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 Table of Contents

1.0 Executive Summary.....................................................................................................................1

1.1 Mission...........................................................................................................................................1
1.2 Objectives....................................................................................................................................1
Chart: Highlights...........................................................................................................................2
1.3 Keys to Success.........................................................................................................................2
2.0 Company Summary......................................................................................................................2
2.1 Company History.......................................................................................................................2
Chart: Past Performance............................................................................................................3
Table: Past Performance............................................................................................................4
2.2 Company Ownership................................................................................................................4
3.0 Services.............................................................................................................................................4
4.0 Market Analysis Summary.........................................................................................................5
4.1 Market Segmentation..............................................................................................................5
Table: Market Analysis................................................................................................................6
Chart: Market Analysis (Pie).....................................................................................................6
4.2 Target Market Segment Strategy.......................................................................................6
4.3 Service Business Analysis......................................................................................................7
4.3.1 Competition and Buying Patterns...............................................................................8
5.0 Strategy and Implementation Summary.............................................................................8
5.1 Competitive Edge......................................................................................................................8
5.2 Marketing Strategy...................................................................................................................9
5.3 Sales Strategy............................................................................................................................9
5.3.1 Sales Forecast....................................................................................................................9
Table: Sales Forecast............................................................................................................10
Chart: Sales Monthly.............................................................................................................10
Chart: Sales by Year..............................................................................................................11
6.0 Management Summary.............................................................................................................11
Table: Personnel..........................................................................................................................11
7.0 Financial Plan................................................................................................................................12
7.1 Important Assumptions........................................................................................................12
Table: General Assumptions...................................................................................................12
7.2 Break-even Analysis...............................................................................................................13
Table: Break-even Analysis....................................................................................................13
Chart: Break-even Analysis....................................................................................................13
7.3 Projected Profit and Loss.....................................................................................................14
Chart: Profit Monthly.................................................................................................................14
Chart: Profit Yearly.....................................................................................................................15
Chart: Gross Margin Monthly.................................................................................................15
Chart: Gross Margin Yearly.....................................................................................................16
Table: Profit and Loss................................................................................................................16
7.4 Projected Cash Flow...............................................................................................................17
Table: Cash Flow.........................................................................................................................17
Chart: Cash...................................................................................................................................18
7.5 Projected Balance Sheet......................................................................................................18

Page
 Table of Contents

Table: Balance Sheet.................................................................................................................19

7.6 Business Ratios........................................................................................................................19
7.6 Business Ratios........................................................................................................................19
Table: Ratios.................................................................................................................................20
Table: Sales Forecast..........................................................................................................................1
Table: Personnel....................................................................................................................................2
Table: Personnel....................................................................................................................................2
Table: General Assumptions.............................................................................................................3
Table: General Assumptions.............................................................................................................3
Table: Profit and Loss..........................................................................................................................4
Table: Profit and Loss..........................................................................................................................4
Table: Cash Flow...................................................................................................................................5
Table: Cash Flow...................................................................................................................................5
Table: Balance Sheet...........................................................................................................................6
Table: Balance Sheet...........................................................................................................................6

Page
 Healing Touch Massage

1.0 Executive Summary

Healing Touch Massage is a sole proprietorship owned by Lavinia Watkins, LMT. Ms. Watkins
has been a Licensed Massage Therapist in the State of Oregon since July 1984, and has run the
business from a home-based location since then. The business has consistently been profitable
since its inception.

We offer massage in a variety of styles - traditional Swedish Massage, Deep Tissue work,
Sports Massage, Hot Stone Massage, Reflexology, and others.

This massage therapy business plan is being used to explore the cost effectiveness of
expanding by moving the business into a downtown location. This would make the services
more accessible to people who work full time, and also make the office more convenient for
clients with medically-ordered massage therapy.  Billing insurance companies for medically
required massage is lucrative, but the nature of the therapy - usually 15 to 30 minute sessions,
focused on a specific body area, with a short-term duration - makes it imperative that the
clients can get in to see the therapist over their lunch hour or during their work day.

1.1 Mission

Our mission is to run a profitable business by providing therapeutic massage in a caring,

professional environment. We offer massage in a variety of styles - traditional Swedish
Massage, Deep Tissue work, Sports Massage, Hot Stone Massage, Reflexology, and others. Our
goal is to tailor the client's experience based on initial interview information, as well as in-the-
minute feedback during the massage, to insure the client's comfort and satisfaction, and to
increase repeat business. We intend to offer massage that is effective, yet respectful of the
client's personal boundaries, so that the experience is relaxing and energizing for both the
client and the provider. We are mindful of the overall experience - using quality oils and lotions,
appropriate scents, and soothing music, nature sounds or silence - as the client prefers.

