page will be developed to present the capabil-
ities of the system. Members of the senior
management team will network extensively
among medical professionals and hospital
administrators to ensure further exposure of
the product.
Sales Forecasts
Of the 5,764 registered hospitals in the
United States, approximately 40 percent
(2,305) fall within the mid-sized target seg-
ment. With an average supplies and equip-
ment budget of $45 million per mid-sized
hospital and target revenue of 1 percent of
that amount, the potential total market
amounts to over $1 billion. Over the next
five-year horizon, MedTrack’s goal will be to
capture 10 percent of that market or $100
million in revenue.
FINANCIAL PLANS
Financial Statements
The financial statements that follow are
based in part on the following assumptions:
- Each individual sale will average
$2MM. - First installation will be complete in 12
months. This first installation will be
at a reduced price of $1MM. This
reduced price will aid in securing the
first contract quickly. - Progressive payments will be negotiat-
ed with customers for enhanced cash
flow. - MedTrack’s revenue will exceed
$100MM in year five. - Three-year (average) maintenance
contracts will be secured with 70 per-
cent of the installations. Each mainte-
nance contract will average $2MM
annually.
Note that MedTrack will attempt to secure
government financial assistance to aid in the
startup financing, but no government funds
have been included in the financial statements
due to the uncertainty of the endeavor.
Financial Resources
The four equal partners will each invest
$250,000 obtained through their own means.
The four partners will also have resources
beyond this initial investment such that they
will require no salary in the first year of oper-
ation. For additional key personnel, reduced
wages along with ownership stakes will be
offered as a means to manage cash flow.
Financial Strategy
An initial investment of $6MM is required to
begin operations. Beyond the $1MM invest-
ed by the four partners, an additional $5MM
will be sought from a value-added venture
capitalist who can contribute to the success
of the business with connections, experience,
and expertise.
After the first year, an additional $4MM is
needed. A bond issue at 12 percent will be
budgeted that can be called at the end of year.
The venture capitalist will be asked to advise
in this endeavor and there may be better
alternatives to secure this additional $4MM.
Beyond the initial financing, MedTrack’s
fiscal strategy will promote the growth of the
company. For example, MedTrack will invest
heavily in R&D from the outset. In the first
three years of operation, the R&D expendi-
ture will be 38 percent of the entire operating
budget. Then, beginning in year four, expen-
ditures will be maintained at 10 percent of
sales. This significant investment will be nec-
essary to quickly launch the company and
sustain a leadership role in the market.
MedTrack expects to achieve premium
pricing on installations due to the value
offered. While the hardware will be priced at
a modest 10 percent markup (due to the
commodity nature of the hardware business),
the software, integration, training, and fol-
low-on support will exhibit characteristics
that position MedTrack for a sustainable
competitive advantage. These resources are
considered rare, valuable, and hard to copy.
Dividends will not be considered when
organic growth opportunities exist. MedTrack
will establish internal benchmarks for financial434 ENTREPRENEURSHIP CASE