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1.0 Executive Summary
The purpose of this business plan is to raise $200,000 for the development of a medical laboratory while showcasing the expected financials and operations over the next three years. Medical Laboratory, Inc. (“the Company”) is a New York based corporation that will provide testing of blood, tissue, bodily fluids, chemicals, and other organic/medical components on behalf of its client base in its targeted market. The Company was founded by John Doe.
1.1 Operations
The primary revenue center for the business will come from the ongoing testing of bodily fluids and organic/medical components on behalf of its client base, which will primarily consist of medical practices, hospitals, and other medical facilities. The business will earn substantial fees from carrying out these tests. The business will also provide per hour consulting fees and project review fees regarding the development of laboratory tests as they related to more complex studies. This is a very important secondary income stream for the Company. The third section of the business plan will further describe the services offered by the Medical Laboratory.
1.2 The Financing
Mr. Doe is seeking to raise $200,000 from as a bank loan. The interest rate and loan agreement are to be further discussed during negotiation. This business plan assumes that the business will receive a 10 year loan with a 9% fixed interest rate.
1.3 Mission Statement
Medical Laboratory, Inc.’s mission is to provide comprehensive and state-of-the-art medical and organic chemical testing on behalf of its client base.
1.4 Management Team
The Company was founded by John Doe. Mr. Doe has more than 10 years of experience in the laboratory testing industry. Through his expertise, he will be able to bring the operations of the business to profitability within its first year of operations.
1.5 Sales Forecasts
Mr. Doe expects a strong rate of growth at the start of operations. Below are the expected financials over the next three years.
1.6 Expansion Plan
The Founder expects that the business will aggressively expand during the first three years of operation. Mr. Doe intends to implement marketing campaigns that will effectively target hospitals, medical practices, drug companies, and other businesses with medical testing needs within the target market.
2.0 Company and Financing Summary
2.1 Registered Name and Corporate Structure
Medical Laboratory, Inc. The Company is registered as a corporation in the State of New York.
2.2 Required Funds
At this time, the Medical Laboratory requires $200,000 of debt funds. Below is a breakdown of how these funds will be used:
2.3 Investor Equity
Mr. Doe is not seeking an investment from a third party at this time.
2.4 Management Equity
John Doe owns 100% of the Medical Laboratory, Inc.
2.5 Exit Strategy
If the business is very successful, Mr. Doe may seek to sell the business to a third party for a significant earnings multiple. Most likely, the Company will hire a qualified business broker to sell the business on behalf of the Medical Laboratory. Based on historical numbers, the business could fetch a sales premium of up to 4 times earnings.
3.0 Operations
Below is a description of the services offered by the Medical Laboratory:
3.1 Medical Testing Services
The primary source of revenue for the business will come from the ongoing testing of blood, tissue, bodily fluids, and organic compounds on behalf its client base. The Company will charge a per project/per test basis depending on the size and scope of the required test. At the onset of operations, the Company will have three properly qualified scientists that will perform laboratory work as it relates to medical testing. Mr. Doe intends on using a high impact marketing campaign to bring in business from medical practices, hospitals, and drug companies that require these services on an ongoing basis.
3.2 Consulting Services
The Company will also generate secondary streams of revenue from consulting and project management services as it is related to overseeing the ongoing development of a specialized medical study. The Company will be able to advise its client base on how to minimize these issues, resulting in fewer regulatory issues. The income derived from these services carry very high margins.
4.0 Strategic and Market Analysis
4.1 Economic Outlook
This section of the analysis will detail the economic climate, the medical laboratory industry, the customer profile, and the competition that the business will face as it progresses through its business operations.
Currently, the economic climate within the United States is moderate. There has been a change in global trade policy which may contribute to higher inflation. Additionally, higher inflation may translate into higher operating costs for the Medical Laboratory. Management will remedy this issue by implementing a standard markup over cost in order to ensure that the business can continue to effectively provide its services to medical entities and the general public.
4.2 Industry Analysis
There are approximately 33,000 businesses that are actively involved in providing medical laboratory services to the general public. Industry revenues are currently $57 billion per year. The industry employs approximately 500,000 people. Moving forward, the anticipated compounded annual growth rate of the industry is expected to remain near 4% over the next five years.
One of the continued avenues of growth for this industry is that the Baby Boomer generation continues to reach their later years. As a result of this, these individuals require a far greater degree of ongoing medical testing for a broad range of medical issues. This will continue to be a major driver of economic growth within the industry over the next 10 to 15 years. Management sees a substantial opportunity to ramp up operations in order to accommodate this demand.
4.3 Customer Profile
There are a wide number of entities that will become potential clients of the Medical Laboratory. Most importantly, the Company will focus on establishing ongoing relationships with medical doctors that operate in both a solo practitioner capacity as well as with group practices. This is primarily due to the fact that these entities do not maintain their own in-house laboratory operations, and Management sees a substantial opportunity to partner with these firms in regards to their ongoing testing needs. These entities will typically generate anywhere from $1 million to $5 million a year of revenue. The Company will also establish ongoing relationships with specialized outpatient treatment centers as well as hospitals that require specialized services. Given the broad range of medical services that are provided, the business will be able to very quickly establish relationships with these types of entities.
4.4 Competitive Analysis
As it relates to competition, the Company will continue to face a moderate number of competitors as it expands within the target market. Foremost, the business will maintain a strong differentiating factor given that it is able to test the wide range of medical samples on a highly cost-effective basis. Additionally, the business will maintain subcontracting relationships with third party laboratories when specialized testing is needed. This will allow the medical laboratory to operate as a one stop shop for entities that require ongoing testing of biological samples.
