Acupressure Complimentary Treatment - Assignment Example

Q1 Communicating my idea A) What is my idea It is my intention to launch an Acupressure machine rental/therapy centre. This will combine the novel idea of Acupressure machines along with complimentary therapy in a centre based in a retail location. This contrasts with the traditional complimentary centre which tends to operate as a niche market to a small number of people at a high price. Although some centre’s do operate from retail outlets they tend to operate in substandard premises and rely only upon the traditional revenue streams. In the case of my complimentary centre it will provide a value service by providing economical treatments in good quality surroundings which are on par with the standard complimentary centres. Furthermore it will implement acupressure machine rental which is a unique offering and a very good revenue stream for the business. B) What are my SMART Objectives SMART Objectives Specific launch the therapy center Expand to a second centre within five years. Measurable By the end of year one the therapy centre will be running at a loss of -10% of turnover. Profitable from middle of second year. By the beginning of year four the second center will be open. Attainable The above projections are attainable. For instance to reach breakeven point requires only two hundred customers per month. Resource Realistic This business offering does not require any rare resources. Although some technology is present it is highly available. Time Bound Breaks even in two year; launch second center in year four. C) How will my ideas operate in practice The centre will be located in a retail unit in a high street location in a medium sized City with a footfall of at least 10,000 per day. It has three distinct revenue streams which are: Acupressure machine rental within the centre itself. The machines can be used in the centre which will be open six days per week and can be rented out on a pay per session rate of £10 plus vat or monthly subscription of £100 per month plus vat. The complimentary therapy. The therapists will be partnering with the centre so they will not receive payment for attending rather they will receive a fifty percent split on profits earned per session. Supplement sales of herbal supplements which are appropriate to a complimentary treatment center. D) How will my idea generate a return My model encourages the complimentary treatment model to be rolled out away from its usual niche environment and instead it is on offer in a high street setting. Up to now any complimentary centres which I have seen operating in the high street have operated in below par premises which are not in keeping with a therapeutic environment. By offering a quality service in a high street environment at a competitive rate this presents unique offering to the customers. Furthermore the implementation of acupressure rental is a significant addition to the therapeutic centre; it provides an economic therapeutic option to the customer while presenting my business with another viable income stream. Also complimentary treatments can be upsold from acupressure rental subscribers and cross sales can be created from therapy customers to acupressure machine rental. Q 2 Evaluations and Critical Reflection A) 0pportunity and Idea Inherent appeal of the idea It is my intention to launch an Acupressure Rental/Therapy Centre. This business will have multiple streams of income: The rentals of acupressure massage devices usage within the center. Up sales to complimentary therapies in the centre namely: Acupuncture; Head massage; Reflexology and kinesiology and also cross sales back from the therapies to device rental. There is also logic behind the therapies been offered; acupuncture is a natural progression from acupressure rental; head massage is a quick and relaxing treatment which suits busy shoppers as does Reflexology. Regarding kinesiology it is a very popular way of allergy testing and can be advertised accordingly. Upscale to supplement sales. It will be located in a retail area in a medium sized City of population greater than 250,000 but no more than 500,000 in order to take advantage of population combined with reasonable property rental. The centre will be located in a retail area with a footfall of at least 10,000 per day in order to achieve good conversion numbers for the business. The unique appeal of this business model lies in the affordable rental of a wide array of acupressure massage devices in a retail setting. After consideration a retail location was judged to be the best one because the intention is to make complimentary treatments available to the common man or woman in the street and the pricing structure reflects this. Inherent Appeal Points There are several unique selling points namely: The rental of acupressure devices is a unique value offering in itself. These hi tech machines offer considerable relief from painful symptoms at an affordable price ; since the cost of the machines runs into the thousands there are very few who would buy the full range when they will gain the relief which they are looking for within a few months of using the machines in the centre. Furthermore if customers want to purchase any of the machines we will register as dealers with TIENS the machines manufacturer, this way we gain either way. The machines are also a very good way to up sale to complimentary treatments. The machines encourage the customers to take up complimentary treatments because they reveal the benefit of acupressure. Furthermore complimentary treatments are expensive so for many people moving on from complimentary treatments to machine usage is a very good way of assisting the healing process. The machines require no expertise to operate so they can encourage ordinary people to start treating themselves at an economical price. The machines supplied by the TIENS Corporation have extensive capabilities and will pleasantly surprise most customers with their ability to improve overall health and wellbeing. The combination of machine