vitalsolutions, llc business plan

7/28/2019 VitalSolutions, LLC Business Plan

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VitalSolutions LLC

1013 8th AvenueNashville, TN 37203

615-411-2233

Daniece LeavyBlake LehmerMiroslav MrazChandler Tarr


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TABLE OF CONTENTS

Executive Summary........pg. 3

Vision .. pg.5

Mission.pg. 5Values . pg 5

Product Overview ...pg.6

Product Concept..pg.6

Product Line

CustomerBenefits .pg.8

Warranties and Guarantees ..pg.9

Product Competitive Advantage ...pg.9

Product Fundingpg.10

Industry Analysis ..pg. 12Industry Characteristics

Relevant Trends .... .pg. 12

Existing Competitors ..... . pg. 14

Potential Competitors ..pg. 16

Business Strategy .....pg.18

Our Competitive Advantage ...pg.18

Our Business Model ..pg.21

Marketing Strategy ............. pg.21

Target Customer .............pg.21

Advertising ............... pg.22

Pricing pg. ......pg.26

Positioning .pg.27

Team Organization ...pg.29

Financials ...pg.31

Financial Assumptions pg.31

Income Statements .pg.34-40

Statements of Cash Flows .. .... pg.41-42

Balance Sheets . .pg.43

Works Cited

References

Appendices


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EXECUTIVE SUMMARY

Nowadays, hospitals are plagued with outdated, overcomplicated technology

which creates a cluttered and inefficient environment. This is especially true of the

method for obtaining patient vital information. All the devices and cords used to monitor

patients creates a web of cords. There can be up to 11 wires and cords on a patient at one

time. Our company has keyed in on the opportunity to simplify this process.

VitalSolutions is an innovative company with goal of creating a more efficient

hospital and post-operative environment by simplifying the patient care process. Our

product is a wireless EKG monitoring system. The system is comprised of four

components: A refurbished monitor which displays information, a wireless receiver

which is adapted to the monitor, wireless signal emitters which are substitutes for wired

leads, and lastly, disposable electrode adhesive pads. Of the 11 cords commonly found

around a patient, the EKG lead wires account for five of them. The product will remove

those wires and replace them with five wireless electrode emitters, each producing

wireless signal which will be received by the monitor and displayed as patient vitals.

The business model is includes contracting, retailing, wholesaling and trading. This

innovative combination will be explained in detail below and Most importantly, it allows

for successful entry in a capital-intensive industry for relatively low initial equity

investment. VitalSolutions will operate as a limited liability company in the heart of

downtown Nashville, TN (second largest city in Tennessee) at 1013 8th

Avenue. Nashville is home to the Hospital Corporation of America, which is the largest

private operator of health care facilities in the world. Consequently, the greater Nashville

is the states center for healthcare industry growth.


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There are many strong competitors in this market. Multi-billion dollar giants like General

Electric and other small innovative companies like Lifesync, MedAssets, MedTronic, and

Mortara Instrument have their hand in the wireless diagnostic market. There are also

several companies who have high-tech capabilities and could become competitors in the

near future. However, with our unique and entirely wireless system, and unique business

model, we feel we offer superior product value. This will allow us to quickly gain a

foothold in the marketplace and begin to compete with our national competitors.

Our competitive advantage is that our product is completely wireless, where the other

companies all contain some wired component.

With the constant technological advancements in hospital equipment, our product

allows our customers to have the newest innovation of EKG monitors for roughly half the

cost of a brand new traditional monitor. Once we have established a presence in the

Nashville, Knoxville, and Chattanooga areas, we plan to expand our target market to

include the Southeast Region. We will be using direct sales techniques. If a growth rate

of 15% is sustained for 7 years, the company will have the capital necessary to become a

national player in the medical device industry.

Financials include: Projected Annual Profit and Loss Statements for the first four

years of operations, Projected Annual Balance Sheet for the first four years of operations,

Projected Annual Cash Flow statement for the first four years of operations. Also,

includes analysis of start-up costs, revenue drivers, and comparisons of market

competition financials.

The founders of VitalSolutions form a well-rounded management team with

combined backgrounds in sales, logistics, healthcare administration, marketing, finance


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and the patient care process. The team knows from first-hand experience the value that

the VitalSolutions product will add in the form of increased productivity, operational

efficiencies, and quality of patient care.

VITALSOLUTIONS VISION AND MISSION

VitalSolutions mission is, To create a safer, more efficient hospital and post-

operative environment through the implementation of high ethical standards, reliability,

and functionality for our products.

VitalSolutions vision is, To become a model organization by providing a

platform that creates a more efficient and unrestricted environment for both healthcare

providers and their patients. This vision will aid health-care providers in managing the

fast paced ever-changing health-care landscape.

VITALSOLUTIONS VALUES AND PRINCIPLES

Our company strives to achieve customer focus by providing the best quality and

satisfaction. We do this by collecting and implementing a constant feedback from our

customers. Ourintegrity and reliability is achieved from our products and services that

are highly ethical and meet technological standards that allow us to build customer trust.

