Executive Summary
iCare Solutions is a new software development firm that offers customer-focused solutions in the long-term care market. Its strategy is to differentiate itself through low pricing, product quality, and customer focus. This business plan details iCare’s marketing strategy, products/services, and objectives. It also gives a detailed analysis of the projected financial performance of the firm in the industry.
General Company Description
Vision
Our vision is to become a market leader in the development and sale of cost-effective external reporting solutions to long-term care (LTC) providers.
Mission
iCare Solutions is a start-up company that specialises in the development and sale of superior, easy-to-use, and inexpensive reporting software to help LTC operators manage every aspect of their business.
Objective
To provide inexpensive and customer-centric reporting solutions to LTC providers to grow our customer base by 5,000 clients annually.
Values
- Quality – provide high-quality and innovative software to clients.
- Customer-centric – develop customised business solutions.
- Integrity – cultivate an organisational culture of honesty.
Products/Services/Solutions Offering by the Company
iCare will offer a range of integrated computing software solutions to small LTC providers. It will provide scalable applications for accounting, secure data storage, reimbursement, quality improvement, prescription and medication records, and client medical data management. The firm will also maintain the program infrastructure and provide technical training to clients.
Team
The management team will consist of the president who will also be the Chief Operating Officer of the company. It will also include LTC professionals/consultants and software developers. The other members will include the Chief Financial Officer, the R&D director, and the Marketing director.
Market/Industry Analysis
The elderly population in the developed world is projected to grow, pushing the demand for long-term care upwards. Currently, private and public LTC providers handle large volumes of data to facilitate government reimbursement, medication usage, inventory management, accounting, and care transition. Over 18,000 providers paid through the Medicare and Medicaid programmes are in operation in the US.
The LTC software market has three segments, namely, users of high-quality software, users of the software with limited functionality, and nonusers. Many programs are available for collecting, analysing, and reporting the data. However, quality programs are costly in terms of licensing fees and maintenance costs. On average, licenses cost about $15,000 while maintenance costs can reach $1,500 monthly. The demand for cost-effective and scalable software solutions to manage data is high.
Marketing Strategy and Implementation
iCare Solutions will develop software for the three market segments with a key focus on software features of ease of use, scalability, and cost-effectiveness. A content marketing strategy will be used to create brand awareness and differentiate iCare products from those of its competitors. The company’s focus will be on quality, user-friendliness, and customer needs. This will generate referrals that will boost sales. The implementation of this strategy will involve multiple promotional tools, including “internet marketing, direct selling, public relations, strategic alliances, advertising, and personal selling”. iCare will adopt a competitive remuneration policy to attract and retain skilled labour to support its efforts to develop quality software for its market.
Research and Development Plan
iCare Solutions will invest in advanced hardware and software to target the LTC market. Most of the current software in the market runs on Windows operating systems. iCare will seek to develop software that runs on both Windows and Macintosh systems to create a universal appeal for the program. Another area iCare will invest in is cloud computing. Cloud-based solutions will enable clients to access data and virtual programs through internet-connected devices at any time or place.
The LTC market will need advanced software for data management as more people opt for home-based care instead of residential care. Thus, reporting practices to Medicaid and Medicare programs are likely to change. iCare will seek to develop an easy-to-use software to support the new reporting requirements.
Operational Plan
An operational plan details the “day-to-day tasks and activities required to run the organisation” in line with its strategic objectives. iCare will need to secure computers and a strategic workplace location before launching its operations. iCare’s operational plan for the 2014/2015 period is given in table below.
Financial Analysis
Start-up Costs
iCare requires $140,000 start-up capital to finance its software development, purchase an office space, pay staff, and fund its marketing activities. The firm will recoup this initial investment within two years of operation. This investment will enable iCare to expand its customer base in the LTC provider market.
Funds Breakdown
The development of software that runs on both Windows and Macintosh is projected to cost $20,000. Upgrade and maintenance costs will amount to $15,000 per year. The maintenance costs will amount to $30,000 in two years. Projected advertising expenses will amount to $20,000 while staff training will cost $10,000. The remaining initial funds ($45,000) will be used to pay staff and fund the operational expenses.
Working Capital Requirements
Frase and Ormiston define working capital requirements as the amount of money needed to run a start-up firm until it becomes self-sufficient. Since software licenses will involve a monthly subscription model, iCare is unlikely to experience enough cash flow within the first 30 days. Taking into account the fixed costs (rent, utilities, and salaries), sales expenses, and 15% miscellaneous costs, iCare will require a working capital of $161,000 for the next year.
