METTU UNIVERSITY

FACULTY OF BUSINESS AND ECONOMICS

DEPARTMENT OF MANAGEMENT (MBA)

PROJECT ANALYSIS AND MANAGEMENT COURSE

Bussiness Plan For the Establishment of Seglen Ilu General

Hospital

By:
1. Fuad Abdu…………………………WM0110/13
2. Mesay Diriba………………………WM0112/13
3. Tolesa Aseffa……………………….WM0117/13
4. Wudineh Birhanu………………….WM0118/13
5. Zegeye Fetene………………………WM0123/13

Submitted to : Ins Suleman Abdela(Ass. Prof.)

Jan, 2022
Mettu, Ethiopia
 Table of Contents
Executive Summary .............................................................................................................................................. 3

1.0 Background of the study ................................................................................................................................ 4

1.1 Medical Services ......................................................................................................................................... 4

1.2 The Financing ............................................................................................................................................. 4

1.3 Mission Statement ..................................................................................................................................... 4

1.4 Management Profile................................................................................................................................... 4

1.5 Sales Forecasts ........................................................................................................................................... 5

1.6 Expansion Plan ........................................................................................................................................... 5

2.0 Company and Financing Summary ................................................................................................................. 6

2.1 Registered Name and Corporate Structure................................................................................................ 6

2.2 Required Funds........................................................................................................................................... 6

2.3 Investors Equity .......................................................................................................................................... 6

2.4 Management Equity ................................................................................................................................... 6

3.0 Medical Services ............................................................................................................................................. 7

4.0 Strategic and Market Analysis ........................................................................................................................ 8

4.1 Economic Outlook ...................................................................................................................................... 8

4.2 Industry Analysis and Market Study........................................................................................................... 8

4.3 MARKET STUDY .......................................................................................................................................... 9

4.4 Market Demand ........................................................................................................................................ 9

4.5 Customer Profile....................................................................................................................................... 11

4.6 Competitive Analysis ................................................................................................................................ 11

5.0 Marketing Plan ............................................................................................................................................. 11

5.1 Marketing Objectives ............................................................................................................................... 14

5.2 Marketing Strategies ................................................................................................................................ 14

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 5.3 Pricing ....................................................................................................................................................... 14

6. HOSPITAL CAPACITY AND OPERATIONAL PROGRAM ..................................................................................... 15

6.1. Hospital Service Capacity ........................................................................................................................ 15

6.2. Operational Program of the Hospital ...................................................................................................... 16

6.3. MEDICAL SUPPLIES AND UTILITIES .......................................................................................................... 16

6.4. TECHNOLOGY & ENGINEERING ............................................................................................................... 18

7. HUMAN RESOURCE AND MANAGEMENT ..................................................................................................... 24

7.0 Organizational Plan and Personnel Summary .............................................................................................. 24

7.1. Human Resources.................................................................................................................................... 24

7.2. Organizational structure ......................................................................................................................... 26

7.3. Management Biographies ....................................................................................................................... 26

8.0 Financial Plan................................................................................................................................................ 27

8.1 Underlying Assumptions .......................................................................................................................... 27

8.2 Sources of Finance................................................................................................................................... 27

8 .3 Balance Sheet ......................................................................................................................................... 28

8.4 Income Statement .................................................................................................................................... 29

8.5 Cash Flows ................................................................................................................................................ 30

8.6. FINANCIAL EVALUATION ......................................................................................................................... 31

8.6.1. Profitability ..................................................................................................................................... 31

8.6.2. Ratios ............................................................................................................................................... 31

8.6.3. Break-even Analysis ....................................................................................................................... 32

8.6.4. Payback Period ............................................................................................................................... 33

8.6.5. Internal Rate of Return ................................................................................................................. 34

8.6.6. Net Present Value ........................................................................................................................... 35

References .......................................................................................................................................................... 37

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Executive Summary

The purpose of this business plan is to raise fund for the development of a hospital while a 60million
birr is the expected total investment forf inancials and operational expenditures over the next five
years. The General Hospital will be built in Oromia Regional state Ilubabor zone Mettu City. It will
provide emergency and general medical care services to patients in its targeted market. The
Company will launch its operation in the year 2025.

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1.0 Background of the study

1.1 Medical Services

The General Hospital has been designed to become a recognized leader in Oromia Regional State;
particularly, the Ilubabor Zone, and Buno Bedele zone for its expansive line of emergency, clinical,
and surgical services. The facility will feature 5,000sqm of clinical space that will include a full-scale
emergency room, several operating rooms, inpatient, outpatient as well as a radiology departments.
The General Hospital will also have 50 beds for in-patient care.

1.2 The Financing

The General Hospital is seeking to raise funds from Financial Backers. The terms, equity investment
covenants, and payouts are to be discussed during negotiations. However, this business plan assumes
that the Company will give a guarantee 61% of equity (building cost) as a mortgage in exchange for
the required capital.

