Business Plan for a New Entrepreneurial Business - Research Paper Example

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Business plan for a new entrepreneurial business Contents Contents 3 Executive summary 5 Company 5 Company history 5 Mission ment 5 Products and services 6 Current status 6 Legal Status & Ownership 6 Industry Analysis 6 Industry size, growth rate and sales projections 6 Industry structure 6 Nature of participants 7 Key Success Factors 7 Industry trends 7 Long-term prospects 7 Market Analysis 8 Market segmentation and target market selection 8 Buyer behavior 8 Competitor analysis 8 Marketing plan 8 Overall marketing strategy 8 Product, price, promotions and distributions 9 Product 9 Price 9 Promotions 10 Distributions 10 Management team and company structure 11 Management team 11 Board of directors 11 Board of advisors 12 Company structure 12 Operations plans 14 General approach to operations 14 Business location 14 Facilitates and equipment 15 Product Design & Development 15 Development status and tasks 15 Challenges and risks 15 Intellectual property 15 Financial Projections 17 Sources and Uses of funds 17 Assumption Sheet 18 Pro forma Income Statements 18 Pro forma Balance Sheets 18 Pro forma Cash Flows 20 Ratio Analysis 21 References: 23 Executive summary The business plan, promotes the entrepreneurial effort taken up by a team of medical experts in an effort to deliver value for money solutions for the healthcare sector. The target segment is mostly the old people who need to take medicine at the right time and at the right amount. The product AutoMed will serve that purpose by alerting the patient to take the medicine at the required time. The plan gives a brief overview of the company’s product offerings as well as the industry analysis and market analysis. Company description Company history The company, Digital Medical Instruments is a US based company was the brain child of few experts in the field of medical sciences. Founded in the year 2009, the company was quick to identify the growing needs and pains of the consumers in terms of healthcare solutions. Coming together in the form of a team, the team of experts wanted to provide value for money end user products related to the medical field, which will provide greater benefits to the patients and their family members, thereby helping them to derive a greater value for the money spent on purchasing medicine and medical services in times of global financial slowdown. Mission statement The Mission objectives for the company is to cater to the growing the needs of the customers for individualized healthcare products at affordable prices, while promoting quality for the products The vision of the company is to be the most preferred vendor for providing of healthcare based products and services to the individual clients within a span 6 years, from now. Products and services The product offering of the company is AutoMed. AutoMed is a highly technologically advanced modern day healthcare equipment for the end users. AutoMed’s main purpose is to cater to the needs of the sick and old patients, who prefer to stay independent despite their health related weaknesses. In order to prevent them from skipping their medications at prescribed intervals and to cut the costs of maintaining a healthcare person to look after their medication needs, the AutoMed will remind the patients by alerting them to take the prescribed medicines with the exact dosages. This device will also enable the family members of the patients to have a peaceful day at work, with the assurance that the device will alert their dear ones to take the prescribed medicines at the right time. Current status The company is planning to venture into the consumer market by attempting to tap the demand arising out of personal needs of the patients on a regular basis in the domestic front. Legal Status & Ownership The company is formed by a team of highly motivated, entrepreneurial team of medical experts who have the much needed skills and relative business acumen to understand the needs of the consumers in a better way, when it comes to managing physical healthcare in the domestic front. The company was started, by taking the initial funding from a group of investors, who were willing to provide the much needed financial support for the starting of the company. Industry Analysis Industry size, growth rate and sales projections The global industry for medical supplies and medical equipments are expected to touch a revenue base of around $ 350 billion from the current 273 billion, for the year ending of 2016 (Epsicom, 2011). Industry structure The US health care industry is a highly fragmented one, which comprises of a rough estimate of around 6000 device manufacturer and a total of over 5500 hospitals (Keckley and Bigalke, 2012). The US market is undoubtedly the world’s largest market for the growth and prospects of medical as well as healthcare industries. US is a top level player in the global medical market, with reports estimating that the industry is supposed to be worth of $85 billion (Reportlinker, 2012). Nature of participants As of the current scenario, there are around 11,000 players in the market of healthcare supplies and medical equipments with players ranging from GE Healthcare, Hitachi Medical Systems, Siemens Healthcare, Medtronic, Boston Scientific, Baxter International and Johnson & Johnson etc (Reportlinker, 2012). Key Success Factors The key success factor behind this product is the macro factor related to the health of the US economy. Slow recovery of the US economy will create a high demand for this particular product as it will be delivering value to the customers, while reducing side expenses related to the maintenance of nurses and other health care staff. Also, effective value communication to the target market will be another key success factor in this case. Industry trends As of the current trend in the US, consumers in the year 2011 spent around 14% for availing services and products related to healthcare. Due to the non coverage of consumers by insurances, more and more customers are increasingly paying from their own pockets (Deloitte, 2012). Long-term prospects Due to the slow recovery for the US economy in the recent times, the consumers will continue to fund their own healthcare spending, thereby leading to an increased rise in demand for more price conscious and value for money services and healthcare products. Market Analysis Market segmentation and target market selection The target segment for marketing this particular kind of health care product is mostly the end consumers, who are mostly old and elderly people and wish to retain their independence and prefers staying alone. The target segment will also include people who are increasingly looking forward to provide their old parents with the medicines at the right time, despite their busy working schedules. The target market for the marketing of the device is mostly the US healthcare industry. The product can be launched in surrounding markets as well like Germany, France and UK, which is also seeing an increase in consumer spending for availing the products and services related to personal healthcare. Buyer behavior Due to the global slowdown, most of the consumers are paying for their healthcare costs from their own pockets. This has prompted the demand for value for money products in the healthcare sector (Keckley and Bigalke, 2012). Competitor analysis At present, the market is completely virgin for this kind of a product. Though there are a lot of competitors in this particular segment, yet none of them have a product similar to ‘AutoMed’. This will provide the company with the first mover advantage in the market. Marketing plan Overall marketing strategy The overall marketing strategy for Digital Medical Instruments operating in United States should be based on meeting the following objectives. Firstly the marketing strategy should focus on the specific target market composed of patients and old people. Further the target segment for Automed also consists of people that are disabled enough to take the medicines out of the drawers. Thus focusing on the above target market the strategy in the second case the marketing strategy should focus on designing a market survey to understand the specific needs of the consumer base to help develop the product of their choice. Effective marketing surveys would be conducted through the use of questionnaires aimed at interviewing a sample of respondents pertaining to the target group. Thirdly the marketing strategy plan should focus in designing effective communication plan through the use of both print and visual media to help render a large amount of consumer awareness. It must be understood in this case that the patients or the old people are not in a position to decide and purchase on their own such medical equipments. Therefore adequate communication planning is required in this case to rightly reflect the effectiveness of using such instruments as a means to enhance the quality dimension of the healthcare services. Fourthly in order to conduct the marketing surveys and communication activities in an enhanced fashion effective budgeting should be made to allocate potential investments in regards to such activities. However while deciding on the investments an eye must be rendered in deciding on the price structure to help meet the break-even points of the company. Fifthly in addition to development of adequate communication activities in regards to print, visual, audio and online mediums the marketing strategy gains effectiveness in that it helps in reaching the target consumers effectively. Accessibility and availability of the products are the key parameters that need to be worked upon in such cases. Product, price, promotions and distributions Product The product development strategy for Digital Medical Instruments should focus on the development of a product named as Automed that would help the target population in gaining access to the medicines that they require in regards to meeting their day to day health needs. In that the product would contain of five chests that would be