1.2 Objectives

1. Increase number of day-time clients by 100% by moving to a downtown location.

2. Increase new clients by 50% by advertising locally.
3. Find other LMT or other personal service provider to sublet space in new location.

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 Healing Touch Massage

Chart: Highlights

Highlights

$50,000

$45,000

$40,000

$35,000 Sales
$30,000
Gross Margin
$25,000
Net Profit
$20,000

$15,000

$10,000

$5,000

$0
2003 2004 2005

1.3 Keys to Success

1. Professionalism: which includes everything from maintaining confidentiality, to keeping our

LMT training up-to-date, to maintaining good boundaries between clients and therapist.

2. Individual Attention: making that extra effort to customize each client's experience to his or
her preference.

3. Repeat business/Recommendations: giving the kind of service that brings people back for
regular treatments, and encourages clients  to recommend us to friends, and other health
professionals to recommend their clients.

2.0 Company Summary

Healing Touch Massage is a Sole Proprietorship owned by Lavinia Watkins, LMT. Ms. Watkins
has been a Licensed Massage Therapist in the State of Oregon since July, 1984, and has run
the business from a home-based location since then. In the years since first obtaining her
license, Ms. Watkins has consistently taken more Continuing Education classes than required to
continue her degree, and has studied a wide variety of massage and other therapeutic
techniques, including: Shiatsu, Deep Tissue, Sports Massage, Reiki, Watsu, Acupressure,
Reflexology, and Integrated Breathing. As  a result, Ms. Watkins has is adept in a wide range of
massage styles, and can tailor each massage to the client's needs and preferences.

2.1 Company History

Lavinia Watkins, LMT, owner of Healing Touch Massage, has been licensed by the State of
Oregon since July 1984. An initial (and expensive!) advertising blitz in the local paper helped
Ms. Watkins establish an initial clientele, many of whom are still clients, some of whom she
continues to offer in-home service. The bulk of her clients come to her home office, and her
advertising has been primarily word of mouth for a number of years. Volunteering to work at
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 Healing Touch Massage

local track and bicycle events in the late 80s established her reputation as a Sports Masseuse,
and attracted another group of long-term repeat clients. In 1993, Ms. Watkins began to make
contact among the local chiropractors, orthopedic surgeons, and other medical professionals in
an effort to build her referrals of "medically-necessary" massage.

The increased in popularity of Section 125 and other "cafeteria plans" has given rise in recent
years to clients who are able to afford regular massage by using these "pre-tax" dollar plans to
increase their discretionary spending budgets for massage.

In 2000, Ms. Watkins became affiliated with the American Health Specialties Network, whose
website is: http://www.ashn.com. This increased her exposure to clients with health insurance
coverage that have Alternative Care coverage, and also greatly decreased the time lag and
difficulties usually associated with filing insurance billing claims.

Ms Watkins is now looking at moving to a downtown location, to further increase her availability
to short-term clients referred my medical professionals.

Chart: Past Performance

Past Performance
$40,000

$36,000

$32,000

$28,000
Sales
$24,000
Gross
$20,000

$16,000 Net

$12,000

$8,000

$4,000

$0
2000 2001 2002

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 Healing Touch Massage

Table: Past Performance

Past Performance
2000 2001 2002
Sales $32,000 $35,000 $39,000
Gross Margin $28,000 $31,058 $34,320
Gross Margin % 87.50% 88.74% 88.00%
Operating Expenses $6,500 $6,800 $7,000
Collection Period (days) 0 0 0

Balance Sheet
2000 2001 2002

Current Assets
Cash $500 $350 $1,000
Accounts Receivable $200 $350 $500
Other Current Assets $50 $50 $50
Total Current Assets $750 $750 $1,550

Long-term Assets
Long-term Assets $1,200 $1,500 $2,000
Accumulated Depreciation $1,100 $1,150 $1,200
Total Long-term Assets $100 $350 $800

Total Assets $850 $1,100 $2,350

Current Liabilities
Accounts Payable $50 $50 $50
Current Borrowing $0 $0 $0
Other Current Liabilities (interest free) $0 $0 $0
Total Current Liabilities $50 $50 $50

Long-term Liabilities $0 $0 $0
Total Liabilities $50 $50 $50

Paid-in Capital $800 $1,000 $1,200

Retained Earnings $0 $50 $1,100
Earnings $0 $0 $0
Total Capital $800 $1,050 $2,300

Total Capital and Liabilities $850 $1,100 $2,350

Other Inputs
Payment Days 0 0 0
Sales on Credit $0 $0 $0
Receivables Turnover 0.00 0.00 0.00

2.2 Company Ownership

Healing Touch Massage is a Sole Proprietorship owned by Lavinia Watkins, LMT. 

