A basic understanding of financial analysis and projection is important, even if you have a partner or someone you hire handling this aspect of your business. You need to understand their reports and recommendations and be able to evaluate their work.

Components of Financial Analysis and Projections for a Business Plan

1. Establish a price for the product or service.
2. Describe your order fulfillment strategy.
3. Estimate financial costs for raw materials, salaries, activities (e.g., travel), rent, and equipment.
4. Estimate the time it takes for product production.
5. Make sales/revenue and other income projections.
6. Analyze cash flow and balance statements.
7. Estimate a year’s worth of costs, while raising money and have this much in savings. Include a plan to repay any loans.

To make sure your business is feasible, you need to use the above information to generate a financial projection, among other considerations. A worksheet for a Projected Financial Statement can be downloaded from the SCORE.org website. It takes you through several calculations and interpretations of the results, which help indicate whether your business is likely to succeed.

How long does it take to bring a product to market?

Developing diagnostics, medical devices, and molecular tests can take from 3 to 7 years and cost millions (Biolyze, 2018). Developing a new drug or biologic could cost around $2.5 billion and take 10-15 years (ULP, 2020; Biolyze, 2018). However, there are successful biotech companies that started rapidly with under $200,000 (ULP, 2020).

What is the success rate for biotech companies?

There are different ways of measuring a startup’s success, and it differs by industry. For example, success is sometimes defined as having an initial public offering (IPO) or being acquired by another company (Melchner et al., 2021). Using this definition plus achieving drug approval as a measure of success, the success rate for pharma startups is 18 to 37%. A study comparing biotech to non-biotech companies found that, although non-biotech companies created more net value, more biotech companies were acquired by established businesses than non-biotech companies, often before the initial public offering (Black, 2021). The startup success rate for Health Tech, which includes hospital management, health monitoring software, and telemedicine, is 20%, which is comparable to the overall success rate for all startups in the U.S. (SPD Load, 2022). The most common reasons for failure in health tech as not determining the business’s value proposition or choosing the wrong strategy to prove it.

Sources:

Biolyse. How To Start A Biotechnology Company Fast. Biolyse. August 21, 2018.

Black S. Are biotech companies really high-risk investments? ScienceBoard.net. January 7, 2021. Citing a study by the Bentley University Center for Integration of Science and Industry

Melchner von Dydiowa G, van Deventer S, Couto DS. How large pharma impacts biotechnology startup success. Nat Biotechnol. March 2021;39(3):266-269. doi:10.1038/s41587-021-00821-x.

SPDLOAD. Startup Success Rate in 2023 by Stage, Industry, Location. SpdLoad. Accessed 12/30/2022.

SCORE. Business Feasibility Analysis – SCOR# 4.15. July 29, 2021.

University Lab Partners. Finding Funding for Your Biotech Startup. June 8, 2020.