Market Estimation and Income Statement for New Trauma Center

1 Market Estimation and Pro-forma Income Statement Name: Institutional Affiliation: Date:

2 Market Estimation and Pro-forma Income Statement Project summary This assignment will present a case where the firm intends to invest in a new trauma center. The rationale for this recommendation is that ECRH intends to expand its services to match the increasing demands of the surrounding populations. Targeting an emergency department will expand the target population likely to seek emergency services at the facility. The assessment assumes that the facility is in Houston, Texas, and that most consumers will seek emergency services in the new trauma center. Market size determination The first step is establishing the potential market size the facility may target and address. This section is based on the perception that the hospital will invest in a new trauma center. The facility will help deliver critical services to people involved in accidents and other incidents that require emergency interventions ( Subramanian, 2021 ). In this context, it is, therefore, assumed that the target market for the facility is the general population. The rationale for this argument is that emergency incidents may affect any person regardless of their age, gender, and occupation. For example, accident victims may need emergency interventions following an incident. On the other hand, people diagnosed with acute and chronic illnesses may require such services due to the magnitude of their conditions. However, the facility targets the population residing within its geographical location. The estimated population in Houston is 2304580. On the other hand, the facility may refine the target population to the people involved in motor crashes. In 2021, it was reported that the region had over 66988 accidents (White, 2024). Assuming that at least such cases will be reported, the firm should target 40%. This proportion

3 represents the existing market for its new trauma center. Therefore, the facility projects that the total market will comprise 26800 people. Breakeven evaluation Breakeven elements Breakeven costs and revenue Costs Fixed costs (A set one-time cost that will be required to produce or deliver a product or service, such as the construction of a new office or lab space. This occurs once, and does not vary based on the number of products or services delivered) $100000 for new site construction Variable costs (Costs that repeat each time the product or service is manufactured or delivered, such as physician salary per procedure or visit, office staff salary per procedure or visit, supplies used per procedure or visit, calculated per individual visit). Practitioner costs: $80 Supplies: $30 (case dependent) Staff costs: $50 Others: $10 Revenue per Product or Service delivered (per visit) $300 per patient attendance. Breakeven Quantity Required (Fixed Costs (100000/(300-170)) = 769.23 (770

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4 Breakeven elements Breakeven costs and revenue / [Revenue per Unit - Variable Cost per Unit]) patients) The facility will deliver emergency services to the target populations. In achieving the intended goals, the hospital will require the intervention of multiple parties. The fixed and variable costs incurred will be used to cater to the establishment of new facilities and centers. Similarly, they will include the expenses used in attending to each patient. It is expected that each encounter will take about 30 minutes. The practitioner involved will be paid at least $80 for their interventions, while clinical supplies, support staff, and miscellaneous costs will be $30, $50, and $10, respectively. It is expected that each client encounter will take about 30 minutes. The price of each service will be $300. The clinic projects that it will attend to about ten clients daily. The breakeven evaluation above shows that the clinic must offer services to at least 770 clients. Therefore, its profits will be earned after offering its services to over 770 patients. Pro-forma income statement Understanding the profit generation trends for the facility is critical for financial planning. The cost and revenue breakdown is provided in the table below. It is assumed that the facility will deal with at least ten patients daily. Projected Year 1 Projected Sales Revenue 300*10*365 = $1095000 Cost of Sales (Fixed + Variable Expenses) 100000+(365*(170*10)) = $720500

5 Projected Year 1 Gross Profit: (Projected Sales Revenue - Cost of Sales) ((300*10*365)-720500) = $374500 Marketing Expenses (7% of Sales Revenue) $76650 Net Income (Projected Profit): (Gross Profit - Total Marketing Expenses) $297850 Net Profit Margin % (Does this amount of profit make sense?) (Net Income/Sales Revenue) 27.2% The assessment above shows the firm will have $720500 in annual sales costs. The facility will deal with at least 3650 patients by the end of the year. The total revenue is expected to be $1095000. The cost of goods sold will consider the fixed and variable expenditure amounting to $720500. These expenses will be based primarily on the desire to cater to the expenditure incurred in the establishment processes and care delivery interventions. The facility will use at least 7% of its total revenue in marketing and advertising. This proportion accounts for $76650. The net income considers the sales costs, income, and marketing expenditure. The summary shows that the hospital`s annual revenue will be $297850, which shows that it will

6 record a profit. This outcome is critical since it reveals that investing in the new centre will translate into a positive return. The net profit margin is realistic because it accounts for 27% of the annual revenue. It is possible for a firm to earn such an income based on the services offered and the total number of patients served. It is expected that the firm will have a positive return since the services offered best align with the increasing demands of the region. Market plan variables When establishing a new product and service, exploring the different variables that may affect the capacity to achieve the intended goals is critical. The core resources needed to achieve the expected goals may include budgets and strategic positioning within the market compared to rivals. While the hospital will offer emergency services to trauma patients, the city has high competition. Therefore, a strategic marketing program is needed to support its operations. Organizations must invest in strategic plans that may be used to minimize the overall effectiveness associated with the marketing intervention. The hospital will benefit from investing in strategic measures to align with the prevailing marketing goals. Economic and financial variables impact the adopted advertising interventions used at a given firm. In this case, the management teams must understand the current internal and external variables from an economic and financial dimension. For example, the current status and performance will influence the effectiveness of such interventions. A company with superior fiscal positioning and strength will likely develop a reliable marketing initiative since it has the required resources to guarantee success. In the case above, the hospital’s management must allocate the necessary resources, including money, to support an effective campaign. Its success will be influenced largely by the ability to establish sufficient funds to support its advertising projects. On the other hand, the

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7 prevailing economic conditions may influence the effectiveness of its operations. For example, consumer buying behaviour and capacity are critical variables to consider. These elements translate into the overall affordability of the services offered. They are influenced largely by the prevailing economic trends and conditions ( Akopova et al., 2020 ). For example, a positively growing economy creates opportunities that guarantee positive returns and sufficient purchasing power. The hospital must address these elements because they directly influence its marketing campaign. Understanding the implications of such components on the firm will assist in strategic budgeting and consumer alignment. It is expected that the hospital will promote its services within the immediate city environment. Therefore, it is critical to examine the effects that the current financial and market positioning may have on the hospital concerning the alignment with the needs of the target clients. References Akopova, E. S., Przhedetskaya, N. V., Przhedetsky, Y. V., & Borzenko, K. V. (2020). Marketing of healthcare organizations: technologies of public-private partnership . IAP.

8 Subramanian, L. (2021). Effective demand forecasting in health supply chains: emerging trend, enablers, and blockers. Logistics , 5 (1), 12. White, B. (2024). Houston Car Accident Statistics. LawRank. https://attorneybrianwhite.com/houston-car-accident-attorney/statistics/#:~:text=In %202021%2C%20Houston%20had%2066%2C988%20traffic%20accidents.

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