3.0 Services

Healing Touch Massage offers therapeutic massage services.

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 Healing Touch Massage

4.0 Market Analysis Summary

The planned move to a downtown location will facilitate access by clients recovering from
injuries. We have identified this as a lucrative target market because they usually are funded by
insurance claims, and represent repeat visits for a duration of up to one year. Because this
group very often needs multiple, short sessions for a series of weeks or months, a downtown
location would make us convenient for mid-day appointments.

It is also quite probable that other clients who work during the day would be more likely to
book a day-time massage when we are more conveniently located to their place of work. Since
the number of day time slots far exceeds the number of evening slots, this is increased
business we would be able to book in addition to our current clients.

4.1 Market Segmentation

Clients who come for massage fall into four basic groups:

1. Clients recovering from injuries or accidents

o Often also seeing a chiropractor or physical therapist (more often referral from
chiropractor)
o Frequently paid by insurance
o Usually insurance will pay for short-term therapy only, although clients will
sometimes supplement out-of-pocket

2. Clients pampering themselves

o High disposable income individuals

o Sometimes have chronic pain or old injury issues
o Massage 1 - 4 times a month for relaxation

3. Clients who prefer alternative health care

o Use massage as preventative health care

o Use other alternative practices - e.g. acupuncture, Chiropractor, Naturopath,
Herbalist, etc.
o Try to have massage as regularly as they can afford - usually once per month

4. Serious Athletes

o Injury and workout recovery, also preventative

o Many serious runners/bicyclists in local area
o Massage for improved performance - great for word-of mouth referrals if they see
results

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 Healing Touch Massage

Table: Market Analysis

Market Analysis
2003 2004 2005 2006 2007
Potential Customers Growth CAGR
Injury Recovery 3% 156 161 166 171 176 3.06%
Self-pampering 5% 300 315 331 348 365 5.03%
Alternative Care 5% 144 151 159 167 175 5.00%
Athletes 2% 180 184 188 192 196 2.15%
Other 0% 0 0 0 0 0 0.00%
Total 3.99% 780 811 844 878 912 3.99%

Chart: Market Analysis (Pie)

Market Analysis (Pie)

Injury Recovery

Self-pampering

Alternative Care

Athletes

Other

4.2 Target Market Segment Strategy

As individual as our clients are, they seem to fall into one of five general categories: Injury
Recovery, Self-Pampering/Relaxation, Alternative Care Users, Athletes, and the inevitable
Other. Besides the obvious differences in the style of massage each of these prefer, they also
represent separate groups for marketing and retention purposes.

The Injury recovery group is usually referred by a Chiropractor, self-referred through our listing
on the American Specialty Health Network site, or referred by another client who found
massage helpful during an injury recovery. So the marketing to this audience is done indirectly,
through the referring parties. While car insurance will typically pay for massage for only a
limited time period (less than one year), many health insurance policies now have Alternative
Care coverage with a renewable annual maximum. And Cafeteria Plans will reimburse for
"medically necessary" massage - which is a bit ironic since few, if any, medical doctors will
proactively recommend massage, but most will be willing to sign off on a recommendation, if
specifically asked by their patients. The rapid turnover of this group is offset by the fact that
they will pay top dollar per session. The key is to keep getting new referrals.
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 Healing Touch Massage

Clients who have the disposable income to indulge in massage for self-pampering or relaxation
are the core of our long-term repeat customers. These clients will come once a week to once a
month for years, and often refer other family and friends. The difficulty working with these
clients comes from the 'familiarity breeds contempt" factor - they can believe they deserve
lower rates, cancellations of short or no notice, and can come to seem as friends, rather than
clients. The challenge here is maintain a professional relationship, while encouraging the
warmth and personal connection that is as much a part of their experience as the actual
massage. This type of client can be  difficult to find - an ad in the local alternative news weekly
(especially with a coupon for $5 off ) or a donation to a charity auction may result in a one-time
visit, or a long-term client. Another source of usually one-time visitors is the Gift Certificate -
friends pampering friends for a birthday or other special occasion.

The third group are Alternative Care users. These are people who mistrust allopathic medicine,
and prefer to use chiropractors, naturopaths, herbalists, acupuncturists. A local networking
group of alternative care providers is a great way to get referrals, as well as placing posters on
other practitioners offices, and ads in the local alternative newspaper. The problem with this
group is that they can tend to have relatively small disposable incomes, so that a massage once
every two months may be all they can afford. A relatively large pool of these clients will book
only 20% of the available appointments in any given month. 

