This first phase is focused on defining outcomes and finding someone who is interested in paying for them, at a rate that makes the financial model viable. In our research we heard the strong message: start conversations with potential commissioners at the very beginning of your journey developing a SIB, rather than starting with detailed technical modelling. It can take time to get a commissioning body engaged, and without a committed commissioner, any investment in modelling will be wasted.
During the ‘Define’ phase, an organisation will need to dedicate some resource to the possible SIB or set up a project team. These have been led successfully by a variety of team members from finance managers, operations directors and chief executives to pro bono consultants. Each may have areas of expertise and gaps; it is important that whoever takes on this responsibility is supported with advice and ‘sounding boards’.
Tools referenced in phase one
Scenario analysis model
Contributed by Sune Frandsen, KKR
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To use this model, first make sure you ‘enable content’ on the workbook. Then, set about adjusting the variables in the following tabs, bearing in mind that cells highlighted in yellow are those that you should change:
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The ‘Rate Card’ tab: set the financial value of your outcomes for different cohort sizes. N.B. rates are not inclusive of VAT. Ensure you establish VAT rates payable if applicable, as this may have an effect on the cashflow.
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The ‘Scenario Assumptions’ tab: set a downside, base case and upside. For example, 70% means that 70% of participants will achieve this outcome.
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The ‘Base Case’ tab: set other variables, including programme length, staff numbers/salaries and other costs, and the amount of initial investment.
The other tabs in the workbook will give you the results: in ‘Scenario overview’, find the rate of return that your investors can expect. In ‘Detailed scenarios’, find out whether or not the cashflow works comfortably. Adjust within the ‘Base Case’ tab.
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