1.3 Mission Statement

The Hospital’s goal is to provide the general public with 24hours health care services, inpatient and
outpatient-based hospital facility that will also provide urgent healthcare to people with medical
emergencies. The Company will provide patients with compassionate and comprehensive medical
treatments for all of their emergency care, clinical, and surgical needs.

1.4 Management Profile

The Company will be founded by Mr.Fuad and his group who have more than 15 years of experience
in the medical and healthcare industry. Through their expertise, they intended to be able to bring the
operations of the business to profitability within its first year of operations.

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1.5 Sales Forecasts

The Company expects a strong rate of growth at the start of operations. Below are the expected
financials over the next five years.

Seglen Ilu General Hospital

Annual Sales forecast based on Market Study

Table 1.1

Average
Years Patient flow Price/patient Annual Service Revenues
1st Year 36,000.00 800 28,800,000.00
2nd
Year 39,240.00 872 34,217,280.00
3st Year 43,164.00 915.6 39,520,958.40
4th Year 49,206.00 961.38 47,305,664.28

5thYear 50,000.00 1009.44 50,472,000.00

Total Revenues 200,315,902.68

1.6 Expansion Plan

As time progresses, Management will continually seek to expand the visibility of the facility within
the target market. This will be accomplished by continuing to reinvest into the hospital’s
infrastructure to accommodate specialist physicians that can increase the range of medical services
offered by the Hospital. The Company may also seek to develop an academic affiliation with a
regionally based medical school so that the Hospital can better its reputation as a premier provider of
medical services to the community.

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2.0 Company and Financing Summary

2.1 Registered Name and Corporate Structure

It is owned by Mr. Fuad Abdu and has the registered name Seglen Ilu General Hospital. The
Company will be a Sole proprietorship in Oromia Regional State Mettu Town(Ethiopia).

2.2 Required Funds

At this time, the General Hospital requires 60million birr of total investment. Below is a breakdown
of how these funds will be used:

Budget allocation Description

Buildings & Civil Work 37,412,800.00 birr
Machinery and Equipment 11,300,000.00
Office Equipment and Furniture 2,100,000.00
Motor Vehicle 2,500,000.00
Sub-total 53,312,800
Pre operating Cost 675,000.00
Working Capital 5,490,743.00

2.3 Investors Equity

At this time, the Owner is seeking to assure 61% of the total investment for the Hospital in exchange
of 60 million birr fort he needed capital. The investor will also have a seat on the Management team
and a regular stream of retained earning starting from the first year of operations.

2.4 Management Equity

Eng. Fuad owns 100% of the Hospital. This capital structure will remain the same once the requisite
capital is raised and the Company hires its Senior Management Team.

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3.0 Medical Services
As discussed in the executive summary, the General Hospital is seeking to develop an expansive
facility that will provide emergency, medical, and surgical services to the residents of the target
market. Engineer Fuad anticipates that upon completion, the Hospital will feature two operating
rooms, laboratories, a full scale emergency room, an in house pharmacy, a radiology department, and
a general medical laboratory. The hospital facility will be 5,000 square meter of occupational space.
The total in patient space is expected to be about 50 beds. By the second year of operation, the
Hospital is expected to operate at 72 % occupancy. For each section of the hospital, the latest in
medical technology will be acquired. Currently, Mr. Fuad has sourced a number of medical leasing
companies that the Hospital will use to acquire its medical/surgical assets. This is especially true
within the radiology department, which will feature the latest technology for diagnostic services and
MCH treatment.

The Hospital will provide services which are listed below

. Nursing Services
Patient flow services
InPatient service
Internal Medicine Services
Pediatric Services...
Surgical and Orthopedic Care Services
Gynecology and Obstetrics Care Services
Anesthesia Services
Intensive Care unit (ICU) Services
Mental Healthcare Services
Dentistry Services
Otorhinolaryngology (ORL) Services
Ophthalmology Services
Dermatology Services

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 Oncology Services
Rehabilitation Services
Radiology Services
Medical Laboratory Services
Pathology Services
Pharmaceutical Services
Blood Transfusion Services
Ambulance Services
Infection Prevention
Medical Recording
Food and Dietary Services
Sanitation and Waste Management
Housekeeping,Laundry and Maintenance Services

The above-described services meet the standard set by the Ethiopian Food, Medicine & Healthcare
Administration and Control Authority (FMHACA)

4.0 Strategic and Market Analysis

4.1 Economic Outlook

The project can create employment for 83 people. In addition to supply of the domestic needs, the
project will generate Birr 38.9 million in terms of tax revenue within five years. The project will
provide the basic necessity for residents of Ilubabor Zone, Buno Bedele and nearby cities in general
and in particular to increase their productivity.

