Working Paper

043

Business Planning Guidelines for Laboratories

Prepared by Ms. Bukirwa Faridah

                   

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TABLE OF CONTENTS

Table  of  contents  

INTRODUCTION   3  

BUSINESS  PLANNING  GUIDELINES   3  

LABORATORY  BUSINESS  PLAN  DEVELOPMENT   6  

1.  AIM  OF  THE  LABORATORY   7  2.  OPPORTUNITIES  AND  CRITICAL  SUCCESS  FACTORS  (CSF)   10  3.  THREATS   12  4.  SEGMENTATION  OF  THE  CLIENTS  OR  USERS  OF  THE  LABORATORY  SERVICES   12  5.  COSTS  OF  LABORATORY  DIAGNOSTICS  AND  TESTING   13  

A  SUGGESTED  OUTLINE  FOR  A  BUSINESS  PLAN  FOR  A  LABORATORY  (EITHER  START  UP  OR  EXPANSION)   15  

 

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Introduction    

Laboratories are an essential component of food safety systems. They provide support to producers in self-assessment and provide their technical assistance to the authorities competent for official inspections. The quality of this service is clearly dependent on scientific know-how and equipment, but its continuity is also strongly dependent on maintaining financial health and regular investment. It is therefore essential for laboratories to be able to build business plans.

They have, in fact, become a business requirement. Given budget restrictions and the decrease in public subsidies, laboratories must become increasingly efficient and convince their private and public clients of their added value in the market place.

Business  Planning  Guidelines  These guidelines do not capture all situations, variations and local circumstances. The most important element of this set of guidelines is the need to view the decision making as a process in which a business plan can be helpful in identifying elements such as costs, assets, values, and a management structure leading to an action plan for the immediate, medium or long term future. As a starting point, it is assume for the purposes of this workshop that certain tests are to be available at a laboratory - the following description of the microbiological and chemical test methods along with indicative costs was used in the development of the example financial models used in this guide. There are a number of different types of recommended microbiological and chemical test methods (Table 1). ISO/IEC 17025:2005 accreditation for the testing services is required by the EU and for the international acceptance of generated test data. This Guide has been prepared to reflect the requirements for such accreditation. Table 1: Different types of recommended microbiological and chemical test methods Water Fish and Fishery

Products Fish and Fishery Products

Shellfish

Colony Count at 220OC and 360OC (EN ISO 6222: 1999) Escherichia coli and Coliforms (EN ISO 9308-1:2000)

Colony Count at 300OC (EN ISO 4833:2003) Salmonella spp. (EN ISO 6579:2002)

Heavy Metals2 Histamine3 TVBN4

Paralytic shellfish poison Amnesic shellfish poison Diarrhetic

                                                                                                                         2  Important  for  predatory  species  and  where  chances  of  environmental  contamination  are  high  3Important  for  all  fish  but  predominantly  oily  fish.  Occurs  during  spoilage    4  Indicators  of  spoilage  

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Clostridium perfringes-Including spores (EC Directive 98/83/EC) Intestinal enterococci (EN ISO 7988-2:000) Pseudomonas aeruginosa (EN 12780: 2002)

Clostridium perfringens (EN ISO 7937:2004) Coliforms (ISO 4832:2006) Escherichia Coli (ISO/TS 16649-3:2005) Coagulase positive Staphylococci-Staphylococcus aureus and other species (EN ISO 6888-1:1999) Vibrio cholera and Vibrio parahaemolyticus (ISO/TS 21872-1:2007) Listeria monocytogens (EN ISO 11290-1:1996/Amd.1:2004) Enumeration of Yeasts and Moulds-Products with a water activity less than or equal to 0.95 (ISO 21527-2:2008)1

Sulphur dioxide and Sulphite5 Pesticides and PCBs

Shellfish toxins

These methods of analysis can be further classified according to the capital equipment cost potential throughput (which can influence the price charges for each analysis) (Table 2).

