We talk to many people who are looking to finance equipment for a business startup and part of the financing process is discovering whether the business has a solid foundation or not. In some cases, the answer is, "no, not really" but occasionally the business prospects are pretty exciting.
Whether a business is going to have a reasonable chance of success or not depends partly on the talent and determination of the business owner, but a huge factor is the fundamentals of the business itself. How solid of a business is 3D ultrasound?
Is 3D Ultrasound a Good Business to Go Into?
I was a customer for 3D ultrasound a few years back, and I marveled that even during a recession, there was a steady stream of customers coming in and out - and while we came in for a $79 package, we and most of the other patrons walked out spending well over $200 after 15 minutes in a room and with about $12 worth of materials.
A good way to determine whether a business idea has real merit is to analyze it in terms of something called Porter's 5 forces. The "forces" you have to look at in looking at the strengths and weaknesses of a business are:
- Supplier Power
- Buyer Power
- Competitive Rivalry
- Threat of Substitution
- Threat of New Entrants
Let's look at each of these forces in relation to the 3D baby picture business:
Supplier power relates to how much "leverage" your suppliers have over you, or their pricing power. The only major material you need in the ultrasound business is an ultrasound machine, and there is a huge market for both new and used machines, so suppliers have very little power.
The second force to be reckoned with is what sort of power buyers have to negotiate better prices with you. Once someone is in your office for the $59 or $69 special and you show them the list of add-ons, how many husbands can make the case to their expectant wife about to see her child for the first time that they really don't need to spend the $150 for a DVD and a teddy bear with a heartbeat?
Secondly, if the customers are in your office and have already committed to your appointment, are they really going to go across town to find out if the "platinum" package is $10 cheaper somewhere else? Not likely.
This relates to how many other businesses you are going to be competing against, and how strong they are. If you sell something that is easily purchased online, for example, you've got significant rivalry, but in 3D ultrasound you're only going to be competing with businesses within driving distance of your customers.
In most markets, you will have at most 3-5 competitors within reasonable driving distance. In San Diego County, for example, a market of about 3 million people with about 50,000 births per year, there are less than 10 businesses offering this service.
Threat of Substitutes
What are the alternatives to a 3D ultrasound studio for expectant parents who want pictures of junior? Virtually none.
Threat of New Entrants
While 3D ultrasound isn't a terribly expensive business to get into, you have to know how to operate an ultrasound machine. This, however, can be accomplished in 4-5 days.
With that being said, the business is still pretty much under the radar, but the fact that just about anyone can start a 3D ultrasound business with a small amount of capital means that at some point you may face some competition.
DIY versus Buying a 3D Ultrasound Franchise Vs. Hiring A Consultant
There are several franchise opportunities in the industry, and this may be a good idea for some, but not all people starting a 3D ultrasound business. If you've never run a business before, franchising can occasionally be worth the additional cost simply for the time and heartache a good franchisor will save you by allowing you to learn from mistakes others have made before you.
Franchise fees generally run about $25,000 which sounds like a lot, but if you amortize those costs against the length of time you plan to be in business for, (hopefully 20 years or more) it is very possible you will more than recoup that amount with the additional money you will make by following a plan that has already been shown to work.
With that being said, an additional alternative is to hire a non-franchise consultant. I recently had the opportunity to speak with Anna Rodekuhr of 3D Ultrasound Consultants. Anna has a unique perspective: as an owner of a 3D ultrasound business that started out by going the franchising route, Anna almost went out of business by following bad advice gotten by a franchisor. Like any intrepid entrepreneur, Anna found a way to make her business work, and decided to open a new business teaching others what she learned along her journey.
Anna's business goes from the "whole shebang" which can occasionally cost up to $25,000, but you can get everything you need to start a business on the right foot from the company for $10,000 or less. Importantly, they have several a la carte services, one of which is a market anaylsis including population densities and birth rates that will show you where the best place is to open a business (think of how McDonald's studies traffic patterns before placing a restaurant) and more importantly, whether or not your business is likely to succeed based on the geographic area you reside in. The market analysis only costs $500 - which puts it in the range of things you'd have to be crazy not to take advantage of before starting up.
Advertising Your Baby Imaging Services
Getting customers in the door is the single most important thing that will determine your success or failure, and it's one of the things many business owners know the least about.
