Breakeven in 6 Months… with No Funding
Health Care Information Systems Startup
With no access to external funds, the challenge was to create a self-supporting enterprise that could quickly attain breakeven.
Provided strategy consulting to create innovative business model and a virtual organization. Co-authored operating plan, worked as fractional executive, then coached the CEO through first year of operation.
Initial clients on-boarded rapidly and cash flow breakeven achieved in 6 months. Unusual business model validated in first year.
It was a global vision for changing health care. Instead of technologists learning about hospitals, doctors would learn about technology to automate their own hospitals. This revolutionary approach was based on public domain software developed and used by the federal government VA and DoD. There was also a philanthropic aspect to the mission: providing free training and documentation for the programming language underlying the software. This double mission made the organization nearly-for-profit so attracting investors would be extremely difficult.
Removing Barriers to Growth:
1) Generating Immediate Cashflow
With no access to external funding, the client’s founder/CEO bootstrapped the startup with his own resources. This meant the fledgling healthcare IT company had a short runway to get off the ground. If it didn’t achieve cash flow breakeven in Year 1 there would be no Year 2. This unusual situation called for extreme measures so I proposed we go to market immediately with a ‘sell first, plan later’ approach, after all, the market will tell you quite quickly when you veer off-track.
We prioritized the company identity along with sales and marketing materials. I proposed a satisficing approach to certain decisions that often drag on like naming the company or creating a logo and tag-line: we agreed the important criteria, came up with a draft mission statement and vision then brainstormed each item accepting the first idea that met all the criteria. With these basics in place we prototyped a professional website and one-page pdf overview of service offerings. Business cards appeared and we started selling. In parallel with the effort to win early clients, we created rough working drafts of an operating plan, financial model, pricing, membership agreement, and board member packet. It felt like building the airplane while flying it but somehow we managed because there was no other option. After just six months, two hospital groups were under contract and the client had achieved cash flow breakeven — wheels up, and comfortably before the end of the runway.
2) Creating a Virtual Company
To win large hospital automation contracts the company had to be credible as a vendor with adequate staff and resources to deliver, but without any funds to hire beyond an assistant and a part-time admin that would be impossible. The solution was to create a virtual organization with dozens of domain experts and technical specialists available on a part-time and interim contract basis as project work arose during engagements. These virtual staff joined the organization as members. Fortunately, the founder/CEO had previously been president of a non-profit associated with the same software platform and was extensively connected within its community. This allowed him to recruit dozens of members who would be his talent pool and flexible workforce. Some people had misgivings about the practicality of this strange staffing model, but it has worked well over the last few years and now that the client base and cash flow has grown it is supplemented by a core group of full-time project managers and support staff.
3) Establishing Market Credibility
Without any history, the fledgling company lacked a track record and success stories to illustrate its capabilities. I proposed we use the founder’s track record and prior experience as a stand-in and as members joined the virtual organization, their experience would also become part of the expertise pool of the company. This approach worked well, so well in fact that I was surprised to learn clients weren’t even questioning the organization’s credibility. The reasons for this became obvious over time. My client’s pool of virtual experts were vastly better qualified than the staff at large systems integrators and the startup’s project estimates and daily rates were so much lower than the alternative that the purchase decision was a no-brainer for most hospitals. One of the first adjustments we made was to increase all estimates and rates by 50% though shockingly the customers felt this still represented tremendous value for money.