Sales Forecast
iCare sales will come from software/product licensing and maintenance/consulting fees. The revenue will ensure sufficient cash flow to the business until it breaks even. The sales are projected to increase by 30% for the maintenance business and 10% for software licensing. The sales forecast for years one, two, and three are indicated in table.
Marketing Budget
iCare will market its products/services using different promotional tools. The aim is to penetrate the medium and small software market segments of the LTC industry. The marketing budget will fund advertising through print and electronic media, product placement, personal selling, public relations, and internet advertising. A breakdown of the 2015/2016 budget is included.
Income Statement
iCare will generate its revenues from licensing and maintenance charges. The major expenses will include the cost of sales, software development costs, salaries, utilities, rent, and income taxes. iCare’s income statement for the first year is included.
Breakeven Analysis
The operational costs are projected to be about $14,350 monthly. These include expenditure on rent, salaries, utilities, staff training, R&D, and marketing. The income will come from licensing fees and maintenance charges obtained from clients who are expected to reach 100 by the end of the first quarter. The breakeven point will be the end of the first month of the second quarter. At this point, iCare will earn revenue of $14,350, as shown in the chart below.
Cash Flow Projections
iCare’s cash flow projections for the next three years indicate an upward trajectory. The cash flow will come from its operating profit, working capital, and investments. The details of a three-year cash flow projection are included.
Performa Profit and Loss Statement
The Performa profit and loss statement projects a firm’s “future revenue, expenses, and income”. iCare’s sales revenue is projected to increase over the next three years to reach $156,000. The cost of sales will remain constant while operating expenses will rise as the firm invests in new software. The profit and loss statement is included.
Performa Balance Sheet
The balance sheet projections indicate that iCare’s current assets will increase from $512,000 to $695,000 in three years. Long-term assets will remain unchanged while current liabilities will decline.
Financial Ratios
The firm will use debt, current, and quick ratios to determine the returns on the net worth of the business. Other financial ratios will include activity ratios such as accounts payable turnover and collection days.
The Ask and Returns
The shareholder equity in iCare is $140,000. The owner will give away 25% of the company to investors. Its net worth in a year’s time when the firm breaks even are projected to be $752,000. The returns from this investment are indicated in the ratios below.
- ROI = Net profit/Total assets = 236,000/752,000 = 0.31
- ROE = Net Income/Shareholder’s equity = 236,000/140,000 = 1.7
Risks and Contingencies Plan
iCare intends to monitor the sales data to respond to market trends appropriately. This will inform marketing decisions to focus more on particular services/software to attract more clients. The firm will also avoid direct competition with established software firms. Another contingency plan is to introduce a range of products within its market niche to appeal to diverse client characteristics.
Timeline
Five-year Plan
- Develop cost-effective software that runs on all existing operating systems by 2017.
- Increase customer base by 35% by the end of 2019 through aggressive marketing campaigns to acquire over 5,000 new LTC providers annually.
- Introduce cloud-based solutions to clients by the year 2020.
Conclusion
iCare Solutions’ success in the LTC software industry will rely on the aggressiveness of its marketing campaigns, the quality and pricing of its products, and staff productivity. The start-up will use multiple marketing tools to penetrate the market and compete effectively. Its five-year plan underscores the intention to acquire 5,000 new LTC providers annually.
Bibliography
Brigham, E, & J Houston, Fundamentals of Financial Management, Cengage Learning, Mason, 2009. Web.
Drake, P, ‘Financial ratio analysis’ Journal of Business and Finance, vol. 12, no. 1, 2010, pp. 1-14. Web.
Frase, L, & A Ormiston, Understanding Financial Statements, Pearson Prentice Hall, New Jersey, 2004. Web.
Harris-Kojetin, L, M Sengupta, E Park-Lee, & R Valverde, ‘Long-term care services in the United States: 2013 overview’, Vital Health Statistics, vol. 3, no. 37, 2013, pp. 234-246. Web.
Holm, O, ‘Integrated marketing communication: from tactics to strategy’, Corporate Communications: An International Journal, vol. 11, no. 1, 2006, pp. 23-33. Web.
Horne, J, & M Wachowicz, Fundamentals of Financial Management, Pearson Education, New Delhi, 2006. Web.
Hudak, S, & S Sharkey, Health information technology: are long-term care providers ready? California Healthcare Foundation, San Francisco, California, 2011. Web.
Kotler, P, & L Keller, Marketing Management, Prentice Hall, New York, 2011. Web.
Nelson, R, Marketing: Communication Tools, Blackwell Publishing, New York, 2008. Web.
Resnick, HE, BB Manard, RI Stone, & M Alwan, ‘Use of electronic information systems in nursing homes: United States, 2004’, Journal of American Medical Information Association, vol. 16, no. 2, 2009, pp. 179-186. Web.