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The risks related to our business are both internal and external.
6.1 Financial Risks
Our quarterly revenues and operating results are difficult to predict and may fluctuate significantly from quarter to quarter as a result of a variety of factors, including:
- Changes in our pricing policies or the pricing policies of our competitors.
- Seasonal patterns of spending by advertisers and sponsors and trends in advertising rates.
- Costs related to acquisitions of businesses or the timing of payments to our strategic partners.
- Fluctuations in expected revenues from our strategic relationships.
6.2 Legislative / Legal landscape
- Malpractice liability exposure.
- Privacy legislation.
- Advertising drugs, cosmetics and nutritional supplements.
- Storage, transmission and disclosure of medical information and healthcare records.
6.3 Operational Risks
To attract and retain users to the SanaSana community, we need to continue to provide unique and informative content. We will need to purchase or license a portion of this content from third parties. Competition for content from people with the professional reputation, name recognition and expertise that we require is intense and increasing. This competition may increase the fees charged by high quality content providers, resulting in increased expenses for us.
6.3.1 Content generation /Acquisition
We will not only have to expend significant funds to obtain and improve our content, but we must also properly anticipate and respond to consumer preferences for this content. If we are unable to enter into agreements for the delivery of desirable content, or lose any existing agreements, it could delay market acceptance of the SanaSana network. Other risk include:
6.3.2 Content delivery
- Attract and retain a large audience of users to our SanaSana community.
- Gain revenues from vendors of health-related products and services.
- Create and maintain successful strategic alliances with portals, provider groups, content providers and other third parties.
- Develop our institutional Internet services business and external content delivery infrastructure.
- Attract, retain and motivate qualified personnel.
- Develop or acquire unique health-related content
Any systems problems in the SanaSana network, such as system disruptions, slower system response times, and degradation in customer service levels, could result in negative publicity, cause our users to use our competitors' services and reduce our revenues. Additionally, if we fail to meet the web site performance standards in our contracts with our institutional clients, they may terminate their agreements, require refunds or fail to renew contracts with us, any of which could decrease our institutional revenues.
- The SanaSana site may experience temporary system interruptions due to power and telecommunications failures
- We are also vulnerable to breaches in our security and natural disasters.
- Outsourcing the server hosting function to a third party may leave some systems interruptions outside of our control.
6.4 Brand Building & Awareness
A failure to build our brand names quickly and significantly will result in lower than expected revenues. If we do not gain significant brand recognition quickly, we may lose the opportunity to build a critical mass of customers and our business may fail. To increase brand recognition, we will need to increase substantially our sales and marketing efforts, our third party alliances, and our content, product and service offerings, all of which are expensive.
We receive sponsorship revenues from advertisers of health-related products on our web sites and revenues from sales of health-related products. However, our success in attracting and retaining users to our web sites depends on our being a trusted source of independent health-related information. There are several risks inherent in brand building; we believe the following to be most relevant:
1 U.S. Department of Commerce, "Population Projection of the United States by Age, Sex, Race and Hispanic Origin: 1995-2050". February 1996.
2 United States Center for Disease Control and Prevention, 1997.
3 Cyber Dialog, "Healthcare Industry in Transition". 1999.
4 Selig Center for Economic Growth, University of Georgia, "Hispanic Buying Power by Place of Residence". 1999.
5 E. Miller, M.D., Interview, Dean and CEO, Johns Hopkins. Medicine
6 Cyber Dialog, "Healthcare Industry in Transition". 1999.
7 Ernesto Levy, Interview, Brand Manager - Fit Brand, Procter & Gamble Co.
8 Based on capture rate of all Internet consumers using drkoop.com Inc.
9 The Boston Consulting Group states that the price to retain an existing online customer to be $7.
10 U.S. Department of Commerce. "Falling Through the Net: Defining the Digital Divide". July, 1999.
11 U.S. Department of Commerce. "Falling Through the Net: Defining the Digital Divide". July, 1999.
12 US Department of Commerce, "Population Projections of the United States by Age, Sex, Race and Hispanic Origin: 1995-2050, February 1996.
13 US Department of Commerce. "Falling Through the Net: Defining the Digital Divide". July, 1999
- Compete effectively against better-established Internet health companies, such as drkoop.com, medscape.com or webMD.com.
- Promote our HealthCapsule newsletter and the associated brands related to SanaSana
- Address the ability to offer desirable product promotions.
- Deal with fluctuations with which visitors to our SanaSana web site convert into customers.
- Shifts in user traffic levels on SanaSana and associated costs.