If you're buying a franchise, the franchisor company may be able to give you a "ready-made" advertising plan that has been proven to work, but it's always good to know your options regardless. I talk to many new business owners, and find that one of the things I hear most is that folks wish they were more educated on ways to advertise their businesses.
Here is a quick primer on a few of the best and most effective ways a startup can advertise:
Pay for Listings on the Search Engines
One of the most effective ways to advertise is simply to have your company show up in results when someone is searching for your service. You'll see if I do a search for 3D ultrasound in my area (San Diego, Ca) that several companies are paying to be listed.
The amount of search volume and cost of keywords will vary tremendously depending on what area you target, but the average number of searches reported by Google for keywords related to 3D ultrasound services is around 1,300 monthly per 1 million population in your area, and cost per click can be as low as $.30 if you don't need to be at the very, very top.
Pay-per-click advertising can be difficult, but there are 2 excellent resources that make it accessible:
Unbounce - Unbounce has templates and easy training that will allow anyone create pages that convert visitors into sales starting at $50 per month.
The Ultimate Guide to Google Adwords -I read this book when I was getting demolished by competitors on Adwords and it helped me turn my campaigns around. If you are planning on doing pay-per-click advertising, I would tell anyone I wish I had read this book before I had ever started.
There won't be enough business to be had from advertising on the search engines to base your whole business around it, but a properly set up campaign should more than pay for itself.
Another fantastic resource to learn about advertising on search engines can be found on Fit Small Business' How to Advertise on Google and Boost Your Small Business.
Get "Found" On the Internet for Free
If you speak to many business owners, they will tell you this is impossible, but the truth is they just didn't find the right resource. Proof of this is the fact that you are reading this article right now.
It just so happens that there are a select few that know how to do this better than anyone else on the planet. One of the best people in the world for helping you learn to get found on the internet is Marcus Sheridan, and he has a free eBook on his website called Inbound Marketing Made Easy.This book should be required reading for anyone who wants to learn how to be found on search engines.
Getting yourself found on Google is a long process that takes some work, but nothing beats free traffic that found you by doing an online search. Also, you may want to get yourself listed on some of the better online directories such as Directory World or Dmoz.
Direct Mail to New Parents
Direct mail can be expensive, but it's hard to beat getting in front of an expectant mother at exactly the time she is ready to look for your services. One company that has a program for this is Red Rhino Market Group.
Guerilla Marketing Tactics
There are a lot of creative ways to build your business that won't cost you very much. One idea for your marketplace is get a list of all the OB/GYN's in your area and offer a free appointment to patients for a short period of time (think of it like an open house or a grand opening) and ask all the patients to share their experience with your company on Facebook or Twitter or whatever social media outlet they are using.
There are more ways to advertise your business but that list should give you a good starting point of tactics that actually *do* work. There many resources online such as this one that talks about the different ways small businesses can advertise.
Start Up Costs for a 3D/4D Ultrasound Business
Total startup costs will range from $25,000 to $75,000, although it depends on your market, how you plan to set everything up, and some other factors.
Some of these factors include whether you intend to get an office space or run it out of your garage or a mobile service, general office set up fees, etc. Ideally a new business would have funds set aside for 6 or more months of rent and payroll so that you can focus on building your business and not be constantly worried about cash flow but that's not always feasible.
The absolute largest and most important cost in setting up your ultrasound business is the actual ultrasound equipment, which for decent equipment is going to run around $20,000 used or $40,000 new. Luckily, this can easily be financed for most situations.
Financing your Ultrasound Machine
It was just mentioned that the most important business cost you'll have is your equipment. Some new business owners rent equipment, and that can be a great option to "test the waters" or if your situation is so bad financially that nobody will provide equipment financing.
The downside to renting is that decent equipment will cost you much more than payments on a machine loan or lease, and you're not building any "equity" in that equipment. Since most new business owners don't want to use their cash for the equipment, many do a loan or equipment lease.
We talk in detail about the costs of a loan or lease on an ultrasound machine in this article, but for a quick down and dirty, for a startup business to get a $20,000 ultrasound machine, payments will be between $670 and $1,000 monthly depending on the length of financing, whether you choose a loan or lease, your personal credit, etc.
These costs are somewhat higher than for a company that has been in business for a while to compensate for the risks inherent in lending to a new business.
If you need help financing your ultrasound machine, we can help. Just contact us or give us a call at (866) 631-9996.