The XYZ Company Centerville Multi-Modality Clinic
CEO/CFO: COO/Marketing: Headquarters:
John Bigman Arnie Salesguy 2450 Plaza Blvd. Centertown, OH 45202
XYZ
The XYZ Company provides advanced AccoLazer (ACLR) services in support of medical professionals and personal injury attorneys needing diagnostic information about their patients or clients. The latest in ACLR technology is used to provide superior diagnostic results. The XYZ Company is committed to outstanding service to the referring doctor and staff, the personal injury attorney, and the patient. The proposed expansion described in this business plan results in an outstanding return to the investors.
Executive Summary Centertown New Center Development ACLR Technology Background Center Services Infrastructure Marketing Plan Operational and Organizational Plan XYZ Company Management The XYZ Company of ―Clinic City‖, LLC Financial Plan Projections Consolidated P&L 2005-2007 (Holding Company, Centertown, Eastown, Downtown, and Uptown Clinics)
Attachments Supporting Proforma Office Lease Agreements Partnership Agreement General Partner Resumes & Personal Income Statements
11/4/2009 6:05 AM Confidential
The XYZ Company Centerville Multi-Modality Clinic
Executive Summary The XYZ Company of Centertown, LLC (Centertown) began operations on December 8, 2003 at 2450 Plaza Boulevard, Centertown, OH. Centertown was two (2) years in the making by General Partners JR Buckman, Mike Rock, Arnie Salesguy, John Bigman and with equity from a group of nine (9) passive investors. The General Partners each own 20% and the passive investor group owns 20% in total. Centertown proposes raising equity of $10.5 million to expand operations within Niceregion County and Pleasant County. A Holding Company will be formed that manages expansion and provides common services required by all clinics. The proposal includes acquisition of the Centertown clinic, which provides immediate cash flow, the addition of two new clinics in the Fourth Quarter of 2005, and the third new clinic in the Second Quarter of 2006. The third new clinic will be funded through positive cash flow. Centertown has two major barriers to market entry and is positioned for substantial growth at the current locations and the proposed locations within a contiguous geographic market. The first major barrier to entry was being accepted onto the major insurance panels that allow the referring doctors to send any patient to the Centertown clinic. A number of large insurance carriers had closed panels (i.e.; United Healthcare, Blue Cross/Blue Shield, etc.) that required extensive effort and persuasion to gain approval to bill. These panels represent approximately 40% of the patient insurance volume. Gaining acceptance took over a year to achieve. A similar challenge was resolved after a year to be approved for Medicare Part B procedures. The proposed new clinics will have immediate use of these hard-to-get panels. The second barrier was the acceptance within the referral base. While the ACLR technology Centertown offers provides a substantial, unique benefit to the market, the key to growing volume is the relationships between the referral sources and the clinic. The competition had long standing relationships that needed to be altered or broken. This has proven to be a slow, methodical effort that is now taking hold. The approach, besides promoting our outstanding service and technical superiority, includes two essential elements: Building business volume for our referral sources by expanding their own network of cross-referring practices. Participating actively in organizations that are socially important to 70% of our referring base.