rental and complimentary treatments will drive supplement sales. Complimentary treatments tend to be directed at the upper rage of the market and even when made available in retail setting it is unique to offer complimentary treatments and acupressure rental machines in the same treatment center. The major appeal of this business model lies in the provision of various complimentary offerings offered at a value price range to a wide range of people. Market potential of the idea This business has a very good market potential and offers a scalable business which can easily be replicated throughout the UK. Pricing Acupressure machines can either be rented on a pay per use basis at £10 per session plus vat (a session can last as long as the customer wants) or a monthly fee of £100 plus vat (this entitles the customer to attend the center anytime during the Centre’s opening hours which will be between nine am and nine pm Monday until Saturday inclusively). Pricing for complimentary treatments will be at the lower end of the going market rate which will work out at approximately £30 per hour. Supplements will also be sold at the lower end of the going market rate. In order to keep with the complimentary niche the supplements sold in the centre will be herbal in nature. Market Requirements Because the essence of this offering lies in presenting a wide range of complimentary services at a value price range there is a requirement to operate in a catchment area with a high level of footfall. Traditionally complimentary treatments are offered in treatment centres either located in business locations; near medical premises or from home locations. However because my focus is mass appeal I need to operate in a busy environment. Also from the perspective of a brand, operating form a high street environment will rapidly boost brand awareness. Looking at projections for year one (Appendix 2.1) and the five year projections (Appendix 2.2) it is clear that in order to work this business requires a reasonable number of customers. In year one it is projecting a total customer number of approximately 1100.For comparison purposes this is high compared to a standard complimentary treatment practice; for instance a well-established three practitioner practice will often only have a total of less than 1000 customer per year. So to aim for ten percent more customers by the end of the first year is an ambitious goal. However this goal can be achieved by investing in a high street premises and deploying a professional marketing plan. Looking at the analysis of the business (Appendix 2.3) reveal that this business has great potential. However two things become clear upon completing this analysis: In order for this business to succeed aggressive marketing is required otherwise the economical pricing will result in a cash flow crisis. If successful it will result in many competitors joining in and potentially diluting our market share, possibly even undermining this business. In order to counter this it is necessary to create a brand and aggressively market the company. In order to quickly move onto an expansion phase this is planned for the beginning of year four when it is our intention to open a second branch. By quickly rolling out branches it will secure market share and also rapidly make this business a highly profitable one. Finally with this in mind our marketing strategy (Appendix 2.4) will rapidly build up the customer base and make this success a reality. Capital requirements and forecast of financial and/or social returns From a start-up perspective we are forecasting £145000 in order to set up the centre and cover running costs for the first six months. Although it is my intention to be turning over revenue by the end of the first month by having enough money to run the business without any external input for the first six months providing enough cash flow to offset any sudden hidden costs. Complementary therapy centres atypically are a reasonably low investment business model. However although our business model is economical it does require a considerable outlay in the form of property rental and marketing spend. Rent for the first year is projected at £48,000 pounds plus a further £12,000 pounds deposit and marketing is projected at £25000 pounds. At a projected expenditure of £230,000 in year one this reflects an expenditure of 26% on property rental and 10.8% on marketing. This reasoning is based upon the need of this value offering to appeal to wide range of customers and attract them to come for acupressure rental and /or complimentary therapies. I believe that this investment in setting up a property in a busy retail setting with good signage; nice centre interiors and marketing will drive the required traffic into our business. Looking at the cash projections for the first five years (See Appendix 2.1. and 2.2) the only initial investment will be the £145,000.The business should be operating at 90% of cost by end of year one and reaching profitability by the middle of year two. Based upon projections this will allow us to open a second branch in the first part of year four. This will require a further investment of approximately £145,000 however as the figures reveal once the business system is proved to work it should be making good profitability so that even with the outlay of a second centre by the end of year five profitability per year will be up slightly by running two branches instead of one. It is our intention then to rapidly expand this business in order to protect market share and also to rapidly increase profitability since on average the initial investment in one centre will be paid off in its fifth year of operation. Looking at SMART objectives ( Appendix 2.3) the plan is to launch the centre by September this year; to operate with only a 10% loss in year one; to break even in the middle of year two and to launch a second branch by the beginning of year four. To achieve breakeven point requires turnover of £17500 per month (based on year two figures). It is difficult to say exactly when this will