LoLiT Business Plan Presentation
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For EAS 546: Engineering Entrepreneurship II at Penn, my team decided to prepare a business plan for DEKA Bionic Arm. This is the final presentation we gave at the end of the course
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LoLiT Business Plan Presentation
- 1. 1600 young soldiers return without arms 1
- 2. Stick and Hook Solutions 2
- 3. ™ LOLIT LOST LIMB REPLACEMENT TECHNOLOGIESADVANCED MYOELECTRIC ARM Ashwin Agrawal Matthew Buckle Jerome Goh Saurabh Palan Wendy Tay
- 4. Like’n Arm 4 Functionality, Comfort & Touch
- 5. Like’n Arm – The most unique Functionality 5
- 6. Like’n Arm – The most comfortable Arm 6
- 7. Like’n Arm – We Bring Back Touch 7
- 8. Like’n Arm – The World’s Most Unique Arm 8
- 9. LoLiT’s Management Team Ashwin Agrawal – CEO Matthew Buckle – CFO Jerome Goh – CTO Saurabh Palan – COO Wendy Tay – CMO 9
- 10. Overview Market Analysis Customer Analysis Operations Financial Highlights 10 Overview Customer Conclusion Industry Operations Finances
- 11. Existing Arms with Less Functionality & Comfort 11 Overview Customer Conclusion Market Operations Finances
- 12. Touch, Better Functionality & Comfort Best Factors Functionality Comfort Sense of Touch Like’n Arm iLimb Hand Utah Arm Otto Bock Like’n Arm is the only prosthetic that provides sense of touch and the best functionality and comfort. 12 Overview Customer Conclusion Market Operations Finances
- 14. 6,000 new cases every yearExisting 100,000 amputees, with an additional of 6,000 new cases in the next year 6,000 new cases in the next year Targeted 1,800 (30%) out of the new cases every year 106,000 Targeted 1,800 around 2% of the existing market 13 Overview Customer Conclusion Industry Operations Finances
- 15. Active and Insured Amputees Active Trans-humeral (entire arm) Amputees covered by Insurance - Age in the range of 18-55 - Fulfill existing unmet need for functionality Target Insurance Providers Network: - Veterans Affairs - Preferred Providers Organizations (PPOs) 14 Overview Customer Conclusion Industry Operations Finances
- 16. Prosthetic Arm Fitting Process 15 Pre-approval Prosthetist Prosthetist Physician Physician Insurance Claim from PPO Network PPO Payment to Supplier Overview Customer Conclusion Industry Operations Finances
- 17. LoLiT’s Primary customer: Prosthetists 16 “Our decisions are based on the opinions of the medical professionals that we go to… No matter how much I read up about a prosthesis…” - Nishan, Prosthetic Arm User, Wharton Rugby Team Assistant. Overview Customer Conclusion Industry Operations Finances
- 20. Reducing Markups in the supply and distribution of Like’n Arm “Follow the trend!” – CEO Independence Blue Cross Blue Shield Prosthetic Arm Producers Prosthetists DME Suppliers Prosthetists Markup 2 18 Markup 3 Markup 1 Markup 2 Markup 1 Overview Customer Conclusion Industry Operations Finances
- 23. Comfort, Functionality and Sense of touch
- 24. Less hassleOverview Customer Conclusion Industry Operations Finances
- 25. Generating Demand for Like’n Arm AWARENESS & INTEREST: Creating awareness through websites and magazines targeted at Amputees. EVALUATION & TRIAL: Like’n Arm evaluated by Prosthetistand tried on some potential customers. PURCHASE & USE: Like’n Arms user training, customization and Insurance coverage. 20 Overview Customer Conclusion Industry Operations Finances
- 29. Target: 1800 units 2 Years 1 Year 2 Years Timeline: Overview Customer Conclusion Industry Operations Finances