4.2 Industry Analysis and Market Study

Ethiopia with its total population 115 million [2020, world bank] has the population growth rate
2.5% per year. It indicates that the population will be 130 million by the year 2025 while the health
supplies unable to meet the current demand as well as for the coming years.

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According to the Canadian Network for international surgery (www.cnis.ca), the life expectancy at
birth is 56/year, fertility rate 6.1 children/women, and maternal mortality ratio 720/100,000 live
births in Ethiopia. With this regard the health professional ratio is below the international standard
which is less than 5 physician/100000 people. As a result of this, Ethiopia in a Global Health
Industry ranked 157 on UN Human Development Index and only 6% of births attended by a skilled
attendant.

So, private sector health investment in Hospitals is the back-bone for the overall development
in health services. The general hospital is a medical facility that provides health care to both
inpatients and outpatients and treats many types of diseases with medical professionals. In
Ethiopia general hospital is supposed to serve 50,000 people/annum and provide all types of
clinical service including surgery.
Moreover, improved health service coverage and quality will have a positive effect on
improving the quality of life of the community.

4.3 MARKET STUDY

The market feasibility study includes all the governmental and private health care service suppliers in
Ilubabor Zone.
Method of market survey; in our target market was focused on gathering primary Data through direct
observation & interviewing the health professionals in the above-mentioned Oromiya towns. But we
used secondary data for other information in this business plan from
www.Centralstatisticsagency.gov.et, investment opportunity in Ethiopia, Oromiya Health Office
Planning Department & www.ethiomedic.com.

4.4 Market Demand

Health service provision is one of the most priority service areas for the population. The target
market for this venture is Oromia Regional State Ilubabor Zone but the research includes health
service coverage in around Ilubabor nearby for potential clients in the future. At present, health
service providers in Addis Ababa and around Oromia regions are Federal Government Agencies,
Oromiya Health Office, Non-Governmental Organizations (NGOs), Factories, and the Private
Entrepreneurs. The number of registered and licensed Hospitals by the Oromiya Health Office, and

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 Ilubabor Zone in 2021/22 is 1 Hospital are densely distributed in the capital city while 1 primary
hospital is scarcely distributed with focusing only preventive health care service in Ilubabor Zone .
The Government plan to deliver health care service by General Hospital is in the rate of one referral
hospital to 1.5 million people. But the feasibility study indicates that the total population of Ilubabor
Zone is nearly 1.3 million that means now the population of the area with growth rate of 2.5% is
around 1.6 million without one General Hospital in the private sector and the Government as well.
So, the private General Hospital investment at Mettu Town is inspiring to health care service for the
people and the Government.

NUMBER OF HEALTH FACILITIES IN ILUBABOR ZONE OROMIA REGIONAL STATE

Table 4.1

Types of Health Facilities

All types of
S/No Health Service Suppliers Hospitals Health Centers Clinics Health Post Totals

1 Ilubabor Zone 2 Primary 39 25 97 149

Total Government 2 39 25 97 149

% Share by Gov 100% 100% 56 % 100% 92%

Sources: Some Health service Information,Ilubabor Health Office.

As can be seen from Table 4.1 the distribution of health facilities is:
✓ 2 hospitals,
✓ 39 health centers,
✓ 25 clinics, and
✓ 97 health posts.
The health service coverage and quality is improving in the city and the nearby oromia Regional
State towns from time to time. However, health service supply is still below the standards established
by the Ministry of Health. According to the standard set by the Ministry of Health; one district

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hospital is for 250,000 people, one regional hospital for 1,500,000 people, and one specialized
hospital for 5,000,000 million people.
Hospitals in the region are not limited to providing services for the people residing in the city only.
As a result, practically high shortage of hospital services is observed in and around the city

4.5 Customer Profile

As any person with a medical issue is a potential patient of the Hospital, it is difficult to determine
the “average” demographics of people that will use the medical services rendered by the Company.
However, Management anticipates that at least 40% of patients will be over the age of 60 with
chronic medical conditions and the rest 60% is expected from birth to 60years old people

4.6 Competitive Analysis

In the target market there is no private or Governmental referral Hospital which can be considered as
a strong competitor. So, the current market research confirmed that the business will provide service
without competition.

5.0 Marketing Plan

The Hospital intends to maintain an extensive marketing campaign that will ensure maximum
visibility for the business in its targeted market. Below is an overview of the marketing plan,
strategies, and objectives of the Company.

