How to write a business plan for a neonatology practice?
Putting together a business plan for a neonatology practice can be daunting - especially if you're creating a business for the first time - but with this comprehensive guide, you'll have the necessary tools to do it confidently.
We will explore why writing one is so important in both starting up and growing an existing neonatology practice, as well as what should go into making an effective plan - from its structure to content - and what tools can be used to streamline the process and avoid errors.
Without further ado, let us begin!
Why write a business plan for a neonatology practice?
Understanding the document's scope and goals will help you easily grasp its structure and content. Before diving into the specifics of the plan, let's take a moment to explore the key reasons why having a neonatology practice business plan is so crucial.
To have a clear roadmap to grow the business
Small businesses rarely experience a constant and predictable environment. Economic cycles go up and down, while the business landscape is mutating constantly with new regulations, technologies, competitors, and consumer behaviours emerging when we least expect it.
In this dynamic context, it's essential to have a clear roadmap for your neonatology practice. Otherwise, you are navigating in the dark which is dangerous given that - as a business owner - your capital is at risk.
That's why crafting a well-thought-out business plan is crucial to ensure the long-term success and sustainability of your venture.
To create an effective business plan, you'll need to take a step-by-step approach. First, you'll have to assess your current position (if you're already in business), and then identify where you'd like your neonatology practice to be in the next three to five years.
Once you have a clear destination for your neonatology practice, you'll focus on three key areas:
- Resources: you'll determine the human, equipment, and capital resources needed to reach your goals successfully.
- Speed: you'll establish the optimal pace at which your business needs to grow if it is to meet its objectives within the desired timeframe.
- Risks: you'll identify and address potential risks you might encounter along the way.
By going through this process regularly, you'll be able to make informed decisions about resource allocation, paving the way for the long-term success of your business.
To get visibility on future cash flows
If your small neonatology practice runs out of cash: it's game over. That's why we often say "cash is king", and it's crucial to have a clear view of your neonatology practice's future cash flows.
So, how can you achieve this? It's simple - you need to have an up-to-date financial forecast.
The good news is that your neonatology practice business plan already includes a financial forecast (which we'll discuss further in this guide). Your task is to ensure it stays current.
To accomplish this, it's essential to regularly compare your actual financial performance with what was planned in your financial forecast. Based on your business's current trajectory, you can make adjustments to the forecast.
By diligently monitoring your neonatology practice's financial health, you'll be able to spot potential financial issues, like unexpected cash shortfalls, early on and take corrective actions. Moreover, this practice will enable you to recognize and capitalize on growth opportunities, such as excess cash flow enabling you to expand to new locations.
To secure financing
Crafting a comprehensive business plan for your neonatology practice, whether you're starting up or already established, is paramount when you're seeking financing from banks or investors.
Given how fragile small businesses are, financiers will want to ensure that you have a clear roadmap in place as well as command and control of your future cash flows before entertaining the idea of funding you.
For banks, the information in your business plan will be used to assess your borrowing capacity - which is defined as the maximum amount of debt your business can afford alongside your ability to repay the loan. This evaluation helps them decide whether to extend credit to your business and under what terms (interest rate, duration, repayment options, collateral, etc.).
Similarly, investors will thoroughly review your plan to determine if their investment can yield an attractive return. They'll be looking for evidence that your neonatology practice has the potential for healthy growth, profitability, and consistent cash flow generation over time.
Now that you understand the importance of creating a business plan for your neonatology practice, let's delve into the necessary information needed to craft an effective plan.
Information needed to create a business plan for a neonatology practice
Drafting a neonatology practice business plan requires research so that you can project sales, investments and cost accurately in your financial forecast, and convince the reader that there is a viable commercial opportunity to be seized.
Below, we'll focus on three critical pieces of information you should gather before starting to write your plan.
Carrying out market research for a neonatology practice
Carrying out market research before writing a business plan for a neonatology practice is essential to ensure that the financial projections are accurate and realistic.
Market research helps you gain insight into your target customer base, competitors, pricing strategies and other key factors which can have an impact on the commercial success of your business.
