Stacy Becker

Vice President, Programs

According to ReThink Health’s 2016 Pulse Check, only 5% of multi-sector partnerships have complete, long-term financial plans. You might think that you don’t really need a financial plan—you don’t have the money yet anyway. But just going through the process of creating a longer term financial vision brings rewards, so why not get started?

Before elaborating on the rewards of just diving in, I want to be clear about how I’m defining “financial plan.” For those without a finance background, the concept can be really confusing because finance professionals throw about all sorts of related terms: budgeting, forecasting, financial projections, pro formas, cash flow projections, and sources and uses. If you’re pursuing population health, a financial plan could also describe your investment portfolio and/or the funding for integrator functions. All these possibilities make things seem far from simple.

But what if I told you that “financial plan” is simply a generic term to describe a schedule of current and future intended uses of money, and ideally, estimated sources of that money? That is: what do we need money for, how much, where from, and over what period of time? This is useful at many different levels, whether planning for interventions taken on by multiple organizations across a region or for addressing key integrator functions within a single organization.

We’ve probably never met, but working with this definition, I can confidently say you already have the skills to create a financial plan. If you’re worried that I’m wrong, I wrote this blog to encourage you to get started anyway. Starting where you are, right now, will help you build the skills and insights that will come in handy when you move on to more complicated financial maneuvers in the future.  

A Rewarding Practice

In addition to skillbuilding, there are numerous other rewards just for engaging in the practice of creating a financial plan. Namely: vision, alignment, guidance, opportunity, and sustainability. Consider these examples:

  • If you have a long-term goal in mind, then a plan, no matter how bare bones, can help you crystallize your vision. Research on saving for long-term care showed, for example, that even the act of estimating future financial needs on the back of an envelope put these families ahead.
  • A financial plan—even a bare bones plan—can help guide and align decision-making. When I was budget director for the City and County of San Francisco, the deputy mayor for finance kept a small sheet of paper in his breast pocket. It was an outline of the major points of a plan for balancing the $2 billion budget. He referred to it often, using it to monitor our progress as we developed the budget.
  • A plan can open your eyes to funding opportunities. The Northside Home Fund in Minneapolis developed a portfolio to address a neighborhood ravaged by foreclosures. When costed out (very roughly), the plan suggested about $100 million would need to be raised. Staff scoffed at the sum at first, but the plan laid out the financial goals so clearly that, several years later, they had succeeded in raising almost that much.
  • The attempt to build a plan provides insights into what information is needed, and what assumptions are critical and perhaps worth testing.

But What Exactly is the Practice?

If you’re just starting out, a financial plan doesn’t have to be any more complicated than a household budget. If you’re further along, you can create a more detailed and complex plan. Your choice will depend on where your organization or multi-sector partnership is in its development and the purpose of the plan. The process of preparing your plan can help you fine-tune your priorities as you develop a better idea of how much things cost and likely revenue sources. But the basic elements are always the same:

  1. What do we need money for? Name these uses. If your plan describes an investment portfolio, the items would be the list of interventions you’re investing in, such as lead poisoning prevention, prenatal care, and tobacco prevention programs. If you are doing a more detailed plan, you might identify the components of such interventions. For example, lead poisoning prevention could involve lead pipe replacement, blood testing and/or treatment in children, or lead paint abatement.
  2. How much money do we need (or want)? Estimate spending amounts for each use specified in question 1. Obtaining reasonably reliable estimates is easier than it might seem. Ask an expert, go to a source like http://www.wsipp.wa.gov, or simply Google a question such as: “how much does lead paint abatement cost?”
  3. What are our sources of funding? Name these along with amounts. You can estimate, or if you don’t know, leave it blank. The Northside Home Fund left it blank but succeeded in raising the nearly $100 million the plan called for.
  4. Over what time frame? 5-10 years is a good time frame. Longer than that, the work gets too speculative. Shorter than that and you may be cutting off paths to sustainability.

A lot of people get hung up on number 2 above. But here’s a tip: do not worry about nailing down precise cost estimates. There are simply too many assumptions that can swing the bottom line one way or another. A far better use of time is to identify key assumptions and make sure your estimates around these are reasonable.

If you want to develop a more advanced plan, you can build on this basic framework by distinguishing between start-up costs and ongoing costs, identifying loans and repayment streams, projecting cash flow, estimating return on investment, and conducting sensitivity analysis (i.e., determining how key assumptions impact the bottom line). But for now, let’s start with a simple real-life example.

A Simple Example

The Northside Home Fund is a multi-sector partnership created to address blight and disinvestment in North Minneapolis—a problem made devastatingly worse by the foreclosure crisis, as you can see by the map, which plots foreclosures around the community. A planning group in the city’s housing agency drafted a plan that was then shared with the broader partnership. The purpose of the plan, they decided, was simply to outline action steps and how much the steps might cost. 

First of all, the planning group decided on a list of strategies that would help them achieve their mission of “adding value to existing neighborhood, city, and other private and public efforts to support safe, vibrant, and sustainable neighborhoods in North Minneapolis.” Then, they set numerical goals for each strategy, using their intuition and experience as experts about what was needed, and considering implementation capacity and lead-time.

Second, for each strategy, they indicated how they would accomplish it (such as refinancing assistance, marketing campaign, and rehab loans) and estimated the unit costs of doing so, again relying on their experience and expertise to estimate costs. The final step was simply to total the costs from all the strategies into a spreadsheet. If a more detailed plan was desired, the plan might have indicated the year the loan funds would be distributed, interest rates, and repayment dates. But the purpose of this plan was not understanding cash flow. Remember, the purpose was only to lay out an effective plan of action and estimate the costs of that plan.

What was the result? This simple plan worked because it served to focus and align priorities, actions, and resources.

  • The city’s director of housing said, “Every time I would get called to the floor to respond to a City Council issue I would simply remind them that we have a five-point strategy . . . and read each strategy and rationale . . . it was like magic . . .”  Almost without fail, the plan would redirect debates and keep decision-makers focused on the goal.
  • The director of community development said, “It looked audacious then, some banks even said so. And few neighborhood organizations could have predicted that funders would join with banks to feel a part of the solution instead of an isolated or powerless cog in an investment picture that made no sense.”

For example, a tornado ripped through the neighborhood, and when a few key businesses said they wanted to help, the staff could respond with “here’s how.”  With the plan, the staff and neighborhood knew exactly what they wanted to accomplish, and how to direct funds.

Helpful Tools are Coming Soon

In our forthcoming financing workbook, we’ll provide tips, tools, and information for you to build your own financial plan. While we finish preparing it, we’re interested in learning from your stories of financial planning. What has worked well? What outstanding challenges do you continue to face? Please comment below or send an email to ThinkWithUs@rethinkhealth.org.

The personal views and opinions expressed in this blog (and in any comments) are those of the original authors only, and do not reflect the opinions of The Rippel Foundation or ReThink Health. Neither The Rippel Foundation nor ReThink Health is responsible for the accuracy or validity of any of the information contained in the blog or any comments. All information is provided on an “as-is” basis.

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