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Business and Financial Plan

R.N Hospital Delhi

BUSINESS PLAN STRUCTURE

Business Name and Address: R.N Hospital National Highway - 8, Ambience Island, Gurgaon 122002, India Proprietors Name and Address: Ram Nivas, National Highway - 8, Ambience Island, Gurgaon 122002, India Business Form: Multi-Specialty Hospital (Service Sector) Business Activity: RN Hospital is a multi specialty hospital that runs under the accreditation of All India Institute of Medicals Sciences. RN Hospital caters to the medical requirements of locals of Haryana State. The overall population of Haryana is 25,353,081 and has an urgent need of multi-specialty hospitals. Hospital is a part of the service sector industry employing highly skilled people and is a very critical profession. Vision and Mission statement: Vision: To ensure that all people in Haryana have the availability to multi-specialty services within one premise. Mission: To be the best equipped hospital to cater to the growing demand of health and treatment in Harayana.

PEST analysis: Political Analysis: Haryana is in North India, and attached to the capital of India, New Delhi. The ruling party in the state is the Indian National Congress (INC). The chief minister of Haryana is Sri Bhupinder Singh Hooda. The political status of Haryana is stable. Haryana has had political stability under the INC for two consecutive elections. Economic Analysis: Haryana is economically very stable state. Haryana is the home for many large production industries and houses brands such as Maruthi Udyog limited (car manufacturing unit), Hero MotorCorp (2 wheeler manufacturing), Haryana is the richest state of India and is third in per capita income. Haryana is the home for many IT giants and BPO companies. Haryana has the second largest refinery of South Asia at Panipat. Haryana is the largest manufacturer of cars, two wheelers and tractors in India. It has had a consistent growth since 1970 and has sustained the growth. Haryana is the leading contributor of food grains in India Haryana

has contributed the most to the Green Revolution of India. Haryana also commands the position of having the most costly real estate in India. It is the headquarter to Indias largest real estate company DLF Limited. The total area of land being 44,212 sq kms, with a density of 570/km. Haryana is the house to Nokia Siemens Networks, United Healthcare, Schneider Electric, Alcatel-Lucent, Mitsubishi Electric ,ABB Electric, , HONEYWELL, ALSTOM, Matsushita Electric, Nippon Electric Corporation Ltd., ERICSSON, A2Z Group, Aricent Group, Fuji Electric, , Huawei, Tata Consultancy Services, IBM, NIIT, Hewitt Associates, Dell, Accenture, Convergys, General Electric GE , and The Boston Consulting Group are based with their head office at Gurgaon. Social Analysis: The Human Development Index is 0.644 and is ranked 11 th in India. The per capita income of Haryana is 67,891rupees. The sex ratio is 877 and the official language is Hindi.

Technological Analysis: Technologically Haryana comes in the advanced states in India. The presence of many Global giants and their offices signifies the availability of technically skilled resources. Haryana is among those states who have implemented the Governance in health sector. The department uses a lot of Information and Communication Technology (ICT) in its day to day activities. Haryana has launched the patient care at government health centers program using the e-Governance. Haryana is moving ahead in the health sector by improvising its technology domain and equipping to use the latest technology. Haryana boasts of the availability of the latest technology at its disposal and has been a supporter of those entrepreneurs who intend to have latest technological equipments. The health industry is a very fast growing industry where new technology outsmarts the old one. This is an advantage to the investors in the health industry as there is abundant availability of development and new technology equipments.

Government support and rules and regulations: The Govt of Haryana has supported the private participation into the health sector. The presence of world class multi-specialist hospitals in Haryana is a physical proof to this. Hospitals such as Apollo, Wockhartd etc has bought in the latest medical science to the people of Haryana. The need to supplement the population with regular inflow of more medical facilities is a necessary aspect. The Govt has many policies to support the private entrepreneurs who are willing to invest in this sector. Govt of Haryana does an analysis of its existing assets to see how they can be utilized by the effective partnership from the private sector. The main focus of GOH is to

integrate the private partners service in line to the policies for the society and provide economical and good health services. GoH recognises that 'social' projects may not always be viable on PPP. In such cases Government would use other mechanism of compensation such As provision of Viability Gap Funding (VGF) or annuity payments or 'shadow' (usage/ availability based) payment. GoH may also consider implementing such projects upfront and then transfer management of services to a Private Sector Participant (PSP) where feasible.