Indicative Costs of Microbiological and Chemical Test Methods Type of Test Method

Types of Equipment required

Indicative cost of Equipment

Indicative Throughput

Potential cost of each analysis (Assuming a good demand)

Microbiological Autoclave, Incubator, Drying

Medium High Low

                                                                                                                         1  Applies  to  dried  fish  5  Applies  to  shell  fish  and  crustaceans  

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cabinet or laminar flow cabinet, Microscope

Heavy metals Microwave digester, Atomic Absorption Spectrophotometer

High Medium Medium

Histamine

HPLC, Centrifuge, Homogeniser

High Low High

TVBN Steam distillation apparatus, Laboratory blender, High speed homogeniser

Low Medium Low

Sulphur dioxide and Sulphite

Distillation apparatus, chilled water circulation

Low Medium Low

Pesticides and PCBs

GC with ECD, GC/MS

High Low High

Paralytic shellfish poison

HPLC, Centrifuge, Homogeniser

High Low High

Amnesic shellfish poison

HPLC, Centrifuge, Homogeniser

High Low High

Note: These costs all assume that laboratories (microbiological and chemical) already have the basic equipment For the purposes of the example models, the cost of undertaking each analysis will depend on the following factors:

• The test method – microbiological testing is generally less expensive than chemical ones which may require the use of expensive analytical equipment which needs to be operated by specifically trained technicians, the use of standards and requires continuous use so that the results can be relied upon;

• The individual situation – the size of the country, the size of the coastal zone and local infrastructure;

• Size and throughput of the laboratory – small laboratories with a high sample throughput for specific tests tend to have a lower cost than larger ones; and

• The cost of shipping the sample – where it is not practical to undertake an analysis locally, samples can be shipped to a remote laboratory within the region.

Some examples of how the cost might vary are given below: Microbiological testing: In the UK, typical costs for microbiological testing vary between £15 and £25 per sample depending on the complexity. This cost does

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not include any interpretation of the results. However, this test may cost more in a less developed country if the sample throughput is lower, media and reagents are more expensive and there is longer downtime because of breakdowns and repairs. Chemical testing: Using heavy metal as an example, in the UK, testing may cost in the region of £50 per sample while it might be higher elsewhere (for example £90 in Ghana). A reason for the higher cost in Ghana was thought to be similar to above, being the lower sample throughput, higher cost of reagents and longer downtime when the equipment requires spare parts and servicing. The costs per sample are further increased if the samples need to be air-freighted to a remote laboratory, perhaps by £100 per sample if it has to be shipped in ice etc

Laboratory  Business  Plan  Development  The first step in setting up or expanding a laboratory should be the formulation of the intention or so called Business Plan. This Business Plan gives the information about the justification to set up or expand a laboratory and its intended functions. In this case reference is made to undertaking various tests to support the fishing industry in countries where a number of options and decisions have to be made in the face of economic and financial constraints and realities. A Business Plan will encourage the creation of an inventory of possible opportunities, threats and risks that are being faced, given either the presence of some level of laboratory facility or possibly none at all. A business plan should, as a minimum, contain the following elements which will be discussed in order below.

1. The Aim of the Laboratory: the aim of the organisation wishing to set up or expand a laboratory, based on the needs of the state or region. This should be as realistic as possible rather than being overly ambitious.

A position based on research and evidence about the requirements of the region in the field of laboratory needs. Other existing regional laboratories have to have an inventory drawn up and described. This search has to be based on real information from all kinds of inspection and analytical services. Consulting a wide range of practitioners will need to be undertaken.

2. Opportunities and Critical Success Factors (CSF): Opportunities and

Critical Success Factors (CSF) have to be identified.

3. Threats: Threats will need to be identified, and assessed as to likelihood.

4. Segmentation of the clients or users of the Laboratory Services: Understanding the clients or users of the laboratory will be important.

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5. Costs of laboratory Diagnostics and Testing: All costs of laboratory

diagnostics should be broken down into direct, indirect and hidden costs. Costs will also fall into two main categories, capital and recurrent.