highlighted in an alphabetical fashion using the first letters like ‘A, ‘B’, ‘C’ and so on and so forth. Further the product should work on alarms altering the people to take the right dose of medicine at the right time. Price The pricing of the product should be made based on a strategy known as odd-pricing technique where depending on the pattern of innovation and techniques used for the product the price decided would be $499. Odd pricing technique creates a sense in the minds of consumers as products are being rendered in a discount amounting to $1. Such price structure is held to help penetrate a larger portion of the target market in regards to the competitors. Promotions The promotional activities for Automed are held to work based on a plethora of options ranging from print to visual media. Other than working to render advertisements in the health magazines and publications and also in conducting promotional slots in televisions the company would also go for launching a page in the social networking sites to grab the attention of the viewer profile. Further in-house advertising campaigns would also be conducted inside clinics and hospitals to gain the attention of the families of the patients and old people. Billboards and hoardings should also be placed in different corners along the region and also in front of medical services rendering units to gain mass coverage. Distributions In regards to aptly distributing the product to help the patient population along with the old people the company is focusing to the creation of exclusive outlets in the name Digital Medical Instruments in different regions where effective surveys reflect existence of large number of old people and patient population. Exclusive outlets would contain different range of medical equipments along with such highly innovative automotive boxes to help the people get the right medicine. Further another level of distribution channel would be fixed by the company depending on a network of middlemen groups consisting of wholesalers and retailers. These channel partners would help in arranging of key logistics and market support for the effective marketing of the products to the right consumer base. A third type of a distribution channel can be decided upon for the marketing of the product where it requires the presentation of the equipment in a shop-in-shop structure. Here, Digital Medical Instruments can work with tying itself with other retail hubs working in malls and through different outlets specializing on the sale of such type of equipments. Management team and company structure Management team The management team of the company would consist of individuals that would like to harness innovation and empowerment pertaining to the different roles in the company. Management body in regards to production would focus on empowering individuals to work on a thinking note to help render large amount of innovation to the product involved. Percolation and conceptualization of the ideas would be carried out by the production management team through the holding of meetings and workshops aimed at collectively addressing and engaging the different work groups involved. Similarly the production management body should work in the enhancement and sustenance of product quality through training the production groups on quality management initiatives and also test firing prototypes before being finally launched in the market for sale. Again the marketing and sales management team of the company is required to work in such aspects where they would formulate targets for the product on a monthly or quarterly basis and then divide the same along sales teams and territories to gain on in effectively. This team is also required to enhance the consumer relationship aspects through rendering after sales services and working on offers. Finally the management team of the company would also consist of support functions like the financial and human resources department engaged in assisting the business operations through the optimization of resource functions pertaining to human and financial capital (Zoltners, Sinha and Lorimer, 2009, p.259). Board of directors The board of directors for Digital Medical Instruments is headed by a Chairman who works in the convening of meetings and thereby presides over the activities in regards to the incorporation of different stakeholders like the shareholders, employees, supplier groups and other such groups. Decisions in regards to formulation of a new business process or in innovation of new technological equipment like the one in question should be actively shared in between the different stakeholder groups to enhance the level of transparency in the concern. Such activities would make the stakeholders internal and external feel being cared for and thereby would help in enhancing their sense of loyalty to the concern. Board of advisors The board of advisors pertaining to Digital Medical Instruments is divided into two main segments. The first advisory segment helps in rendering advices in regards to the scientific and research paradigm while the