Business plan for medical lab

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Business plan for medical lab

  1. 1. Business plan Swanthana Medical Laboratory Submitted by Arun Raj K., Job Thomas, Mathew George, Raj Vinod, Sreekumar and Vishnu Sankar M. M. SHOOL OF MANAGEMENT STUDIESCochin University of Science and Technology Cochin, Kerala, India, PIN 682 022 October 2012
  2. 2. Executive summarySwanthana Medical Laboratories (SL) is a start-up company committed to providing the mostconvenient, friendliest blood testing service to people in and around Kalamassery. SwanthanaMedical Laboratories is founded as partnership firm formed by group of committed enthusiasticgentlemen. The partners are Mathew George, Raj Vinod, Job Thomas, Arun Raj K., Sreekumar andVishnu Shankar.Swanthana Medical Laboratories has established three significant objectives to pursue. The first issecuring 60% of customers from Co-operative Medical College, Kalamassery. The second objectiveis to develop 20% of their revenue from physicians who practice in the nearby vicinity. The thirdobjective is the desire to reach profitability with 12 months.Swanthana Medical Laboratories has identified three market segments they will serve. First segmentis the large number of patients of Co-operative Medical College, Kalamassery, who will be attractedby giving quality testing at reasonable cost. This customer segment is expected to have growth rateof 10%. The second group of patients is expected from physicians having private medical practicesin other nearby facilities. The third group of patients are expected locally, who come for routinehealth check-up.Swanthana Medical Laboratories offers a comprehensive clinical test for potential patients. Severaltests will be done in-house including: Clinical Pathology, Biochemistry, Hematology, Microbiology,X-ray, ultrasound and CT scan.Swanthana Laboratories will serve patients with fast, accurate, private, reasonably priced clinicaltesting services. Swanthana Medical Laboratories will exceed all of their customers expectations.Swanthana Medical Laboratories will be providing home collection of samples, which will be uniquefor the customers in Kalamassery locality.Business descriptionSwanthana Medical Laboratories will strive towards achieving the target health quotient of India.The total Indian healthcare sector is today INR 220 crores and it is projected to grow to nearly INR250 crores by 2013. The diagnostic and pathology market is around two percent of the total market.Indian diagnostic market has been growing fast, at 15-20 percent growth rate but there are lots ofdevelopment needs. The growth rate is estimated to remain the same for the following ten years.One of the major driving forces is the basic demographic change: the migration to urban cities, withincreasing number of people having access to modern healthcare. Consequently, more and moreinvestments are being made in hospitals and clinical laboratories. However, the rural sector is not tobe forgotten. The emerging industry structure is headed towards providing healthcare services as anintegrated comprehensive package rather than the traditional concept of providing healthcareinfrastructure and reactive medical care. Among the middle and high-income families in India thereis a rapidly increasing health consciousness which leads to high demand on preventive health care. 2 Business plan for Swanthana Medical laboratories
  3. 3. Swanthana Medical Laboratories offers a comprehensive clinical test for potential patients under oneroof. The tests include: Clinical Pathology:- Laboratory chemical analysis of bodily fluids, such as blood, urine Biochemistry:- Testing of proteins, carbohydrates, lipids, nucleic acids and other bio- molecules Hematology:- Testing of blood cells, hemoglobin, blood proteins in blood Microbiology:- Analysis of microorganisms including bacteria, viruses, fungi and parasites X-ray:- Radiographs, Computer tomography, Fluoroscopy, Radiotherapy Ultrasound:- Obstetric sonography, visualizing subcutaneous body structures including tendons, muscles, joints, vessels and internal organs CT scan:- Computer processed medical imagingMarketingSwanthana Medical Laboratories has identified three market segments. First segment is the largenumber of patients of Co-operative Medical College, Kalamassery. The second group of patients isexpected from physicians having private medical practices in other nearby facilities. The third groupof patients are expected locally, who come for routine health check-up. The details of marketsegmentation