Our goal is to improve our services and products with relentless improvement by

devoting resources to research and innovation. The VitalSolutions strong management

team will strive to be a model organization for promotion and delivery of our post-

operative products and services. Ourleadership and profits from our success will be

managed and allocated extensively to increase VitalSolutions growth.


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of $15,000 apiece. Our refurbished wireless monitor system will be sold for $6,068. The

second SKU is the electrode pad that attaches to the emitters. This disposable product is

extremely cheap and has highly favorable margins. It serves as a captive product and

must be reordered often. This residual income is a significant revenue driver especially

after several years of growth.

Customer Benefits

VitalSolutions aim is to enhance the patient care experience by providing

benefits that are apparent for both health-care providers and their patients. The benefits

provided by our product include safety, simplicity, and increased process efficiency in

hospitals. Safety is of utmost importance in a hospital setting since the life of an

individual is at risk. Old vitals monitors consist of wires that often times interfere in

medical practices and bear the risk of becoming unplugged or tangled. Our business is to

take these wired monitors and adapting them to a wireless system. An operating or

patient care room without monitor wires allows surgeons and doctors to concentrate more

on their patients and spend less time dealing with the excess distractions of traditional

wired monitors. The absence of the 6-12 tangled wires will make the patient remarkably

more comfortable and put their family more at ease.

The wireless system also offers real health benefits. Without the risk of tripping

over wires, patients can be mobile sooner, expediting the healing and rehabilitation

processes. This will provide a safer, less congested, and more mobile environment for

physicians and their patients. It will also allow for easier transportation of patients and

medical equipment. These benefits will be presented to


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Warranties and Guarantees

Our customers will receive, with the purchase of the wireless monitor system, a

lifetime warranty. This warranty will cover all malfunctions and broken components

except those that originate from misuse. The product will also come with a guarantee for

the new monitor to be installed and ready for operation the day after the old monitor is

uninstalled.

Competitive Advantage of the Product

Some of the competition in the industry has EKGs with partially wireless

components. For example, LifeSyncs electrode emitters are connected by wires that

converge on a box that is worn on the arm. This box then sends this information via

wireless signal to the appropriate monitor. Several other competitors have similar,

partially wireless systems. No other company in the industry offers a completely wireless

monitoring system. In that sense, our product is entirely unique. There will be absolutely

no lead wires surrounding the electrodes and attached emitters. This strategic

differentiator is absolutely a critical success factor. The technology must be designed to

allow for such small signal emitters to have a battery life up to 24 hours. For this hurdle

to be overcome, we will need to acquire funding for a massive research and development

expense. For some reason, very capable competitors in the industry have refrained from

going completely wire-free. The R&D teams must discover this reason and produce a

viable solution.


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Product Funding

VitalSolutions strives to not only enter the market with this innovative product,

but it also strives to lead the medical device and healthcare industries in product

development for years to come. This is an expensive goal. The expense required for R&D

of the current product alone would render the business non-viable were it not for two

federal programs.

SBIR

The SBIR (Small Business Innovation Research) federal grant is a program

provided by the government to stimulate innovation in the high-tech arena. The program

is only available to for-profit businesses with fewer than 500 employees that also meet

several high-tech criteria. The purpose of the grant is to provide necessary capital for

cash-strapped startups. The awards are highly competitive and the award amounts range

from $1,000 to more than $1.5 million dollars. Given the intense competition, a sizeable

award would seem unlikely. However, some statistics provide some encouragement.

The Department of Health and Human Services is one of fourteen federal

departments participating in the SBIR program. This one department received 34% of the

entire SBIR budget in 2012. 21% of the total number of SBIR awardees received their

grant from the HHS department. The average HHS award amount was $600,000

compared to the SBIR average of $350,000. Not only does a healthcare-related company

have a higher chance at being awarded a grant, they receive more money per award. So, it

goes without saying that our company will apply for an SBIR grant. For this business

plan, it is assumed that we will be awarded an SBIR grant of $550,000. These funds will

be allocated to initial product development and future R&D.


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STTR

TheSTTR (Small Business Technology Transfer)grant is a similar federal

program to the SBIR with a different focus. The criteria required of competing businesses

is the same as the SBIR and it is equally competitive. The grant includes a small

monetary award but the essential benefit of the program is a strategic partnership with an

academic institution for R&D purposes. The STTR board assigns each awardee to a

school and facilitates collaboration unto technology innovation. This coveted free

research from the nations elite universities is, like the SBIR, dominated by companies in

the healthcare industry. 24% of all awards went to the HHS department and each HHS

award was valued at $512,000 compared to the STTR average of $335,000. For this

business plan, it is assumed VitalSolutions will receive a research partnership valued at

$500,000 and the sum of this award is allocated to initial product research.


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INDUSTRY ANALYSIS-

Industry Size, Trends, and Competitors

In the United States, the medical device manufacturing industry consists of 632

businesses, generating overall revenue of $34.9 billion. This industry includes the

manufacturing of electromedical and electrotherapeutic, spinal, cardiovascular and

surgical technologies. The cardiac device subcategory of the industry constitutes a

sizeable amount of the goods produced. This subcategory, including EKG systems,

pacemakers, and heart defibrillators, makes up 18% of all of the product and services

offered in the industry. The global ECG/EKG market is estimated to be worth between

$2.5 and $3 billion.