The final group is another backbone of this business - the amateur athletes. There is a large
population of runners and bicyclists in the local areas, as well as out-of-town participants who
return for annual events, and book massages during those times. This business tends to be
slightly seasonal - as most amateur athletes will only train, or gear-up their training during the
Spring and Summer months. However, they are a very loyal group, and will readily give word-
of-mouth recommendations, especially if they see massage as having given them a specific
boost to their performance. This group will cross over from the Injury group, and become long-
term clients after the specific initial injury has healed. They also tend to have chronic injuries or
pain, especially as they age, which can help them become repeat clients.

4.3 Service Business Analysis

The massage industry consists of several dozens of individual therapists working out of home or

private offices, in addition to LMTs working in chiropractors' offices, gyms, beauty salons, and
other venues.

Additional massage services are offered by graduates of specialty schools; Rolfers, Breath
Managers, Hakomi Therapists, as well as Physical Therapists.

Fortunately, massage is a very personal service, and different clients are attracted to different
techniques and personalities. Healing Touch Massage offers the unique services of Lavinia
Watkins, LMT, which cannot be duplicated by any other practitioner.

This business is becoming increasingly easy to "break into," since obtaining the training
necessary for licensing is not all that arduous, nor difficult to maintain. But while getting the
credentials and equipment necessary to start a new massage business is easy, establishing
a clientele is not, so our established practice of over 20 years duration helps us compete with
the ever-available flow of LMTs graduating from local schools.

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 Healing Touch Massage

4.3.1 Competition and Buying Patterns

The key element in purchase decisions made by potential massage clients is trust in the
professional reputation, and ultimately, in the skill and knowledge of the provider as
experienced in the initial massage. For this reason, a discount coupon or donation to a charity
auction can be an effective way to troll the waters for new clients. Recommendations from
other clients and alternative health service providers is also critical.

While there is a range of prices charged for massage service in the area, there is some price
sensitivity among the long-term clientele. Since the variable cost of each massage is nominal,
the best bet has seemed to be to charge less than the market will bear. The one exception is
when billing insurance companies, where there is no penalty for charging the full Reasonable
and Customary Rates for the area.

Clients rarely compare massage therapists directly, although they may try a second LMT if they
are not entirely happy with their first experience. Usually they follow word-of-mouth
recommendations, and return for repeat sessions as often as their budget allows.

5.0 Strategy and Implementation Summary

If, as it has been said, the top three items which determine success in business are location,
location, and location, then the planned move to a downtown location represents our top
marketing strategy. By being more available to working clients, and by making the other health
professionals who will refer those clients to us aware of our new location, we literally make
ourselves accessible to more business.

Once a client experiences the level of personalized care that we offer, we are confident that we
will have a return client, for as long as their funding holds out. And since we have seen many
clients who began as insurance-paid injury-recovery cases turn into regular self-paying clients,
we believe this will serve our long-term goal of increasing business also.

5.1 Competitive Edge

This is another section where mission and passion create the same results as "Marketing." Our
"competitive edge" is our ability to give intuitive massage - to sense in the client's musculature,
posture and presence what work is needed - where the pain is, where the tension is. There is a
way that years of study of technique combine with a deep knowledge of kinesiology and
anatomy, that is then synthesized with an acute sense of empathy and ability to "read" people
that enables us to provide a massage experience that is exactly what each client needs at that
given moment.

We have repeatedly heard of word-of-mouth recommendations bringing in new clients with

words like "magic hands" and "a higher sense of healing."

Quite apart from this gift, or talent, however, is a sense of what it take to run a business: How
to pace appointments to conserve personal energy; how to use networking - whether local or
the ASHN - to reach prospective clients; how to maintain that fine balance between personal
service and professional boundaries.

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 Healing Touch Massage

The change to having an outside-the-home office in a downtown location is both exhilarating

and a bit scary. It will definitely make Healing Touch Massage accessible to more clients - and
hopefully, the top-end, insurance-paid clients. But can we also retain the long-term clients who
feel 'at home" in our home office after all these years? We believe so.

5.2 Marketing Strategy

Critical to the success of the move to a new location with be the maintenance of referral -
creating contacts with other health care providers, especially chiropractors. Also, researching
the possibility of becoming a Preferred Provider with other health insurance companies that
offer Alternative Care to their members will be critical. Any opportunity to convince allopathic
physicians - MDs - to see massage as having long-term healing benefits for their patients will
also be taken, since they hold to key to having massage paid for as "medically necessary." 

5.3 Sales Strategy

It can be difficult to think of offering the best possible massage service as a sales strategy,
since that is also the mission and personal passion of the owner of Healing Touch Massage.
Each client comes with a specific personal agenda, both emotional and physical, and the goal is
to "read" that client, and provide the pain relief, relaxation, and feeling of increased well-being
that will allow that client to leave feeling satisfied.