In particular, it is useful in forecasting revenue as it provides valuable data regarding potential customers’ spending habits and preferences.
You may uncover that parents are increasingly interested in holistic approaches to neonatology care. This could include complementary therapies and lifestyle changes, such as dietary and exercise modifications. Additionally, your market research could reveal that parents are increasingly looking for shorter lengths of stay in the neonatal intensive care unit. They may prefer to take their child home as soon as possible, rather than remaining in hospital care.
This information can then be used to create more accurate financial projections which will help investors make informed decisions about investing in your neonatology practice.
Developing the sales and marketing plan for a neonatology practice
Budgeting sales and marketing expenses is essential before creating a neonatology practice business plan.
A comprehensive sales and marketing plan should provide an accurate projection of what actions need to be implemented to acquire and retain customers, how many people are needed to carry out these initiatives, and how much needs to be spent on promotions, advertising, and other aspects.
This helps ensure that the right amount of resources is allocated to these activities in order to hit the sales and growth objectives forecasted in your business plan.
The staffing and equipment needs of a neonatology practice
Whether you are at the beginning stages of your neonatology practice or expanding its horizons, having a clear plan for recruitment and capital expenditures (investment in equipment and real estate) is vital to ensure your business's success.
To achieve this, both the recruitment and investment plans must align coherently with the projected timing and level of growth in your forecast. It is essential to secure appropriate funding for these plans.
The staffing costs for a neonatology practice might include the salaries for nurses, neonatal physicians, and medical assistants. The equipment costs might include incubators, special monitors, and specialized medical and diagnostic equipment.
To create a financial forecast that accurately represents your business's outlook, remember to factor in other day-to-day operating expenses.
Now that you have all the necessary information, it's time to dive in and start creating your business plan and developing the financial forecast for your neonatology practice.
What goes into your neonatology practice's financial forecast?
The financial forecast of your neonatology practice will enable you to assess the profitability potential of your business in the coming years and how much capital is required to fund the actions planned in the business plan.
The four key outputs of a financial forecast for a neonatology practice are:
- The profit and loss (P&L) statement,
- The projected balance sheet,
- The cash flow forecast,
- And the sources and uses table.
Let's take a closer look at each of these.
The projected P&L statement
The projected P&L statement for a neonatology practice shows how much revenue and profit your business is expected to make in the future.
A healthy neonatology practice's P&L statement should show:
- Sales growing at (minimum) or above (better) inflation
- Stable (minimum) or expanding (better) profit margins
- A healthy level of net profitability
This will of course depend on the stage of your business: numbers for a startup will look different than for an established neonatology practice.
The forecasted balance sheet of your neonatology practice
The projected balance sheet of your neonatology practice will enable the reader of your business plan to assess the overall financial health of your business.
It shows three elements: assets, liabilities and equity:
- Assets: are productive resources owned by the business, such as equipment, cash, and accounts receivable (money owed by clients).
- Liabilities: are debts owed to creditors, lenders, and other entities, such as accounts payable (money owed to suppliers).
- Equity: includes the sums invested by the shareholders or business owners and the profits and losses accumulated by the business to date (which are called retained earnings). It is a proxy for the value of the owner's stake in the business.
Analysing your neonatology practice projected balance sheet provides an understanding of your neonatology practice's working capital structure, investment and financing policies.
In particular, the readers of your plan can compare the level of financial debt on the balance sheet to the equity value to measure the level of financial risk (equity doesn't need to be reimbursed, while financial debt must be repaid, making it riskier).
They can also use your balance sheet to assess your neonatology practice's liquidity and solvency:
- A liquidity analysis: focuses on whether or not your business has sufficient cash and short-term assets to cover its liabilities due in the next 12 months.
- A solvency analysis: takes and longer view to assess whether or not your business has the capacity to repay its debts over the medium-term.
The cash flow forecast
As we've seen earlier in this guide, monitoring future cash flows is the key to success and the only way of ensuring that your neonatology practice has enough cash to operate.
As you can expect showing future cash flows is the main role of the cash flow forecast in your neonatology practice business plan.