Research has identified several environmental trends within the healthcare

industry. The baby-boomer generation is an aging population with increasing healthcare

needs, increasing use of outpatient care, increasing wireless technology capability and a

growing nursing shortage. These trends in the market offer potential for rapid growth.

INDUSTRY TRENDS

Trends resulting from emerging technologies and evolving social scenarios are

bound to have a direct impact on the execution of medical processes and the way

post-operative care takes place. These are the major trends that are currently shaping and

influencing the healthcare industry:

Emerging Technologies

Medical research and technological advancement is paving the way for new

technologies and offering further opportunities for innovation. The media is giving these

new technologies and medical breakthroughs public exposure, which creates patient


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expectations. Hospital innovation and cutting edge technology is becoming the standard,

not the exception. This puts pressure on hopsitals to implement new technologies to keep

from losing share of mind.

Changing Demographics

In 2000, approximately 12.4%, or 35 million Americans were over the age of 65.

For 2010, this number increased to about 40 million or 13% of the population. The future

will likely show an increase in the number of Americans over the age of 65, quickly

growing to 89 million in 2050 or 20.3% of the population (See Table and Graph 1 in

Appendix). This age group is becoming the most populated demographic ofthe

population. Wireless technologies in patient-monitoring devices can capitalize on the needs

of this growing market. Individuals older than 65 require could use our technology to be

monitored from home and avoid a hospital visit altogether. Our product is right in the middle

of the window of opportunity to meet the growing need for telehomecare, remote patient

monitoring, etc.

New Wireless Technologies

Everything is wireless these days. Headphones, video game controllers, laptops,

internet connections, cell phones and several common devices all operate with wireless

technologies. The implication is that wireless technology is well established. Much is

known about it and the product design will be much cheaper to develop. This is also true

for our competitors who will reap the same benefits from the wireless trend. Within

hospitals, wireless technologies can allow for portable monitoring equipment that moves

with a patient or a patients bed and forwarding data to a central station. This is

particularly valuable when a patient is being moved within the hospital, needs to be

moved quickly, or during surgical operations.


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Legislation: Affordable Care Act of 2010

The piece of legislation affects more than 30 million people who will be provided

with insurance. It will be accomplished by expanding Medicaid and providing federal

subsides to help lower-and middle-income Americans buy private coverage ("Health Care

Reform"). Not only will the Affordable Care Act have a major impact on the healthcare

industry but it will also affect those industries and businesses that work with the healthcare

industry. This legislation makes healthcare much more affordable for more patients. It does,

however, makes high quality healthcare much more expensive for the provider. Essentially,

doctors are required to treat more patients for less money. This makes hospitals less

profitable. This will be a large barrier to overcome when attempting to sell a premium, luxury

product to these penny-pinching institutions. There will beemphasis on reducing hospital

days and increasing healthcare efficiency

Reducing a patients length of stay is highly profitable for a hospital. Housing,

feeding, and caring for the patient after surgical operations is much less profitable than

the healthcare providers andinsurers are all seeking to reduce the number of hospital

admissions and lengths of stay. Wireless monitoring systems allows patients to mobilize,

use the restroom, handle personal needs, and also makes the work of nurses easier. All of

this contributes to a quicker patient recovery and shorter length of the stay.

INDUSTRY COMPETITORS

In general, our competition has well-established market share, economies of scale

and scope, and n the healthcare industry. Some of the companies profits exceed over a

billion dollars annually. They have great long-term relationships with their customers

that raise our (Vital Solutions) barriers of entries. The medical device manufacturing


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industry is a moderately concentrated, highly competitive industry with moderate to short

product life cycles and quick product diffusion rates.

Existing Competitors

General Electric is a multi-billion dollar corporation that manufactures a variety

of different products ranging from refrigerators to medical equipment. They offer

wireless patient monitoring and networking systems geared for hospitals. Portable

bedside monitoring with features a variety of monitors, pulse oximeters, and other

medical devices. Most of General Electrics financial success comes from their different

product lines fund most of their medical device products.

Medtronicis a multi-billion dollar international medical technology firm with

interest in diagnostic innovation. They continue to innovate and put out new products to

stay ahead of the competition. They have a network for implantable devices that allow

for automatic data transmission, customizable alerts, and device checks.

Mortara Instrument is a company centered around innovation of wireless EKG

systems. They recently obtained a 3-year contract to be distributed through

MedAssets. They suffered in more $2 million dollars for each of first three years of

producing medical devices. They have recently moved from distributor to manufacturing

of the wireless EKG systems.

Lifesync is a new venture that is exclusively a designer and creator of wireless

EKG systems. In its first four years, it has had trouble acquiring more than 2% of the

existing sales in the market. It has not yet posted a gain, despite improving sales. Their

financial statements show that cash flow is decreasing and expenses are increasing.