This is one business where the service IS the sales technique. It is impossible NOT to offer
completely customized services, since each client will present a unique body to be worked on.
Of course, the total environment in which the service is offered - smells, lighting, sounds, feel
of the linens and oils, emotional presence of the therapist - all combine with the techniques of
actual tissue manipulation and knowledge of the musculo-skeletal systems to create the client's
experience.

5.3.1 Sales Forecast

The following table and charts give a run-down on forecasted sales. We expect sales to remain
fairly stable, as the practice is relatively "full" for the present. We anticipate moving into the
new downtown location in 2004. This move to a location more convenient for mid-day
appointments should increase our injury/insurance billing by 50%, and our self-pampering
group by at least 5%.

There is also a bit of seasonality - athletes tend to get more massage during the Spring and
Summer "performance" months.  Also, we have regularly experienced a slight increase in late
December, January, and May due to Gift Certificates purchased for the holidays and Mothers
Day.

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 Healing Touch Massage

Oct Nov Dec

Table: Sales Forecast

Jul Aug Sep

Sales Forecast
2003 2004 2005
Sales
Injury Recovery $9,480 $14,220 $21,330

Jun
Self-pampering $15,300 $16,065 $16,868
Altenative Care $7,200 $7,200 $7,200
Athletes $7,700 $7,700 $7,700

Apr May
Total Sales $39,680 $45,185 $53,098

Direct Cost of Sales 2003 2004 2005

Linens $1,500 $1,650 $1,815

Feb Mar
Oils & Lotions $200 $220 $242
Insurance Billing $480 $528 $581
Subtotal Direct Cost of Sales $2,180 $2,398 $2,638

Jan
Chart: Sales Monthly

Sales Monthly
$3,600

$3,200

$2,800

$2,400 Injury Recovery

$2,000 Self-pampering

$1,600 Altenative Care

$1,200 Athletes

$800

$400

$0

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 Healing Touch Massage

Chart: Sales by Year

Sales by Year

$50,000

$40,000 Injury Recovery

Self-pampering
$30,000
Altenative Care

$20,000 Athletes

$10,000

$0
2003 2004 2005

6.0 Management Summary

Healing Touch Massage is a sole proprietorship owned by Lavinia Watkins, LMT. Ms. Watkins
has been a Licensed Massage Therapist in the State of Oregon since July 1984. Ms. Watkins has
consistently taken more Continuing Education classes than required to continue her degree, and
has studied a wide variety of massage and other therapeutic techniques, including:
Shiatsu, Deep Tissue, Sports Massage, Reiki, Watsu, Acupressure, Reflexology, and Integrated
Breathing.

Ms. Watkins currently holds certificates of completion of the Advanced level training from the
prestigious Boulder School of Sports Massage, a Second Level Reiki Degree, and 30 hours of
Watsu training. She is also an avid practitioner of Ki Akido, and a member of the Eugene
Zendo. She hold a BA degree from University of California, Riverside in Urban Studies, with a
minor in Business. She is a member of the Oregon Association of Alternative Practitioners, and
of the American Massage Therapy Association.

Table: Personnel

Personnel Plan
2003 2004 2005
Owner Draw $30,000 $30,000 $33,500
Other $0 $0 $0
Total People 0 0 0

Total Payroll $30,000 $30,000 $33,500

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 Healing Touch Massage

7.0 Financial Plan

The following Financial Plan represents a continuation of actual business revenues and expenses
for the remainder of 2003, and then a planned increase in both revenues and expenses as a
result of a location change.

Another scenario for maintaining income to match the increased expenses of the new downtown
location would be to sublet part of the space to another LMT or complementary health care
provider. A third scenario would be to try out a downtown location by subletting office space
from a chiropractor or in an existing LMT office. Since these last two scenarios are mutually
exclusive to the first, preferred plan, they are not reflected in financial plans presented here.

7.1 Important Assumptions

The financial plan depends on important assumptions, most of which are shown in the following
table as annual assumptions.

The collection days are for insurance billings only, and not a factor we can influence easily.
Interest rates, tax rates, and personnel burden are based on conservative assumptions.

Two of the more important underlying assumptions are:

1. We assume a strong economy, without major recession.

2. We assume, of course, that there are no changes to the Medical/insurance Industry, such as
the nationalization of health care.