are shown in Figure 2. Market segmentation 15 Patients from CMC 25 60 Referral patients Health check-upFigure 2. Market segmentationSwanthana Medical Laboratories will provide services geared to three distinct customer segments.1. Patients of Co-operative Medical College, Kalamassery - This segment is made up of patients visiting Co-operative Medical College, Kalamassery. The laboratory facility at Co- operative Medical College, Kalamassery is not sufficient to cater the present day demand because of the high volume. There are about 17 departments functioning in the medical college and about 10,000 patients are suggested to carry out the clinical test for diagnosis. However with 3 Business plan for Swanthana Medical laboratories
  4. 4. the available infrastructure and staff, the delay for giving report is about 3 to 4 days. Hence, it is expected that there will be a flow from this regime to new laboratory facilities. Swanthana Medical Laboratories aims to receive about 60 percent of its customers from Co-operative Medical College, Kalamassery.2. Referral patients: there are about 40 physicians doing private practices in small clinic or at home available in Edapally, Palarivattom, Kalamassery area. Most types of doctors need blood work done on their patients with some regularity. The physicians have always just had to send their patients to city to have blood drawn and analyzed. This is not convenient for their patients and is time consuming, so physicians in the said locality would generally be quite happy if there were a blood laboratory within Kalamassery.3. Regular health check-up: In the modern urban life styles, deterioration of the health is increasing day-by-day due to stress, lack of physical exercise etc. Hence, most of the urban inhabitance does check their sugar and cholesterol level in the blood frequently. The large infrastructural facility in Cochin University Campus detained from traffic congestions are being utilized for routine morning exercises by the large group of people around the locality. The proposed medical laboratory at Kalamassery will serve this health conscious group of people.OperationsSwanthana Medical Laboratories is located at university road Kalamassery. The location is close tothe bus stop and has good parking space. The location of the laboratory is about 2 km fromCooperative Medical College. There are about 40 physicians doing private practices in small clinic orat home within 2 km from the laboratory. The building is set in the ground floor, which helps easyaccess for the patients. The total of 500 square feet area is being rented for this purpose.The building is accessible both for shipping and receiving customers. One senior technician and twojunior laboratory technicians will be appointed on regular basis for the smooth functioning of thefirm. The license will be obtained in the name of senior lab technician. In future, profit sharing tothe licensee will be considered. The total estimate for the asset at start up is INR 83 lakhs.The amount spent on operations is given in Figure 3. Cash Flow (Year 1) INR 8,000,000 INR 6,000,000 Received INR 4,000,000 Spent INR 2,000,000 INR 0 Operation OthersFigure 3 Details of Cash Flow 4 Business plan for Swanthana Medical laboratories
  5. 5. ManagementSwanthana Medical Laboratories is founded as partnership firm formed by group of committedenthusiastic gentlemen. The partners are Mathew George, Raj Vinod, Job Thomas, Arun Raj K.,Sreekumar and Vishnu Shankar.Mathew George is one of the managers of Swanthana Medical Laboratories. Mathew received hispostgraduate degree in Business Management from Cochin University of Science and Technonolgy.While in college, Mathew owned an automobile spare parts shop at Trichur. In addition to thisbusiness Mathew ventured in e-business by selling paintings and handicrafts that purchased fromartisans from different parts of Kerala. This provided him with hands-on business experience tocombine with his business degree.Raj Vinod and Job Thomas are Engineers by profession and also graduated from prestigiousbusiness school. Sreekumar and Vishnu Shankar have graduation in commerce and post graduationin Business administration. Arun Raj is working as a manager in a multinational company and hisexperience in handling perishable good will add advantage in inventory management.Personal Plan Mathew George will handle business development, sales, marketing, accounting. Senior lab technician will prepare and sign on reports. One junior lab technician will be engaged to draw and analyze samples One junior lab technician will be responsible for doing onsite collection of samples. He is expected to have valid driving license to drive mobile sample collection unit. Table 1: Personnel Plan Year 1 Year 2 Year 3 Mathew George INR 1,100,000 INR 1,400,000 INR 1,600,000 Junior Technician 1 INR 825,000 INR 900,000 INR 900,000 Junior Technician 2 INR 750,000 INR 900,000 INR 900,000 Senior Lab technician INR 1,100,000 INR 1,200,000 INR 1,200,000 Total People 4 4 4 Total Payroll INR 3,775,000 INR 4,400,000 INR 4,600,000 5 Business plan for Swanthana Medical laboratories