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MedAssetsis a comprehensive healthcare solutions company offering a variety

of products and services ranging from financial advising to innovative products.

The healthcare industry is becoming so consolidated that there is too much focus

on profit and not on the customer. Most of our competitors offer a wide range of product

lines, which decreases their effectiveness to market to the medical

industry. VitalSolutions wants to establish excellent relationships with smaller groups to

obtain a good reputation and develop a more personal approach than some of our

competitors.

Competitive Profile Matrix

Existing Competitors

Company

Name

Vital

Solutions

General

Electric

Medtronic Mortara

Instrument

Lifesync

Strengths -Lean Inventory-Innovative Bus.

Model

-Economies ofScale

-R&D budget

GlobalExpansion

Manufacturer ofMedical Devices

-FinancialGrowth

Weaknesses -Small Size-No Market

Share

Size prohibitsagile marketadjustments

-Low Amt. ofCash

-Growth

-Net Losses-Decr. Revenue

-Poor MarketShare

Market

Share

Poor AboveAverage

Average Medium Poor

Financial

Status

Poor AboveAverage

Average Medium Poor

Potential Competitors

The heavily saturated industry is always filling up with new medical ideas, new

technologies, and increased regulations as potential competitors knock on the entry doors

to seek new ways to capture customers. We must pay very close to our existing

competitors and new ones that may arise.


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Honeywell HomMedoffers monitoring solutions for patients, physicians, home

healthcare, and various senior living communities. These monitors measure heart rate,

weight, and blood pressure. This device is a wireless monitor.

GlobalMedia Groupprovides remote patient monitoring by specializing in video

conferencing to track patients conditions. The devices include otoscopes, digital

stethoscopes, microphones, and cameras.

Cybernet Medical Corporation uses a MedStar system to collect and forward

vital signs. These peripheral monitoring devices can plug up easily and use a

wireless/land-based phone. The MedStar peripheral packages consist of tracking asthma,

diabetes, obesity, and many other conditions. Devices include blood pressure cuff, pulse

oximeters, and respirometers to monitor the state of patients.

The medical device manufacturing industry is a very crowded industry with room

to grow and innovate. Currently, many of the existing companies in the market are

continuously manufacturing new products to introduce to customers (old and new). The

baby boomer population is increasing in age and is in need of advanced technology to

enhance their health. Any additional entries to the market would cause our firm to keep

innovating and enhance current products to stay ahead of the competition. Barriers of

entry are very high and any competitor with substantial resources will give them an

advantage to establish relationships with hospitals and patients. Lack of credibility hurts

our company and makes the mode of entry very difficult to enter with more potential

competitors. Competition accelerates growth and our firm is prepared for substantial

improvement across the industry


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BUSINESS STRATEGY

Uniqueness: VitalSolutions is a health-care manufacturer that specializes in the

refurbishment of wired vital monitors to a new wireless platform. This reconstruction will

allow for safer and more efficient hospital care. There are several value-adding aspects of

the business model and strategy that are addressed below.

Competitive Advantage:

VitalSolutions derives its competitive advantage from its ability to in-house

reconfigurations, delivery, and technology service and training while outsourcing product

manufacturing and design. The reconfigured monitors will provide the same advantages

that wireless monitors provide for a fraction of the rapidly approaching transition cost

(from wired to wireless). This is possible because many of the costs associated with new

monitor development and manufacturing can be dismissed.

The business will operate on the following strategy: VitalSolutions Sales Reps

will direct sell to hospitals and acquire sales contracts for newly refurbished and wireless-

adapted monitors. The hospital will not want to switch monitor brands since that incur

productivity loss and re-training costs. For this reason, we will then take the sales

contract and buy the ordered number of monitors from discount retailers or wholesalers.

The monitors will all be the exact same model and make of the monitors currently being

used by the customer. We will then participate in a trade-in deal with the hospital. We

will discount price of sale by an average of$1,675 for trade of the customers old


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monitors. This discount makes our product more affordable to the hospitals. It also frees

them from the liability of depreciating their old monitors if they are unable to sell them.

For us, this trade-in provides us with a new monitor for the cost of the discount. Given

that the purchase of monitors represents our largest component of COGS, we are able to

lower our costs and increase profitability.

Once we acquire a new batch of old monitors, we will immediately turnaround

and sell them to online wholesalers, retailers nursing homes, small private hospitals, start-

ups, and to home consumers in the wired platform. We expect to sell all traded monitors

within three months of acquiring them. This way, we only experience a quarters worth of

depreciation for each monitor we receive via trade-in. With the overall profit from the

transaction ((Sale to traded monitor) minus Discount to Hospital) being $700, we lower

COGS and require less cash to purchase the next quarters inventory for the sales

contracts.

Overall, the trade-in feature benefits include lower inventory costs, more liquid

cash assets, lowered COGS, and the ability to take custom orders from customers. If we

only offered certain lines or brands of monitors, we would be excluding hospitals who

didnt use those brands. With the trade-in, we get cash rewards from taking the hospitals

monitors and can use that money to subsidize the cost of a new customers batch of

monitors. It also allows us to offer whatever brand, make or model that the customer

desires to purchase.