Table: General Assumptions

General Assumptions
2003 2004 2005
Plan Month 1 2 3
Current Interest Rate 5.00% 5.00% 5.00%
Long-term Interest Rate 5.65% 5.65% 5.65%
Tax Rate 28.17% 28.00% 28.17%
Other 0 0 0

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 Healing Touch Massage

7.2 Break-even Analysis

The following chart and table summarize our break-even analysis. Because this business has
been run from a home office, the fixed costs for rent and utilities have been moderate. As we
move the business into a downtown location, the fixed costs will rise substantially.

The break-even assumes minimal variable costs: linens and massage oil. If having a downtown

office increases the number of clients paid for by insurance, there will be additional costs per
client for claims processing.

Table: Break-even Analysis

Break-even Analysis

Monthly Revenue Break-even $3,101

Assumptions:
Average Percent Variable Cost 5%
Estimated Monthly Fixed Cost $2,931

Chart: Break-even Analysis

Break-even Analysis
$2,000

$1,500

$1,000

$500

$0

($500)

($1,000)

($1,500)

($2,000)

($2,500)

$0 $1,000 $2,000 $3,000 $4,000 $5,000

$500 $1,500 $2,500 $3,500 $4,500 $5,500

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 Healing Touch Massage

7.3 Projected Profit and Loss

Sales and expenses for 2003 are projected from YTD actuals, and seasonal variations noted
over the last few years. The big change comes in 2004 and 2005, with the addition of a
downtown office, which will increase the rent dramatically. As noted in the Sales Forecast, the
expectation is that the number of Insurance Billing clients will rise as the business becomes
more convenient for short, mid-day appointments.

There is no personnel cost other than the owner's draw, as the company is a sole
proprietorship. Payroll taxes are calculated at 15%, however, as Self Employment Taxes (FICA)
must also be paid. Estimated taxes will be paid quarterly, although they are calculated monthly
on this table.

Not included on this table is the scenario where the Insurance Billing clients do not increase
sufficiently quickly to cover the increased cost of rent. At some point, the decision could be
made to rent out part of the office space, or rent the entire space to another massage therapist
for set times during the week, which would offset the same costs. If a lease needs to be signed,
which is most likely for the 2004 year, it will be for one year only, to minimize the risk if the
anticipated increase in Insurance Billing clients does not occur.

Chart: Profit Monthly

Profit Monthly
$300

$270

$240

$210

$180

$150

$120

$90

$60

$30

$0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

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 Healing Touch Massage

Chart: Profit Yearly

Profit Yearly

$2,100

$1,800

$1,500

$1,200

$900

$600

$300

$0
2003 2004 2005

Chart: Gross Margin Monthly

Gross Margin Monthly

$3,200

$2,800

$2,400

$2,000

$1,600

$1,200

$800

$400

$0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

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 Healing Touch Massage

Chart: Gross Margin Yearly

Gross Margin Yearly

$50,000

$40,000

$30,000

$20,000

$10,000

$0
2003 2004 2005

Table: Profit and Loss

Pro Forma Profit and Loss

2003 2004 2005
Sales $39,680 $45,185 $53,098
Direct Cost of Sales $2,180 $2,398 $2,638
Other Costs of Sales $0 $0 $0
Total Cost of Sales $2,180 $2,398 $2,638

Gross Margin $37,500 $42,787 $50,460

Gross Margin % 94.51% 94.69% 95.03%

Expenses
Payroll $30,000 $30,000 $33,500
Sales and Marketing and Other Expenses $550 $600 $600
Depreciation $50 $50 $50
Rent (inc Utilities) $2,400 $9,600 $9,900
Insurance $636 $800 $1,000
Payroll Taxes $335 $30 $429
Other $1,200 $1,500 $2,000

Total Operating Expenses $35,171 $42,580 $47,479

Profit Before Interest and Taxes $2,329 $207 $2,981

EBITDA $2,379 $257 $3,031
Interest Expense $0 $0 $0
Taxes Incurred $656 $58 $840

Net Profit $1,673 $149 $2,141

Net Profit/Sales 4.22% 0.33% 4.03%

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7.4 Projected Cash Flow

The following Cash Flow table shows us with a consistent positive Cash Flow throughout the
transition. Because the business is a sole proprietorship, the amounts listed as "payroll" are, in
fact, owner's draw, so they are obviously the area of cash flow where adjustments are, and will
be, made if  the Cash Flow becomes tight.

We do list a marked increase in outflow of Cash for the purchase of Fixed Assets in 2004. These
would be for fixtures and lease improvement to whatever new space we rent for our new
downtown location. Since all of the equipment we currently use is portable, this additional cost
is fairly moderate, since it mostly represents cosmetic improvements. There is a possibility that
the landlord would do many of the improvements before we moved in, in exchange for an
increase in the monthly rent, which would flatten out the cash outflow a bit.

