’s demographics in terms of the veteran population, their social status, welfare, access to healthcare, and counseling services (Anheir, 2014). Also, the presence of organizations and business entities that are particularly interested in sponsoring nonprofit initiatives of such type should be verified, as it determines the further budgeting strategy. These data should be collected and attached to respective startup capabilities of the Reintegrate Consultation Firm. The second stage is raising funds, which should involve preliminary social advertising, contacting potential sponsors, and allocating the preliminary working capital since it depends on the raised funds (Anheir, 2014). A common practice suggests that the collection of donations online is less popular and effective than the real-world public presentation; consequently, the social media should be utilized for encouraging the public to participate. Contacting interested parties, as well as a strong public presence, are the main objectives at this stage.
Concerning the stage of establishing the institutional presence, some basic financial and physical assets should be collected. Renting an office, recruitment of personnel, and minimal promotion of the organization are the central activities needed for building the institutional presence. Moreover, the registration of a non-profit business, as well as license for the counseling and psychotherapy services and standard compliance with the safety, fire emergency, and other federal requirements comprise the institutional essence of any firm (Anheir, 2014). The fourth stage is the collection of funds for the working capital and liquidity. This process of fundraising differs from the initial one as the firm collects money for operational expenses and is liable to sponsors in terms of operating a certain number of customers out of the target population. The company is recommended to design a specific fundraising mechanism and program of incentives for a particular budgeting period, as the working capital should circulate on a regular basis (Anheir, 2014). The fifth step is the resource allocation, and it is pivotal for the further business sustainability because balanced expenses imply a balanced performance of the firm and its stable potential for donations and sponsorship in the future. Initially, the firm needs to allocate its assets according to the basic needs for the holistic business performance so that the innovation and expensive marketing initiatives are omitted (Bryson, 2011). The last stage is the evaluation and revision. The assessment of the initiative should undergo the basic measurement of the expected and actual state of the company. Meanwhile, revision is applicable to any of stages after during or after its implementation.
Summary of the Key Elements of the Proposal Achievement
The startup of the initiative should presuppose a profound environmental scanning with the view to identify required costs, potential benefits, and related implications that may become an obstacle towards sustaining a regular performance of Reintegrate Psychotherapy. Thus, the company is required to evaluate the business environment, as its startup cannot be isolated from external influences. James and Rose-Ackerman (2013) assumed that environmental scanning has to consist of the market research, industry assessment, social trending, and the analysis of regulatory policies. As soon as managerial planning is settled, an executive part of the initiative should take place. The company needs to hire board members, managers, counselors, psychologists, and support staff for starting its factual performance according to the already developed strategy (James & Rose-Ackerman, 2013). Funders and investors should be not neglected, as well, since their decision-making regulates the investment and sponsorship for the future (Puyvelde, Caers, Du Bois, & Jegers, 2012). As for customers, a proactive advertising campaign and further retention program should be applied for their active involvement. All in all, the Reintegrate Consultation Firs is expected to address such constraints as the environment scanning, market research, further market entry, PR management, settlement of legal requirements and standards, and studying the target audience.
Utilizing some elements of the social media marketing is an obvious managerial activity needed for the marketing strategy of an organization and its regular business performance. As long as the organization aims at founding a digital community of retired veterans, a strong social media presence and going viral are needed. Seingah Nah and Gregroy Saxton (2013) admitted that non-profit businesses that utilize the social media management can effectively encourage people for the real-world action and monetary donation. Again, Reintegrate Psychotherapy intends to create a digital community for veterans; thus, a particular management of social media platforms is a natural need (Seingah & Saxton, 2013). The company has to manage its social media accounts such as Facebook and Tweeter in order to reach its target audience.
In spite of the managerial excellence, non-profit companies often tend to fail their executive leadership and activities, especially at the board level. Non-profit companies perform based on the commitment of its employees; thus, the executive leadership plays a much greater role. Executive leaders provide their subordinates with a certain example of behaviors, actions, and mindset. Henceforth, the executive leadership sets a particular form of commitment in the personnel. Moreover, an actual performance of certain activities and their control is a responsibility of an executive leader, who should be able to guide other workers and perform these activities instead of them, if needed (Holloway, 2012). Thomas Wolf (2013) suggests that that the executive leadership is an important issue not only in strategic but also in organizational context. The researcher argues that board members often do not see an organization in its largest context; thus, their performance is limited to managing regular activities. Meanwhile, the participation and understanding of their executive essence are usually neglected (Wolf, 2013). It becomes increasingly difficult to ignore the fact that a flat organizational design is an independent managerial activity for the Reintegrate Consultation Firm and the most desired organizational structure for its regular performance.
