Inc. revisits a health-care products start-up to find that sales growth is taking longer than projected.
Here's how one commentator evaluated Buddy Systems when it was profiled in INC. a year ago:
"I don't see any way it can put money on the bottom line next year . Which is not bad; a venture capitalist is going to look at this and say there's no way they should be able to." What bothered him, the commentator continued, was that the founders thought they could ramp up so quickly. That, he concluded, showed they didn't understand the cautious habits of health-care providers.
While founder Thomas Manning didn't expect to make a profit on his $90,000 home-monitoring computer systems in 1989, he did assume he'd sell $750,000 worth of units. He anticipated signing on three big customers by the end of 1989. And he thought he'd be well on his way to selling more than $5 million Buddy Systems in 1990.
If only it were really that easy.
Once again, we hear the same start-up song: everything takes longer than projected. A year ago, the Northbrook, Ill., company was doing business with one customer and had sold two of its systems -- computer packages that let ill people monitor their vital signs, symptoms, and medication at home and transmit the information to their physicians.
Since then the company has added only one other customer, and that customer bought just one system, for testing. Projections for 1990 sales might be scaled down.
But the good news, according to Manning, is the company has laid important groundwork. "There are certain fundamentals," he says, "that have been put into place over the past year that don't immediately impact the revenue line, but which are absolutely essential to establishing a sound business and leadership in the market." Those fundamentals: developing relationships with top cardiologists and making headway with the major players in the home health-care industry. And the customer that did sign on is Upjohn HealthCare Services, which, with 234 service offices, has the potential to become a major client.
Buddy Systems is sticking by its original plan: convince home health-care providers that owning the device adds value to their service, making them more competitive. Then, convince doctors to request that private health-care companies serving their patients use a Buddy System. Slowly, Manning says, cardiologists are coming around to believing that "the service offered by the home therapy company should include this type of monitoring."
Over the past year the company has added a director of sales (with sales experience at American Hospital Supply Corp.) and an independent sales representative. There are plans to hire full-time sales reps as well. The company raised an additional $500,000 in equity capital and is in the process of arranging another $2 million to $3 million, all of it from institutional investors.
Expecting two more big-company customers to sign on this summer, Manning is still enthusiastic when he talks about Buddy Systems's future. "We're as excited as we were last year when the first story was printed," he says. "We very much feel as if we're on the leading edge of a major movement here." -- Leslie Brokaw
Buddy Systems Inc., manufacturer of a computer system that reads vital signs, allowing ill people to stay at home and still be monitored by physicians ("House Calls," July, 1989, [Article link])
* Conservative market: Can the company convince liability-skittish doctors to use electronic monitoring?
* Cash flow: Will the company be able to sustain itself if the sales cycle is longer than predicted?
RESULTS TO DATE
1989: Projected Actual
Sales $750,000 "Less than that"
Loss ($400,000) "More than that"
Capitalization $4 million Another $500,000; working on $2-million to $3-million private offering