Rationale for launching the business: Haryana has a great potential to be a stronger and healthier state. The rationale behind the hospital business is that, it would facilitate good quality treatment at lower costs. Health is the main concern in todays busy life. The present living style of a common man has its own ill-effects that lead to many health issues. With a density of 570/km, Haryanas health sector is among the fastest growing sector. Public health sector now becoming an open tot eh private investment is an opportunity to serve and earn from the society. The service industry as a whole is growing and is a very potential area of investment. The health industry has many players both directly benefiting from the industry and indirectly benefiting from the health industry. The easy health insurance availability, the requirement of good medical. Market Size and Growth: The present density of the population is 570/km which is a very potential market size for a hospital. Presently going by the census figures for 2011, the population of Haryana is 25,353,081 people. Going by the investment that GOH is making into this sector we can estimate the market size and growth of the health sector of Haryana. GOH is had spent Rs. 24 crores on Hospitals, Rs. 85 lakhs on Community Health Centers, Rs. 25 lakhs on Primary Health Centers and Rs. 1.0 lakhs on Sub-Center. Also going by the provisions set aside for the year 2010-2011 of Rs. 33 crores, estimate an excellent growth of the market for the Health centers. Among the various program that the Govt of Haryana has planned for the year 2011 are, a raise in the sex ration this year in the age group of 0-6 years and to 950 till the year 2016-17. Malaria reduction rate by 50% by the year ended 2010 and moving ahead by 10% by the year ended 2012. Reduction of death rate by 50% for 2010 for Dengue Mortality rate. All these programs are run through the private participation and are the growth areas of the health sector of Haryana. Selection of Location with reasons thereof:

The location for the hospital has to be such that it is close to the habitat population and easily accessible to the general public. A prime location would not be a good proposal as the initial cost of set up would increase exponentially thereby increasing the time to realise the ROI. Therefore the location is selected basis the below attributes: 1. Availability of large piece of land close to a national highway 2. Good logistics connectivity and access to the major parts of Haryana 3. Easy and traffic free access, less burdened by peak time traffic 4. Location that is identified and approved by the Govt of Haryana for development. Proposed Customers: The proposed customers to the RN Hospital are the local residents who live in a radius of 5 kilometers. They form the integral customer base that would need health facilities within least time and of good quality. Also going by the mission statement of to ensure all people of Haryana have access to a Multi-Specialty hospital, the customer base includes all residents of Haryana and other states. The customer base can be segmented broadly as follows: 1. Service class and middle class business income people 2. Income segmentation between Rs 1.0 lakhs p.a to Rs. 1.0 crores p.a 3. Cultural segmentation being semi-urban and urban part of Haryana The customer base segmentation based on the type of treatment: 1. General consultation and outpatient services 2. Gynecologist consultation and Child delivery patients 3. Pediatrics and children patients 4. Accident and Emergency patients 5. Diagnostic and Imaging patients 6. Elderly service department patients 7. Radiology and Oncology departments patients 8. Pharmacy requirement patients. The proposed customers are expected to arrive round the clock and therefore there is a facility of 24 hours service, 7 days a week. The patients from other hospitals are also a part of the proposed customers however; this number being limited for the first 2 years is not forming a part of the above segmentation list.

Competitor Analysis: Name Strengths Indraprastha Apollo : Sarita 1. Good visibility Weaknesses 1. Expensive

to

Vihar, Delhi Mathura Road, New Delhi

2. Centrally located 3. Part of a big group 4. Accredited by the AIIMS 5. Professional 6. Latest equipments in medical science

common customer 2. Located in the metro and not available for non-metro

Self Analysis: Strengths 1. 2. 3. 4. 5. Cost effective Locally available Personal touch with patients. Speak the local language Weaknesses 1. Local reach and not metro reach 2. Limited investments available 3. Limited access to latest technological equipments and expensive medical machines 4.

Competitive Advantages: The cost of treatment at RN hospital is an advantage. RN Hospital can attend to the patient at just 30% of the cost of the treatment for the same treatment at Apollo. 1. Cost Advantage: RN Hospitals has based its advantage of providing optimum cost for health services. In comparison to the Apollo hospital, the target is to be at a lower cost than Apollo by at least 20% and providing the same quality of service as Apollo. This being a major attractor to customers, the cost advantage would be a major benefit to RN Hospitals. The planning is such that the cost advantage is to be kept consistent up to 2 years from the initiation of the Hospital. 2. Differentiation Advantage: This competitive advantage is also employed to create a market awareness of RN Hospitals. The differentiation factors are so based