Centertown Centertown is located at 2450 Plaza Boulevard, Centertown, OH, which is in the Northwest portion of Niceregion County. This location is well positioned to take advantage of the rapid population growth in the County being accelerated in future years by the MedUSA Project. The
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The XYZ Company Centerville Multi-Modality Clinic
center has a seven (7) year lease with options for an additional ten (10) years. The web page address is www.XYZACLR.com. On an accrual basis from January 2004 through December 2004, Centertown generated $715,612 of Income with $1,323,408 in total Expenses with a Net Loss of $(607,796). Centertown has total Fixed Assets of $748,788, total Liabilities of $2,025,380, and total Equity of $(1,276,592). From January 2005 through March 2005, Centertown generated $320,326 on Income with $406,557 in total Expenses with a Net Loss of $(86,032). ACLR volume has grown consistently from a starting point of 28 ACLRs in January 2004 (average daily ACLR rate of 1.4) to 195 in March 2005 (average daily ACLR rate of 9.5). We anticipate continued growth in the number of ACLRs. The growth has been the result of the marketing program taking hold that includes involvement in the community activities important to our referral base and networking between doctors, chiropractors, and personal injury trial lawyers. The networking approach has improved our volume of motor vehicle accident cases, which are the most lucrative ACLRs. Records on ACLR mix began in November 2004. Following is a comparison of the mix from November 2004 to March 2005. 11/2004 % of ACLRs 26.6 10.8 20.9 20.9 8.6 03/2005 % of ACLRs 29.0 19.7 11.5 37.2 2.7 Average Income Per ACLR 425 475 300 1,050 450
ACLR Category Commercial Medicare Worker’s Comp Motor Vehicle Other
We are targeting Motor Vehicle to represent 40% of our total volume. Centertown includes three (3) major intangible assets in addition to an ongoing, successful clinic—approved insurance panels, extensive marketing through out Niceregion County, and an experienced management team. Insurance Panels—Centertown is on all major commercial insurance panels and is an approved Part B Medicare facility. A fee-for-service contract also is active with the Veteran’s Administration Hospital located within five (5) miles of the facility. Currently, the clinic is applying to become a Medicaid provider, which opens up other Niceregion County opportunities. The new centers located within Niceregion County easily can be added to the insurance panels. Expansion to other counties will require new authorizations, which will be facilitated by Centertown’s good standing within Niceregion County. Marketing—Niceregion County is approximately 20 miles from North to South borders and 25 miles from East to West borders. The population within the county is resistant to driving more than 15-20 minutes to obtain ACLR services. A substantial portion of the population in the County is outside that driving radius. Centertown currently markets to
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The XYZ Company Centerville Multi-Modality Clinic
medical doctors, chiropractors, and personal injury trial lawyers through out the County. The XYZ Company name is a known entity within the county and coincides with the referral sources (doctors, chiropractors, and trial lawyers) that have multiple offices within the covered geography. Adding locations in the Southwest and Southeast portions of the county will pickup the referrals outside the 20-minute drive radius with minimal additional marketing effort. In addition, these new sites will open up the Northern portion of MidArea County. Adding a site in the Southeastern portion of Pleasant County will pickup the Northwestern portion of Niceregion County with minimal additional marketing and will establish a foot hold for expansion within other portions of Pleasant County, which is expanding rapidly. Management Team—Arnie Salesguy and John Bigman have worked together over fifteen (15) years in various capacities. For more than two (2) years, they have worked as a team to build, develop, and operate Centertown and the long-term business plan. Together they have developed and implemented a strong market approach that distinguishes The XYZ Company from the competition. The foundation of the strategy is to: 1. Direct involvement of owners in the marketing and problem resolution with the referral sources. The doctors, chiropractors and lawyers appreciate the daily involvement by the owners, consistent with their view of their own businesses. The referral sources have 24-hour access to Arnie and John for any issues that arise. This is different than marketing reps hustling business without the ultimate say in getting things done. 2. Provide ACLRtech services that are specialized for the type of referral source. For instance, some ACLRtechs are better in handling Motor Vehicle Accident reads that are sensitive to the trial lawyer requirements. Or, an ACLRtech specializing in neurology provides better report content for a Neurologist. While other clinics have ACLRtechs on staff, often as owners, this limits their clinic in the type of services they provide to their referring sources and can lead to long-term issues if they are not good at meeting the needs of their client base—the referral source. 3. Resolve in not ―buying‖ business that takes a clinic into ―gray‖ legal areas. Rather than out bidding the competition, the approach is to build referral networks between doctors, chiropractors, and lawyers that build each of the participating parties business. This is a longer and harder path to volume growth, but is the best way to creating a sustainable, solid business backbone. Bottom line to the strategy is that it is all about the relationships that will determine success or failure. These intangible assets ensure a fast start at the new clinics, leverages the work already performed by Centertown and positions The XYZ Company as a dominant competitive force in the contiguous geographic area. This positioning reduces the overall operating costs through the easy sharing of resources including management, marketing and billing personnel and ensures a smooth, seamless launch of new facilities.
