A healthcare market analysis will answer this question! Many people believe that the first step in beginning a new business venture is to formulate their business plan. However, they are missing the all-important step of the healthcare market analysis.
You can’t know whether it’s right to move forward with your project until you are sure of your project’s viability, and you can’t be sure of anything until you complete a comprehensive market study.
What’s involved in starting a new project?
The initial phases of completing a new healthcare facility or expanding an existing service include:
- A comprehensive market analysis.
- A financial feasibility study.
- A business plan.
The financial feasibility study, combined with your market analysis, will give you either the confidence to advance to the business planning stage or the knowledge that your project does not have market viability.
With your newfound information, you will understand your project’s future success. If you uncover problems, you can either adjust your plan or scrap your project altogether.
Either way, you’ll save yourself an immense amount of time and money that was in danger of being wasted on a project with no market demand.
What is a healthcare market analysis?
A market analysis, or feasibility study, assesses the given market before you get heavily involved in the details of planning your new facility. A healthcare market analysis assesses specific factors such as:
- Who your potential clients are.
- What the size of your market is.
- Who your main competitors are.
- What their strengths and weaknesses are.
In the healthcare industry, this market analysis should provide a range of data regarding your market segment and a breakdown of what to do next based on the nature of your market.
Know the nature of your market
Social determinants have a big impact on the health of a population. For example, the socioeconomic position of a community impacts the health outcomes of the people living in the area.
A healthcare market analysis should answer some questions regarding the community, such as:
- What are the demographics of your potential patients?
- What are the social, economic, and physical conditions of the population near your proposed facility?
- Are there any upcoming trends that might change these factors?
Once you explore the demographics and socioeconomic factors, your analysis should also cover:
- A comprehensive examination of the healthcare service lines you are planning.
- A demand analysis for the physical space and medical services.
- Possible enhancements to your service line that would improve your competitiveness.
- Marketing initiatives that would be successful within the population.
- An analysis of the anticipated use of the new services.
What are the benefits of conducting a market study?
A market study determines whether your project is viable in your given market, and it helps you focus on your mission statement. Beyond that, other benefits include:
- Service optimization. When you know your market, you can create service lines that will be in demand.
- Risk reduction. With optimized service offerings that provide the most value to patients, you can reduce risk.
- Awareness of emerging trends. Knowing what is coming and how those changes will affect your organization helps you remain competitive.
- An understanding of your strengths and weaknesses when compared to your competitors.
For example, studies have shown that patients are willing to travel further distances to higher prestige hospitals for major surgeries. But this trend doesn’t seem to hold up for minor procedures. The healthcare industry has become a customer-driven market, and accurate market research, including a thorough analysis, is critical for success, especially for new ventures.
The next step: financial feasibility
If you have completed your market analysis and have decided to move forward, the next step is conducting a thorough financial feasibility study. This includes pro forma financial statements that detail revenue and expense items for your proposed plans. Pro forma statements make hypothetical assumptions, and therefore, must be specific.
However, because these pro forma statements are based on assumptions, it’s possible to inflate an organization’s expected finances. This would be a mistake.
It’s critical to have an accurate estimate of your negative cash flow. In the beginning months of a new healthcare organization, there are bound to be early losses. It takes time to collect money from billing, and you will have a lag before operations begin to ramp up and collect payments. To be best prepared, identify an accurate estimate of the cash you’ll need at the beginning of operations.
After you’ve completed your financial feasibility study, you’re finally ready to start your business plan!
Should you attempt a healthcare market analysis on your own?
There are plenty of online tutorials and information on how to conduct market analyses. But, as we’ve covered here, the healthcare industry is unique and complex. Unless you have a lot of experience, you may be better off hiring experts to conduct your healthcare market analysis. In addition, there will be instances where a market analysis must be conducted by an outside, third-party expert. Often, lenders and investment partners will make such requirements.
Find a consultant who has completed many studies in the medical industry and understands which factors need to be assessed. They can answer your questions and help you make informed decisions on where to go next and how to get there.