1.  Aim  of  the  Laboratory  A questionnaire to start the process for the body considering setting up or expanding a laboratory could include the following:

  General  Discussion  and  Preliminary  Analysis  • What  chemical,  micro-­‐biological  or  environmental  laboratories  are  present  in  the  country  or  

region  at  the  moment?  • What  are  the  current  prices  charged  by  these  laboratories  for  their  analysis?  • What  is  the  current  capacity  of  these  laboratories?  Can  they  meet  the  expected  demand?  • Are  the  existing  laboratories  accredited?  • Are  there  new  chemical,  micro-­‐biological  or  environmental  laboratories  entering  the  market  or  

region?  • What  are  the  reasons  for  too  few  laboratories  entering  the  region?  • What  percentage  of  requested  laboratory  tests  has  to  be  sent  outside  of  the  country?  • What  percentage  of  the  industry  players  are  expected  to  access  the  laboratory  being  planned?  

I.e.  what  is  the  level  of  demand?  • What  are  the  reasons  that  some  of  the  industry  players  do  not  access  laboratories?  • What  are  the  expectations  for  growth  in  the  number  of  requests  for  laboratory  testing  in  the  

country  or  region?  • Are  there  local  providers  or  service  and  maintenance  agents  of  laboratory  equipment?  • Can  local  companies  provide  and  deliver  reagents  and  consumables  for  the  tests?  • Are  there  possibilities  to  appoint/staff  technicians  who  can  operate  the  laboratory?  Or  is  it  

possible  to  educate  local  specialists?  •  Which  tests  are  needed  to  start  the  laboratory?  

 Type  of  Laboratory  Envisaged  and  Tests  Needed  for  the  Target  Fish  Industry?      

• What  type  of  laboratory  is  envisaged  and  what  are  the  tests  required  to  serve  the  fish  industry?  • Suggestions  include  laboratories  which  are  designed  primarily  for:  

o Chemical  Testing;  o Microbiological  Testing;  or  o Other  testing  including  environmental  

Costs    Identification  of  costs  (visible/non-­‐hidden  and  hidden)  and  should  be  itemised,  listed  and  priced.    Some  of  these  will  be  capital  based  whilst  others  are  recurrent  in  nature:      1.  Visible  (non-­‐hidden)  Costs  

• What  are  the  building  costs  (rent,  investment,  refurbishment)?  •  What  are  the  technician  and  staff  costs  per  year?  • What  are  the  training  costs  involved?  • What  are  the  equipment  purchase  and  operation  costs?  • What  are  the  utility  costs  (heating,  cooling,  water,  electricity,  generators  etc)?  • What  are  the  accreditation  costs  involved  as  capital  and  then  recurrent  or  ongoing?    

2.  Possible  Hidden  Costs    • There  is  a  need  to  take  account  of  equipment  at  a  sensible  depreciation  rate.  • What  are  quality  control  /laboratory  management  system  costs  incurred  to  provide  minimum  

requirements?  • What  are  the  license  costs  from  the  local  authorities?  • What  are  the  costs  involved  in  accessing  scientific  information  (internet,  subscriptions  etc)?  •  What  costs  are  associated  with  collecting,  processing  and  storing  samples?  • What  are  the  costs  associated  with  report  assembly?  • What  are  the  costs  of  transportation  and  testing  of  less  frequent  tests  to  other  laboratories  • What  are  the  costs  associated  with  spare  parts  and  servicing  equipment?  • What  are  the  costs  of  assessing  properly  other  costs  of  not  doing  a  test  for  chemicals  where  

agricultural  practices  may  have  impacted  on  the  fishery  such  as  through  pesticide,  fungicide  use?  

• What  are  the  costs  of  sample  and  other  disposal  systems?      

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The justification for a panel of diagnostic tests for the laboratory should be undertaken with financial discussion based on regional realities and not on expectations or optimistic assumptions. A possible presentation for the questions above could contain the four following elements:

• Structure • Relations • Markets • Financial Aspects

Structure: The laboratory under consideration will be dependent on the structure of the already existing laboratory facilities. These are either considered as facilities where testing could be undertaken or where potential competitors could be located. The issue to review is one of avoiding duplication of the services on offer. The technological possibilities in the field of laboratory diagnostics influence the type of laboratory considered. Important to consider would be trying to source equipment as locally as possible based on the need to acquire spares if needed. This of course will be determined by the capacity of the laboratory envisaged. Relations: A detailed analysis of relationships with local laboratory providers where these exist, target industry users, local scientists and representatives of government with all suppliers of laboratory diagnostics will have an influence on what laboratory can be constructed or what refurbishment is possible. Markets: The market is considered very critical in the development of any Business Plan. By market is meant the clients or industry players for whom the tests are being carried out as well as the volume i.e. number of tests per week or month. The market will be a function of the size of industry and also as a proportion therefore of economic importance. Whilst it would be extremely "nice" to have a service

  Risk  Considerations    There  are  risks  associated  with  not  testing  or  non-­‐compliance  which  should  also  be  costed  and  therefore  costs  include:    

• Loss  of  public  confidence  in  food  safety  -­‐  what  will  the  impact  be  on  the  fisheries  sector?    • Loss  of  local  markets  for  industry  -­‐  what  will  be  the  financial  loss?  • Loss  of  regional  and  international  market  access  -­‐  what  will  be  the  financial  as  well  as  

economic  loss  such  as  on  employment?  • Loss  of  EU  market  (often  the  largest  destination  of  produce)  -­‐  what  will  be  the  financial  as  

well  as  economic  loss  such  as  on  employment?    

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available for any and every eventuality it is simply not practical, prudent, necessary and most certainly not financially possible to do this. The market may be too small. Financial Aspects: Whichever tests performed must be paid for. This means considering varying models of operation to cover the costs involved. These models include but should be not be limited to the following scenarios:

• Government invests capital and pays all recurrent costs - i.e. they bear the full cost sourced from the national budget;

• Government invests capital and pays recurrent costs but then charges users per test to recover its capital and operating costs;

• Government grants a licence (which is paid for) to a private operator to run the laboratory service on its behalf charging per test. The burden of risk would thereby fall on the venture capitalist to cover both investment, recurrent and operation costs in an effort to service the market industry needs; and

• A further possibility would be the consideration for putting in place an independently managed fund into which industry pays regularly and which is used then to pay for testing.

The elements discussed above are illustrated below in Figure 1 with the laboratory centrally placed to the planning process. Elements around the laboratory are identified and reviewed routinely as the circumstances change and decisions have to be revisited. Figure 1: Elements to be considered in Planning a Laboratory

New  or  ExisIng  Laboratory    

Structure  (CompeGtors,  

Technology,  Entry  threshold)  

RelaIons  (Providers,  Companies,  

Governments)  

Markets    Volume  of  Market,  

Growth  of  market,  Test  available    

Financial  Aspects  (Trends  in  Costs/  Profits/

Insurance/Reimbursement)  

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2.  Opportunities  and  Critical  Success  Factors  (CSF)  The analytical and testing technology needs to be at a level which fulfils the minimum requirements for quality and service of the clients and agents who demand it. In the case of fish exports for example this needs to ensure complementarity with the needs and conditions set by an importing country or region such as the European Union and its member states. Information about the Critical Success Factors (CSFs) of a laboratory must in this be gathered and fully described. This set of guidelines has developed a detailed scenario to take account of CSFs as a model for Business Planning and costing. Three further models have been developed. In all cases the costs and benefits will have to be undertaken to justify the expense and investment in the form of a Business Plan outlining and describing the purpose, function and operating services available. Capital investment costs and operating costs have to be properly developed and presented. Laboratories should be viewed as a business operating at a globally acceptable standard. They should try never to operate at a loss however much prestige they might generate. The following discusses important elements which make up a series of CSFs. CSF 1: Technology: In each scenario analytical and testing technology is assumed to be available at a level which fulfils the minimal requirements for quality and service to the fisheries industry and target other markets. It is not necessary that the newest technology be in operation but rather that at least proven and robust technology is in use. Important however to consider is the reliability of a supply and delivery system to support the laboratory for spare parts and consumables. This element is more critical than the investment costs to begin with. Without this assurance this would be considered a negative CSF. An environment with a reliable utility supply is also a prerequisite and has to be properly accounted for in the plan. CSF 2: Sample Collection: An important CSF is the establishment of a well-organized collection department or appointed service. After collection of samples or other materials the logistics of the process should also be accounted for. Minimizing these costs would be a way to keep the operation functioning at a leaner expenditure rate. Handling rates of the sample would have to be kept as low as possible and results reported electronically. CSF 3: Staff: The human capital of the laboratory is its staff. The need for well educated, trained and motivated members of the unit is an essential element of the CSF. The staff contingent needs to be well described and accounted for.