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The XYZ Company Centerville Multi-Modality Clinic
New Center Development The XYZ Company proposes expansion into sites near Eastown, Downtown and Uptown. These locations leverage the efforts of Centertown and will establish domination in Niceregion County and establish a foothold in Pleasant County. A side benefit will be to discourage other centers from installing Stand Up technology within that geographic footprint. Because of the marketing activity already occurring as part of the Centertown startup, we understand the dynamics, competition, referral sources, and volume potential for these locations. Each center will take advantage of the policies and procedures already established for Centertown. The Holding Company will provide the management and marketing that ensures Corporate direction and consistency is maintained. Below is a discussion of more specific details for the development of a new clinic within The XYZ Company organization. ACLR Technology Background Each center will provide ACLR diagnostic results to referring doctors for patients that they refer. While competitors provide similar ACLR services, the technology inherent in the latest generation of ―open‖ ACLR machines manufactured and patented by LAZERCO, provide superior results and capabilities in several key respects. LAZERCO’s ACLR has successfully defended their patents against companies such as General Electric, who attempted to build a competitive machine. Centertown anticipates the new ACLR will remain the premier standard in ―open‖ ACLRs for ten (10) or more years. Improvements in the ACLR capability will occur through software upgrades and new ACLR application development. ACLRs fall into two main categories – wide and narrow ray. Wide ray ACLRs all require patients to be enclosed. These often cause claustrophobic reactions. They are also noisy. The newer narrow ray ACLRs use more accurate lasers and do not require enclosures. With accuracy comes the ability to see smaller details within the study area. Our competitors offering wide ray ACLRs are the most subject to having business taken away from them by the new narrow ray ACLR. The wide ray ACLRs also will lose claustrophobic patients. The diagnostic and patient-comfort superiority of the new narrow ray ACLR will attract business away from existing wide ray ACLR clinics. In summary, the XYZ narrow ray ACLR machine offers the following attributes, unlike its competition: 1. LAZERCO has patented the only non-claustrophobic ACLR currently in the market. An estimated 33% of the general population has some degree of claustrophobia. While being ACLRed, the patient will watch their favorite program on a large screen plasma TV. 2. Patients are ACLRed in positions that reflect their symptoms. This capability allows doctors an accurate, first-time diagnosis of the problems and provides substantial savings by avoiding additional testing procedures and diagnosis. 3. XYZ’s ACLR offers a complete range of reads and shows certain disorders, which can only be exhibited when the patient is not enclosed.
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The XYZ Company Centerville Multi-Modality Clinic
Center Services In addition to providing superior diagnostic results, Centertown, and new clinics provide the following services: Emergency scheduling. Transportation of the patient if required. A child supervised play area. ACLRtech reports returned to the referring doctor within 24 hours, with faster turnaround if needed. Pre-certification of patient’s insurance with the referring doctor also informed of results, which reduces the referring doctor’s office workload. Patient scheduling and reminder calls to reduce no shows for both the clinic and the referring physician.
Infrastructure Beyond using new ACLR technology and providing quality services, Centertown invested in a strong, technology backbone that anticipates expansion into additional centers. Investments were made in the following areas: 1. The latest communications technology that includes fractional T1, voice-over IP phone switch, email server, firewall, and a network server sized for expansion. 2. Archive Communication System (ACS) technology is used to push ACLR results to the ACLRtechs and doctors. 3. Business application software from LAZERCO is installed with the ability to maintain multiple business entities with office practices that significantly reduce paperwork residing in patient files. 4. MedScreen technology to reduce paperwork in patient files and to provide easy on-line access to patient information. 5. A Web Page is in place with registration completed to major search engines, such as Google and Yahoo.
Marketing Plan Nationally, the number of ACLRs has increased 20% annually. The growth occurs from population growth and new applications for the technology. New applications are possible in the fields of plastic surgery and sports medicine. These new applications result from the development of new laser types. Introduction of these applications are slowed by the acceptance, and thereby payment, by insurance companies. The market is divided into three major segments—Doctors, Personal Injury Lawyers, and the Public.
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The XYZ Company Centerville Multi-Modality Clinic
1. Doctors—Emphasis on neurologists and oncologists. Marketing approach includes: a. Direct marketing to the doctor and the office personnel that write the scripts and determine where ACLRs will be sent. b. Selected trade shows and AMA lectures 2. Personal Injury Lawyers—Emphasis on motor vehicle accident market. In OH, not only doctors are interested in ACLR results, but also personal injury lawyers often need convincing medical information to make their case in front of juries comprised of nonmedical laymen. This market is most lucrative for amount of reimbursement and in many instances the shortest time in receiving payment. Marketing approach includes: a. Direct marketing to the personal injury lawyers. b. Cross-referrals from the medical community 3. Public—Emphasis on same approach used by the drug companies to define the benefit of our product to the prospective patient and to encourage them to ―ask their doctor‖. Patients are becoming aware of the benefits of ACLR, and request that their doctors send them to narrow-ray clinics. Marketing approach includes: a. b. c. d. Advertising in local papers, radio, and TV. Presentations to local civic and community groups. Public relations pieces in papers, TV, and radio. Encouraging satisfied patients to tell their friends about the center.