- 30. LoLiT’s Operation Strategy In-house Processes Outsourced Production Assembly R&D Advantage: Quality Control Protection of IP Mechanical Structure Electronics Circuits and Actuators Advantage: Reduces set-up cost Flexibility of supplier 22 Overview Customer Conclusion Industry Operations Finances
- 31. LoLiT’s Sales Forecast & Revenue Projections 23 1800 units 900 units 200 veterans already on waiting list 300 units 100,000 existing amputees 6000 new amputees per year 0 units 0 units $80,000 per arm with 1800 units sold in Year 5 = $144 MM in Revenue Overview Customer Conclusion Industry Operations Finances
- 32. LoLiT’s Net Earnings over 5 years 24 Increase in Net Earnings to $83 MM over 5 years Overview Customer Conclusion Industry Operations Finances
- 33. LoLiT’s 5 Year Cash Flow (in $) Full production (1800 units) PPO networks (900 units) GSA schedule (300 units) Licensing costs and facilities costs Development and FDA approval Break-even after 163 units sold in Year 3 25 Overview Customer Conclusion Industry Operations Finances
- 35. Licensing, Prototype, Clinical Trials, Operations = $7.5 million
- 36. Accounts Receivable ~ 60 days
- 37. $5.5 million for units sold in Month 1 & 2 of Year 3
- 38. Federal grants from DARPA program of $3 million
- 39. Single round of VC funding for $10 millionLooking for a total of $13 million in funding 26 Overview Customer Conclusion Industry Operations Finances
- 41. Exit Strategy
- 42. Acquisition by Hanger or Otto Bock27 Overview Customer Conclusion Industry Operations Finances
- 43. QUESTIONS? “The mission of LoLiT is to make a positive difference in the lives of individuals with lost upper limbs by assisting them in achieving functionality, comfort and a sense of touch through the development, integration and distribution of the industry’s most advanced myoelectric prosthetic systems.” 28 Overview Customer Conclusion Industry Operations Finances
- 46. Highly Profitable Prosthetic Market Overview Customer Conclusion Industry Operations Finances
- 47. Highly Profitable Prosthetic Market Under Surgical Appliance and Supplies Industry ~ $32 BILLION 32 32 Overview Customer Conclusion Industry Operations Finances
- 48. LoLiT’s solution for its customers 33 Independence Blue Cross Blue Shield PPO – Orthopedics and Prosthetics “Follow the trend!” –Joseph A. Frick, CEO IBX Prosthetists Arm Prosthetic Producers DME Suppliers Suppliers Overview Customer Conclusion Industry Operations Finances
- 50. In 2012, 92% of all claims filed and paid out within 7 days.Source. AHIP Center for research and policy. Survey in Healthcare Claims receipt, processing and payout times. Overview Customer Conclusion Industry Operations Finances
- 54. Able to understand claim submission requirements and submit automated batch claims.
- 55. Handled by LoLiT’s CTO and Director of Medical Affairs.Source. AHIP Center for research and policy. Survey in Healthcare Claims receipt, processing and payout times. Overview Customer Conclusion Industry Operations Finances
- 58. Traditionally, payouts are decreased by leveraging discounts on prosthetists in their network. Prosthetists do not charge as much as they would for a customer who has Insurance.Overview Customer Conclusion Industry Operations Finances
- 60. Premiums are not decreased.Source: Independence Blue Cross Blue Shield Annual Report 2008 Overview Customer Conclusion Industry Operations Finances
- 62. Rates for determining premiums for high-tech, high cost prosthetics and orthopedics are already set high (Medicare Fee Schedule POS00)
- 63. Government together with Amputee Coalition of America introduced Prosthetic Parity Measures. Premiums remain the high regardless of product. Co-payments and deductibles will vary for individual prostheses.