Table: Cash Flow

Pro Forma Cash Flow

2003 2004 2005
Cash Received

Cash from Operations

Cash Sales $34,522 $39,311 $46,195
Cash from Receivables $4,843 $5,761 $6,740
Subtotal Cash from Operations $39,364 $45,072 $52,936

Additional Cash Received

Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0
New Long-term Liabilities $0 $0 $0
Sales of Other Current Assets $0 $0 $0
Sales of Long-term Assets $0 $0 $0
New Investment Received $0 $0 $0
Subtotal Cash Received $39,364 $45,072 $52,936

Expenditures 2003 2004 2005

Expenditures from Operations

Cash Spending $30,000 $30,000 $33,500
Bill Payments $7,411 $14,350 $17,208
Subtotal Spent on Operations $37,411 $44,350 $50,708

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $0 $0 $0
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $2,000 $2,000
Dividends $0 $0 $0
Subtotal Cash Spent $37,411 $46,350 $52,708

Net Cash Flow $1,953 ($1,279) $228

Cash Balance $2,953 $1,675 $1,903

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Chart: Cash

Cash
$3,000

$2,700

$2,400

$2,100

$1,800
Net Cash Flow
$1,500

$1,200 Cash Balance

$900

$600

$300

$0

Jan Mar May Jul Sep Nov

Feb Apr Jun Aug Oct Dec

7.5 Projected Balance Sheet

The only Accounts Receivable carried is any Insurance Billings that are not paid during the
month. It is rare for insurance companies to take more than 6 weeks to pay, and some pay as
quickly as 10 working days, so these numbers assume that they will pay in 30 days.

The Accounts Payable is for linens (paid monthly) and lotions/supplies (usually purchased
quarterly).

We assume that there will be some additional expenses, in the form of long-term assets
purchased, when we move to the new office in 2004.

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Table: Balance Sheet

Pro Forma Balance Sheet

2003 2004 2005
Assets

Current Assets
Cash $2,953 $1,675 $1,903
Accounts Receivable $816 $929 $1,092
Other Current Assets $50 $50 $50
Total Current Assets $3,819 $2,654 $3,044

Long-term Assets
Long-term Assets $2,000 $4,000 $6,000
Accumulated Depreciation $1,250 $1,300 $1,350
Total Long-term Assets $750 $2,700 $4,650
Total Assets $4,569 $5,354 $7,694

Liabilities and Capital 2003 2004 2005

Current Liabilities
Accounts Payable $596 $1,232 $1,431
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $596 $1,232 $1,431

Long-term Liabilities $0 $0 $0
Total Liabilities $596 $1,232 $1,431

Paid-in Capital $1,200 $1,200 $1,200

Retained Earnings $1,100 $2,773 $2,922
Earnings $1,673 $149 $2,141
Total Capital $3,973 $4,122 $6,264
Total Liabilities and Capital $4,569 $5,354 $7,694

Net Worth $3,973 $4,122 $6,264

7.6 Business Ratios

The following table shows the projected businesses ratios. We expect to maintain healthy ratios
for profitability, risk, and return. The ratios for the initial year of growth are, of course, not as
favorable as the second year. And if we cannot maintain healthy ratios during that growth
phase, a return to the lesser level of expenses we have historically had in a home-based
business can be returned to. Industry profile ratios based on the Standard Industrial
Classification (SIC) code 8049.02, Physical therapists, are shown for comparison.

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Table: Ratios

Ratio Analysis
2003 2004 2005 Industry Profile
Sales Growth 1.74% 13.87% 17.51% 5.93%

Percent of Total Assets

Accounts Receivable 17.85% 17.35% 14.19% 26.64%
Other Current Assets 1.09% 0.93% 0.65% 42.05%
Total Current Assets 83.59% 49.57% 39.57% 73.17%
Long-term Assets 16.41% 50.43% 60.43% 26.83%
Total Assets 100.00% 100.00% 100.00% 100.00%

Current Liabilities 13.05% 23.01% 18.59% 29.42%

Long-term Liabilities 0.00% 0.00% 0.00% 19.99%
Total Liabilities 13.05% 23.01% 18.59% 49.41%
Net Worth 86.95% 76.99% 81.41% 50.59%

Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 94.51% 94.69% 95.03% 100.00%
Selling, General & Administrative Expenses 90.28% 94.36% 90.99% 79.27%
Advertising Expenses 0.00% 0.00% 0.00% 0.46%
Profit Before Interest and Taxes 5.87% 0.46% 5.61% 3.28%

Main Ratios
Current 6.40 2.15 2.13 1.95
Quick 6.40 2.15 2.13 1.55
Total Debt to Total Assets 13.05% 23.01% 18.59% 5.28%
Pre-tax Return on Net Worth 58.61% 5.03% 47.60% 60.60%
Pre-tax Return on Assets 50.96% 3.87% 38.75% 13.40%

