Healthcare Business Financial Analysis and Consulting – A Case Study

Overview

An international client approached us for their healthcare business financial analysis and consulting services. The business model relocated nurses from developing countries to developed nations with a higher demand for nursing staff. Our client estimates that about 3% of the nursing staff from a particular developing country will be willing to relocate to a new country. 

This healthcare business financial analysis aimed to create an optimistic profile of the company.  They needed an analysis defining the entire process of the company’s initial five-year plan and growth model. In addition, they wanted to find flaws in the project and what would be better financial revenue solutions for those problems. The client also wanted us to create a five-year valuation model for the company. 

Based on the client’s data, we produced a detailed healthcare business financial analysis. After considering the market analysis, we provided the client with an extensive financial model consisting of valuable insights such as assumptions, revenue analysis, financial statements, and digital marketing, among others.  

Furthermore, we developed a valuation study model that defines equity distribution and investment stages put into consideration. Conclusively, our financial analysts and profound consulting services improved the capital structure assumptions for the client to approach potential investors with a more detailed view of the project.

The Problem

During this healthcare business financial analysis, we found the revenue structure to be very complex. There were different revenue structures at various stages of the business, such as recruitment assumptions defining nurses according to their skills and the revenue they bring. The client will pay this money back if the nurse leaves within six months of recruitment. Another critical factor is the retention fee paid by all the nurses before recruitment. Our financial analysts created a comprehensive revenue analysis to keep the entire revenue data on one page.

The company also required a valuation model and the number of shares they could offer the investors to reach the minimum investment requirements.

The model provided by the client required many constructional phases to develop a financial model that would benefit the company in the long run—keeping the entire cost structure intact. The purpose of this project is to generate a robust assumptions model. Hence, our analysts prepared a financial model with assumption formulations through which our clients can input data and find the best solutions.

Deliverables

• A five-year financial model evaluating the complex revenue structure along with future assumptions
• An entire digital marketing strategic planning, cost summary and leads generated by various social media platforms.

(the purpose is to generate organic leads to develop new customers).

• Evaluate the market share achievable according to the demand from receiving countries.

(finding the recruitment through the client’s platform).

• Estimate the company’s profitability based on the assumptions for each year.
• Estimate the investment requirements at each stage of the company based on the cash flows
• Develop a valuation model that comprises the estimation of shares that the client company can issue to the investors.
• Equity distribution model included.

Solution

Developing knowledge based on the client’s information and market research is an essential factor in this healthcare business financial analysis. Therefore, our financial analysts conducted thorough research on the different aspects of revenue structure and cost consumption. In addition, keeping the client’s requirements in hand, the analysts delivered the best possible solution.

This company required a revenue structure that would improve its future financial strategies. Our analysts developed an advanced assumption base and financial statements to develop such a model.

The company is at the initial stage and requires more data regarding the recruitment of nurses and the revenue they bring. However, the costs of the business have begun for the recruitment process.

First, financial analysts researched the supporting data to develop a sound financial model. With that, we also created assumptions about the growth rates each year. The increasing demand in the healthcare workforce is pushing the growth rate for this healthcare business very high.

We also identified the leads from various social media platforms to improve the company’s revenues and the revenue from rent, hospital, and retention fees. In addition, a significant portion of leads would come from 3rd party marketing companies and partners.

Assumptions

The initial input assumptions during this healthcare business financial analysis become the groundwork for a practical financial model. Hence, assumptions should have all the tables required to calculate accurate financial statements. Our analysts find assumptions on the company’s valuation, revenue, cost, and marketing strategy.

1. Dates

Dates play a critical part in the steady development of the model. Time frame through logic detects the dates and time duration of the idea stage, minimal viable product (MVP) stage, and operational years.

2. Capital Assumptions

Business investments require capital. 

3. Revenue Analysis

Revenue analysis is the most complicated stage in this healthcare business financial analysis. The company has several revenue streams that analysts must align to remove complexity. Removing all the complexities will make it easier for the client to show the business idea to investors. And that’s the core idea behind this entire financial model. Our analysts gave this stage the most time to design the required assumption tables. 

