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 STUDIES

Cochin University of Science and Technology
Cochin, Kerala, India, PIN 682 022
October 2012

Executive summary
Swanthana Medical Laboratories (SL) is a start-up company committed to
providing the most convenient, friendliest blood testing service to people in
and around Kalamassery. Swanthana Medical Laboratories is founded as
partnership firm formed by group of committed enthusiastic gentlemen.
The partners are Mathew George, Raj Vinod, Job Thomas, Arun Raj K.,
Sreekumar and Vishnu Shankar.
Swanthana Medical Laboratories has established three significant
objectives to pursue. The first is securing 60% of customers from Cooperative Medical College, Kalamassery. The second objective is to develop
20% of their revenue from physicians who practice in the nearby vicinity.
The third objective is the desire to reach profitability with 12 months.
Swanthana Medical Laboratories has identified three market segments they
will serve. First segment is the large number of patients of Co-operative
Medical College, Kalamassery, who will be attracted by giving quality
testing at reasonable cost. This customer segment is expected to have
growth rate of 10%. The second group of patients is expected from
physicians having private medical practices in other nearby facilities. The
third group of patients are expected locally, who come for routine health
check-up.
Swanthana Medical Laboratories offers a comprehensive clinical test for
potential patients. Several tests 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 clinical testing services. Swanthana Medical Laboratories
will exceed all of their customer's expectations. Swanthana Medical
Laboratories will be providing home collection of samples, which will be
unique for the customers in Kalamassery locality.

Business description
Swanthana 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 INR 250 crores by 2013. The
diagnostic and pathology market is around two percent of the total market.
2 Business plan for Swanthana Medical laboratories

Indian diagnostic market has been growing fast, at 15-20 percent growth
rate but there are lots of development 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, with increasing number of people having access
to modern healthcare. Consequently, more and more investments are being
made in hospitals and clinical laboratories. However, the rural sector is not
to be forgotten. The emerging industry structure is headed towards
providing healthcare services as an integrated comprehensive package
rather than the traditional concept of providing healthcare infrastructure
and reactive medical care. Among the middle and high-income families in
India there is a rapidly increasing health consciousness which leads to high
demand on preventive health care.
Swanthana Medical Laboratories offers a comprehensive clinical test for
potential patients under one roof. 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 imaging

Marketing
Swanthana Medical Laboratories has identified three market segments.
First segment is the large number of patients of Co-operative Medical
College, Kalamassery. The second group of patients is expected from
physicians having private medical practices in other nearby facilities. The
third group of patients are expected locally, who come for routine health
check-up. The details of market segmentation are shown in Figure 2.

3 Business plan for Swanthana Medical laboratories

Market segmentation
15
25

Patients from CMC

Referral patients
60

Health check-up

Figure 2. Market segmentation

Swanthana 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 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
4 Business plan for Swanthana Medical laboratories

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.

Operations
Swanthana Medical Laboratories is located at university road Kalamassery.
The location is close to the bus stop and has good parking space. The
location of the laboratory is about 2 km from Cooperative Medical College.
There are about 40 physicians doing private practices in small clinic or at
home within 2 km from the laboratory. The building is set in the ground
floor, which helps easy access 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 two junior laboratory technicians will be appointed on
regular basis for the smooth functioning of the firm. The license will be
obtained in the name of senior lab technician. In future, profit sharing to the
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

Received

INR 6,000,000

Spent

INR 4,000,000
INR 2,000,000
INR 0
Operation

Others

Figure 3 Details of Cash Flow

5 Business plan for Swanthana Medical laboratories

Management
Swanthana Medical Laboratories is founded as partnership firm formed by
group of committed enthusiastic 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 his postgraduate 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 this
business Mathew ventured in e-business by selling paintings and
handicrafts that purchased from artisans from different parts of Kerala. This
provided him with hands-on business experience to combine with his
business degree.
Raj Vinod and Job Thomas are Engineers by profession and also graduated
from prestigious business school. Sreekumar and Vishnu Shankar have
graduation in commerce and post graduation in Business administration.
Arun Raj is working as a manager in a multinational company and his
experience 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
Mathew George
Junior Technician
1
Junior Technician
2

INR
1,100,000

Year 2

Year 3

INR
1,400,000

INR 1,600,000

INR 825,000

INR 900,000

INR 900,000

INR 750,000

INR 900,000

INR 900,000

6 Business plan for Swanthana Medical laboratories

Senior Lab
technician
Total People
Total Payroll

INR
1,100,000
4
INR
3,775,000

INR
1,200,000
4
INR
4,400,000

INR 1,200,000
4
INR
4,600,000

Finance
The cash flow statement, profit and loss account and balance sheet for the
upcoming three years are projected for the financial analysis of the project.
The charts of sale-profit details, asset-liabilities are given below. In year 1,
profit is in negative, but it is positive in year 2 and 3. As the project involves
huge investment, the project is not profitable in the first year but will be
profitable in the second year onwards. The projected asset of the project is
increasing in the upcoming years and liability is decreasing with time. In
the first year, the capital was negative and in subsequent years capital is
positive, which indicates a positive growth for the business.