Any project can achieve success only in the case of its precise control and effective time management. An organization is expected to place its project in a Gantt chart framework in order to track the sequence and progress of tasks to be completed (Bryson, 2011). The chart is presented below and demonstrates the main tasks under the project of the startup initiative of the Reintegrate Consultation Firm.
It is abundantly clear that the firm needs to recruit the own personnel: board executives, managers, counselors, psychologists, IT specialists, and the support staff. By the same token, the provision of resources is mandatory. Reintegrate Psychotherapy has to raise funds for budgeting its physical and intangible assets, workforce, and IT equipment. As it has been already discussed, these issues should be managed within the first two years, and resource provision/allocation plays a great role in this regard. Bryson (2011) argues that it is an important strategic consideration since the distribution of resources for non-profit organizations is a managerial issue, especially under circumstances of the limited working capital. Evidently, the organization depends on funding and sponsorship from the outside; consequently, sustaining the flow of investing should be achieved via the adequate management of resources.
Aside from other issues, the stakeholder management and a stewardship model should be applied to the initiative, as well. It is hard to argue that non-profit organizations usually perform according to the commitment of devoted workers and strong leaders; thus, measuring success with values rendered to the communities is quite explicit (Bryson, 2011). Therefore, the creation of appropriate working conditions is a key factor in satisfying and ensuring the workers’ commitment. Likewise, open access to the firm’s services for customers is also one of the main goals that are pursued in the stewardship model. For sure, Reintegrate Psychotherapy is able to implement other organizational management models, but the stakeholder management is best addressed by the stewardship model as it is particularly focused on the workforce and customer commitment. Such an approach is especially important to the non-profit business.
As a matter of fact, the workforce represents operational and executive stakeholders; thus, favorable conditions for their operational excellence is a mandatory requirement. In the same vein, the accessibility, attainability, and flexibility should be demonstrated in approaching the target population. Anheir (2014) asserts that the stewardship theory is a means of rendering values of a specific community and constant enhancement of its qualities. In such a manner, a frequent update and optimization of workflow patterns, rewarded training, and team building activities are a crucial part of the effective human resource management and organizational governance of the firm (Anheir, 2014). In approaching the target population, utilizing the innovative retention and analytics technologies can assist the firm in defining desires and behavior of customers (Anheir, 2014). Such a vision fully reflects the main statement of values of the Reintegrate Consultation Firm and creates a fundamental organizational and executive framework; therefore, the stewardship model is applicable to the startup initiative of the company under consideration.
It is increasingly difficult to ignore the fact that the timely, efficient, and reliable attainment of project deliverables is possible only in the case when the basic project tasks are being evaluated on a regular basis. Therefore, the evaluation and progress metrics are essential in any startup initiative. Nonetheless, the project should fit its tasks into a specific framework; otherwise, the independent quality control and assurance may revise separate tasks in the light of different objectives. Kazi and Radulovic (2011) confirm that a balanced scorecard is the best solution for the alignment and enhancement of the project’s tasks. They argue that the use of a balanced scorecard in the project management framework, internal communications, and workflow designs can leverage the accuracy and relevance of the quality control (Kazi & Radulovic, 2011). The Reintegrate Consultation Firm is suggested to use the balanced scorecard model for aligning the project tasks completion and evaluation because of the fact that this model addresses multiple perspectives of the initiative. It is difficult to deny that the startup initiative involves numerous activities, which often are to be performed simultaneously; thus, they should be adjusted according to a certain objective and priority.
In the light of the stewardship model, it is worth saying that the model should be applied to the workforce performance evaluation. In spite of the fact that it has been suggested to use a flat organizational structure, top-down relations in the evaluative process are compulsory (Puyvelde et al., 2012). The assessment of the workforce performance is based on their job satisfaction since the Reintegrate Consultation Firm is a non-profit organization and the workforce commitment is its valuable executive asset. In such a way, providing favorable working conditions can determine whether the project tasks are completed in accordance with standards of quality, timeframes, budget, and resources allocated for a particular task (Puyvelde et al., 2012). However, the latter element is another matter of the stewardship model since workers should be supplied with sufficient recourses for a successful task performance.
In terms of the quality assurance and control, it is relevant to refer to Joanne Carman (2014), who provided the following argument. The main point of the author is based on the evidence of the heterogeneous environment of a non-profit business. Evidently, an extensive presence of common values matters, but a worker may not perform to the best of the own potential provided that some gaps in the workflow design or physical workplace are present (Carman, 2014). Consequently, the quality control and assurance can be the most objective measurements for both the project performance and workforce commitment. As a result, the quality assurance is expected to conduct a comparative analysis: initially, most members of the staff are devoted employees, and the assessment of the quality has to start with scanning and evaluating the working conditions (Niven, 2008). Specific attention is paid to the concept of the stewardship because the central focus is paid to the devoted performance of the workforce. Thus, the employee commitment has a direct influence on the quality of completed tasks under the project, as well as the operations execution as a whole. Workers perform different tasks, the quality of which is determined by the level of the employee commitment (Niven, 2008). Therefore, the management and improvement of ethical and organizational perspectives of Reintegrate Psychotherapy will provide evaluative outcomes and necessitate some internal updates.