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 Standard Set by Federal Minstery of Health

For General Hospital investment

Table 4.2
Description 1st Year 2nd Year 3rd Year
Capacity 75% 85% 100%
Patient Flow /Annum 37,500 42500 50,000

%Increase 13 18
Source/ www.invest in Ethiopia.com

Patient Flow /Annum

50,000.00 36,000.00
1st Year
39,240.00
2nd Year
49,206.00 43,164.00 3rd year
4th Year
5thYear

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 Health Service Demand Forecast
for the first year

Table 4.3

Average Service
Patient Flow Charge Service Revenues
800 80,000.00
Patient Flow/Day 100
Patient
800 2,400,000.00
Flow/Month 3000
Patient
800 28,800,000.00
Flow/Year 36000

The demand forecast is based on the market survey undertaken in the year 2014 by the market study
team . It shows that there is chronic health care problem agreed by all interviewed professionals. In
the Ilubabor zone, the total current population is estimated to be 1.6 million. In this zone, there are 2
primary hospitals which are found in Mettu town , and Darimu Hospital is operating without x-ray
and ultrasound services. The hospital has 86 beds which cannot be accommodated by its premises
which forced the Hospital administration to use usually corridors for inpatient services. They usually
refer to TikurAnbesa and Paulos Hospitals but most of the time, the patients are unable to reach the
referral Hospital because of different factors such as Economic, Social, and other personal reasons.
Health service problem is severe to the woreda towns located along the road The health center head
nurses confirm that there is 200 patient flow per day and 70 to 80% of cases are beyond the scope
of their facilities. According to the interview ,the societys’ economic capability is increasing from
time to time ;however, they are unable get quality of health services as demanded. So , our hospital
intended to alleviate problem through high-tech medical facilities and well trained skilled
professionalswith 24 hour services at Mettu town. The demand forecast has a conservative approach
which is based on the minimum patient flow 50% lower than the health centers has been
experiencing.

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5.1 Marketing Objectives

Establish relationships with doctors, allied health professionals, NGO working with private sectors
and ambulatory companies within the target market. Implement a local campaign with the
Company’s targeted market via the use of local newspaper advertisements and word of mouth
advertising. Develop an online presence by developing a website and placing the Company’s name
and contact information with online directories.

5.2 Marketing Strategies

Management intends on using several strategies to increase the visibility of the Hospital and the
services it provides. As the business is a 24-hour facility, the Company intends to market the fact that
in the event of an emergency, the Hospital can provide appropriate medical treatment. At the onset of
operations, the Company will distribute advertisements within local newspaper circulars to inform
the public of the Hospital’s opening. The business will also develop referral relationships among
locally based physicians and allied health professionals so that patients will be referred to the
hospital in the event of an emergency. The Company will also have listings in local directories and
the Yellow Books to ensure that patients can quickly find the contact information for the hospital and
its location. Finally,the Owner and the Management Team also develop relationships with local
ambulatory companies so that patients can be brought to the facility in the event of a medical
emergency.

5.3 Pricing

The following table shows the minimum average price per patient.

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 Seglen Ilu General Hospital

Annual Sales forecast based on Market Study

Average Medical Service Price/PatientTable4.4

Card
/Patient 50

Lab/Patient 350

others 400

Total Average Price 800

6. HOSPITAL CAPACITY AND OPERATIONAL PROGRAM

6.1. Hospital Service Capacity

The study will consider an establishment of one general hospital comprised of the following
departments:

a) Emergency Room,
b) Surgical Suites,
c) Intensive Care Units (ICUS),
d) Pediatric and Maternity Awards, and
e) Departments of Radiology, Anesthesiology, Pathology, And Rehabilitation
Medicines.
This hospital will employ medical, nursing and support staff to provide in-patient care to people who
require close medical monitoring and out-patient care to people who need treatment but not constant
medical attention.

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The envisaged general hospital will have 50 beds for patients. The inpatients are assumed to wait for
a maximum of 10 days on average, making 1,825 patients annum. Since the general hospital is
assumed to serve 50,000 patients per annum, the remaining48,125 persons are outpatients. Of the
total 50,000 patients that will be treated in the hospital in a year, it is assumed that about 65% will
take x-ray and laboratory check-ups(i.e., 32,500 patients).
The general hospital in the caption will provide diagnosing health problems, surgery, rehabilitation,
health education programs, and nursing.

6.2. Operational Program of the Hospital

The hospital can start providing service at 72% of its full capacity in the first year, and
slowly build-up its service to 78% ,86%,98% and then to 100%, during the second , third , fourth
and fifth year, respectively. Table 3.3 shows operational build-up programmed.
Seglen Ilu General Hospital
Capacity utilization plan
Table 6.1
Description 1st Year 2nd Year 3rd year 4th Year 5thYear

Capacity% 0.72 0.78 0.86 0.98 1.00

Patient Flow
/Annum 36,000.00 39,240.00 43,164.00 49,206.00 50,000.00

Increase - 3,240.00 7,164.00 6,042.00 794.00

6.3. MEDICAL SUPPLIES AND UTILITIES

A. MEDICAL SUPPLIES

The medical supplies required by the general hospital and corresponding costs are
indicated in Table.