It is best practice to organise the cash flow statement by nature in order to show the cash impact of the following areas:
- Cash flow generated from operations: the operating cash flow shows how much cash is generated or consumed by the business's commercial activities
- Cash flow from investing activities: the investing cash flow shows how much cash is being invested in capital expenditure (equipment, real estate, etc.) either to maintain the business's equipment or to expand its capabilities
- Cash flow from financing activities: the financing cash flow shows how much cash is raised or distributed to financiers
Looking at the cash flow forecast helps you to make sure that your business has enough cash to keep running, and can help you anticipate potential cash shortfalls.
Your neonatology practice business plan will normally include both yearly and monthly cash flow forecasts so that the readers can view the impact of seasonality on your business cash position and generation.
The initial financing plan
The initial financing plan, also known as a sources and uses table, is a valuable resource to have in your business plan when starting your neonatology practice as it reveals the origins of the money needed to establish the business (sources) and how it will be allocated (uses).
Having this table helps show what costs are involved in setting up your neonatology practice, how risks are shared between founders, investors and lenders, and what the starting cash position will be. This cash position needs to be sufficient to sustain operations until the business reaches a break-even point.
Now that you have a clear understanding of what goes into the financial forecast of your neonatology practice business plan, let's shift our focus to the written part of the plan.
The written part of a neonatology practice business plan
The written part of a neonatology practice business plan plays a key role: it lays out the plan of action you intend to execute to seize the commercial opportunity you've identified on the market and provides the context needed for the reader to decide if they believe your plan to be achievable and your financial forecast to be realistic.
The written part of a neonatology practice business plan is composed of 7 main sections:
- The executive summary
- The presentation of the company
- The products and services
- The market analysis
- The strategy
- The operations
- The financial plan
Let's go through the content of each section in more detail!
1. The executive summary
The executive summary, the first section of your neonatology practice's business plan, serves as an inviting snapshot of your entire plan, leaving readers eager to know more about your business.
To compose an effective executive summary, start with a concise introduction of your business, covering its name, concept, location, history, and unique aspects. Share insights about the services or products you intend to offer and your target customer base.
Subsequently, provide an overview of your neonatology practice's addressable market, highlighting current trends and potential growth opportunities.
Then, present a summary of critical financial figures, such as projected revenues, profits, and cash flows.
You should then include a summary of your key financial figures such as projected revenues, profits, and cash flows.
Lastly, address any funding needs in the "ask" section of your executive summary.
2. The presentation of the company
The second section in your neonatology practice's business plan should focus on the structure and ownership, location, and management team of the company.
The structure and ownership part provides an overview of the legal structure of the business, who the owners are and how much each has invested and owns. If you are seeking financing it is important that the reader gets a clear picture of which legal entity is receiving the funds, and who controls the business.
The location part should give an overview of the premises from which the company is operating, and why that location is of particular interest (catchment area, accessibility, amenities nearby, etc.).
When describing the location of your neonatology practice, you may want to focus on the area's potential for growth, as well as its access to resources. You could highlight the potential for increased demand for neonatology services, due to the area's growing population and its strong economic development. Additionally, you might emphasize the area's proximity to large metropolitan centers and its access to reliable transportation networks, which could help you attract more patients and increase revenue.
Finally, you should introduce the management team. Explain each member's role, background, and experience.
It is also important to emphasize any past successes that the members of the management team have achieved, and how long they've been working together, as this will help potential lenders or investors understand why they should trust in their leadership.
3. The products and services section
The products and services section of your business plan should include a detailed description of the offerings that your company provides to its customers.
For example, your neonatology practice might offer a range of healthcare services including consultations, diagnostics, and treatments. It could also provide patients with access to the latest medical technology such as ultrasound scans, blood tests, and virtual check-ups. Furthermore, your practice could offer educational resources such as online forums and patient guides to help parents understand their baby's health and development. All of these products and services provide convenience and peace of mind to customers, helping them make informed decisions about their child's care.
When drafting this section, you should be precise about the categories of products or services you sell, the types of customers you are targeting and how customers can buy them.