4. Digital Marketing

Digital marketing, a marketing subcategory, promotes goods and services using the Internet and other online digital technologies, including desktop and mobile devices. We created a digital marketing strategy based on the digital leads a particular social media source provides. This approach analyzes the importance of paid marketing in bringing potential customers to the business.

5. Valuation

The determination of the overall economic value of a company and its assets is known as company valuation. We consider all facets of the business to assess an organization’s or department’s present value. During this healthcare business financial analysis, our financial analysts provided the client with a valuation model. This valuation model explains the assumptions for equity distribution with new investors and current shareholders. The valuation model also counts the fees paid to the venture capitalists’ consultants to find the right investor. 

Furthermore, our analysts provided the client with the company’s valuation at each phase of the new investment. At this phase, we estimate NPV, IRR, and returns for each shareholder at each stage as a new investment comes into the company.

Human Resource

We developed the payroll schedule considering the increase in the company’s workforce as it expands its services into new regions. Moreover, we incorporated the employment period, base salary, benefits, and social security taxes into the monthly payroll calculations.

Equity Distribution

In this healthcare business financial analysis, the client wanted to reserve the majority equity shares for the owner and allot some claims to the strategic partners and key employees. The remaining percentage of stock will distribute among the investors in return for investment in the company. Businesses often use profits from the transfer of shares to pay off debt or refinance. They could employ it as operating capital as well.

Detailed Revenue Analysis

Our analysts conducted this healthcare business financial analysis with a detailed revenue analysis of its complex revenue structure. The revenue model divides into multiple steps based on when a particular service will be applicable, time, and category-wise. Dividing the system into smaller, easy-to-understand actions made it easier for us to prepare the model with zero errors and minimum complexity. Moreover, it simplified and organized the structure for the client to explain to the investors.

We combined all the revenue streams to create a simplified version of the revenue analysis for this healthcare business financial analysis. Additionally, we formed the initial idea stage, MVP stage, and operation years (1 to 5) to create one revenue sheet. This sheet will help our client to look at the revenue streams from the beginning. 

This detailed revenue analysis will simplify the investor’s understanding of the capital structure and deliver a substantial cost control system that will look for all the minor changes in the capital structure. 

Healthcare Business Financial Analysis

Once the financial model was complete with detailed monthly and yearly cost and revenue schedules and financial statements, we analyzed the numbers to provide multiple insights.

1. Platform Analysis

The platform analysis includes the complete operational detail of our client’s healthcare business financial analysis. For example, the total number of nurses available, allocated, onboard, or still under the recruitment process comes under the platform analysis. In addition, platform analysis also analyzes the fulfillment of demand regarding nurses. Moreover, our financial analysts analyzed the marketing cost for multiple digital and 3rd party partners to determine the business’s customer acquisition cost.

2. Breakeven Analysis

For every new startup, the first goal is always to achieve a breakeven point. This stance helps determine when the company will become self-sufficient, cover its expenses, and produce returns for investors. The only way investors will consider an investment opportunity is if it promises timely returns. With increasing revenue every year, the cost of sales increases too. This phenomenon creates a higher breakeven point for each year. With our healthcare business financial analysis, we helped the client find the number of nurses required on the platform to reach the breakeven point. 

3. Ratio Analysis

The financial ratio analysis contains relevant ratios that investors look into before investing in the business. Therefore, we calculated all the important ratios, such as EBITDA, Return on Equity, and Net Profit Margin.

4. Company Valuation

To estimate equity distribution among investors, we also created a valuation model within the financial model using the Discounted Cash Flow Method. It is based on the company’s Free Cash Flows and provides an estimate of the company’s worth and the return it will be able to generate for the company and its shareholders.

Conclusion

Despite being a complex healthcare business model, Oak Business Consultant reflected a very close picture of the company in the forecasted business model. The revenue structure was divided into multiple segments for ease of understanding. Moreover, after consolidating all the numbers and schedules into the financial statements, our analysts deeply analyzed each revenue segment to determine the critical KPIs for the business. Moreover, the phase-wise valuation model helped the client determine the investment required and the Equity percentage it could offer to the investors without losing ownership of the company.