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MEDICAL SUPPLIES REQUIREMENT AND ESTIMATED COST
(IN PACKAGE) Table 6.2

Sr Description Qty CIF Price

1 Adrenaline injection 40 197,280

2 Minophyllioc injection 20 123,300

3 Savlon (chlorhexidene +Cotrimide) 25 135,630

4 Alcohol solution 79% 15 55,485
5 Dextrese 40% injection 10 24,660
6 Ergometrine maleate injection tabs 20 133,164
7 Hydrocortisone sodium succinate 5 49,320
8 Lidocaine hydrochloride injection 5 43,155

9 Procaine hydrochloride injection 10 66,592

10 Vitamin k injection 10 98,640

11 Hyoscinehydropromide injection 10 56,718

12 Bandage different sizes 40 220,953

13 Cotton 40 128,232

14 Disposable syringes different types 20 133,164

15 Disposable needle different types 20 93,708

16 All types of L abratorica raw materials 35 2,185,720

Grand Total 325 3,745,720

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B. UTILITIES
The major utilities required by the general hospital are electricity and water. The
required quantity of these utilities and corresponding cost are indicated Table 6.3

ANNUAL UTILITIES REQUIREMENT AND COSTTable 6.3

SrNo. Utility Unit ofMeasure Qty. Cost(‘000 Birr)
1 Electricity kWh 200,000 94.72
2 Water m3 10,000 32.5
Total 127.22

6.4. TECHNOLOGY & ENGINEERING

A.Medical Equipment
The list of medical equipment required by the envisaged general hospital is shown in
Table 6.4. The total cost of medical equipment is estimated at Birr 11 million, out of
which Birr 11 million is required in foreign currency. It is assumed that all equipment
will be purchased from foreign markets.

REQUIRED MEDICAL EQUIPMENT AND COST

Table 6.4
s/ Medical Equipment unit Quantity Unit Price Total
1 Sphygmomanometer pcs 2
152,702.70 305,405.41
2 Clinical thermometers
(assorted) set 1 30,540.54 30,540.54
3 Diagnostic set set set 4
76,351.35 305,405.41
4 Scale infant pcs 4
7,635.14 30,540.54

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5 Scale adult pcs 4
9,162.16 36,648.65
6 Examination bed pcs 6
6,108.11 36,648.65
7 Hospital bed pcs 50
9,162.16 458,108.11
8 Infusion stand pcs 5
9,162.16 45,810.81
9 Instruments sterilizer pcs 2
76,351.35 152,702.70
10 Refrigerator pcs 2
45,810.81 91,621.62
11 Stethoscope pcs 2
45,810.81 91,621.62
12 Centrifuge pcs 4
15,270.27 61,081.08
13 Lab. Bench pcs 2
9,162.16 18,324.32
14 Glass ware (assorted) set set 4
10,689.19 42,756.76
15 Timer pcs 2
3,054.05 6,108.11
16 Photometer pcs 2
30,540.54 61,081.08
17 Hemoglobin pipette set 2
9,162.16 18,324.32
18 WBC pipette set 2
9,162.16 18,324.32

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19 Hemocytometer with its cover pcs 1
slide 91,621.62 91,621.62
20 Test tubes (assorted) set 2
9,162.16 18,324.32
21 Measuring pipettes (assorted) set 2
3,054.05 6,108.11
22 Electrical boiler pcs 1
1,527,027.03 1,527,027.03
23 Delivery table pcs 4
4,581.08 18,324.32
24 Foetal monitor pcs 1
916,216.22 916,216.22
25 Vacuum extractor/retoscope pcs 1
45,810.81 45,810.81
26 Aspirator/manual pcs 2
3,054.05 6,108.11
27 Breast pump pcs 2
21,378.38 42,756.76
28 Suction unit pcs 1
15,270.27 15,270.27
29 Light portable/mobile pcs 2
1,527.03 3,054.05
30 Auxiliary operating light pcs 2
15,270.27 30,540.54
31 minor operating set set 3
183,243.24 549,729.73
32 Autoclave pcs 2
152,702.70 305,405.41

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33 Delivery kit set set 2
4,581.08 9,162.16
34 Stethoscope (baby) pcs pcs 2
30,540.54 61,081.08
35 Oto-opthalmoscope pcs pcs 2
91,621.62 183,243.24
36 Hand reflector pcs pcs 2
4,581.08 9,162.16
37 Respiration bag adult pcs pcs 4
4,581.08 18,324.32
38 Respiration bag babies pcs pcs 4
5,497.30 21,989.19
39 Oxygen cylinder 20 lts pcs pcs 2
30,540.54 61,081.08
40 Tourniquet pcs pcs 2
2,748.65 5,497.30
41 Forceps assorted pcs pcs 2
9,162.16 18,324.32
42 Enema set set set 2 45,810.81 91621.62
43 Pediatric surgical kit set set 2
106,891.89 213,783.78
44 Sphygmomanometer pcs 1
(pediatric,various) 94,675.68 94,675.68
45 X-ray machine pcs pcs 1
3,664,864.86 3,664,864.86
46 Fluoroscopy pcs pcs 2
610,810.81 1,221,621.62
47 Viewers set set 1

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 76,351.35 76,351.35
48 Cassettes intensifying screens, set 1
film set 152,702.70 152,702.70

49 Hanger (different types) set 1

9,162.16 9,162.16
Grand Total 11,300,000.00

Source of Medical Equipment

The medical equipment required by the envisaged hospital can be acquired from the
following supplier.