At the beginning of the financial analysis, it is worth saying that any firm should comply with section 501(c) (3) in order to register its nonprofit status. Reintegrate Psychotherapy is the public charity organization; thus, it is free of taxes that are applied to for-profit businesses and private foundations (IRS, n. d.). The company heavily depends on the public donations and sponsorship; therefore, it is supposed to be registered as a public charity and assigned the primary tax-exempt status (IRS, n. d.). It requires the organization to declare all physical and monetary assets for the public transparency.
The Startup Expenses
Nevertheless, Reintegrate Psychotherapy should make its primary working capital for budgeting startup expenditures. The model of the Wall Street Journal (2016) suggests that the organization is supposed to spend $596,750 for its startup capital and $408,000 for reaching a sufficient liquidity within two years (Figure 2). Tim Berry (2011) argues that making forecasts for short terms and low-bottom margins is an adequate decision. The startup financial planning can be limited to the identification of expenses for the establishment of the company’s institutional presence and launch of the primary working capital only. Even though the overall success of this planning depends on the managerial excellence, initial projections should be respectively adequate.
The Reintegrate Consultation Firm intends to apply a model of the increased sales deliverance in order to provide sufficient returns on investment. The company should provide services to the target audience on 20% worth from investments and gathered donations. For example, the organization’s monthly fundraising outcome is $100,000. Therefore, the company has to provide services as if it has managed to collect $120,000. Such strategy is attainable for Reintegrate Psychotherapy and can ensure the investors and regular donators that the firm performs towards providing a public benefit. Still, the organization should manage its finance from the inside; in such a manner, the cost-benefit analysis is also important.
The Cost-Benefit Analysis
As a matter of fact, startup expenditures are the initial constraint for launching any startup. The firm should make the working capital that will move forward the entire business. However, the working capital is only a monetary instrument of making the business work; meanwhile, the cost-benefit analysis is a projected representation of how successful a certain amount of it will be in the case of a reasonable management (Galaskiewicz, 2016). However, it is worth saying that conducting a cost-benefit analysis for a long term is not reasonable since it does not consider inflation rates, interests, and other external uncontrolled factors (Galaskiewicz, 2016). In such a manner, the analysis of costs spent on the startup and subsequent development of business should be compared to the monetary representation of services to be delivered. Provided that the company will entirely sustain itself within two years and it plans to collect $500,000 each month, the equivalent of delivered services will be 24:3×500,000 = 8×500,000 = $4,000,000 + (4,000,000×0.2) = 4,800,000. As compared to the initial expenses of $596,000 + $408,000 = $1, 004, 000, benefits are evidently higher, thus, justified (Figure 3).
The Working Capital
As Paul Haely and Krishna Palepu (2013) suggest, the attachment of strategic performance to the financial planning is a natural process. However, the identification of the working capital is a preexisting financial tool for the initiative’s startup. Investing in physical and intangible assets is vital for the institutional presence of a company, but the working capital is needed for making the business move forward. In the case these projections do not work, the entire business will fail as a result; therefore, the consideration of the working capital is increasingly important (Haely & Palepu, 2013). The initial working capital for Reintegrate Psychotherapy is equal to $408,000, and it should be launched as soon as all startup expenses are spent. The working capital is the main metric for the financial liquidity; it represents the current financial assets that are owned by the company. Consequently, accounts receivable, current assets, and current liabilities are directly related to the working capital, as they determine its value (Haely & Palepu, 2013). In the future, the working capital can be identified with a difference between current assets and current liabilities. On a separate note, the inventory, operating costs, and uncontrolled expenditures should also be taken into account.
Michaliski (2012) asserts that financial accounts in nonprofit organizations are also essential since accounts receivable reflect the firm’s working capital, thus, its capability of the effective and sustainable performance. In addition, the researcher (2012) argues that the strategic analysis of accounts receivable, current assets and liabilities, inventory, operating expenses, and other financial components are dynamic issues owing to the fact that an organization should not depend on the sponsorship and fundraising only. In other words, Reintegrate Psychotherapy needs to plan and preserve its financial assets beforehand, especially in the case it fails to collect sufficient funds.