4. The market analysis
When you present your market analysis in your neonatology practice business plan, it's crucial to include detailed information about customers' demographics and segmentation, target market, competition, barriers to entry, and any relevant regulations.
The main objective of this section is to help the reader understand the size and attractiveness of the market while demonstrating your solid understanding of the industry.
Begin with the demographics and segmentation subsection, providing an overview of the addressable market for your neonatology practice, the key trends in the marketplace, and introducing different customer segments along with their preferences in terms of purchasing habits and budgets.
Next, focus on your target market, zooming in on the specific customer segments your neonatology practice aims to serve and explaining how your products and services fulfil their distinct needs.
For example, your target market might include pregnant women who are expecting their first child. They may be looking for a neonatology practice that offers comprehensive care for both mother and baby before, during, and after delivery. They may also want a neonatology practice that is conveniently located and has highly experienced and qualified practitioners.
Then proceed to the competition subsection, where you introduce your main competitors and highlight what sets you apart from them.
Finally, conclude your market analysis with an overview of the key regulations applicable to your neonatology practice.
5. The strategy section
When you write the strategy section of your neonatology practice business plan, remember to cover key elements such as your competitive edge, pricing strategy, sales & marketing plan, milestones, and risks and mitigants.
In the competitive edge subsection, elaborate on what makes your company stand out from competitors. This becomes especially important if you're a startup, aiming to carve a place for yourself amidst established players in the marketplace.
The pricing strategy subsection should demonstrate how you plan to maintain profitability while offering competitive prices to attract customers.
Outline your sales & marketing plan, detailing how you'll reach out to new customers and retain existing ones through loyalty programs or special offers.
For the milestones subsection, outline your company's achievements to date and your main objectives for the future, complete with specific dates to set clear expectations for progress.
Lastly, the risks and mitigants subsection should address the main risks that could affect your plan's execution. Explain the measures you've put in place to minimize these risks, assuring potential investors or lenders.
Your neonatology practice could face the risk of losing key personnel. This could happen for a variety of reasons, including unexpected illness, job opportunities elsewhere, or simply burnout due to long hours and high stress levels. This could create a gap in your practice, as well as a potential loss of knowledge and expertise. Another risk your practice may face is the loss of revenue due to changes in the healthcare system. This could happen through changes in reimbursements, insurance company policies, or new technologies that require a shift in the way you do business. This could lead to financial problems if your practice is unable to adjust quickly enough.
6. The operations section
The operations of your neonatology practice must be presented in detail in your business plan.
The first thing you should cover in this section is your staffing team, the main roles, and the overall recruitment plan to support the growth expected in your business plan. You should also outline the qualifications and experience necessary to fulfil each role, and how you intend to recruit (using job boards, referrals, or headhunters).
You should then state the operating hours of your neonatology practice - so that the reader can check the adequacy of your staffing levels - and any plans for varying opening times during peak season. Additionally, the plan should include details on how you will handle customer queries outside of normal operating hours.
The next part of this section should focus on the key assets and IP required to operate your business. If you depend on any licenses or trademarks, physical structures (equipment or property) or lease agreements, these should all go in there.
You might have two key assets and IP in a neonatology practice such as a medical facility and a website. The medical facility could be a physical asset that allows the practice to provide neonatology services. It might also contain intellectual property such as the latest medical equipment and innovative procedures. The website could also be a key asset, providing a platform for the practice to showcase its services and engage with potential patients. It may contain the latest web design technologies, with content that is tailored to the practice's neonatology services.
Finally, you should include a list of suppliers that you plan to work with and a breakdown of their services and main commercial terms (price, payment terms, contract duration, etc.). Investors are always keen to know if there is a particular reason why you have chosen to work with a specific supplier (higher-quality products or past relationships for example).
7. The presentation of the financial plan
The financial plan section is where we will include the financial forecast we talked about earlier in this guide.
Now that you have a clear idea of the content of a neonatology practice business plan, let's look at some of the tools you can use to create yours.
What tool should I use to write my neonatology practice's business plan?
