Here's a template for writing a business plan
Here's a template for writing a business plan
By Stephen W. Earnhart, MS
President & CEO
Earnhart & Associates
Dallas
Many of the contacts I receive via phone, mail, and e-mail ask where I come up with ideas for each month's column. The answer is that I look through my mail and messages and come up with the most commonly requested topic that readers ask me to research. Hence, this month's column: Writing a business plan or giving the format.
As our industry continues to grow and expand, often managers, physicians, and administrators are called upon to do things they have never done before or have little knowledge of. When a center, hospital, or physician is interested in adding a new service or ambulatory surgery center (ASC) or expanding the core business, such a change usually requires a business plan. I've written enough business plans in my career to fill a small closet, and I've learned some things that may make it easier for you to do one on your own.
You may ask, "Why do a business plan?" Someone who doesn't know much about your project or ASC needs information about your 'business' to make a decision about it. It could be to:
* invest money into the project;
* determine the need;
* access the situation.
Rarely does anyone else have the knowledge that you, the writer of the plan, have at your fingertips. What you need to do is take that information you have in your head, add a little research to it, and put it on paper. Sounds simple doesn't it? Actually, it isn't all that bad.
I write better if I have an example to use, so, let's assume that you have an in-house ASC, and your hospital administrator is interested in expanding to a freestanding site that will allow physician ownership in a new ASC. I've written three of these in the past month, so this is a good example for me. While this format may not be what you are working on, it still contains all the necessary information you will need for any medically related business plan.
What should it look like?
All business plans should be single-spaced with margins of 1 inch all around. Choose a font that is easy to read -- nothing fancy that will take away from your words.
You can make it look more professional if you can fully justify the print. For the best presentation, it should be printed on a good quality 20 pound weight paper and bound. It should be organized with the following sections:
* Executive summary.
Under this outline format, you want to state the objective of the business plan. In this case, it is simply as we stated: "to explore the feasibility of expanding our current in-house surgery center to a freestanding facility that will allow equity ownership by new and existing physicians." Easy.
* The business.
Here you want to go into detail about the business of outpatient surgery centers. This section should be fairly detailed and about two pages. Pretend you are explaining your outpatient surgery business to someone who has no idea about it or the concept. Chances are that is who the reader will be, especially if this project will require action by the board of directors or a lending institution.
* Your strategy.
What do you plan to do? How do you plan to do it, and what will be the results of your action? Again, the strategy should cover about two pages. Be detailed here.
* The market.
This section is mostly facts and figures about the industry as a whole. Do not add original thought here, but rather discuss the growth of the industry, the cases nationwide, etc. This section should be very detailed and about two pages.
Also, describe the market's characteristics. For example, how many ASCs are joint ventured with hospitals that allow physician investors? Give the number and a demographic breakdown.
Get into the reimbursement issues here, and use plenty of historic data to back up your projections. Explain the advantages to the patient, the surgeon, and third-party payers.
This section on characteristics should be at least four pages. Remember who you are describing this to: someone who doesn't know a thing about the industry.
* Competition.
Naturally, you will want to add a section on competition to your plan. What is going on in your state, city, and area? Are there other centers out there that could adversely affect this plan? Competition may be the reason you are making this move.
Spend time on this section because it could be the driving force to getting approval on the plan. This is the section in which you may want to add, for example, that other freestanding centers are offering the physicians the opportunity to purchase equity in a center. Explain that the hospital is losing market share by not following the examples of the other ASCs.
Try to stick with your region or area of town in this section. Don't go into detail about areas of the country that have no influence upon your town.
* Market size and growth.
This section is similar to the market, but adds the component of your own backyard information and how you compare with the rest of the country. For example, is ambulatory surgery growing in your part of town or declining? Why? How much?
Again, this section should be very detailed. Use charts and graphs to show trends and/or historic data. This section should be one to three pages.
* Administration.
You can call this section anything you want, but what you want to describe is how you are going to run this new department or ASC. Will you use existing staff or recruit a new one. Why?
Details, details, details.
* Financial analysis.
OK, that was the easy and fun part. Now you need to do a financial analysis of the project.
Lay out in a five-year pro forma what you expect the new ASC will add to the institution. Are you going to just shift cases from one location to another, or do you anticipate picking up new market share?
Shifting cases is a no-no. It's OK to shift some, but at the end of the day, you need to pick up cases that you never would have if you didn't make this move.
How much will it cost you to get that new business? Using the information from the first part of your plan, how much of an increase do you expect to see in the business over the next year? Next two years? Next five years? What will your labor costs be five years from now and at what revenue levels? You have to know that information, or more to the point, the reader needs to know that.
Don't cheat on your financial section, tempting though it will be, because someone is going to come to you in three years and say, "You said in your business plan that you anticipated 500 new cases this year from this expansion. Where are they?" Learn to be conservative.
Often whoever requested the business plan will want to see a three-year, month-by-month budget. Ouch! Most of the time you can't avoid it. The good part about the month-by-month is that you really test your knowledge. The bad part is that someone can come to you at the end of month four and ask why you aren't where you said you would be -- higher or lower.
That is it! Piece of cake, right? Well, not really, but at least you have something of a template for what a business plan should contain. Before you go out and spend money on computer software that claims it can simplify this process for you -- don't. Believe me, I tried that route. They just don't do as they advertise.
It should take you about three to five days to do a good business plan. That, of course, includes gathering your information and laying it out in a logical format. Take your time with it, and try not to get too frustrated.
[Editors' note: To provide feedback or suggest ideas for future columns, contact Stephen W. Earnhart. Earnhart & Associates, Dallas, TX 75252. Telephone: (214) 713-6626. E-mail: [email protected].] *
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