The primary differentiating message is: 1. Diagnostic Superiority—greater accuracy from narrow-ray results. 2. Services to Doctors—radiological reads returned in 24 hours or less and reads performed by ACLRtechs specializing in referring Doctor’s specialty. 3. Patient Comfort Superiority—non-claustrophobic environment where patient watches TV. The marketing plan includes the following activities: 1) Sixty Days Prior to Opening: a. Public Relations – special interest stories will be made available to newspapers and radio. b. Brochures and giveaways will be distributed to attorney and doctor offices. c. Hire a full time sales representative who will schedule meetings with attorneys and doctors. 2) 5 Days Prior to Opening: a. Announce ready to begin accepting scripts for scheduling ACLRs. b. Hold onsite events to demonstrate the unit to attorneys and doctors. c. Obtain public relations coverage with demonstration of the machine with a claustrophobic patient. 3) Ongoing, After Each Center is Opened:
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The XYZ Company Centerville Multi-Modality Clinic
a. The sales staff will call and act as a service liaison with attorneys and medical offices. b. Periodic guest lectures offered to doctors that will count toward certification credits. LAZERCO has adhered to a policy thus far of not flooding one defined market with more than one machine. Thus, purchasers of the new narrow-ray ACLR machine have enjoyed a competitive advantage in their market areas. Operational and Organizational Plan Organizational structure includes (1) Holding Company and (2) The XYZ Company of ―Clinic City‖, each consolidated into the Holding Company. Holding Company Holding Company provides the following services to Centertown and all subsequent new clinics: 1) Senior management for all clinics for operational oversight that includes Arnie Salesguy and John Bigman who are the managers responsible for the start-up and oversight of the clinics. 2) Infrastructure investments for business applications, communications, and other technology shared across centers. 3) Investor relationships and development. 4) Corporate tax accounting. 5) Coordinated marketing events and programs. 6) Insurance panel certifications. The XYZ Company of “Clinic City”, LLC New clinics would use the dba of The XYZ Company. The legal name would be The XYZ Company of ―Clinic City‖, LLC. Each center will leverage the narrow ray ACLR, providing exceptional services to the patient, referring doctors, and personal injury attorneys alike. Each clinic will begin with a nine (9) hour day, Monday through Friday and one-half day each month on Saturday. This will expand as demand dictates. Personnel employed at the Centertown clinic and anticipated at each expansion site include the following:
1. Two ACLR Technicians, $60-70k/year 2. One Receptionist, $30k/year The work environment will be patient-friendly with a commitment to quality and timely service to the referring source. Tools used will incorporate the latest cost efficient technology and be as paperless as possible. Since each center starts with a clean slate, they will not have the costs that competitors will have to convert to new ACS technology. Quality of service will be stressed and rewarded.
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The XYZ Company Centerville Multi-Modality Clinic
Financial Plan Each new center requires and estimated $2.5 million for capitalized assets and $0.7 million in operating capital. The capitalized assets include:
Capital Assets Medical Equipment ACLR plus freight, installation, shipping and taxes Laser Housing ACS System Miscellaneous Office Equipment Application System Computer Servers, Routers, etc. Phone Switch Furniture and fixtures Fax Machines, Copiers Suite Build Out Other Assets Total Assets
Amount $1,760,000 $40,000 $40,000 $10,000
Total $1,850,000
150,000 $25,000 $25,000 $15,000 $65,000 $20,000 450,000 50,000 $2,500,000
To fund the start up cash Flow for operations, an estimated $0.7 million would be required. These funds will pay salaries and other operating expenses that are not capitalized. Following is a three (3) year summary of the P&L on a cash basis: 2005 $1,940,043 $2,440,096 $(500,053) 2006 2007 $9,784,844 $11,834,550 $5,962,935 $2,833,498 $6,836,421 $4,790,863
Cash Receipts Total Expenses Net Income (Loss)
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