- 64. 1 way: Medicare Rates + Varying Co-payments and Deductibles.This is how we stay in business. The challenge for us is to be flexible. -CEO Independence Blue Cross Blue Shield Source. Amputee Coalition of America. Prosthetics Parity Bills and Effects Overview Customer Conclusion Industry Operations Finances
- 65. LoLiT’s COGS over 5 years 40 9% of Revenue 10% of Revenue 12.6% of Revenue COGS decreases as LoLiT benefits from economies of scale
Editor's Notes
- In order find out who our primary customers are, we have to look at how a patient gets fitted with a prosthetic arm.Patient goes to a general physician.Gets a prescription/recommendation to prosthetist.Diagnosis, filing of pre-approval, buys prosthesis from DME Supplier.Fitting of Prosthesis & Payment of DME Supplier5. Prosthetist is paid by Insurance Company, through the PPO Network3 stakeholdersPhysicians are not important as they are not specialised enoughPPO’s are part of insurance companies who payoutProsthetists are the most important
- Advertising and Promotion Strategy In the prior section on our distribution strategy, it is mentioned that LoLiT intends to sell and distribute Like’n Arm prosthetic arms to active upper extremity amputees with the aid of the DoD and healthcare insurance providers. In order to secure our initial target market and gain reputation in the industry, LoLiT intends to start with promoting our product to DoD via the Military Health System (MHS). Since healthcare insurance providers are the deciding factor that pays or partially reimburse our prosthetic arms for the end-users, they serve as an important focus for our promotion campaign. Physicians and prosthetists, being important influencers in the buying decision process for the prosthetic arms will be another of our focus. In addition, the target end-users consisting of active upper extremity amputees will be another focus for our advertising as well. Together, this will form our multi-faceted approach in promoting and generating demand for LoLiT’s Like’n Arm. Initially, to increase awareness among the targeted healthcare professionals, prosthetists and end-users, LoLiT intends to publicize Like’n Arm through the media. For example, getting registered into the product database of online information portal like OandP.com, which acts as an educational e-resource for prosthetic professionals and amputees (Oandp.com, 2009), would be a viable option for LoLiT to inform the benefits of our advanced product. Publications in established scholarly journals or less technical magazines such as Scientific American (Scientific American, 2009), Prosthetics and Orthotics International, “inMotion” (ACA, 2009) or the Popular Science, specializing in the professional reporting of scientific advancements could also help to increase the scientific credibility and branding of our product and build up its reputation in the prosthetic industry. Moreover, to gain credibility for Like'n Arm, LoLiT intends to apply for durable medical equipment accreditations by organization such as the American Academy of Orthotic and Prosthetics (ABC). With these accreditations that are compliance with the requirements of the Centers for Medicare and Medicaid Services (CMS), LoLiT would be able to gain product credibility especially among the insurance providers. In order to increase the exposure and awareness of our products to the targeted end-users, LoLiT also intends to utilize magazines or online portal that is specially targeted at amputees such as Amputee Golf Magazine or Amputee-Online.com. Aside from that, participation in prominent prosthetic related trade shows such as the American Orthotic & Prosthetic Association (AOPA) National Assembly, would also serve as a good platform for us to increase awareness of Like’n Arm to prosthetics professionals through hands-on and demonstrations. Amputees and prosthetic related associations such as the Amputee Coalition of America (ACA), the American Board for Certification in Orthotics, Prosthetics and Pedorthics (ABC), and the AOPA, would increase our credibility through certifications and place us in a prominent spot in the education of new amputees and prosthetists when they approach these associations for information. Acting as a sponsor in active amputees related events such as the 2011 IPC Athletics World or Paralympics, sports competition for amputees (IPC, 2009), help to associate Like’n Arm with sport devices attributes such as durability, comfort and dexterity, and also create awareness and improve reputation in targeted active upper extremity amputees. Concurrent to these plans, LoLiT intends to further educate targeted prosthetic professionals and end-users on our product