that the customer is able to identify them by looking, hearing and actually experiencing them. Proposed customers the middle class service oriented people. The middle class business oriented people. The pregnant women in the radius of 5 kms. The accident cases in the range of 5 kms. The old aged patients in the range of 5 to 10 kms. Advertising and Promotion Strategy: The RN Hospital advertising strategy includes, new paper advertisements, local cable operator advertisements, pamphlet distributions. The advertisement mix also includes, doing free health check up camps, free diabetics checking camps, free eye checking camps. Also, the marketing mix includes programs that cater to the complete health requirements of the family package. Pricing Strategy: The pricing strategy for RN Hospital is based on market pricing. The present market pricing for consultation of various hospitals around in 10kms radius. The pricing strategy for RN hospital has to be based on the current Market orientation and the pricing by other hospitals. The strategy includes doing a research of the pricing for the various facilities and consultations offered by other hospitals and banding the pricing for RN on the same lines. The pricing strategy is also in line with the mission of the hospital which is to bring cost effective multi-specialty health services to the common customer across Haryana. Premises: The premises for RN hospital would include land and building measuring approximately 5000 sq feet. The building area being of 5 floors with carpet area of 2500 sq feet in each floor. The total 12,500 sq feet of building would be utilized as 60% of medical treatment area and 20% patient recreation area. The balance 20% of area would be for the ascetics and Future Expansion plans based on any new medical invention. ______________________________________________________________ Equipments: The equipments for the company include beds, medical equipments, fixed medical machines, mobile vans and ambulances, the equipments also include building and premises safety devises, alarms, patient emergency equipments etc.

Various sources of finance available and the source selected by you with rationale. The various sources of finances for the RN Hospitals are as follows: 1. Personal funds: The personal funds include savings of the proprietors, family members of the proprietor. 2. Long term Bank loan on building mortgage

3. Project partners funding

Key People and Job Functions: 1. Chief Executive Officer: The CEO is the head of RN Hospitals. CEO would be managing the complete operations with the support of his team of managers and doctors. 2. Chief Medical Officer: The CMO would report into the CEO. The CMO is a qualified doctor with the best of industry knowledge and skills in running a hospital which has a maximum capacity of 500 beds. The CMO would have a minimum experience of 10 years in a similar role. 3.

FINANCIAL PLAN
I. Sources of funds: Loan Self Cash Self Assets Rs. 2, 00, 00,000 at 8% p.a interest Rs. 1, 00, 00,000 Rs 50, 00,000

II. Funding requirement/Applications: Fixed Assets: Formation expenses: Working capital: Stock: Rs. 1, 00, 00,000 Rs. 50, 00,000 Rs. 50, 00,000 Rs. 10, 00,000

III. Fixed Assets: a. Machinery and Equipment: No. 1 Machinery/Equipment 1. X-Ray machine Price + Taxes 2,00,000 Qty. Required 1 Total Value 2,00,000

2. MRI Scan machine 3. Heart machine 4. Blood testing machine 5.

5,00,000 2,00,000

1 1

5,00,000 2,00,000

b. Premises: the premises will be government funded, therefore the company will not have to spend money on the Premises, however the expenditure on the machinery and the equipments are given below.

c. Raw Material (Stock) No. 1. Item-Type Beds and Chairs Qty. (Monthly/Annual) 500/500 Total Value (Monthly/Annual) 5,00,000

d. Formation Expenses: e. Working Capital for Expenses (and the period for):

V. Key People and Job Functions and Salary: The RN Hospital is a health care center for the people of Haryana. The key people include highly skilled people who are the doctors, the nurses and other allied services specialist. This comprises of the functional part of the RN Hospitals. The head of the functional part of the hospital would

be the Chief Medical Officer, under whose guidance the hospital would conduct its day to day medical activities. The management aspect of the hospital has the board of directors, the CEO and the administrative staff who would effectively managing the hospitals day to day activities. Also the board of directors would be taking the planning and other decisions regarding the operation of the hospital. The following are the Key people in the hospital: 1. CMO : Chief Medical Officer, whose salary would range from Rs. 10,00,000 to Rs. 15,00,000 per annum 2. CEO: Chief Operating Officer, whose salary would range from Rs. 12,00,000 to Rs.18,00,000 per annum. 3. The Board of Directors : The board consists of the director members whose salary would range from Rs. 7,00,000 to Rs. 10,00,000 per annum 4. The Specialist doctors : The experts consultants whose salary would range from Rs. 6,00,00,000 to Rs. 10,00,000 per annum and in addition to this a 10% bonus on the billing through their line of activity 5. The General doctors : The general doctors or the junior doctors whose salary would range from Rs. 3,00,00,000 to Rs. 6,00,000 per annum and in addition would receive a bonus of 5% per annum on the billing done through their line of activity 6. The Administration staff : The general staff, front reception staff and the nurses of the hospital. The salary would range from Rs. 1,50,000 to Rs. 4,00,000 per annum and in addition they would receive a variable bonus on performance and customer feedback. 7. The Hospital management team : This team is in charge of the daily requirements to run the hospital and maintenance of the hospital. The salary would range from Rs. 4,00,000 to Rs. 6,00,000 per annum. In addition they would be eligible to a variable bonus on the performance and customer feedback.