Raja medical equipment supplier

West Bombay 123456, INDIA
Raj Bavanstreet
Fax. 213-346789

B. ENGINEERING
Land, Building and Civil Works

The total area requirement of the project is estimated at 5,000 m2, out of which the built up area is
estimated to be 2,800 m2. The total cost of building and cost of other civil works, at an average cost
of Birr 7,466 per m2 is estimated to be Birr 37 million birr.

The details of the various buildings are given below:

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 Table6.5
S/No Departments Units of Area
measurment
1 Emergency room Sq.meters 255sq. meters
2. Surgical room Sq.meters 150 sq. meters
3. Intensive Care Sq.meters 150 sq. meters
4. Pediatric and Maternity Sq.meters 255 sq. meters
5. Departments ( x 4 ) and Wards Sq.meters 1110 sq. meters
6. Administration Building Sq.meters 255 sq. meters
7. General purpose Sq.meters 625 sq. meters
Total Sq.meters 2800 sq meters

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 7. HUMAN RESOURCE AND MANAGEMENT

7.0 Organizational Plan and Personnel Summary

7.1. Human Resources

The hospital will have in effect a contingency plan for assuring adequate staffing at all times. The plan
shall detail policies and procedures to regulate closure of available beds or services, if actual staffing
levels fall below specified levels.
The general hospital will have at least the following summary of professionals and staffing:

Seglen Ilu General Hospital

MANPOWER REQUIREMENT AND LABOUR COST

Table 7.1

Monthly
Ser Required Salary[birr]/ Total Monthly Annual
No Description No Employee Salary Salary[birr]
1 CEO 1 8,000.00 8,000.00 96,000.00

3 FM 1 7,000.00 7,000.00 84,000.00

3 Marketing M 1 4,000.00 4,000.00 48,000.00

4 Accountant 1 3,500.00 3,500.00 42,000.00

5 Medical Director 1 10,000.00 10,000.00 120,000.00

6 Admin 1 2,500.00 2,500.00 30,000.00

7 Medical Doctor 6 12,000.00 72,000.00 864,000.00

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8 Mraton[Head Nurse] 2 2,500.00 5,000.00 60,000.00

9 Nurse 8 2,000.00 16,000.00 192,000.00

10 Health Assistant 6 3,000.00 18,000.00 216,000.00

11 Health Officer 2 1,500.00 3,000.00 36,000.00

12 Midwife 4 3,000.00 12,000.00 144,000.00

13 Radiographer 2 2,000.00 4,000.00 48,000.00

14 Assistant X-ray tech 2 1,000.00 2,000.00 24,000.00

15 Lab Technician 4 2,400.00 9,600.00 115,200.00

16 Card Room Staff 4 600.00 2,400.00 28800

17 Assistant Lab Technician 3 1,500.00 4,500.00 54000

18 Secretary[Receiptoninst] 2 700.00 1,400.00 16800

19 Cleaner 18 600.00 10,800.00 129600

20 Driver 2 1,200.00 2,400.00 28800

21 Guards 12 600.00 7,200.00 86400

Grand Total 83 69,600.00 205,300.00 2,463,600.00

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7.2. Organizational structure
CEO

7.3. Management Biographies

The hospital’s management team is listed in the following table. Table 7.3

Titleof the Management

team Qualification Experience Current Working Place
More than 15
CEO Engineering years Contractor
More than 15
VICE CEO Bsc Nurse years Owner of Zagol&Medha Clinic
ADMIN &FINANCE BA in Finance More than 10 Senior Accountant in

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 years Compensato Factory
Dentist(Dental More than 7
MEDICAL DIRECTOR Doctor) years Instructor in Atlas University
BA in Human More than 8
HRM &PR Resource M Years HRM in Snaps Juice Factory

8.0 Financial Plan

8.1 Underlying Assumptions

• The Hospital will have an average annual revenue growth rate of 27% per year.

• It will require 60 million birr of equity funds to develop the Hospital.

• The Hospital will settle most short term payables on a monthly basis.