be achieved; looking at projected cash flow figures for year two breakeven point should be achieved by May 2012 at the latest. B) Critical Reflection This proposed business has undergone considerable changes since the earlier assignment. This business plan has now changed substantially in two areas: The actual business model itself which was initially based mainly on acupressure machine rental with a small amount of therapy room rental building up over a few years as well as some supplement sales. The investment structure of the business which was initially set at a first year budget of £110,000 and now has been reset to £230,000! The reason for such substantive changes reflects a complete rereading of this business from my side. After an initial burst of enthusiasm I felt upon writing the initial report that there was potentially a good business here if I could manage to attract enough people into renting the acupressure devices in the first place. However this was an area of uncertainty and also at the time of finishing the previous report I was still unsure as to the best location from where to launch the therapy centre. In particular as a business model it addresses the following weaknesses in the present market: Allopathic treatment is expensive when the long term use of pharmaceuticals is taking into consideration. And the standard complimentary treatments are expensive starting at approximately £30 per hour and treatment plans often running well in excess of ten sessions plus various herbal supplements makes it expensive and only appealing to the well-funded. Complimentary treatments are perceived as exotic by the majority of the populace much like flying in the 1960’s or attending the gym in the 1970’s. Complimentary healthcare is seen as the prerogative of the health conscious. It is my firm believe that although the appeal of complimentary care has increased it has by no means become truly widespread as yet. The arrival of advanced hi tech acupressure message devices mean that it is now possible to improve health under one’s own steam. With this in mind the above revisions have come about. Firstly I came to the conclusion that because of the necessity of a wide appeal in order for this (business to be profitable because of the value orientation) combined with the growing market potential of bringing complimentary healthcare to the masses that with this in mind the best location to operate from is a high street retail one. Taking into account the feedback from the last assignment that I have underestimated marketing and labour costs brought about a revision in marketing outlay and employee numbers. These two aspects of the business brought to my intention my initial unwillingness to spend beyond my comfort limit in this business. I have now taking a 360 degree turnaround in relation to this and now realise that the only way to make this business work is to do the following: Invest enough money into the business in order to provide a range of acupressure devices and complementary therapies at a value price however in a professional manner in a retail setting (so far anyone whom I have seen who has provided complimentary treatment in a retail setting has skimped on the quality angle which is a mistake in my opinion).To do this and market it right and provide enough properly trained personnel requires investment. Because I now reckon that the way forward lies in investing in the business including setting up in a high street location this also opens up the option to operate from larger premises of approximately 1000 sq. feet instead of 400/500 sq. feet. With this change it makes it more viable to emphasize the complimentary therapies. Furthermore in a high street location it is easier to drive numbers into the complimentary therapies, hence the complete turnaround of this business model. Taking that my business plan works and that customers do come on board and that they up sale from acupressure devices to complimentary therapies and cross sale from complimentary services to acupressure devices then the success will bring competition. The best way to beat the competition is to brandise the operation as quickly as possible which is easy to do working in a popular retail area and with a fair degree of marketing and then grow the business by opening up new branches as quickly as possible. Clarifications of Points raised by the mentor relating to Taxation; insurance and employee law: Vat will be charged on services and products sold at the appropriate rate. Regarding taxation figures in the year one forecasts they are set at a low level due to year one losses. I have not elaborated upon them for the subsequent years because it is difficult to be accurate on this point. The centre will require public liability insurance however it will not require insurance for therapists since they themselves will have their own insurance. From the perspective of the employee law the centre will be operating under the “Beauty and Special treatments” licence. For this we do not need to be licensed as therapists however any therapists working there do have to be. Also in order to obtain the licensing we will need to enlist some therapists to fill in the form ahead of opening, this could be carried out in August. Considering the present economic climate it should not be difficult to sign up some therapists to do this as part of their partnering with the centre. Also to clarify the partnering of therapists with the centre in the present economic climate I see no need to pay therapists when it is difficult for them to find work; by partnering with ourselves we supply the marketing and high street location and they supply their availability; whatever profits then are split two ways. This is an ideal network scenario for our therapy centre to operate effectively! Final Considerations I believe that this business can succeed however to do so requires the right location; the right investment and a professional roll out of the machine usage and therapies at a competitive rate. It will also require brandisation of the