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This process will effectively lower the cost of goods sold account. If an acquired

contract requires a similar monitoring system to one currently held in inventory the sell

and repurchase costs of acquiring the monitoring system for reconfigurations can be

ignored. This would decrease the cost of goods sold account significantly.

We realize how fast paced the healthcare industry can be and that time saved is

also money saved. Hospitals simply cannot afford to shut entire departments down for

installation of a wireless adapter. This is why we decided to include the monitor with the

wireless adaptation already installed in our product. If we sold only the manufactured

wireless emitters and receiver as a SKU, then the hospital would have to perform the

installation and configuration in-house. While configuration was taking place, the

hospital would be missing out on gains from surgeries and other patient care activities.

Since we sell the monitoring system already configured with the wireless device,

our installation teams can quickly fix the monitors to the walls, plug them in, and leave. It

is also important to keep in mind that we will purchase our initial inventory from hospital

companies under foreclosure or in their liquidation phase in order to receive the best

prices (higher initial investment). Our product will provide the innovative benefits of

wireless monitors at a price that seems impossibly low. While the low price does give the

product value, the main differentiator is our ability to lower COGS through the This will

be described in detail in Product section of this plan.


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BUSINESS MODEL

THE UNIQUENESS OF THE BUSINESS MODEL

MARKETING STRATEGY

Kalorama Information estimates the US market for advanced patient

monitoringinclusive of devices, software, and peripheralsreached $8.9 billion in

2011, increasing 22.8% over $3.9 billion in 2007 and is forecast to reach $20.9 billion by

2016, reflecting a compound annual growth of 18%. This market includes wireless and

remote technologies, patient data processing applications and equipment, and

applications and equipment that transfer patient monitoring results to electronic medical

records (See Graphs 5-6 and Table 4). There are 4 major target customers for our

products that are as follows (See Graph 3):

Customers

Target Customers

Hospital Groupsare responsible for providing medical care, which includes

functions such as emergency, surgical, and rehabilitative services. The US hospital

market for advanced patient monitoring totaled $5.4 billion in 2011 and is projected to

reach $12.8 billion in 2016. While growth in the number of units will not be as high for

hospitals as for home healthcare, hospitals buy much more expensive units.

Home Healthcareprovides treatment of chronic diseases remotely from the

patients home which can lead to fewer hospital visits as well as flexibility for the elder

people requiring care. The US market for advanced patient monitoring in home

healthcare totaled nearly $2.5 billion in 2011. This segment is predicted to grow at a


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compound annual rate of 18.6%, reaching $6.2 billion in 2016. Annually about 3 million

Americans are under full-time home health care and an additional 9 million require part-

time or alternative home care. There are about 2 million home health care providers

currently offering services. Additionally, the Bureau of Labor Statistics estimates that

growth for home health providers will increase by 70% to 2020.

Nursing Homesprovide rehabilitation and other health-related personal care

needy patients. The US market for advanced patient monitoring systems in nursing

homes totaled about $495 million in 2011. Compound annual growth of 14.3% will result

in a market value of $955 million in 2016. They are less responsive to the new

technologies but it is predicted that this will change with the government incentives and

increasing demands on quality and service from residents. Other target markets include

physician offices, first responders etc.

As noted above, one of the major growth drivers in our business is the increased

life expectancy, which has been increasing steadily around the world owing to the

advancement in healthcare, sanitation, research, nutrition, etc. By 1980 an American

newborn were expected on average to live to 74 years of age. By 2011 the average life

expectancy in the US had risen to more than 78 years of age and this trend is expected to

continue in the future (See Graph 4 and Table 3).

Advertising and Promotion

The use of advertisement in the healthcare industry, specifically for Diagnostic

Cardiology and Medical Tech companies, is limited. This limited use of advertisement is

due to the lack of transparency in medical pricing. The use of advertising within the

healthcare industry is also minimal because most individuals seeking health reform have


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personal or government mandated health insurance, which absorbs the need for price

disclosure by healthcare firms. The need for business-to-business advertising, in order to

stimulate awareness of ourcompanys products and services among hospital groups and

individual hospitals, is of more importance for our desired financial performance. While

we plan to budget for a small use of business-to-business advertisement, the use of mass

advertisement is still unnecessary because the industry is so concentrated and separate

geographically. As VitalSolutions matures and obtains the resources and revenue to

outreach to different geographical regions, we plan to increase our advertising budget to

increase awareness and grow our reputation.

Media Used for MarketingProfessional Healthcare Journals/Digests for Hospital Administrators, Websites, & Direct

Selling

The primary sources of media we plan on using to reach potential customers is

traditional text advertisements such as Professional Healthcare Journals and Digests

targeted to hospital administrators and their management teams and direct selling

techniques. The majority of our advertising efforts will be concentrated on direct selling.