through its main website which would provide product specifications, and benefits of Like’n Arm. Traffic flow to our main website will be driven by referrals from online portals such as Oandp.com as mentioned previously and also online marketing tools such as Google Adwords and Search Engine Optimization (SEO). After generating interest in the advanced technology offered by Like’n Arm, LoLiT intends to proceed onto the next step by sending marketing representatives to targeted PPOs network consisting of prosthetists, insurance providers and physicians. These marketing representatives will bring along with them, materials such as the Like’n Arm prosthetic arm, demo DVDs and educational brochures. These visiting sessions to the DOD’s MHS, insurance providers, physicians and prosthetists, aim to satisfy their interests by letting them have a feel of the prosthetic arm, educate them on its benefits and basically let them realize its advantages as opposed to the existing alternatives for prosthetic arms. With that, we would reach out to these PPOs’ insurance providers and offer them a supply contract of our product at a promotional discount rate that is 10% to 20% less than that of our original retail price. With this special contract rate and the distinctive technological benefits of our products, we hope that it would serve as an incentive and persuade prosthetic professionals and insurance providers in the network of the targeted PPOs to recommend our prosthetic arms to their patients and help to generate demand.Upon securing contracts with the targeted PPOs, our next approach would involve the signing up of the physicians and prosthetists for Like’n Arm’s training and educating program. Learning from the example educational and training program utilized by the “Da Vinci System”, LoLiT has developed several avenues to impart the TMR surgical procedures to physicians. Interested physicians will be invited to participate in the training of the surgical procedures of the Target Muscle Reinnervation (TMR) surgery required for Like’n Arm. They could either attend sponsored on-site TMR training in which surgeons attend an instructional and hands-on training session at hospitals or go for a live procedure observation or to undergo surgeon proctoring under TMR experienced surgeon (Intuitive Surgical, 2009). A cost effective and efficient training way is to go through the The American Academy of Orthopaedic Surgeons (AAOS). By conducting Continued Medical Education (CME) through these surgeons affiliated associations, it would lend more credibility to the certifications given to these physicians and also cut down the resources LoLiT would need to train physicians (AAOS, 2009). Furthermore, through our alliances with prosthetists associations such as ABC, we are able to organize or incorporate Like’n Arm training into certification courses or to organize training workshops. Taking Hanger as an example, we have formulated a training program for prosthetists. Led by our team of educators, LoLiT aims to host Upper Extremity Prosthetics technical workshop for practitioners and rehabilitation professionals, which would also include hands-on workshops on our prosthetic product Like’n Arm (Hanger, 2009). Aside from the professional certifications gained at the end of these sessions, this will help to get these professionals be acquainted with the benefits of our products and helped to act as a medium to relate this information to the end-user.LoLiT understands that physicians are responsible for providing a “consol”, which list the approved prosthetics for the patients, whereas the patients will approach prosthetists thereafter to choose their prosthetic and get it fitted. In this whole process, whereby patients usually started off with minimal knowledge in prosthetics, physicians and prosthetists seem to play a critical role in acquainting them with the existing prosthetic options and their benefits. As such, with our strategy to promote the benefits of our products to these key players, they would help to communicate this knowledge to the end-users and help to influence their buying decision and generate demands for Like’n Arm. Furthermore, aside from the certification provided by the educational talks to facilitate support to their patients’ usage, the talks would also help to drill in our product knowledge and benefits into these professionals. Our key advertising message to be communicated to the end-users, insurance providers and healthcare professionals would be the key benefits of Like’n Arm: its technological superiority in functionality, sensory feedbacks, power source and architecture; as compared to the existing options. Overall, it will be