8.2 Sources of Finance

Seglen Ilu General Hospital

Sources of finance

Financeing %
Equity Contributions 62 37,412,800

Management Investment
Total Equity Financing 62 37,412,800

Bank and Lenders 35 21,390,743.00

Other Creditors 3 1,704,977.09.00

Total Debt Financing 38 23,095,720.00

Total Financing 100 60,508,520

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8 .3 Balance Sheet
Seglen Ilu General Hospital

Beginning Balance Sheet

For the Year 2025 Table8.2

Asset
Cash 2,625,000
Account Receivable 150,000
Amortized Development cost 675,000
Medical and Other Supplies 1,560,000
Medical Inventories 2,185,720
Total Current Asset 7,195,720
Building and Civil Work 37,412,800
Machinery and Equipment 11300000
Office Equipment and Furniture 2100000
Motor Vehicle 2500000
Total Fixed Asst 53,312,799.91
Total Asset 60,508,520.00

Liability and Capital

Account Payable 1,704,977.09
Long Term Liability 21,390,743.00
Total Liability 23,095,720.09

Net Worth 37,412,799.91

Total Liability and Equity 60,508,520.00

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8.4 Income Statement
Seglen Ilu General Hospital

Proforma income statement

for five years Table8.3

Year 1 Year 2 Year 3 Year 4 Year 5 Total

Sales 28,800,000 34,217,280 39,520,958 47,305,664 50,472,000 200,315,903

Less- Cost of
sales 6,755,775 5,664,458 7,363,794 9,234,199 11,635,089 40,653,314

Gross Profit 22,044,225 28,552,823 32,157,164 38,071,466 38,836,911 159,662,589

Gross Profit
Margin 0.77 0.83 0.81 0.80 0.77 0.80

Less-Fixed Cost

Adminn/Selling 6,300,005 6,068,755 5,895,357 5,765,239 5,665,680 29,695,036

Operating income
Before Tax 15,744,220 22,484,068 26,261,807 32,306,227 33,171,231 129,967,553

Tax 30% 4,723,266 6,745,220 7,878,542 9,691,868 9,951,369 38,990,266

Income After Tax

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 11,020,954 15,738,847 18,383,265 22,614,359 23,219,862 90,977,287

Less-InterstExp 1,818,213 1,454,571 1,090,928 727,285 363,643 5,454,639

Net Income 9,202,741 14,284,277 17,292,337 21,887,073 22,856,219 85,522,647

8.5 Cash Flows

Seglen Ilu General Hospital

Cash Flows

For the 3 Years ending table8.4

Years 1st Year 2nd Year 3rd Year

Cash from operation 11,020,954.00 15,738,847.00 18383265

Cash from Receivable

Operatin cash inflows 11,020,954.00 15,738,847.00 18383265

Other Cash Inflows

Equity investment

Increased Borrowings

Sales of Business Asset

A/P Increases 300,000.00

Total Other Cash Inflows 300,000.00

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 Total Cash Inflow 11,020,954.00 16,038,847.00 18,383,265.00

Cash Outflows

Repayment of principal 4,278,148.00 4278148 4278148

A/P Decreases 504,977.09 600,000
A/R Increases 377,864 629,186
Asset Purchases 10,000,000
Withdraw

Total Cash Out Flow 5,160,989 4,907,334 14,878,148

Net Cash Flow 5,859,964 11,131,513 3,505,117

Cash Balance 10,195,116 18,716,309 25,628,000

8.6. FINANCIAL EVALUATION

8.6.1. Profitability
Based on the projected profit and loss statement, the project will generate a profit throughout its
operation life. Annual net profit after tax will grow from Birr 9.2 million to Birr 85.5 million during the
five years of the project. Moreover, at the end of the project life the accumulated cash flow amounts to
Birr after returning its initial investment at present value is 4.6 million.

8.6.2. Ratios
In financial analysis financial ratios and efficiency ratios are used as an index or yardstick for evaluating
the financial position of a firm. It is also an indicator for the strength and weakness of the firm or a
project. Using the year-end balance sheet figures and other relevant data, the most important ratios such
as return on sales which is computed by dividing net income by revenue, return on assets (operating
income divided by assets), return on equity ( net profit divided by equity) and return on total investment

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( net profit plus interest divided by total investment) has been carried out over the period of the project
life and all the results are found to be satisfactory. See the table below
Table8.5.1
Business Ratios -
Yearly
Year 1 2 3
Sales

Return on Investment 18% 26% 30%

Return on Asset 17% 21% 21%
Financials

Profit Margin/ROS 31% 41% 43%

Asset to Liabilities 3.5 5.2 9.2
Equity to Liabilities 2.55 4.25 8.27
Return on Equity 19% 23% 22%
Liquidity

Acid Test 8.94 13.25 14.72

Cash to Assets 0.16 0.25 0.12

8.6.3. Break-even Analysis

The break-even analysis establishes a relationship between operation costs and revenues. It indicates the
level at which costs and revenue are in equilibrium. To this end, the break-even point of the project
including cost of finance when it starts to operate at full capacity (year 5) is estimated by using income
statement projection.
BEyear1=Fixed Cost
Price – Variable Cost/Patient
= 6,300,005
800-187.66
=10,294 Patient at minimum average Charge 800birr

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8.6.4. Payback Period
The payback period, also called pay – off period is defined as the period required recovering the original
investment outlay through the accumulated net cash flows earned by the project. Accordingly, based on
the projected cash flow it is estimated that the project’s initial investment will be fully recovered within
5 years. The following table also shows that the bank long term loan repayment plan but this may be
modified after an agreement is signed. See the table on the next page.