This will be most effective source for generating publicity and growing a strong clientele

base. The use of direct selling will not only help to accurately communicate our

companies product and objectives but will also allow for allocation of capital to be used

to support other functions within our business. We (the management team) plan to

personally meet with prospective customers (healthcare groups) to give a full explanation

of our product and service features and the benefits they provide. By personally meeting

with prospective clients, we will be able to ensure VitalSolutions objective to increase

shareholder value for our clients and reassure that conducting business with us will help

to increase profits, efficiency, and reputation while decreasing potential liabilities.


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In addition VitalSolutions will use a well-designed webpage to display the

companies mission, vision, and value statements. We will also include before and after

pictures and specs on the different monitors we reconfigure. This will be effective in

communicating the value we offer visually. We will also use a section of the website to

describe our business model in detail, followed by our management teams contact and

experience information. Although we do not anticipate a large amount of orders directly

from our website, we will incorporate an online ordering and delivery system to cater to

the needs of individuals or individually owned hospitals that may desire to place an order

via our website. Finally, the website will contain a product/service feedback section that

will allow our management team to display our performance and make improvements

where necessary.

Frequency of Marketing Usage

VitalSolutions makes it a priority to constantly focus on our marketing ability and

effectiveness. While we anticipate a relatively small advertising budget as a startup, we

will stay mindful that generating publicity can be accomplished in many ways that will

help to excel our business. We will strive to display a new add in a professional digest

quarterly. This will allow hospital groups to monitor our success and growth. Our website

will be checked and updated daily in order to quickly and effectively respond to our

customers. We will manage and continuously focus on creating a transparent

environment for our customers in order to generate new clientele and strengthen past

relationships. Through the uses of media, we hope to create a network that will strengthen

supplier and customer relationships in order to increase overall efficiency within our

company.


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Plans for generating publicity

VitalSolutions managing team realizes that generating publicity must stem from

positive and optimistic experiences. To generate publicity based on a negative

experience would be detrimental to our image and in this case would be worse than

generating no publicity. We will make it a priority to involve our employees in many

programs and events like The Boy and Girl Scouts of America, The Better Business

Bureau, The Ronald McDonald house, as well as other health related charities and

programs. The individuals we help and the relationships we make will be a way for Vital

Solutions to give back, and while it will not be our intent, we recognize that as we

familiarize ourself with our community our community will become familiar with our

company. We also plan to use social media sites like Facebook, Twitter, and various

professional media sites to further educate and engage followers. Most of these social

media sites would be a platform for free/cheap advertisement and relationship building.

The focus of these sources would be to educate and inform. If there is a healthcare

breakthrough (especially dealing with Diagnostic Cardiology) we will publish a story to

inform our followers. We will also create and continuously update a timeline displaying

our accomplishments and growth. Social media sites provide numerous opportunities that

we believe could generate valuable advantages over our competitors.

We have already touched on our website and direct selling approaches to generating

publicity and believe that constant focus and improvement in these areas will only

flourish our business.


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Pricing our Product

The pricing of our product will reflect the costs associated with production,

delivery, installation, and technology training. While we will attempt to be the price

leader in our specific industry, our concentration will primarily be on the value we create.

We will not sacrifice our image or customer satisfaction to be a cost leader. Since we are

in the business of reconfigurations, the price of our product will be significantly less

expensive when compared to a newly manufactured wireless monitoring system.

VitalSolutions goal is to drive revenue and profits through customer satisfaction,

referrals, and ethical business practices instead of depending on prices to squeeze

margins. Due to the high cost nature of the healthcare industry, our product may seem

expensive when compared to consumer products, but we encourage our customers to

view our product as an investment whose benefits pay for themselves.

Cost structure

Accurately forecasting sales is always a challenging task. This is acutely felt by a

small startup in the healthcare industry such as ourselves. In the business-to-business

market, sales will come in the form of large, expensive contracts that require months of

proposals and agreements. These sales and resulting spikes in revenues will be followed


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by periods of no revenue as the sales team pitches to new clients. This industry reality

will require an extremely flexible cost structure. Therefore we will work to minimize

fixed costs and reallocate these funds to the variable expenses. For example, we must be

agile enough to survive six months without a sale and then capable of fulfilling a contract

worth $700,000 of merchandise. This will require a complicated and delicate balance of

several business decisions, especially during the introductory phase of the business. This

balance will be comprised of decisions such as inventory levels, contract fulfillment

deadlines, employees (Hired vs. Contracted)and many more.

As mentioned above, the bulk of costs of the business will be variable. With our

business venture will be variable. This is due to uncertainty in growth, resource

availability, and clientele base. Using this variable cost approach will allow

VitalSolutions flexibility in its startup phase. This will also enable our management team

to adapt our cost structure to fit demand and sales volume during a specific time period.

Desired Image in the Market

VitalSolutions will rely heavily on our service, customer focus, and efficiency.

The continuing consolidation within the healthcare industry does not intimidate us.

Rather it provides an opportunity to generate increasing profits while but instead provides

an opportunity to excel in customer service. The relationships we form unto client

satisfaction are of are utmost importance to our success. VitalSolutions will strive to

separate ourselves from competition by concentrating on not only the bottom line but also

the small things. We understand that our customers will be small hospital and

management groups looking for growth and a plethora of attention and focus. We will

never lose sight of our customers needs because we put our patients before profits.