Sale-Profit details
INR 16,000,000
INR 12,000,000

Year 1
Year 2

INR 8,000,000

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

7 Business plan for Swanthana Medical laboratories

Assest, Liabilities & Capital

INR 10,000,000
INR 8,000,000
Year 1
INR 6,000,000

Year 2
Year 3

INR 4,000,000
INR 2,000,000
INR 0
(INR 2,000,000)

Asset

Liabilities

Capital

Figure 5 Details of assets, liabilities and Capital

Critical risk
In Kalamassery, there is a total of six blood drawing laboratories. Of the six,
two only serve their specific clients and do not do work for other physicians.
Of the remaining four, three offer Chemical tests and not having scanning
facility and the remaining one is full-fledged laboratory not having on-site
collection of samples.
The closest competitor to Swanthana Medical Laboratories is DDC, located
at Edapally. This is the facility that 95% of the physicians in the
Kalamassery currently use. It is used by these physicians because of
convenience, it WAS the closest laboratory. As mentioned earlier, medical
testing service providers 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 during traditional daytime
office hours.

Harvest strategy
When 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 in constitution of the firm and
the business continues. At the time of transfer, as business of the firm
8 Business plan for Swanthana Medical laboratories

continues, stock can be valued at cost or market value which-ever is lower.

In case of retiring partners, they are receiving balance in their capital
accounts including the revaluation reserve on valuing land and building of
the firm at market value. The buildings, equipments, machineries and
people will be insured for secure functioning of the business.

Milestone schedule
The milestones are the guideline for the functioning of the business. The
various milestones identified for Swanthana Medical Laboratories are given
below.

Milestone
Competition of business plan
Secure lease
Increase customers
Profitability
Meet revenue target

Q1
Q2
XXXXXX
XXXX
XX
XXXX
XX

Q3

Q4

XXXXXX
XXXXXX
XXXX
XX

9 Business plan for Swanthana Medical laboratories

Appendix
A1. Start-up
Start-up Expenses
Legal
Stationery etc.
Brochures
Consultants
Insurance
Rent
Research and
Development
Expensed Equipment
Other
Total Start-up
Expenses
Start-up Assets
Cash Required
Other Current Assets
Long-term Assets
Total Assets
Total Requirements

INR 50,000
INR 0
INR 25,000
INR 0
INR 25,000
INR 50,000
INR 0
INR 100,000
INR 0
INR 250,000
INR 0
INR 4,600,000
INR 0
INR 3,650,000
INR
8,250,000
INR
8,500,000

10 Business plan for Swanthana Medical laboratories

A2. Start-up
Funding
Start-up Expenses to Fund
Start-up Assets to Fund
Total Funding Required
Assets
Non-cash Assets from Start-up
Cash Requirements from Startup
Additional Cash Raised
Cash Balance on Starting Date
Total Assets
Liabilities and Capital
Liabilities
Current Borrowing
Long-term Liabilities
Accounts Payable
(Outstanding Bills)
Other Current Liabilities
(interest-free)
Total Liabilities
Capital
Planned Investment
Investor (6 memebrs)
Other Investor
Other
Additional Investment
Requirement
Total Planned Investment
Loss at Start-up (Start-up
Expenses)
Total Capital
Total Capital and Liabilities
Total Funding

INR 250,000
INR 8,250,000
INR
8,500,000
INR 3,650,000
INR 4,600,000
INR 0
INR 4,600,000
INR
8,250,000

INR 0
INR 5,000,000
INR 0
INR 0
INR 5,000,000

INR 3,500,000
INR 0
INR 0
INR 0
INR
3,500,000
(INR 250,000)
INR 3,250,000
INR 8,250,000
INR 8,500,000

11 Business plan for Swanthana Medical laboratories

A3. Cash Flow Statement

(Projected)
Year 1

Year 2

Year 3

Cash Received
Cash from Operations
Cash Sales
Cash from Receivables
Subtotal Cash from Operations
Additional Cash Received
Sales Tax, VAT, HST/GST Received
New Current Borrowing
New Other Liabilities (interest-free)
New Long-term Liabilities
Sales of Other Current Assets
Sales of Long-term Assets
New Investment Received
Subtotal Cash Received
Expenditures
Expenditures from Operations
Cash Spending
Bill Payments
Subtotal Spent on Operations
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out
Principal Repayment of Current
Borrowing
Other Liabilities Principal
Repayment
Long-term Liabilities Principal
Repayment
Purchase Other Current Assets
Purchase Long-term Assets
Dividends
Subtotal Cash Spent
Net Cash Flow
Cash Balance

INR
1,226,650
INR
2,392,650
INR
3,619,300
INR 0
INR 0
INR 0
INR 0
INR 0
INR 0
INR 0
INR
3,619,300
Year 1
INR 0
INR
3,775,000
INR
3,526,850
INR
7,301,850

