Exhibit B: Cash Flow Statement, Year Two
At this point, the business is earning a healthy return and Mr. Ahn is receiving will be able to bring in a reasonable salary. The nature of the business may well change at this point. At the maximum revenue of $144,000 per year the pretax profit would be $63,600. As a result, it is likely that a clinic will be formed with other practitioners in order to minimize expenses and increase profitability.
We did not include taxes in our cash flow examples because the company is going to be set up as a sole proprietorship. This means that the income from the company will be rolled into the income for Mr. Ahn, as well as his liabilities. Mr. Ahn's personal expenses are therefore not included in the model, which is intended to solely illustrate the finances specifically relating to the clinic itself.
Exhibit C: Balance Sheet
The balance sheet reflects the $10,000 startup cost plus the loss in year one. The profit in year two is then accounted for. It is important to note that Mr. Ahn will not draw a salary directly from the clinic for the first two years of operation. His wife has a full-time job and will meet his basic living expenses while he establishes the business.
The target market for the venture will be mainly Koreans living in the downtown/Koreatown area of Los Angeles. Because of Mr. Ahn's language abilities in English, Chinese and Japanese, it is expected that the clinic will be able to draw customers from other groups as well, depending on the visibility of the location. Koreatown is a high-density, multiethnic area and its residents are knowledgeable and open to ideas from other cultures. This means that there is a market for an English-speaking TCM practitioner; few in the Los Angeles area are, particularly not in Koreatown, an area in which Korean immigrants can live for years without developing English language proficiency.
The narrow market consists of the estimated 46,000 Koreans living in the area. The broader market consists of the English-speaking area residents with an interest in TCM, and Koreans from other parts of Los Angeles, particularly those who commute to the area for Korean-specific services such as TCM, restaurants, groceries and entertainment. This broader market is estimated to amount to between 100,000-150,000, as there are other major Korean population centers in the area from which few such commuters can be expected.
The two primary channels used for marketing will be word of mouth and print. The print ads will run in the city's two main Korean newspapers. The ads will be basic black and white ads. The tone will be informational, containing...
Ahn's background and experience, the value proposition the clinic offers, its convenient location and the multilingual aspect.
Word of mouth forms a crucial aspect of the business plan. Korean society is relatively conservative and family-oriented. Both Mr. Ahn have family and community ties in the Koreatown area, which will help them to establish a strong word-of-mouth network for the business. Extensive networking will also be conducted in order to maximize potential.
A key component of the marketing strategy will be the launch of the clinic. Additional funds above and beyond the basic marketing budget will be dedicated to this. Part of the launch will be larger, full-page ads in the newspapers. In addition, approximately $500 will be spent on leaflet and poster advertising in the Koreatown area. Also during the launch phase, extensive publicity will be undertaken. Mr. Ahn will attempt to secure time on Korean programs on LA's local Asia-market television outlet and on community radio as well. Moreover, it is expected that the high advertising spending in the newspapers will be reciprocated with stories highlighting the arrival of the new clinic.
In the future, the advertising budget may be increased, particularly if sales do not meet expectations. Alternative marketing tactics that are being considered are Google ads targeted towards Korean-language Internet users with Los Angeles-based IPs. Also, the English-language market is another potential target for supplementary marketing campaigns. The size of this market is unknown as are the best means by which to reach it; therefore, this market is considered secondary and will not be given a marketing budget unless needed.
No author (2007). Traditional Chinese Medicine. Alternative Medicine Foundation. Retrieved December 18, 2008 at http://www.amfoundation.org/tcm.htm
No author (2005). Regulation of TCM in the United States. Medscape Today. Retrieved December 18, 2008 at http://www.medscape.com/viewarticle/511877_7
No author (2008). HIV / AIDS, the U.S.-China Partnership for Public Health at Work, and Traditional Chinese Medicine in the U.S. Fact Sheet. U.S. Department of Health and Human Services. Retrieved December 18, 2008 at http://www.hhs.gov/news/facts/chinahiv.html
Census information from U.S. Census Bureau. Retrieved December 18, 2008 at http://factfinder.census.gov/home/saff/main.html?_lang=en
No author. (2003). Population Change by Race and Ethnicity, 1990-2000, USA, California, Los Angeles County, Orange County, Koreatown. California State University, Los Angeles & Korean-American Coalition-Census Information Center. Retrieved December 18, 2008 at http://www.calstatela.edu/centers/ckaks/census/7203_tables.pdf
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