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Other traits that will allow us to hold this position in the industry include efficiency,

quick response, and lifetime guarantees.

Comparison Against Competitors Prices

Many of our direct competitors consist of large healthcare manufacturing

companies such as GE and Medtronic. While these companies have significant

advantages in economies of scale, their concentration is on manufacturing new wired and

in some circumstances wireless monitors. Many large hospital chains may gravitate

towards a new and more expensive monitor, but our target market will be in need of a

less expensive more service-oriented product. Relative to these large medical

manufacturers we expect our product to be significantly less expensive. When comparing

our product price with companies such as Lifesync or Mortara Instrument our outlook is

to provide increased service to offset any similarities in price. Although similarities in

pricing are unlikely due to Lifesync and Mortaras focus on newly manufactured products

instead of reconfigured and refurbished ones, we anticipate our products giving us a price

advantage. Finally, evaluating other healthcare refurbishment companies is of extreme

importance, while we may not be able to beat these companies on product prices we

certainly expect our product to remain affordable and gain significant advantage through

increased product benefits.

Distribution Strategy

The distribution strategy for VitalSolutions is relatively simple. The customer will

be given an average lead time of two months. So, order delivery and installation will

occur no more than two months after signing of the sales contract. The delivery method

will be same day delivery and installation. We will have an installation crew comprised


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of three contracted technicians who, when notified by management, will load the delivery

truck with inventory and depart for the desired destination to install the new monitoring

systems. As VitalSolutions grows into a national and international player in the medical

device market, focus will be given to implementing new forms of transportation and

distribution strategies.

Channels of distribution used (delivery trucks)

The channel of distribution VitalSolutions will use is derived from a key concept

in our competitive advantage. We will use direct transaction, which allows for ignorance

of intermediaries and results in lower prices. Specifically, we will have a small fleet of

delivery trucks, that when notified will transport inventory to our customers for

installation. Our sales team will also help our channels of distribution as we develop as

and grow our company.

TEAM ORGANIZATION

Our founders are four experienced business students who have the essential skills

ready to launch VitalSolutions. Two team members are currently involved in the

healthcare industry. The VitalSolutions wireless EKG will allow our company to offer a

clean, stable, and efficient environment. Our founders have observed first hand how

messy a postoperative environment can get for the nurses and patients. Our knowledge in

areas of finance, logistics, human resource, marketing, and management will help assist

in the building blocks of a successful business. Along side our founders, we will have

three installers and one technician with incredible mechanical engineering experience to


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assist us in our everyday operation. We, VitalSolutions, will strive to provide the best

products for our industry.

MANAGEMENT TEAM

Daniece Leavy is a senior at The University of Tennessee majoring in Logistics &

Supply Chain management with a collateral in Management. She has had experience in

dealing with customers in the restaurant industry. Dealing with people is key to any

successful firm. Her knowledge of warehousing, transporting goods through different

modes (Map Point programs), forecasting demand, and managing inventories (Excel

spreadsheets, Logex programs) will enhance the growth of VitalSolutions supply chain.

Blake Lehmer is a senior at University of Tennessee majoring in Finance with a

collateral in Management. He has been successful in dealing with clients to develop

personalized financial plans from simulated spreadsheets. He is currently searching for a

job in the medical industry where he can utilize his business degree in helping

others. Managing a firms financials helps to acquire additional assets and pay off

liabilities. His profound knowledge of investment banking will assist VitalSolutions with

any mergers or acquisitions that may occur in our product life cycle.

Miroslav Mraz is a senior (International Exchange Student) at The University of

Tennessee majoring in Finance and Management. His knowledge of financial

management will assist in the firms preparation of any financial statement. Correct

interpretation of financial statements will assist in the firms cash flow. He has excellent

knowledge of English and French languages that will open new entries to the

International market. The International market will have high barriers of entry but

communication will be key in the negotiation processes.


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Chandler Tarr is a senior at The University of Tennessee majoring in Marketing

and is also a Pre-Medical Student. He will soon be attending medical school with the

goal of becoming an orthopedic surgeon. His knowledge of the medical device industry,

along with his work experience at Fort Sanders Hospital, has served to create and shape

the VitalSolutions product offering. Since the healthcare industry is so highly regulated,

his access to hospital management will continue to play a vital role.

FINANCIALS

Financial Assumptions

The projected revenues and COGS highlighted in the Income Statements are based on the

following research-based assumptions:

We will target 3 individual hospitals and 1 small hospital group. The 3 individualhospitals contain an average of 150 beds with 25% of these beds requiring a

bedside monitor. The hospital group we are targeting is West Tennessee

Healthcare. This healthcare group has 6 hospitals under management with a total

of 920 beds which translates to 230 required monitors. Our first year sales have

been derived from the above stated numbers. Our financial statements take into

account the fact that we would need to sell to independent hospitals first to

establish brand equity which increases chance of sales to hospital groups. Lastly,

we applied the sales of the initial 3 independent contracts as a semi-annual

average. We followed the same application for the hospital group.