second advisory segment render advices in regards to clinical aspects. The board of advisors in regards to scientific and research paradigms work in the enhancement of the research and development functions in the company by largely rendering expertise involved in the selected areas pertaining to product development and any development required in the technological process. Thereby the group closely works with the production and operational team of the concern to help in the formulation of effective operational and technological planning to produce a highly innovative product. The second advisory body mainly consists of clinical experts who help in the designing of prototypes for the product and thereby test using the same upon a sample of a target population consisting of patients and old people. The clinical advisory board works in the enhancement of the product through rendering advices in the creation of chests for helping in the holding of gadgets like nebulizers and others (Shimasaki, 2009, p.65-70). Company structure The organizational structure of Digital Medical Instruments would be as follows as depicted from the following diagram. It is found from the above diagram that the medical organization works on a close knit hierarchy of different people pertaining to different specialized fields ranging from operations to quality testing and to other clinical services. Moreover the support functions pertaining to marketing, finance and human resources are also jointly administered through a chain of hierarchy emanating from the chairman and percolating through the directors and managers. Figure 1: The Organization Structure Operations plans General approach to operations Operations would mainly focus on the production of innovative equipments like AutoMed in the region of United States to help enhance the system of healthcare in the stated market. Business location The location of exclusive stores for the product in United States along with the promotional activities would be carried out in respect to regions like Georgia, San Francisco, Manhattan, Boston and New York. These regions are chosen owing to the large number of hospitals where such activities would be conducted (Konver, Knickman, and Jonas, 2011, p.14-16). Facilitates and equipment High level computer software is required for the designing of three dimensional designs in the production of such automatic medical equipments. Existence of a laboratory would help enhance the ergonomics related to the easy design and manufacture of such digital equipments in effective volumes (Nah and Dawodu, 2007, p.110). Product Design & Development The product named ‘AutoMed’ will facilitate the process of taking medicines by the old patients at the designated time, with the right amount of dosage. So, the automatic device will be computerized in nature, as the major functionality related to it will be controlled by the digitized inputs provided in regards to the medicine, the dosage amount and time. The device also needs to have an internet based connectivity and a specialized software, which will enable the concerned physicians to automatically load the prescriptions to the customers’ device. Development status and tasks So, the product will have to be developed by a team of highly skilled software and hardware engineers. Also, the device needs developing a specialized software, a part of which that has to installed in the device while the client interface has to be installed on the physician’s computer. Challenges and risks The success of the device is dependent on internet connectivity on both the customer as well as the physician’s side. Failing to have internet connectivity will lead to requirement of manual inputting of the related details. Intellectual property Since this is a newly invented device, the device has to be applied for patent rights that are applicable under the ‘American Inventor's Protection Act of 1999’ for the US (Uspto, 2012). This will empower the inventors, the exclusive rights for the production of this amazing device, which will automatically provide them the highly desired competitive advantage in terms of other rival companies, who are in the same segment. Financial Projections Sources and Uses of funds The owner of Digital Medical Instrument intends to invest around $100,000 of personal assets and around $300,000 in the form of bank loans. The start up expenses as well as the preliminary financing is shown in the following table: Start up Expenses Values in $ Legal 1,500 Patent 20,000 Insurance 1,000 Rent 20,000 Furnishing 20,000 Equipments & Machinery 1,00,000 Others 55,000 Total 2,17,500 Start up assets Cash Required 60,000 Start up Inventory 35,000 Other Current Assets Non-Current assets Total Assets 95,000 Total Requirements 3,12,500 Assumption Sheet The price at which the product AutoMed would be preliminary launched in the market is $ 499. Considering the elevated percentage of elderly population and the expenses related to keeping an all time attendant, it is expected the company would sell a large number of AutoMeds in its first year