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Further education or training could be complemented by local or overseas exposure. This would be an investment cost which would need to be budgeted. As part of the business plan with respect to staff, appropriate job descriptions and responsibilities given to staff need to be accounted for. The incorporation of a staffing plan and organisation as well as monitoring and line of decision-making would also form part of the business plan at least in summary terms. The service from the managerial staff to fellow colleagues is also an important part of the overall CSF. CSF 4: Analytical Service: A CSF is the correct set of tests based on real demands of the industry and external inspection system where this applies. This is an important element of the business plan because it instils rigour and the need for analysis of profit and real cost of the running the laboratory. In undertaking such a calculation the following should be undertaken:

• The costs of the reagents and consumables per test; • The costs of the quality assessment per test; • The costs involved in obtaining and maintaining accreditation; • The costs of pre-analytical phase per test (sample collection, pre-test

handling etc.); • The costs of the scientific interpretation of the test result (of course if the

laboratory does not do this then the costs will be lower); • The costs of the report undertaken by the scientist per test; • The costs of the overhead per test (building, temperature control etc.); • The costs of the staff calculated per test; and • The relation between the number of tests and number of reported results.

It cannot be stressed enough that the laboratory must cover its costs. Profit, although an overall aim, would not necessarily be required for every test. It is important however that the sum of profits be positive overall especially as the laboratory will be operating on a cost recovery from the start for a number of years. Profit from the laboratory should not be used for anything except the laboratory. A business plan will need to incorporate this as a possibility where this may not be the case. As an alternative, sending samples for testing to another government-run laboratory, for example, may sound attractive but this will still amount to a cost even if it is transfer payment and have an impact on the budget of the laboratory in question. CSF 5: Marketing: Marketing is not normally an element in food safety testing by a public laboratory. However, it is important that the industry be aware of its existence and that there are costs associated with running this service. This would involve developing a mission statement or motto and the description of the

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services it undertakes. Periodic consultation with the industry players and external inspection services would form part of any good business plan. CSF 6: Government and Legislation: Knowledge of national and international legislation (in particular EU) and contacts with representatives from other ministries, governments and industry will assist in running the laboratory and keeping it informed. Important in this category would be issues of liability, working conditions and environmental policy. The identification of the Ministry holding this information will have to be made (most probably Ministry of Agriculture, Animal Industry and Fisheries) though this varies from Country to Country. An insurance and cost recovery policy connected with legislation of the government will also be an important consideration. CSF 7: Membership of Accreditation and Reference Laboratories: The laboratory management needs will need to consider the membership of regional or international associations or bodies of accredited laboratories. This will add value to the service on offer. Being a member of a reference laboratory group will incur a cost, but benefits may contribute to the establishment of the facility as a centre of excellence.

3.  Threats  Every business or operating institution has threats which have to be described in the business plan. To ignore these would be a serious breach of realism. Listing them will help in possibly minimising, avoiding or neutralising them. A number of such threats have been identified:

• Over optimistic prognosis for the number of requests of laboratory diagnostics;

• Unexpected changes in laws and regulations whether national or foreign. Insufficient knowledge can be costly;

• The need for expenditure and training in new equipment to meet future changes in regulations or demand;

• Other competing laboratories opening up which may duplicate the work of the one being planned or expanded and therefore be a competitor;

• Rises in the costs of staff as a result of loss of staff or having to undertake continual training to keep abreast of technological changes;

• Self-complacency can lead to an assumption of no change being necessary when operations are running smoothly. A business plan will need to be revisited continuously with updates and modifications being made all the time to take account of changes. Six monthly plans are not uncommon.