VI. Key financial assumptions: 1. The long term loan interest rate would remain fixed for 5 years. This is an important factor. An increase in the interest rate would sweep the profits of the hospital and this would impact the growth plan. 2. The annual turnover is based on the market survey of patients and their expenses annually. This is based on the census figures that are issued by the Govt of Haryana and the projected customer potential. 3. The government policies would remain the same or improve to help seed more profits. Any changes to the policies would positively or negatively impact the

performance of the hospital. The Govt tax exemptions and continued support of providing cheaper electric, water and other basic facilities would have a positive impact on the progress business of the Hospital. 4. The financial market would move in a direction to increase the per capita income of the resident of Haryana. An increase in the per capita income would help in regular utilization of expensive equipments thereby helping in deploying latest technology machinery in the coming years. 5. The development of the surrounding area where the hospital is being set up and the demographic habitation around the hospital. Financial Highlights Financial Highlight Year 1 Turnover: 25,000,000 Profit: 2,500,000 Breakeven: GP % 10 NP% 6 6 6 6 6 10 10 10 10 3,500,000 4,500,000 5,500,000 6,500,000 35,000,000 45,000,000 55,000,000 65,000,000 Year 2 Year 3 Year 4 Year 5

Monthly Cash Flow Forecast Amount in Month

Sales 100 Volume 50 Value 2,000 Receipts 1,800 Sales-cash 1,500 Sales-debtors 500 Capital introduced 20,000 1,000 Grants, loans etc 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 Total (X) 35,950 17,590 18,230 18,870 19,510 20,150 20,790 21,430 22,070 Payments Materials 1,000 Wages/salaries 1,500 Electricity 250 Telephone 150 Advertising 50 Insurance 20 Transport/travel 50 Stationery/postage 25 Repairs/renewals 25 Local taxes 50 Professional fee 50 50 50 50 50 50 50 50 25 25 25 25 25 25 25 25 25 25 25 25 25 25 25 25 50 50 50 50 50 50 50 50 20 20 20 20 20 20 20 20 55 60 65 70 75 80 85 90 150 150 150 150 150 150 150 150 250 250 250 250 250 250 250 250 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,200 1,400 1,600 1,800 2,000 2,200 2,400 2,600 1,000 1,000 1,000 1,000 1,000 1,000 1,000 500 500 500 500 500 500 500 500 1,700 1,900 2,100 2,300 2,500 2,700 2,900 3,100 2,000 2,200 2,400 2,600 2,800 3,000 3,200 3,400 2,200 2,400 2,600 2,800 3,000 3,200 3,400 3,600 70 90 110 130 150 170 190 210 120 140 160 180 200 220 240 260

50 Other __________ 100 Capital purchases 5,000 Loan repayments 1,000 Drawings/dividends 500 Total (Y) 9,770

50 100 1,000 500 4,975

50 100 1,000 500 5,180

50 100 1,000 500 5,385

50 100 1,000 500 5,590

50 100 1,000 500 5,795

50 100 1,000 500 6,000

50 100 1,000 500 6,205

50 100 1,000 500 6,410

Cash Balances Cash Flow (X) (Y) 26,180 12,615 13,050 13,485 13,920 14,355 14,790 15,225 15,660 Opening Balance

References: 1. Govt Of Haryana : http://haryana.nic.in/it-in-haryana/e-health.htm 2. Govt Policies Govt Of Haryana : http://haryana.gov.in/government%20Policies/PPP-Policy-Haryana.pdf 3. http://www.sciencedirect.com/science/article/pii/S0140673610614924 4. http://www.mohfw.nic.in/WriteReadData/l892s/9457038092AnnualReporthealth.p df
5. Paul Burns (2010), Entrepreneurship and Small Business: Start-Up, Growth and Maturity, Palgrave MacMillan. 6. Paul Burns, Entrepreneurship and Small Business, Palgrave (2001)