5.0 Marketing Plan
Medical Laboratory, Inc. intends to maintain an extensive marketing campaign that will ensure maximum visibility for the business in its targeted market. Below is an overview of the marketing strategies and objectives of the Company.
5.1 Marketing Objectives
- Develop strong ongoing relationships with local doctors, hospitals, drug companies, and other businesses that have ongoing medical testing needs.
- Develop an online presence by developing a website and placing the Company’s name and contact information with online directories.
5.2 Marketing Strategies
Most importantly, the Company will use a number of direct outreach strategies that will bring the attention of the Medical Laboratory to physicians, medical clinics, urgent care centers, and hospital systems that operate throughout the target market area. The Company intends to hire a number of sales team members that will directly create ongoing relationships with these entities as they will provide the Medical Laboratory with a number of orders on a highly predictable basis. These sales agents will receive highly competitive base salaries coupled with commissions on each new relationship that they secure.
In regards to the Company’s online presence, the business will maintain an expansive website that showcases the entire scope of services offered by the Medical Laboratory. The website will be both mobile device friendly and search engine optimized. As it relates to search engine optimization, the business will coordinate these efforts with a regional firm that will ensure that when searches for medical laboratories or medical testing services are conducted – the website will appear frequently within the body of the search results. It will take approximately three months to nine months for this type of marketing to become effective.
To a more limited extent, the business will maintain a presence on social media platforms. A substantial focus of these operations will be on LinkedIn in order to create brand name awareness among medical professionals within the target market area.
The Company will also take out print advertisements among regional medical journals as well as publications that focus on allied health professionals that require medical laboratory testing from time to time. Moving forward, the business will expand its marketing reach to include municipal and state-based government agencies that operate medical facilities. Many of these agencies do not maintain the same level of state-of-the-art equipment, and the founder sees a substantial opportunity to establish ongoing relationships with government agencies. This will further contribute to the economic stability of the business.
The Medical Laboratory will also maintain ongoing relationships with regional colleges and universities. Through these relationships, the business will be able to work with individuals that are completing their programs that can ultimately become technicians or scientists at the medical laboratory. This is important for a few reasons. First it will allow the business to more easily recruit individuals that can work for the business. It is no secret that recruitment within the medical laboratory industry is an extremely expensive endeavor. Second, the business will be able to increase its brand visibility among individuals that are engaged in the medical profession. It is fully expected that these ongoing relationships will allow the business to further establish purchase order agreements with both academic hospitals and private entities.
6.0 Organizational Plan and Personnel Summary
6.1 Corporate Organization
6.2 Organizational Budget
7.0 Financial Plan
7.1 Underlying Assumptions
- Medical Laboratory, Inc. will have an annual revenue growth rate of 8% per year.
- The Owner will acquire $200,000 of debt funds to develop the business.
- The loan will have a 10 year term with a 9% interest rate.
7.2 Sensitivity Analysis
Medical Laboratory’s revenues are not sensitive to changes in the general economy. Much like the rest of the healthcare industry, the Company will be able to effectively generate revenues from medical businesses that have ongoing testing needs. As such, the current economic climate will not hinder the Company’s ability to launch operations.
7.3 Source of Funds
7.4 General Assumptions
7.5 Profit and Loss Statement
7.6 Cash Flow Analysis
7.7 Balance Sheet
7.8 Breakeven Analysis
7.9 Business Ratios
Medical Laboratory SWOT Analysis
Strengths
As it relates to the strengths of a medical laboratory business, these entities are able to remain profitable and cash flow positive in any economic climate given that they render a highly important service for physicians, dentists, allied health professionals, hospitals, and related medical entities. These companies produce substantial contribution margins from the ongoing testing of biological samples. Additionally, medical laboratories enjoy substantial access to ongoing capital given the economically secure nature of these businesses. Although the costs associated with starting a medical laboratory can range anywhere from $100,000 all the over $1 million, many financial institutions are willing to provide the necessary capital support in order to establish and expand these operations. Furthermore, manufacturers of medical laboratory testing equipment typically have highly reasonable leasing programs that allow for equipment to be acquired on an ongoing basis.
Weaknesses
As it relates to weaknesses, these businesses do have moderately high expenditures given that they are required to employ highly trained technicians and scientists in order to render their services. Additionally, there are numerous licensing issues that need to be addressed on an ongoing basis. One of the other ongoing issues that are faced by medical laboratories is that they are required to maintain strict compliance with a number of regulations given that biological samples are being handled and tested.
Opportunities
There are numerous opportunities available for medical laboratories to expand their operations. Foremost, these businesses can expand through organic growth of their marketing operations in order to onboard a greater number of medical entities that use the services on an ongoing basis. Medical laboratories are also highly scalable and additional locations can be established in other markets once a foothold has been established in the initial market. As noted above, financial institutions are willing to provide the necessary capital especially to establish medical laboratories to further expand their operations on an ongoing basis.
There is also the opportunity to acquire existing medical laboratories that can be integrated into the Company’s ecosystem.
Threats
As it relates to threats, challenging economic climates do not typically have a major impact on a medical laboratory’s ability to remain profitable and cash flow positive period these services are in demand at all times. A bulk of their revenue comes from reimbursement through private insurance as well as publicly funded healthcare systems. The primary threat to medical laboratories involves economic risks with a focus on inflation as this can unexpectedly cause the operating costs of the business to increase.