4.  Segmentation  of  the  clients  or  users  of  the  Laboratory  Services  Not all clients of the laboratory are the same and new clients will come on stream and old ones will fall away. The client base is always changing and responding to them will be important. It might be possible to group clients and the laboratory

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testing that they need together but the issue of confidentiality will need to be examined closely. This will help in focusing activities and prioritising actions. Pricing plans and offerings can also be developed to match the client needs. It will also be much easier to offer negotiated packages and develop a cost base for the more frequent tests that have to be performed. Segmenting the more relevant clients will be more important than just servicing the more profitable tests as this could lead to a longer plan and more appropriate response to the market - in essence the laboratory is moving with the market rather than responding to something which may only be a fad.

5.  Costs  of  Laboratory  Diagnostics  and  Testing  This is perhaps the most difficult area to consider as it will mean developing a cost per test. A common approach is an activity based costing structure and can be used as a managerial tool to identify and regulate costs involved. The basic idea behind activity based costing is a focus on the process from collection of a sample to testing and production of a result. The development of a cost per test commences with incoming materials and equipment from the suppliers to the laboratory to make the test possible. The outgoing product is the laboratory result itself. In parallel to this process is the conversion of money into materials and materials into results and the results back to money in the form of payment. The combined transformation called the operational process is illustrated in Figure 2 below.

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Figure 2: Operational Process of a Laboratory

The central rectangle shows the laboratory itself. Materials from suppliers are converted into orders needed by the laboratory in the production of the report or results. For this the laboratory needs equipment and finances. These are shown as the vertical lines in the figure whilst the diagonal lines show money out or money in, possibly coming from a number of sources such as government, banks, national budget or private companies. This model which has been adapted from a clinical business planning guideline can be used as starting point for activity based costing and mapping.

Costs are made up of direct and indirect costs. In addition hidden costs are also to be accounted for. These are discussed below.

Direct costs: These are costs accounted for directly by a laboratory product and costs for reagents, time of the staff member undertaking the test and other consumables.

Indirect costs: These are all the other costs which are incurred by the laboratory as a whole and refer to items such as overheads including equipment.

To be factored into indirect costs for equipment is a depreciation element. A commonly accepted value would be about 10% per year. However, in some cases equipment could last for many more years because it remains "fit for purpose" as long as it is maintained and retains its validity in terms of testing to the accepted standard. Assuming depreciation however, the 10% depreciation rule per year divided by the number of tests performed will produce the indirect costs for the laboratory per year.

Other indirect costs include costs for utility usage, accommodation rent and collection and distribution. Other costs to be considered are the costs of any

Suppliers  of  Equipment  

Finances/Banks/National  budget  allocation  /Private  Company  under  license    

Outgoing  Money  

Laboratory  Results    Suppliers  of  Materials    

Incoming  Money  from  Industry    

Incoming  Materials     Outgoing  Products    

Incoming  Equipments     Outgoing  Money  

Outgoing  Money   Incoming  Money  

Supplies     Reports  Production/Testing  

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detailed research needed, implementation of new tests, and identification of new "clients", insurance, telephone and communication. Such costs will however be a function of what could be termed "Turn-around time" and based on the duration of the test itself and the time taken by the analyst.

In summary it can be possible to simplify the costing to the "80:20 rule" which when applied to the development of a costing plan suggest that 80% of test costs are accounted to an individual test, whilst 20% are arbitrarily accounted to the test itself.

The overall costs must equal the sum of all the costs accounted to an individual tests and a test is a reported test result, "the output" or product. Importantly however there is rarely just one test performed but a suite of tests which in combination produce a reported result.

This process leads to the development of a pricing, a breakeven, cost recovery or profitability plan for the laboratory either being planned from start up or as an expanded operational service. Of course it is difficult to do this prior to starting up a laboratory but is nevertheless essential to get an insight into the future financial return of the practice. An existing operation is far easier to analyse.

A Business Plan becomes an essential tool in the process of understanding the mechanics of the unit in terms of staffing, structure, location, competition and financial value and allows improved planning and hopefully more rational decision-making to take place. Keeping proper and up to date cost accounts is also part and parcel of the process of deciding, guiding and continuing to operate a service which is perceived as essential and adding value to an industry of sectoral importance such as fisheries. Every three months, say, a reconciliation of costs and income or revenue should be undertaken which will allow an annual review to become much simpler and more accurate.