In this section, we will be reviewing the two main options for writing a neonatology practice business plan efficiently:
- Using specialized software,
- Outsourcing the drafting to the business plan writer.
Using an online business plan software for your neonatology practice's business plan
The modern and most efficient way to write a neonatology practice business plan is to use business plan software.
There are several advantages to using specialized software:
- You can easily create your financial forecast by letting the software take care of the financial calculations for you without errors
- You are guided through the writing process by detailed instructions and examples for each part of the plan
- You can access a library of dozens of complete business plan samples and templates for inspiration
- You get a professional business plan, formatted and ready to be sent to your bank or investors
- You can easily track your actual financial performance against your financial forecast
- You can create scenarios to stress test your forecast's main assumptions
- You can easily update your forecast as time goes by to maintain visibility on future cash flows
- You have a friendly support team on standby to assist you when you are stuck
If you're interested in using this type of solution, you can try The Business Plan Shop for free by signing up here.
Hiring a business plan writer to write your neonatology practice's business plan
Outsourcing your neonatology practice business plan to a business plan writer can also be a viable option.
Business plan writers are skilled in creating error-free business plans and accurate financial forecasts. Moreover, hiring a consultant can save you valuable time, allowing you to focus on day-to-day business operations.
However, it's essential to be aware that hiring business plan writers will be expensive, as you're not only paying for their time but also the software they use and their profit margin.
Based on experience, you should budget at least £1.5k ($2.0k) excluding tax for a comprehensive business plan, and more if you require changes after initial discussions with lenders or investors.
Also, exercise caution when seeking investment. Investors prefer their funds to be directed towards business growth rather than spent on consulting fees. Therefore, the amount you spend on business plan writing services and other consulting services should be insignificant compared to the amount raised.
Keep in mind that one drawback is that you usually don't own the business plan itself; you only receive the output, while the actual document is saved in the consultant's business planning software. This can make it challenging to update the document without retaining the consultant's services.
For these reasons, carefully consider outsourcing your neonatology practice business plan to a business plan writer, weighing the advantages and disadvantages of seeking outside assistance.
Why not create your neonatology practice's business plan using Word or Excel?
Using Microsoft Excel and Word (or their Google, Apple, or open-source equivalents) to write a neonatology practice business plan is a terrible idea.
For starters, creating an accurate and error-free financial forecast on Excel (or any spreadsheet) is very technical and requires both a strong grasp of accounting principles and solid skills in financial modelling.
As a result, it is unlikely anyone will trust your numbers unless - like us at The Business Plan Shop - you hold a degree in finance and accounting and have significant financial modelling experience in your past.
The second reason is that it is inefficient. Building forecasts on spreadsheets was the only option in the 1990s and early 2000s, nowadays technology has advanced and software can do it much faster and much more accurately.
And with the rise of AI, software is also becoming smarter at helping us detect mistakes in our forecasts and helping us analyse the numbers to make better decisions.
Also, using software makes it easy to compare actuals vs. forecasts and maintain our forecasts up to date to maintain visibility on future cash flows - as we discussed earlier in this guide - whereas this is a pain to do with a spreadsheet.
That's for the forecast, but what about the written part of my neonatology practice business plan?
This part is less error-prone, but here also software brings tremendous gains in productivity:
- Word processors don't include instructions and examples for each part of your business plan
- Word processors don't update your numbers automatically when they change in your forecast
- Word processors don't handle the formatting for you
Overall, while Word or Excel may be viable options for creating a neonatology practice business plan for some entrepreneurs, it is by far not the best or most efficient solution.
- A business plan has 2 complementary parts: a financial forecast showcasing the expected growth, profits and cash flows of the business; and a written part which provides the context needed to judge if the forecast is realistic and relevant.
- Having an up-to-date business plan is the only way to keep visibility on your neonatology practice's future cash flows.
- Using business plan software is the modern way of writing and maintaining business plans.
We hope that this practical guide gave you insights on how to write the business plan for your neonatology practice. Do not hesitate to get in touch with our team if you still have questions.
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