focused on how the product would improve and change the life of its end-users. This communication between LoLiT and the insurance providers and healthcare professionals will be an ongoing process, to keep them updated on the improved benefits of our products and to gain feedbacks to be input in our development process. By promoting LoLiT’s Like’n Arm via this approach, we are effectively strengthening our competitive position. Instead of the traditional method of either promoting medical products to the doctors or the end-users, we intend to leverage on the wide network of hospitals and patient centers under the PPOs. This effectively helps to increase our outreach in the industry and yet minimize the financial and manpower resources required. ORGANIZATION To facilitate management and communication of LoLiT’s employees, an organizational chart classifying the various departments is constructed (OrgChart.net, 2009). The organization consists of four main departments of Research and Development (R&D), Sales and Marketing, Operations, and Finance, reporting to the CEO as shown below: LoLiT Inc. (Lost Limb Replacement Technologies) intends to adopt the legal entity structure of a new “C” class Corporation, due to the financial and structuring benefits it offers. With this structure, company shareholders will have limited liability to the amount they invested in the firm if the company is in debt. Aside from this benefit, it provides the advantage of flexibility as LoLiT will be able to distribute various types of stocks and dividends as they deemed fit. In addition, being a “C” class corporation allows LoLiT to pursue either an IPO or a merger, which is critical to the exit strategy of LoLiT. Functioning as LoLiT’s Chief Executive Officer (CEO), Chief Technology Officer (CTO), Chief Financial Officer (CFO), Chief Operation Officer (COO) and Chief Marketing Officer (CMO), are the respective cofounders AshwinAgrawal, Jerome Goh, Matt Buckle, Saurabh Palan and Wendy Tay. To further motivate and reward the founders, equity will be given as extrinsic rewards for them. LoLiT plans to distribute 24% stock equity to the CEO, and 19% each to the CTO, CFO, COO and CMO. This equity structure allows the CEO to have a higher share and more authority during decision-making compared to other officers, and hence helps to facilitate and speed up the process. Working alongside the CEO of LoLiT, will be the Board of Directors that consists of individuals working at the frontier of the irrespective fields. With their knowledge and expertise in the field, LoLiT intends the Board of Director to participate in voting and add value to the major decisions. Their roles involve the defining of relatively wide policies and objectives to facilitate the day-to-day management of LoLiT; helping and evaluating of the CEO performance; annual budget approval; supervision of the financial resources; and are accountable to the shareholders (Wikipedia, 2009). Further to that, their range of contacts and experience are also critical when the firm is raising capital or are facing operational problems. The day-to-day management of LoLiT will be left to the governance of the elected four officers with the guidance of the CEO and Director of LoLiT. LoLiT’s Board of Advisors will generally consist of individuals who will provide a wide range of expertise and knowledge. Though these advisors are not authorized and hold any power to make decisions for the firm, their experience is especially critical for LoLiT’s success when LoLiT delves into issues that are beyond the knowledge and expertise of the firm’s officers. Particularly in the case for LoLiT, individuals skilled in the healthcare insurance and prosthetic device industry are critical for the firm to reach out to our target customers and obtain subsidy for our device. Dependent on the evolving needs of the firm, LoLiT intends to bring in relevant expertise into the board and help add value to LoLiT. Compensations for the Board of Directors and Board of Advisors will be different. The Board of directors will receive a retainer of $10,500.00 per annum, requiring the directors to participate in at least a half-day meeting once every month and be available to the officers for any advices. In addition each Board of Director will receive $400 per meeting they attend to subsidize their travel and other miscellaneous fees. Assuming monthly meetings, each Board of Director will be getting paid a total of $15,300.00. Board of Advisors will be paid a retainer for $6,0000 per annum and receive $400 per meeting they attend. LoLiT, at this time, will not be awarding any Board member equity stake in the company. Marketing and Sales Expense In