INR 3,158,200
INR 7,447,400
INR
10,605,600
INR 0
INR 0
INR 0
INR 0
INR 0
INR 0
INR 1,300,000
INR
11,905,600
Year 2
INR 0
INR 4,400,000
INR 7,007,150
INR
11,407,150

INR
3,488,200
INR
10,118,200
INR
13,606,400
INR 0
INR 0
INR 0
INR 0
INR 0
INR 0
INR 0
INR
13,606,400
Year 3
INR 0
INR
4,600,000
INR
7,735,450
INR
12,335,450

INR 0

INR 0

INR 0

INR 0

INR 0

INR 0

INR 0

INR 0

INR 0

INR 600,000
INR 0
INR 0
INR 0
INR
7,901,850
(INR
4,282,550)
INR 317,450

INR 600,000
INR 0
INR 0
INR 0
INR
12,007,150
(INR
101,550)
INR 215,900

12 Business plan for Swanthana Medical laboratories

INR 600,000
INR 0
INR 0
INR 0
INR
12,935,450
INR
670,950
INR 886,850

13 Business plan for Swanthana Medical laboratories

A4. Profit and Loss Account (Projected)

Year 1
Sales
Direct Cost of Sales (0.350.40)
Other Costs of Sales
Total Cost of Sales
Gross Margin
Gross Margin %
Expenses
Payroll
Sales and Marketing and Other
Expenses
Depreciation
Rent
Utilities
Insurance
Payroll Taxes
Other
Total Operating Expenses
Profit Before Interest and
Taxes
EBITDA
Interest Expense (16.5%)
Taxes Incurred (30%)
Net Profit
Net Profit/Sales

INR 4,906,700
INR 1,717,350
INR 0
INR
1,717,350
INR 3,189,350
65.00%

INR 3,775,000
INR 120,000
INR 730,200
INR 600,000
INR 90,000
INR 120,000
INR 566,250
INR 0
INR
6,001,450
(INR
2,812,100)
(INR
2,081,900)
INR 817,500
INR 0
(INR
3,629,600)
-73.97%

Year 2
INR
12,632,700
INR
4,421,450
INR 0
INR
4,421,450
INR
8,211,250
65.00%
INR
4,400,000
INR 150,000
INR 730,200
INR 675,000
INR 90,000
INR 150,000
INR 660,000
INR 0
INR
6,855,200
INR
1,356,050
INR
2,086,250
INR 760,000
INR 178,800
INR
417,250
3.30%

14 Business plan for Swanthana Medical laboratories

Year 3
INR
13,952,700
INR 4,883,450
INR 0
INR
4,883,450
INR 9,069,250
65.00%

INR 4,600,000
INR 175,000
INR 730,200
INR 725,000
INR 90,000
INR 175,000
INR 690,000
INR 0
INR
7,185,200
INR 1,884,050
INR 2,614,250
INR 700,000
INR 355,200
INR 828,850
5.94%

A5. Balance Sheet (projected)

Assets
Current Assets
Cash
Accounts
Receivable
Other Current
Assets
Total Current
Assets
Long-term Assets
Long-term Assets
Accumulated
Depreciation
Total Long-term
Assets
Total Assets
Liabilities and
Capital
Current Liabilities
Accounts Payable
Current Borrowing
Other Current
Liabilities
Subtotal Current
Liabilities
Long-term Liabilities
Total Liabilities
Paid-in Capital

Year 1

Year 2

Year 3

INR 3,817,450

INR 3,715,900

INR 1,287,400

INR 3,314,500

INR 0

INR 0

INR 5,104,850

INR 7,030,400

INR 3,650,000

INR 3,650,000

INR 730,200

INR 1,460,400

INR 2,919,800
INR 8,024,650
Year 1

INR 2,189,600
INR 9,220,000
Year 2

INR 0
INR
8,047,650
INR
3,650,000
INR
2,190,600
INR
1,459,400
INR
9,507,050
Year 3

INR 504,250
INR 0

INR 582,350
INR 0

INR 640,550
INR 0

INR 0

INR 0

INR 0

INR 504,250

INR 582,350

INR 7,900,000

INR 7,300,000

INR 8,404,250

INR 7,882,350

INR 3,500,000

INR 4,800,000

Retained Earnings
Earnings

(INR 250,000)
(INR 3,629,600)

(INR 3,879,600)
INR 417,250

Total Capital
Total Liabilities
and Capital

(INR 379,600)

INR 1,337,650

Net Worth

INR
4,386,850
INR
3,660,800

INR 8,024,650
(INR 379,600)

INR 9,220,000
INR 1,337,650

INR 640,550
INR
6,700,000
INR
7,340,550
INR
4,800,000
(INR
3,462,350)
INR 828,850
INR
2,166,500
INR
9,507,050
INR
2,166,500

15 Business plan for Swanthana Medical laboratories

16 Business plan for Swanthana Medical laboratories