A  suggested  Outline  for  a  Business  Plan  for  a  Laboratory  (either  start  up  or  expansion)  The laboratory planned or expansion considered will be dependent on the structure of the existing laboratory facilities in the region (possibility these are seen as competitors). These competitors have to be researched in order to avoid duplication of services offered (there may be other overarching reasons why an entity wishes to start or expand a laboratory and which may be political or practical in nature). Technological possibilities in the field of laboratory diagnostics will influence this decision. The use of local or regionally available technology should be considered because of the issue of sourcing spare parts and service support and these should be discussed in the plan. A basic business plan could contain the following subject sections. This outline is merely a suggested starting point or guideline but all the elements will certainly need to be considered.

1. Introduction 2. Summary of the Plan 3. Introduction 4. Aim of setting up or expanding a laboratory and which type 5. Description of the existing laboratory and purpose for which it is used. This

will include:

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a. Location b. Type of laboratory c. Staffing and human resource structure d. Historical use and functions of the laboratory

6. Options for different cost models (new build or expansion) 7. Strategy for realising or paying for these different models (government,

donor, private sector or combination of). 8. Other issues and challenges that need to be considered in the plan include

size of industry, compliance, staff turnover, staff recruitment, training etc. 9. An Action Plan or work plan will need to be developed by the designers in

relation to contactors, equipment suppliers, who does what and when. 10. Every Business Plan will need the following financial analysis sections:

a. A Financing Plan will need to be developed covering direct, indirect costs and revenue streams. In effect this will be a cost recovery as well as cash flow forecast of the operational facility taking account of the number of tests, pricing and other elements such as equipment depreciation and/or replacement.

b. A sensitivity analysis of the cash flow will need to be undertaken. This allows assumptions and changes to be considered and the possible financial impact on the laboratory.

c. For existing facilities a Profit and Loss and Balance Sheet (showing an inventory of existing equipment and their values, as well as investments, loans and other financial borrowings) will have to be captured.

A SWOT table is useful to consider as this lays out very clearly and in a summarised way the options under consideration and why some offer a better fit. An example of this is shown in Table 3 below. These responses are not definitive by any means and should be developed based on further discussion and previously tried and tested options which might be revisited.

Other solutions which have been seen to operate elsewhere successfully should be considered but within context.

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Option Type Strengths of Option Weaknesses of Option

Opportunity of Option Threats of Option

Government funded entity

• The laboratory comes under a central management system.

• It fulfils the mandate that Government is supporting the industry

• Government itself is not a scientific body

• Government perhaps should be outsourcing the functions of an accredited institution in the interest of public health

• Government funding may become a fast track way to get a central laboratory funded or expanded

• It is a demonstration of Government support to the sector of national importance because of the revenue the sector generates

• Government policy can change

• Government budgets can be reallocated

• The laboratory may be permitted to run at a loss in the interest of public health or the support of the industry.

• Control over the laboratory test in its entirety rests with government

Government funded recurrent costs only and Donor finance capital costs

• The laboratory comes under a central management system.

• It fulfils the mandate that Government is supporting the industry

• In some cases Government may feel that donor support can add value to the exercise and that this is a partnership in the interest of both producers and consumers locally as well as internationally

• Government itself is not a scientific body

• Government perhaps should be outsourcing the functions to an accredited institution in the interest if public health

• Donors may have an alternative agenda which it imposes on the joint venture which may steer the project away from the original intention

• Government funding may become a fast track way to get a central laboratory funded or expanded

• It is a demonstration of the support Government places on a sector of national importance because of the revenue the sector generates.

• Donor support may be a way of supplementing Government budgets which are strapped already but can fast track the setting up or expansion of existing facilities for a limited period of time. Refurbishment or repair maybe alternative ways of bringing a laboratory to a functional state.

• Government policy can change

• Government budgets can be reallocated

• The laboratory may be permitted to run at a loss in the interest of public health or the support of the industry.