concept and a rapid expansion plan in order to guarantee the longer term viability. Appendix 2.1 Cash flow Year one TMA 2:1 Year One Budget Function Own/staff or external contractor When needed Hopeful Outcome Budget Search for Shop Own August 2011 Move into shop beginning of August. Launch beginning September Deposit=12000 Rent=4000 per month Total=60000 Buy Signage External August 2011 Sign ready by July and in place in August 5000 Equipment Own August 2011 In place by August 2011 3930 Fittings per therapy room Own August 2011 In place by August 2011 2800 Once off Fittings and yearly Consumables Own August 2011 In place by August 2011 5300 Shop Fittings Contractor August 2011 In place by August 25000 Marketing Own Initially August 2011; then January; April and June In place by early August 10000 initial; 6000; 3000; 3000; Total= 25000 Staff Training program External September Create the correct working environment 3000 Staff Own December April Train first employee in December Train second employee I April 1300 per month six months 2600 per month for second six months Total=25350 Myself and wife August Ready for company launch in September 3000 per month Total=36000 Company Set up Costs External June Fully established by end June 2000 Insurance Own August Public liability insurance 5000 Tax External June 2012 Assessment for end June 2000 estimate. Probably very little tax. Mainly accountant’s fees Communications Website August 2012 Website working by end August 500 initial outlay and 20 per month for hosting fees Total=740 Internet August 2012 Internet in business account by August end 30 per month Total=360 Telephone August 2012 Working by end of August 30 per month Total=360 Local service fees External August 2012 August onwards 12000 for the year as an estimate Electricity Own August 2012 August 3000 estimate Heating Own August 2012 August 2000 Total 218840 Total Budget Rounded upwards 230000 Complimentary Therapy Projections Are based upon therapists been available for a certain number of hours per week both onsite where they wait for customers and also on call hours where they will not be in attendance in the centre unless an appointment has been arranged. The reality of therapy been provided in retail setting means that most customers will drop in from the street and want immediate therapy without appointment; however some people will opt for appointments. Furthermore because the centre will be partnering with the therapists whereby they do not receive payment except for what they do it will mean that therapists will be reluctant to sit all day in the Centre. With this in mind it is my intention that initially one third of the time a therapist will be available and that this shall increase over time. The centre will have four reasonably sized therapy rooms (100 sq. feet) each, initially one shall be used as a storage room and three shall be open to therapists. The centre will open 72 hours per week, so this equates to 216 hours potentially for the therapy rooms to be in use, the initial availability period of 288 hours represents one third of the total available time over a four week period. Projected Therapy Cash flow Month Hours Room Availability Hours in Active use Cash flow I Pounds September 2011 288 hours 40 hours 600 October 2011 288 hours 80 hours 1200 November 2011 288 hours 160 hours 2400 December 2011 288 hours 80 hours 1200 January 2012 320 hours 280 hours 4200 February 2012 320 hours 220hours 3300 March 2012 320 hours 260 hours 3900 April 2012 400hours 310 hours 4650 May 2012 480 hours 360 hours 5400 June 2012 520 hours 420 hours 6300 July 2012 520 hours 350 hours 5250 August 2012 520 hours 350hours 5250 Total 5704 2580 43650(Rounded down to 40000)* *Please toe that all cash flow projections are rounded down in order to produce a more conservative figure. Projected Therapy Cash flow Year Two Month Hours Room Availability Hours in Active use Cash flow I Pounds September 2012 560 hours 450 hours 6750 October 2012 560 hours 420 hours 6300 November 2012 560 hours 400 hours 6000 December 2012 560 hours 300 hours 4500 January 2013 560 hours 500 hours 7500 February 2013 600 hours 420hours 6300 March 2013 600 hours 480 hours 7200 April 2013 650hours 560 hours 8400 May 2013 700 hours 620 hours 9300 June 2013 750 hours 650 hours 9750 July 2013 650 hours 550 hours 8250 August 2013 650 hours 550hours 8250 Total 7400 5900 88500(Rounded down to 85000)* *In order to be conservative in my projections all cash flow is rounded downwards. Projections of Acupressure Subscription Members Figures based on a daily footfall of 10,000 plus per day over twelve months, taking into consideration a sudden surge in the first two months followed by a lull around Christmas; a surge in the new year , followed by continued growth up until the Summer months and some stagnation over the Summer months during the holiday period. September = 60 new customers (15per week) October = 48 new customers (12per week) November = 24 new customers (6 per week) December = 8 new customers (2 per week) January = 120 new customers (30 per week) February = 60 new customers (15 per week) March = 72 new customers (18 per week) April = 100 new customers (25per week) May = 120 new customers (30per week) June= 100 new customers (25 per week) July = 60 new customers (15per week) August = 40 new customers (10 per week) Total new customers year 1 = 812 Based on the average customer subscribing for two months thee turnover will be £162,400, which rounded down equates to £160,000 Supplementation Cash projections Based on 1100 customers in year one and presuming that one in four purchase supplements, this provides a figure of 275 regular supplement customers. If on average they buy five bottles each with a profit margin of £4 per bottle this means that gross profit on supplements will be £5500 in year one. Rounded down this equates to £5000. Appendix 2.2 Five year Projections Growth figures are based upon a conservative growth rate of 10 % year on year growth on the acupressure rental figures and supplement sales from year one and ten percent