  6. 6. FinanceThe cash flow statement, profit and loss account and balance sheet for the upcoming three years areprojected for the financial analysis of the project. The charts of sale-profit details, asset-liabilities aregiven below. In year 1, profit is in negative, but it is positive in year 2 and 3. As the project involveshuge investment, the project is not profitable in the first year but will be profitable in the secondyear onwards. The projected asset of the project is increasing in the upcoming years and liability isdecreasing with time. In the first year, the capital was negative and in subsequent years capital ispositive, which indicates a positive growth for the business. Sale-Profit details INR 16,000,000 INR 12,000,000 Year 1 INR 8,000,000 Year 2 Year 3 INR 4,000,000 INR 0 Sales Margin Expenses Profit (INR 4,000,000)Figure 4 Details of sale, margin, expenses and profit Assest, Liabilities & Capital INR 10,000,000 INR 8,000,000 INR 6,000,000 Year 1 Year 2 INR 4,000,000 Year 3 INR 2,000,000 INR 0 Asset Liabilities Capital (INR 2,000,000)Figure 5 Details of assets, liabilities and Capital 6 Business plan for Swanthana Medical laboratories
  7. 7. Critical riskIn Kalamassery, there is a total of six blood drawing laboratories. Of the six, two only serve theirspecific clients and do not do work for other physicians. Of the remaining four, three offerChemical tests and not having scanning facility and the remaining one is full-fledged laboratory nothaving on-site collection of samples.The closest competitor to Swanthana Medical Laboratories is DDC, located at Edapally. This is thefacility that 95% of the physicians in the Kalamassery currently use. It is used by these physiciansbecause of convenience, it WAS the closest laboratory. As mentioned earlier, medical testing serviceproviders are chosen based on convenience, how close they are to the patients. Hours of operation(i.e. longer hours/evening hours) are insignificant since physicians are only available duringtraditional daytime office hours.Harvest strategyWhen a few partners retire from the Swanthana Medical Laboratories and the remaining partners,who are two or more, take over and continue the business of the firm, there is merely change inconstitution of the firm and the business continues. At the time of transfer, as business of the firmcontinues, stock can be valued at cost or market value which-ever is lower. In case of retiringpartners, they are receiving balance in their capital accounts including the revaluation reserve onvaluing land and building of the firm at market value. The buildings, equipments, machineries andpeople will be insured for secure functioning of the business.Milestone scheduleThe milestones are the guideline for the functioning of the business. The various milestonesidentified for Swanthana Medical Laboratories are given below. Milestone Q1 Q2 Q3 Q4 Competition of business plan XXXXXX Secure lease XXXXXX Increase customers XXXXXX XXXXXX Profitability XXXXXX Meet revenue target XXXXXX 7 Business plan for Swanthana Medical laboratories
  8. 8. AppendixA1. Start-upStart-up ExpensesLegal INR 50,000Stationery etc. INR 0Brochures INR 25,000Consultants INR 0Insurance INR 25,000Rent INR 50,000Research and Development INR 0Expensed Equipment INR 100,000Other INR 0 Total Start-up Expenses INR 250,000Start-up Assets INR 0Cash Required INR 4,600,000Other Current Assets INR 0Long-term Assets INR 3,650,000 Total Assets INR 8,250,000 Total Requirements INR 8,500,000 8 Business plan for Swanthana Medical laboratories
  9. 9. A2. Start-up FundingStart-up Expenses to Fund INR 250,000Start-up Assets to Fund INR 8,250,000 Total Funding Required INR 8,500,000AssetsNon-cash Assets from Start-up INR 3,650,000Cash Requirements from Start-up INR 4,600,000Additional Cash Raised INR 0Cash Balance on Starting Date INR 4,600,000 Total Assets INR 8,250,000Liabilities and CapitalLiabilitiesCurrent Borrowing INR 0Long-term Liabilities INR 5,000,000Accounts Payable (Outstanding Bills) INR 0Other Current Liabilities (interest-free) INR 0 Total Liabilities INR 5,000,000CapitalPlanned InvestmentInvestor (6 memebrs) INR 3,500,000Other Investor INR 0Other INR 0Additional Investment Requirement INR 0 Total Planned Investment INR 3,500,000Loss at Start-up (Start-up Expenses) (INR 250,000)Total Capital INR 3,250,000Total Capital and Liabilities INR 8,250,000Total Funding INR 8,500,000 9 Business plan for Swanthana Medical laboratories