Seglen Ilu General Hospital

Loan Repayment plan

For the Coming 5 Years

Table 8.5.2

Payment on
Years principal Interst Expense Payment Loan Balance

0 21,390,743.00
1st
Year 4,278,148.60 1,818,213.16 6,096,361.76 17,112,594.40

2ndYear 4,278,148.60 1,454,570.52 5,732,719.12 12,834,445.80

3rdYear 4,278,148.60 1,090,927.89 5,369,076.49 8,556,297.20

4thYear 4,278,148.60 727,285.26 5,005,433.86 4,278,148.60

5thYear 4,278,148.60 363,642.63 4,641,791.23 0

Total 21,390,743.00 5,454,639.47 26,845,382.47

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8.6.5. Internal Rate of Return
The internal rate of return (IRR) is the annualized effective compounded return rate that can be earned
on the invested capital, i.e., the yield on the investment. Put another way, the internal rate of return for
an investment is the discount rate that makes the net present value of the investment's income stream
total to zero. It is an indicator of the efficiency or quality of an investment.
A project is a good investment proposition if its IRR is greater than the rate of return that could be
earned by alternate investments or putting the money in a bank account. Accordingly, the IRR of this
project is computed to be 11%indicating the viability of the project.

Seglen Ilu General Hospital

Netpresent value at at 11%IRR

for five years

Table 8.5.3

Years CFAT At IRR 11% NPV

1st Year 9,202,740.84 0.901 8,291,669.50

2nd Year 14,284,276.73 0.812 11,598,832.70

3st Year 17,292,337.29 0.731 12,640,698.56

4th Year 21,887,073.40 0.659 14,423,581.37

5thYear 22,856,219.16 0.593 13,553,737.96

Total 85,522,647.42 60,508,520.09

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Investment Decision Crieterion
Net present value discounted by 11% IRR= 60,508,520.09
Less- Intial Investment 60,508,520.09
Net present value is = 0
The discounting rate K=8.5%
Its profitability index=Total NPV/Intial Investment=1
The IRR is greater than K and the profitability index is one. Therefore, the investment is acceptable.

8.6.6. Net Present Value

Net present value (NPV) is defined as the total present (discounted) value of a time series of cash flows.
NPV aggregates cash flows that occur during different period’s over time during the life of a project into
a common measuring unit i.e. present value. It is the standard method for using the time value of money
to appraise long-term projects. NPVis an indicator of how much value an investment or project adds to
the capital invested. In principal a project is accepted if the NPV is non-negative. Accordingly, the net
present value of the project at 8.5% discount rate is found to be Birr4.6 million which is acceptable.
Seglen Ilu General Hospital
Present Value at discounting at the rate(k) of 8.5%
for five years

Years CFATI Discounting[.085%] NPV

0 (60,508,520.09) 1 (60,508,520.09)
1 9,202,740.84 1.0850 8,481,788.79
2 14,284,276.73 1.1772 12,134,112.07
3 17,292,337.29 1.2773 13,538,195.64
4 21,887,073.40 1.3859 15,792,678.69
5 22,856,219.16 1.5037 15,199,986.14
Total 85,522,647.42
NPV.085 4,638,241.25

Investment Decision Criteria

The investment decision value shows that NPV is 4,638,241.25 which is greater than
zero . So, this project is acceptable.

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9.0 Summaries and Conclusion

Seglen Ilu General Hospital will be one of the private sector health investments at mettu town.
When it launches its operation, it will increase the productivity of the people through alleviating
their health care problems.

The venture will enhance the health care service coverage in the target market, and generate 38
million birr Tax Revenue for the government within five years .

Furthermore, it will create job opportunity for 83 people and return its initial investment in the
years in to consider.

In general, it is a feasible project having positive present value and will pay 5.4 million birr
interest to financial institution.

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 References

1, General Hospital Investment Requirment; prepared by Ethiopian Embacy

www.invest in Ethiopia .com

2,Final Draft Health Facility Standard for General Hospital;preparedbyEthiopian Food, Medicine
& Healthcare Administration and Control Authority (FMHACA)

3,HealthAbstruct 2011/2012; www.csa.gov.et

4,Sample Hospital Business Plan New York based corporation. The Company was founded in
2008 by John Doe.

5,Other relevant data is taken from the following web sites:

www.ministry of health in Ethiopia.com

www.ethiomedic.com

www.private hospital in ethiopia.com

6, Data collected from Oromiya Health office planning Department, Mettu Karl Hospital,
Ilubabor Health Office

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