Step-by-Step Guide
How to Calculate Demand for a Project
Your supervisor has sent you the expert’s demand projections for each investment proposal Woodland Ridge is considering. She would like you to calculate the demand for year one of the project. She’s also asked that you use the expert’s projections to determine high, medium and low demand scenarios and then project the demand for the life of the project based on these scenarios. Finally, she would like you to make a decision about which scenario you will base your financial analysis on.
The following step-by-step will help you do your work.
Prepare for the Task
- Review the email from your supervisor. Make sure you understand the work you are being asked to do and the information she has given you.
- Meet with your team and create a plan for completing this task. As you have done in the past, review everything you have been asked to do and decide how your team will approach the work.
- Gather the material you need for this task.
- Download the email attachments.
- Your supervisor has provided you most of the data you will need in this task, but you should also have you the proposals you were provided in Task 1 close by. They contain information on the planned operating hours of each proposal that will helpful in the work that follows.
Review Projections
- Review the projections provided by your supervisor for the CyberKnife and Alzheimer's Unit proposals.
- Implement the plan you created in Task 3.1: Planning to determine if the demand figures provided are realistic. Specifically determine if there there are enough patients in the population of Mitchell, CO to support the demand doctors have projected.
Your superviser has provided you demographic informaiton for the local area which will help you.
- Refer to the information on the Resources tab for information to help you complete this task.
- Summarize your findings for your supervisor. In a brief report you should:
- Explain what did you do to determine if the demand projections were reasonable.
- Desribe your findings. Explain whether or not the doctor's projections for demand reasonable given the prevalence of patients in the area.
Determine Demand for Year One of the Project
The following steps walk you through the process of calculating a project’s year one demand. Be sure that you repeat these steps for each of the four investment proposals.
- Set up your Excel spreadsheet. You have been asked to use Excel to complete this task. You are encouraged to use the formulas in Excel to complete the mathematical calculations you are being asked to do. Though it is possible to complete these figures by hand, in future tasks in this rotation you will have to use Excel formulas to complete the work, so it might be a good idea to start setting up those formulas now. The formulas you would use in this task are fairly straightforward and would help you prepare to use more complicated ones down the road.
- For help setting up your Excel spreadsheet or using Excel formulas, review the Excel information available on the Resources page.
- You may want to set up your spreadsheet so that each project has a sheet within the same file. This will help you keep you analysis together.
The Financial Analysis Archive posted to the Resources page for this task. This resource is designed to supplement the instructions given in the step-by-steps for this course. In addition to walking you through the steps of the financial analysis it includes information to help you understand the work you are doing and what your results mean.
The Archive includes information understanding and calculating demand. You may want to follow along in the Archive as you do the work in this task. If you need help access the Archive and begin at Step 1: Calculate Demand.
- Based on the daily rate you have been provided, calculate the weekly demand for year one of the project. Record your calculations on your spreadsheet.
- Based on your weekly rate you determine in Step 5, calculate the annual demand rate for year one of the project. Record your calculations on your spreadsheet.
Determine Demand for the Life of the Project
The following steps walk you through the process of calculating demand for the entire length of a project. Be sure that you repeat these steps for each of the four investment proposals.
- Look at the growth projections you have been given and figure out a high, medium and low demand scenario. The experts have given you growth range. The lowest percentage in that range should be your low scenario and highest number in the range your high scenario. You should determine what the midpoint between the high and low percentages and use that as medium demand scenario.
- If you have been given a range with an odd number of percentage points you can use the middle point as your medium. For example if you have been give a range of 1% to 5%, your scenarios would be:
Low = 1%
Medium = 3%
High = 5%
- If you have been given a range with an even number of percentage points you will find the medium scenario by averaging the high and low percentages. For example, if you have been given a range of 7% to 10% you would add the high and low figures, 10 plus 7, which would give you 17. Then you would divide that total by 2 in order to determine the midpoint between those two numbers. (10+7) / 2 = 8.5. Then you know that the scenarios would be:
Low = 7%
Medium = 8.5%
High = 10%
- Based on your year one demand figures calculate demand growth, beginning in year two and running through the end of the project.
- Calculate daily, weekly and annual demand for each year of the project.
- Perform this calculation for each of your three scenarios - high, medium and low.
- Check in with your mentor. Double check the math you have performed or the Excel formulas you have programmed and then check in with you mentor. You want to make sure you have done you calculations correctly as they will be the basis of your remaining work.
Choose a Demand Scenario
Determine the demand you will use as the basis of your analysis. You must now select one of these three scenarios, upon which you will base the remainder of your quantitative analysis.
- Discuss this decision as a team. As part of your discussion, consider the following:
- What does each demand scenario mean? Is there a big difference in the number of procedures performed in different demand scenarios? Be specific in your discussion. Use the numbers you determined in the calculations above.
- What kind of message you sending to the client with your choice? Optimistic? Cautious?
- What happens to the financial numbers if the demand scenario you choose isn’t what happens? What happens if the demand isn’t as high as you thought? What happens if it is much higher?
- Are you playing it safe with your decision or are you building additional risk into your analysis?
- What level of risk are you and your team willing to accept? What level of risk is your client willing to accept?
- Are you making a decision based on your tolerance for risk or theirs?
Tip: The questions outlined above are to get you thinking. Use your best judgment, even if you cannot specifically answer one of them. Remember this is a judgment call. Your client has hired you to make decisions and recommend one option to them. There isn’t a ‘right’ answer and each one has different implications. Be sure you can explain your choice and its implications to your client.
- Update your spreadsheet to reflect the demand scenario you have chosen to use. Be sure to save the calculations you have done for the other scenarios in case you need to refer to them later.
- Summarize your decision. In your final presentation you will need to indicate which demand scenario you selected and why. Spend some time determining what you will say about your decision in your final presentation. You may want to take notes to refer back to during the presentation task.
Review and Submit
- Review your work. Review the work you have done in this task. Be sure that you have set up your Excel spreadsheet properly. Double check your formulas and/or calculations.
- Submit your work. Using the instructions on the Submit your Work tab of this task, submit your work to your mentor.
Resources
Financial Analysis Archive
Excel Resources
The following resources will help you get started using Excel. You may need to search the Internet for more help, depending on which version of the program you are using. Keep in mind that the Help feature built into Excel can also be a great resource.
Excel Tutorial
This tutorial will walk you through the basics of Excel, including types of data, using formulas, and setting up a spreadsheet.
Introduction to Microsoft Excel
This overview highlights Excel’s major functions and offers a quick how-to to help users.
Spreadsheet Basics
This resource starts with the very basics of spreadsheets, including terms you should know. It links to more detailed information.
Excel Modules
This resource allows users to link to modules which explain the various functions of Excel.
Excel Formulas
Microsoft’s commonly used formulas.
Prevalence
Prevelance and Incidence
This resource provides information on calculating the prevalence of a disease in a population.
Prevalence Overview
This resources offers a definition and examples of prevalence.
Demand
Understanding Healthcare Demand
Use pages 56-63 in this resource to better understand how to define demand in health care and what factors influence demand.
CyberKnife Comparative Cases
Because CyberKnife is a unique technology, it may be difficult to find comparative information on the Internet. Accuray has provided the following refereces for use in this rotation. Keep in mind that the Case Study invloving Boulder, CO is just being used for reference and does not represent the situation you are being asked to consider in this case.
Georgetown Case
Bristol Case
Boulder Case
Ask the Expert
What is demand?
How does a hospital project demand?
On what do doctors base the demand projections they give consultants?