the second year, LoLiT plans to spend $260,000 on marketing to raise interest and awareness prior to the launch of Like’n Arm™ to targeted military systems and PPOs. This involve the construction of LoLiT’s main website, advertising in publications, membership in prosthetic related online portals and associations, and gaining accreditations. Upon securing a DoD contract, LoLiT intends to ramp up the marketing campaign with a budget of $445,000 in the third year, in preparation for Like’n Arm to enter the main U.S market. Aside from publications and online portal, LoLiT plans to set up booths in industry tradeshows and to proceed onto directing marketing with targeted PPOs and the education campaign for prosthetists and physicians. After gaining some awareness and interest for Like’n Arm, aside from the ongoing online portals, publications, tradeshows, education and direct marketing, LoLiT plans to start their corporate sponsorship of the Paralympics event down the fourth year and fifth year increasing the annual budget to 1 to 2% of the annual projected revenue. References (2009). Oandp.com. About Us. Main page of oandp.com. Retrieved from: http://www.oandp.com/about/ (2009). Scientific American. About Us: History. Main page of Scientific American. Retrievedfrom: http://www.scientificamerican.com/page.cfm?section=aboutus (2009). FedEx®. Supply Chain Management Solution. Portfolio of Services. Retrieved fromhttp://fedex.com/us/supplychain/services/ (2009). Hanger Prosthetics and Orthotics. Hanger Home Page. Education.http://www.hanger.com/careers/opportunities/Pages/Education.aspx (2009). Ability Prosthetics & Orthotics, Inc. http://abilitypo.reachlocal.net/ (2009). Amputee Coalition of America (ACA). InMotion. Advertiser Inoformation. Retrieved from: http://www.amputee-coalition.org/inmotion_advertising.html (2009). International Paralympic Committee (IPC). IPC. Official Website of the Paralympic Movement. Retrieved from: http://www.paralympic.org/ (2009). Intuitive Surgical. Training Curriculum. Da Vinci® System Training. Retrieved from: http://www.intuitivesurgical.com/services/producttraining/process.aspx (2009). AAOS. About AAOS. Retrieved from: http://www.aaos.org/about/about.asp (2009). OrgChart.net. Org Chart. Main Page of OrgChart.net. Retrieved from: http://www.orgchart.net/wiki/Org_Chart_Resources (2009). Wikipedia. Board of directors. Wikipedia: The free Encyclopedia. Retrieved from: http://en.wikipedia.org/wiki/Board_of_directors (2005) International Organization for Standardization (ISO), Prosthetics and Orthopedics http://www.iso.org/iso/iso_catalogue/catalogue_tc/catalogue_tc_browse.htm?commid=53630 Retrieved from the World Wide Web (2004) ASTM Tests on prosthetic arm materials http://www.rehab.research.va.gov/prog/97/97prch01.htm . Retrieved from the World Wide Web (2007) American Prosthetics Components http://www.apcomponents.com/ Retrieved from the World Wide Web (2006) Prosthetic Innovations, LLC http://www.prolimb.com/ Retrieved from the World Wide Web (2004) Medex International http://www.medexinternational.com/ Retrieved from the World Wide Web (2007) Kingsley Store http://www.kingsleymfg.com/KMFGStore/ Retrieved from the World Wide Web (2007) Orthopedics and Prosthetics Inc, http://www.oandp.com/ Retrieved from the World Wide Web (2009). Peter N. Flocos. K&L Gates. Retrieved From http://www.klgates.com/professionals/Detail.aspx?professional=82. (2009). Ivan R. Sabel. Forbes.com. Retrieved From http://people.forbes.com/profile/ivan-r-sabel/39241. (2009). Entrepreneurship Faculty. School of Engineering and Applied Sciences, University of Pennsylvania. Retrieved from http://www.seas.upenn.edu/entrepreneurship/faculty.php (2009). Dr Stuart Harshbarger. McGill University. Retrieved from http://www.mcgill.ca/transdisciplinaryworkshop/speakers/stuartharshbarger/. (2009) Board of Overseers. School of Engineering and Applied Sciences, University of Pennsylvania. Retrieved from http://www.seas.upenn.edu/about-seas/overseers.php. (2009). COL Geoffrey Ling, M.D., Ph.D. Defense Advanced Research Projects Agency. Retrieved from http://www.darpa.mil/dso/personnel/ling.htm.
- Phase 2: General Services Administration SchedulePhase 3: We reach the private sector by incorporating our product for coverage under select PPO plans.
- LoLiT is not doing anything new, we’re just following the trend set by insurance companies
- Insurance companies are desperate to reduce costs.
- Insurance companies are desperate to reduce costs.
- Insurance companies are desperate to reduce costs.
- Insurance companies are desperate to reduce costs.
- Insurance companies are desperate to reduce costs.
- Insurance companies are desperate to reduce costs.