growth from the therapy turnover from year two onwards. The reason for using year two therapy figures as a benchmark is because of all the revenue streams the therapy will take the longest time to get up and running; with this in mind the year two figures are a more accurate benchmark for future reference. Which I feel is very doable considering the conservative projections of year one. Also please note that year two expenditure is less than year one by £20,000 because there are no once of set up charges involved. Regarding outlay this should only increase above year one figure’s according to extra employees. Employee projections are four by the end of year one, building up to six by the end of year five. Unless the centre is very busy no more than two employees are required at any one time. The therapy only requires coordination by staff and the acupressure customers will require little supervision except for the first couple of sessions. Also the acupressure rental customers will be spread out throughout the month, so for instance during a busy month in year one if 200 customers visit twelve times it equates to 2400/28 working days /12 hours per day which equates to 7 customers per hour. Initial Five Year Projections Acupressure Centre One Year Rental Therapy Supplements Outlay Cash flow Profit/Loss 1 160,000 40,000 5,000 230,000 205,000 -25,000 2 176,000 85,000 5,500 210,000 266,500 56,500 3 193,600 97350 6,000 225600(fifth employee added) 296,950 71,350 4 212,960 107085 6,600 225,600 326645 101,045 5 234,256 117793 7,200 241200(sixth employee added) 359,249 118,049 Total 976816 447228 30300 1132400 1454344 321,944 Please note that these figures do not take into account rising costs, however they also do not take into account higher prices been charged to customers. During the present period it is difficult to factor in the degree to which cost will escalate, however for the next few years we do to see massive escalations in price because of the recession which is keeping inflation low. Initial Five Year Projections Taking into Account high Growth Phase of launching a Second Centre early year Four Year Outlay Cash flow Profit/Loss 1 230,000 205,000 -25,000 2 210,000 266,500 56,500 3 225,600(fifth employee added) 296,950 71,350 4 455600(Second Centre launched) 531645 76045 5 451200 625749 174549 Total 1572400 1925844 353444 Appendix 2.3 Analysis SWOT ANALYSIS Strengths Innovative; Growth Focused (enough experience to see the big picture regarding the business and where it needs to go in order to become a scalable and successful business); analytical; prudent; determined Weaknesses Lack of retail experience; awareness that because of the innovative nature of this business I have had to use a lot of speculation on the projected figures. While my projections are logical I cannot guarantee the result and this leads me to wonder how best to grow the business if the business grows in ways other than expected. Opportunities Complimentary healthcare has for a long time belonged to a specific niche which is not very available to the average person. Human health is always problematic and allopathic health treatments cannot help everybody. There is a distinct untapped market opportunity to bring complimentary treatment into the price range of the average man or woman I the street. Threats The concept behind this business is innovative and somewhat subtle. Most people do not understand the benefit of complimentary therapy or the benefit of acupressure machines. In order for this enterprise to work there is a need to effectively communicate the message. Also if it grows quickly there may well be competition and it is important to brandise this company as quickly as possible I order to gain market share and build the business. Smart Objectives Specific launch the therapy center Expand to a second center within five years. Measurable By the end of year one the therapy center will be running at a loss of -10% of turnover. Profitable from middle of second year. By the beginning of year four the second centre will be open. Attainable The above projections are attainable. For instance to reach breakeven point requires only two hundred customers per month. Resource Realistic This business offering does not require any rare resources. Although some technology is present it is highly available. Time Bound Breaks even in two year; launch second center in year four. Appendix 2.4 Marketing Plan In order to drive sales quickly there is a considerable marketing budget of £25000 has been allocated and will be spent as follows: £10,000 invested for the launch in September. Another £3,000 invested in October; again in April and again in June. £6,000 invested in January because it is a busy time for self-renewal. The marketing plan will involve the following tactics: Pre-launch marketing including radio adverts; interviews with local radio stations; local newspaper adverts; marketers giving out prelaunch leaflets and offers; delivery of fliers within the local community. Pre- launch set up of promotional offer cards which can provide prospects with a couple of free sessions in the acupressure treatment room upon completion of a customer loyalty card with a local vendor. For instance health food shops and Restaurants and Delicatessens. By partnering with them we can provide them with loyalty cards with their company logo on it whereby when their customers receive points for products or services purchased and once the card is filled their customer receives a couple of free sessions. This is a win network whereby the partner company gives some loyalty bonus to a customer and it costs them nothing and we drive prospects into our center for the cost of some loyalty cards. Seasonal repeats of the same offering with the appropriate marketing budget. References B322 Investigating Entrepreneurial opportunities Workbook 1 Developing Entrepreneurial Ideas B322 Investigating Entrepreneurial opportunities Workbook2 Investigating Enterprise Feasibility B322 Investigating Entrepreneurial opportunities End of Module Assignment (EMA) Read More