Claiming a pro forma statement is essential for any business, but its use in the non-profit segment is quite complicated. Pro forma reflects a specific amount of expenses that are spent on certain physical assets and the firm’s potential to recover these expenditures. Since the Reintegrate Consultation Firm is a non-profit organization, these metrics are substituted by funds to be raised and startup expenses. As long as the startup expenses statement (Figure 2) suggests that the computer and office equipment, as well as inventory, constitute only tangible supplies, it is necessary to break down the costs within these amount of cash. The office equipment will include: $10,000 – the basic furniture; $10,000 – 10 MacBook laptops; $3,000 – wires, printers, and scanners; $2,000 – the equipment for call receiving; $5,000 – equipping and outsourcing unified communications within the office; $5,000 – the purchase of software needed for the effective performance; $5,000 – a coffee machine, microwave, and other kitchen equipment for the personnel; $5,000 – the construction and maintenance of the basic restroom; $5,000 – provision of an air conditioning and heating system; and $10,000 – gym and entertaining center for the personnel. In terms of inventories, allocated $600 will be spent in order to budget minor corrections, maintenance, and housekeeping expenses.
The organization is evidently capable of collecting such funds; thus, the allocation of startup expenses, as well as donation goals, is attainable and well-justified. However, the pro forma statement is not a purely financial tool that is used for measuring the correspondence between costs to be spent and the actual presence of assets that demonstrate a liability of a company (Zietlow, Hankin, & Seinder, 2007). As a matter of fact, pro forma is an effective budgeting tool since it demonstrates the specified distribution of costs. The Reintegrate Consultation Firm has quite optimistic projections for its startup, so implications on such favorable outcomes should be investigated with the help of other financial instruments.
Return on Investment
This financial tool is the most complicated one among other financial instruments in the non-profit business, as measuring of sales is substituted for a social contribution value. However, even though this metric is not sufficiently objective, it can determine an ability of a company to deliver a desired value to the community. Consequently, the presentation of the ROI statement is useful for measuring the productive potential and guidance of possible investors, who should be aware of the effects produced and provided by the organization to the target population and the society as a whole (Zietlow, Hankin, & Seinder, 2007). Thus, calculation of return on investment in the non-profit business is conducted according to the following formula: the tangible + intangible value of the community/total resource investment (Zietlow, Hankin, & Seinder, 2007). Both tangible and intangible values are determined by specific estimates. Psychotherapy services suggest the following community value: $500,000 as all expected donations will be spent on servicing the target population. As for intangible value, it is $50,000 since the company is intending to provide services on 20% of costs provided. The organization’s current return on investment is the following: ($500,000 + $100,000): $500,000 = 1.2%.
Provided that the initiative is in the startup stage, such ROIs are quite positive, even though all funds are to be utilized for startup expenses and the creation of the initial working capital. Still, initial optimistic projections contained an implication on the fact that Reintegrate Psychotherapy is unable to produce such sales right after the startup (Healy & Palepu, 2013). The calculation of return on investment makes these projections more realistic, and the rest of managerial plan should be tailored according to such outcomes. Again, the financial and strategic goal should be followed and be attainable, and reaching such a rate of ROI is to be sufficient for the startup phase of the company.
The Sensitivity Analysis
In order to ensure the adequacy of the projections and ROI, the sensitivity analysis should be conducted. It is a measurement of a company’s financial ability to react to internal changes and ability to stay profitable. The sensitivity analysis is conducted with a formula fixed costs (selling price – variable costs). Provided that the company plans to service the target population with consulting and psychotherapy on 20% worth than projected funds to be collected, the sensitivity analysis will include the following figures: $596,000/($600,000 – $408,000) = $596,000 : $192,000 = 3.1%. As a result, the break-even point for the company is 3.1% worth of its present operating expenses. The company will benefit 3.1% of all funds collected from its performance provided that it spends all donations for the startup and working capital. It is a quite positive outcome for the Reintegrate Consultation Firm, and such proactive startup suggests that the company will sustain its performance in the case the rest of managerial objectives are met.
Overall, the projections in the startup phase of the firm in financial terms are evidently positive even though certain implications are present. The company needs to focus on delivering a sufficient community value in order to justify investments funded in the initiative. The allocation of financial and physical assets is especially important at this stage as the organization is expected to maintain its institutional presence and arrange initial liquidity of the working capital (Healy & Palepu, 2013). In the light of positive forecasts for the startup, the initiative is eligible for an actual implementation and executive performance. However, the financial analyses are not ultimate, and minor adjustments are possible, especially in the case the company does not gain sufficient funds (Healy & Palepu, 2013). Therefore, it is relevant to conclude that the financial planning of the initiative’s startup works not only for the future operations with finance but also for gaining these funds from local communities.