  10. 10. A3. Cash Flow Statement (Projected) Year 1 Year 2 Year 3Cash ReceivedCash from OperationsCash Sales INR 1,226,650 INR 3,158,200 INR 3,488,200Cash from Receivables INR 2,392,650 INR 7,447,400 INR 10,118,200 Subtotal Cash from Operations INR 3,619,300 INR 10,605,600 INR 13,606,400Additional Cash ReceivedSales Tax, VAT, HST/GST Received INR 0 INR 0 INR 0New Current Borrowing INR 0 INR 0 INR 0New Other Liabilities (interest-free) INR 0 INR 0 INR 0New Long-term Liabilities INR 0 INR 0 INR 0Sales of Other Current Assets INR 0 INR 0 INR 0Sales of Long-term Assets INR 0 INR 0 INR 0New Investment Received INR 0 INR 1,300,000 INR 0 Subtotal Cash Received INR 3,619,300 INR 11,905,600 INR 13,606,400Expenditures Year 1 Year 2 Year 3Expenditures from Operations INR 0 INR 0 INR 0Cash Spending INR 3,775,000 INR 4,400,000 INR 4,600,000Bill Payments INR 3,526,850 INR 7,007,150 INR 7,735,450 Subtotal Spent on Operations INR 7,301,850 INR 11,407,150 INR 12,335,450Additional Cash SpentSales Tax, VAT, HST/GST Paid Out INR 0 INR 0 INR 0Principal Repayment of Current Borrowing INR 0 INR 0 INR 0Other Liabilities Principal Repayment INR 0 INR 0 INR 0Long-term Liabilities Principal Repayment INR 600,000 INR 600,000 INR 600,000Purchase Other Current Assets INR 0 INR 0 INR 0Purchase Long-term Assets INR 0 INR 0 INR 0Dividends INR 0 INR 0 INR 0 Subtotal Cash Spent INR 7,901,850 INR 12,007,150 INR 12,935,450Net Cash Flow (INR 4,282,550) (INR 101,550) INR 670,950Cash Balance INR 317,450 INR 215,900 INR 886,850 10 Business plan for Swanthana Medical laboratories
  11. 11. A4. Profit and Loss Account (Projected) Year 1 Year 2 Year 3Sales INR 4,906,700 INR 12,632,700 INR 13,952,700Direct Cost of Sales (0.35-0.40) INR 1,717,350 INR 4,421,450 INR 4,883,450Other Costs of Sales INR 0 INR 0 INR 0 Total Cost of Sales INR 1,717,350 INR 4,421,450 INR 4,883,450Gross Margin INR 3,189,350 INR 8,211,250 INR 9,069,250Gross Margin % 65.00% 65.00% 65.00%ExpensesPayroll INR 3,775,000 INR 4,400,000 INR 4,600,000Sales and Marketing and OtherExpenses INR 120,000 INR 150,000 INR 175,000Depreciation INR 730,200 INR 730,200 INR 730,200Rent INR 600,000 INR 675,000 INR 725,000Utilities INR 90,000 INR 90,000 INR 90,000Insurance INR 120,000 INR 150,000 INR 175,000Payroll Taxes INR 566,250 INR 660,000 INR 690,000Other INR 0 INR 0 INR 0 Total Operating Expenses INR 6,001,450 INR 6,855,200 INR 7,185,200Profit Before Interest and Taxes (INR 2,812,100) INR 1,356,050 INR 1,884,050EBITDA (INR 2,081,900) INR 2,086,250 INR 2,614,250Interest Expense (16.5%) INR 817,500 INR 760,000 INR 700,000Taxes Incurred (30%) INR 0 INR 178,800 INR 355,200Net Profit (INR 3,629,600) INR 417,250 INR 828,850Net Profit/Sales -73.97% 3.30% 5.94% 11 Business plan for Swanthana Medical laboratories
  12. 12. A5. Balance Sheet (projected)Assets Year 1 Year 2 Year 3Current AssetsCash INR 3,817,450 INR 3,715,900 INR 4,386,850Accounts Receivable INR 1,287,400 INR 3,314,500 INR 3,660,800Other Current Assets INR 0 INR 0 INR 0 Total Current Assets INR 5,104,850 INR 7,030,400 INR 8,047,650Long-term AssetsLong-term Assets INR 3,650,000 INR 3,650,000 INR 3,650,000AccumulatedDepreciation INR 730,200 INR 1,460,400 INR 2,190,600Total Long-term Assets INR 2,919,800 INR 2,189,600 INR 1,459,400 Total Assets INR 8,024,650 INR 9,220,000 INR 9,507,050Liabilities and Capital Year 1 Year 2 Year 3Current LiabilitiesAccounts Payable INR 504,250 INR 582,350 INR 640,550Current Borrowing INR 0 INR 0 INR 0Other Current Liabilities INR 0 INR 0 INR 0Subtotal CurrentLiabilities INR 504,250 INR 582,350 INR 640,550Long-term Liabilities INR 7,900,000 INR 7,300,000 INR 6,700,000 Total Liabilities INR 8,404,250 INR 7,882,350 INR 7,340,550Paid-in Capital INR 3,500,000 INR 4,800,000 INR 4,800,000Retained Earnings (INR 250,000) (INR 3,879,600) (INR 3,462,350)Earnings (INR 3,629,600) INR 417,250 INR 828,850 Total Capital (INR 379,600) INR 1,337,650 INR 2,166,500Total Liabilities andCapital INR 8,024,650 INR 9,220,000 INR 9,507,050 Net Worth (INR 379,600) INR 1,337,650 INR 2,166,500 12 Business plan for Swanthana Medical laboratories

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