itself. Assuming that it sells around 3000 units in the first year and 3500 units in its second year, the company is likely to earn $1,500,000 to $1,750,000 in its first two years of operation. We would also assume that the cost of goods sold is approximately around 40% of the total revenue. Pro forma Income Statements Income Statement Year1 Year 2 (Values in $) Net revenues 1500000 1750000 Cost of revenues 600000 700000 Gross profit 900000 1050000 Operating expenses: Sales & Marketing 195000 200000 General and Admin 303000 305000 Annual Rent 20000 20000 Net income 382000 525000 Pro forma Balance Sheets Balance Sheet of Digital Medical Instruments (Values in $) ASSETS Current Assets:  Year 1  Year 2 Cash & Cash Equivalents  50000  52000 Marketable Securities     Accounts Receivable  100000  90000 Inventories  40000  50000 Prepaid Expenses  12000  14000 Total Current Assets  202000  206000       Fixed Assets  240000  240000 Intangible Assets  180000  180000 Investments  0  50000 Other Non-current Assets  200000  210000       TOTAL ASSETS  822000  886000       LIABILITIES Current Liabilities:  Year 1 Year 2  Accounts Payable  15000  16000 Accrued Expenses     Short-term Loans  20000  35000 Current Portion of LT Debt  20000  25000 Income Taxes Payable  10000  10000 Total Current Liabilities  65000  70000       Non-current Liabilities:     Line of Credit  300000  320000 Term Loan  180000  180000 Total Non-current Liabilities  480000  500000 TOTAL LIABILITIES  545000  586000       EQUITY Capital  200000  210000 Retained Earnings  77000  90000 TOTAL EQUITY  277000  300000       TOTAL LIABILITIES & EQUITY  822000   886000 Pro forma Cash Flows (All Values in $) Year 1 Year 2 Cash Flow from Operating Activities Cash Receipt from Customers 2160000 2500000 Cash Paid to employees and suppliers (864000) (1000000) Net Cash Flow generated from Operations 1296000 1500000 Cash Flow from Investing Activities Machineries and Equipments (250000) (10000) Replacement of old equipments 0 (60000) Proceeds 0 20000 Net Cash Flow from Investing Activities (250000) (50000) Cash Flow from Financing Activities Proceeds from contributed Capital 50000 60000 Loan Proceeds 150000 120000 Loan Payments (50000) (50000) Net Cash Flow from financing activities 100000 130000 Ratio Analysis (All values in US$) Year year 1 year 2 Current Assets 202000 206000 Current Liabilities 65000 70000 Current Ratio 3.11 2.94 Cash and cash equivalents 50000 52000 Current Liabilities 65000 70000 Cash Ratio 0.77 0.74 Profit from operations 900000 1050000 Profit after taxation attributable to members 382000 525000 Equity attributable to owners 277000 300000 Revenue 1500000 1750000 Total assets 822000 886000 Operating profit margin 60.00% 60.00% Net profit margin 25.47% 30.00% ROE 137.91% 175.00% ROA 46.47% 59.26% Revenue 1500000 1750000 Working capital 137000 136000 Working capital Turnover 10.95 12.87 Revenue 1500000 1750000 Total assets 822000 886000 Total asset turnover 1.82 1.98 Revenue 1500000 1750000 Equity attributable to members 277000 300000 Equity Turnover 5.42 5.83 The current ratio of the company is relatively high, implying that the company would be able to cater to its immediate obligations very comfortably. The analysis of a firm’s capacity to produce cost-effective sales by means of its resources can be determined with the help of the profitability ratios. The profit margins of the company are also expected to be high, indicating that it would utilise its assets and capital in an efficient manner. References: Deloitte. (2012). The Hidden Costs of U.S. Health Care for Consumers. Retrieved from http://www.deloitte.com/view/en_US/us/Industries/life-sciences/Center-for-Health-Solutions-Life-Sciences/research/9659782ba14ce210VgnVCM1000001a56f00aRCRD.htm Epsicom. (2011). World Medical Market Forecasts to 2016. Retrieved from http://www.reportlinker.com/p0570358-summary/World-Medical-Market-Forecasts-to.html Keckley, P., and Bigalke, J. (2011). 2012 Outlook on Health Care, Life Sciences and Government. Retrieved from http://www.deloitte.com/view/en_US/us/Insights/hot-topics/2012-industry-outlook/bf99582cad7c3310VgnVCM2000001b56f00aRCRD.htm Konver, A., Knickman, J., and Jonas, S. (2011). Jonas and Kovner's Health Care Delivery in the United States. New York: Springer Publishing Company. Nah, S., and Dawodu, E. (2007). Establishing Private Health Care Facilities in Developing Countries: A Guide for Medical Entrepreneurs, Volume 434. Washington D.C.: World Bank Publications. Report Linker. (2012). Medical Equipment and Supply Industry: Market Research Reports, Statistics and Analysis. Retrieved from http://www.reportlinker.com/ci02252/Medical-Equipment-and-Supply.html Shimasaki, C. (2009). The Business of Bioscience: What Goes Into Making a Biotechnology Product. New York: Springer. Uspto. (2012). American Inventor's Protection Act of 1999. Retrieved from http://www.uspto.gov/patents/law/aipa/ Zoltners, A., Sinha, P., and Lorimer, S. (2009). Building a Winning Sales Force: Powerful Strategies for Driving High Performance. United States of America: AMACOM Div American Mgmt Assn. Read More