• Donors may withdraw support for the purchase of capital cost equipment perceiving conflicting interests or mandate

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Donors finance capital in entirety and recurrent costs for a defined time

• In some cases donors maybe the only option available to get a laboratory refurbished and operational.

• This would be a fast track method to get the system up and running

• As with many examples reliance on a donor or benefactor can mean that the institution becomes over reliant and fails to plan for independence and self-running.

• This places the facility in a vulnerable and fragile situation

• This maybe a fast track way of getting the laboratory to become fully compliant and operational to perform the minimum tests seen as necessary in-country and therefore as a benefit to industry and therefore brings prestige of providing such a service

• An undetermined length of support will bring uncertainty and increased stress on the shoulders of the facility managers and staff.

• There may be a "trade off" for such financing in terms of other development projects not financed

Private sector funds the facility in its entirety

• The private sector may be encouraged to take over an existing facility and operate it along commercial lines. This may increase efficiencies, turn-around-times and ensure longevity of service to an economic sector of importance both willing and able to pay for tests.

• Private operators will operate along profit lines which mean that pricing plans and costs for tests may be expensive and force companies needing tests to be undertaken to consider less than optimal tests.

• EU authorities may not recognise the results from private laboratories as ‘official’.

• Private operators bear all the costs and responsibilities as well as risk of setting up or expanding operations.

• They may be able to support risks which Government might not be able to do. There might even be possibilities of cross subsidies from other parts of larger companies which allows operations to commence and then continue

• Private operators may not see the commercial interest in setting up laboratories in the country but instead place their investment elsewhere where profit is more easily gained.

• Laboratories will offer the most costly tests as first option or oversell the need to perform more tests than needed. Government will need to monitor carefully and draw up an accredited list of reputable providers.

No laboratories at all, samples are sent to the nearest reference

• It maybe that no laboratory is deemed appropriate because of costs. Samples are sent to the nearest

• It may be that testing by a reference or referral laboratory is costly and time

• By not having a laboratory that undertakes the test needed allows

• The threat of not having access to a laboratory in proximity is of course the necessity for speed of

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or referral laboratory

laboratory for testing providing that the timeframe for turn-around is compliant. This saves costs and the burden of responsibility to meet results falls on the service providers involved.

consuming risking the shipment or consignment

industry to select the service providers which are most competitively priced, located and offer value for money

• It promotes competition for this service where there is market demand

getting a result from the test performed. This may jeopardise a consignment or have wider implications if a system is not in place.

• There will need to be a high degree of confidence generated that each of the referral laboratories performs to an accepted standard and that the complete suite of tests can be combined to generate a result which has meaning, validity and authority and in a specific period of time.

Some basic laboratory level established with Government and Donor funding

• This allows for a balanced and cautious approach to the need for a laboratory versus costs or setting, refurbishing or expanding an existing facility. It can fast track the facility.

• Not all tests may be taken and some samples for further testing will have to be sent overseas

• It exposes the weaknesses in the sector and commitment to support the sector

• Requirements and standards change and the basic services on offer may become obsolete being replaced with other tests. It might actually be very easy to switch or introduce new tests at minimal costs demonstrating prudence and the ability to respond swiftly to changing new science or health requirements

• Testing requirements and standards change and the basic services on offer may become obsolete being replaced with other tests. It might become costly to introduce new tests especially if all the tests become defunct.

Regional Laboratories established

• This would be a sensible option allowing for economies of scale, testing throughput and consideration of an industry (fisheries) in totality. In

• Such an approach fails to take account of political realities and non-regional cooperation.

• It can lead to mistrust

• Commercially this makes sense where the fisheries sector is small and represents a small proportion of GDP in several

• Regional laboratories may not operate to the standards expected.

• The ownership (if government sponsored) of the laboratory may become

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some cases industry is spread across a region with common owners and operators.

and misunderstandings aggravating social or political differences

countries • Reduction in the

stress on limited financial and human resources and aids regional cooperation, collaboration and mutual support for commercial and economic growth

an issue legally (although there are plenty of precedents for regional organisations which function well).