Individual contributions made by our management team are allocated to coverfirst year expenses. These expenses include: purchase of delivery truck and


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marketing efforts for the first year of operations. We assumed based on research

that both of these costs were approximately $20,000. This $40,000 initial

investment would be broken down into 4 individual contributions from

management team of $10,000 each.

The profits made quarterly are immediately allocated to sustain growth byinvesting in next quarters inventory. Business profits do not cover next quarters

inventory costs until Q10 which is why VC investment is crucial to allow

business growth.

After Q10, our business will not require any further seed money. At a constant

growth rate of 15% which is based on expected industry averages. By Q28, the

VC will have realized 100% recoupment of initial investment. Due to the

investors patience, we will offer a significant portion of equity in our company

(30%).

COGS consist of the following components: used wired monitor= $3,500,manufactured wireless technology costs $175 (economies of scale), benefit gained

from trading model (mentioned in Business Strategy section) = $700 decrease in

COGS after Q1 sales.

The 65% markup on COGS gives a price which is still lower than an outrightpurchase of a new wired monitor.

Electrode packages are sold at 330% markup with COGS of $3/package andselling price of $10.

We decided to contract the installation labor and service for a required number ofhours (1 hour/monitor estimated) for the price of: x hours*$10.85 (150% of


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minimum wage) + $5.43 (amount for company)+ $452.5 (accounting for 8%

failure rate).

Our utilities are priced at 0.1 cents/cubic feet* 4000 ft. of our office/storage space. Each inventory unit only depreciates by 1 quarters depreciation rate. This cost is

minimal since we only hold each inventory item for maximum of 3 months before

selling it for profit.

Our insurance expenses are as follows: General liability ($5,000), Propertyliability ($3,500), Workers compensation ($1,500), Vehicle ($1,000).

Financial Statements

Attached: Quarterly Income Statements for first 7 years of operation

Attached: Statements of Cash Flows for first 2 years of operation

Attached: Balance Sheet for first 2 years of operation


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REFERENCES

Interviewees

Caleb Batchelor- Nursing Student at UTK Jody Miller- Nurse at FSRMC( Ft. Sanders Reg. Med Center) Tabitha Douglas- Nurse at FSRMC Andrew Kline- Peri-Op Tech at FSRMC David McDonald- CEO and Co-Founder of Lift1428 ( A healthcare startup

consultant)

WORKS CITED

Bloomberg. Lifesync Strength. Web. 10 Apr. 2013.

Clark County Nevada. Life Expectancy of Technology. Web. 10 Apr. 2013

Daily Finance. Medtronic Weaknesses. Web 10 Apr. 2013

HCA Healthcare. History. Web 10 Apr. 2013

Health Care (Medical Dictionary)." Def. 2.Merriam-Webster's Dictionary. Merriam-Webster's Dictionary, n.d. Web. 17 Feb. 2013.

"Health Care Reform." The New York Times. The New York Times, 08 Nov. 2012. Web.15 Feb. 2013.

Hulewsky, Nikolas. "Hospitals in the US."IBISWorld. IBISWorld, Dec. 2012. Web. 10

Feb. 2013. .

Loopnet. Web. 10 Apr. 2013.


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Mathews, Robert. Cardiology. Web 10 Apr. 2013

Research and Trends."American Hospital Association. American Hospital Association,n.d. Web. 8 Feb. 2013.

Son, Anna. "Medical Device Manufacturing in the US."IBISWorld. IBISWorld, Jan.2013. Web. 10 Feb. 2013..

APPENDICES

Buying Intentions Survey

This survey was given to multiple nurses and other healthcare professionals at Fort

Sanders Regional Medical Center. No hospital executives could be reached for

interviewing. The nurses and techs play a critical role in understanding the feasibility of

the product because they have the most exposure to the lead-monitor system. When asked

about pricing, they were prompted to think like a hospital executive for the sake of the

survey.

1. Do you understand how the product works?

2. Do you understand the benefits of the product?

3. Do you like the product?

4. How much do you think it Costs?

5. How much would it have to cost for you to buy it?

6. So if I had it here today, at that price, would you buy the product?

Industry Expert Interview Questions
http://clients1.ibisworld.com/reports/us/industry/default.aspx?entid=764http://clients1.ibisworld.com/reports/us/industry/default.aspx?entid=764


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We asked industry experts and entrepreneurs to help learn about our industry, target

market and product.

1. As a healthcare professional, what are some things that you value for your patients?

2. What do you think about our product?

3. Is there anything that you would change about it to make it better?

4. What are some tips to getting your foot in the door?

5. What is a good way to network and make connections in the industry?

6. How is our product's performance compared to the non-wireless EKG?

7. Would you recommend our product to other potential customers?

8. How do the patients feel about the product?

9. How do the competitors' products compare to ours?

10. Describe our products in one word.

CHARTS AND TABLES

Table 1


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Graph 1

Table 2


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Graph 2

Graph 3


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Graph 4

Table 3


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Graph 5

Graph 6


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Table 4

Graph 7


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