Additional Ratios 2003 2004 2005

Net Profit Margin 4.22% 0.33% 4.03% n.a
Return on Equity 42.11% 3.62% 34.19% n.a

Activity Ratios
Accounts Receivable Turnover 6.32 6.32 6.32 n.a
Collection Days 59 54 53 n.a
Accounts Payable Turnover 13.34 12.17 12.17 n.a
Payment Days 27 22 28 n.a
Total Asset Turnover 8.68 8.44 6.90 n.a

Debt Ratios
Debt to Net Worth 0.15 0.30 0.23 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a

Liquidity Ratios
Net Working Capital $3,223 $1,422 $1,614 n.a
Interest Coverage 0.00 0.00 0.00 n.a

Additional Ratios
Assets to Sales 0.12 0.12 0.14 n.a
Current Debt/Total Assets 13% 23% 19% n.a
Acid Test 5.04 1.40 1.36 n.a
Sales/Net Worth 9.99 10.96 8.48 n.a
Dividend Payout 0.00 0.00 0.00 n.a

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Table: Sales Forecast

Sales Forecast
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Sales
Injury Recovery 0% $780 $780 $780 $780 $780 $780 $780 $780 $780 $780 $780 $900
Self-pampering 0% $1,400 $1,250 $1,250 $1,250 $1,400 $1,250 $1,250 $1,250 $1,250 $1,250 $1,250 $1,250
Altenative Care 0% $600 $600 $600 $600 $600 $600 $600 $600 $600 $600 $600 $600
Athletes 0% $500 $500 $600 $750 $750 $750 $750 $750 $750 $600 $500 $500
Total Sales $3,280 $3,130 $3,230 $3,380 $3,530 $3,380 $3,380 $3,380 $3,380 $3,230 $3,130 $3,250

Direct Cost of Sales Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Linens $125 $125 $125 $125 $125 $125 $125 $125 $125 $125 $125 $125
Oils & Lotions $50 $0 $0 $50 $0 $0 $50 $0 $0 $50 $0 $0
Insurance Billing $40 $40 $40 $40 $40 $40 $40 $40 $40 $40 $40 $40
Subtotal Direct Cost of Sales $215 $165 $165 $215 $165 $165 $215 $165 $165 $215 $165 $165

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Table: Personnel

Personnel Plan
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Owner Draw 0% $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500
Other 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total People 0 0 0 0 0 0 0 0 0 0 0 0

Total Payroll $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500

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Table: General Assumptions

General Assumptions
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Plan Month 1 2 3 4 5 6 7 8 9 10 11 12
Current Interest Rate 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00%
Long-term Interest Rate 5.65% 5.65% 5.65% 5.65% 5.65% 5.65% 5.65% 5.65% 5.65% 5.65% 5.65% 5.65%
Tax Rate 30.00% 28.00% 28.00% 28.00% 28.00% 28.00% 28.00% 28.00% 28.00% 28.00% 28.00% 28.00%
Other 0 0 0 0 0 0 0 0 0 0 0 0

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Table: Profit and Loss

Pro Forma Profit and Loss

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Sales $3,280 $3,130 $3,230 $3,380 $3,530 $3,380 $3,380 $3,380 $3,380 $3,230 $3,130 $3,250
Direct Cost of Sales $215 $165 $165 $215 $165 $165 $215 $165 $165 $215 $165 $165
Other Costs of Sales $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Cost of Sales $215 $165 $165 $215 $165 $165 $215 $165 $165 $215 $165 $165

Gross Margin $3,065 $2,965 $3,065 $3,165 $3,365 $3,215 $3,165 $3,215 $3,215 $3,015 $2,965 $3,085
Gross Margin % 93.45% 94.73% 94.89% 93.64% 95.33% 95.12% 93.64% 95.12% 95.12% 93.34% 94.73% 94.92%

Expenses
Payroll $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500
Sales and Marketing and Other $0 $50 $50 $50 $50 $50 $50 $50 $50 $50 $50 $50
Expenses
Depreciation $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $50
Rent (inc Utilities) $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200
Insurance $53 $53 $53 $53 $53 $53 $53 $53 $53 $53 $53 $53
Payroll Taxes 20% $27 $8 $20 $33 $58 $39 $33 $39 $39 $14 $8 $17
Other $100 $100 $100 $100 $100 $100 $100 $100 $100 $100 $100 $100

Total Operating Expenses $2,880 $2,911 $2,923 $2,936 $2,961 $2,942 $2,936 $2,942 $2,942 $2,917 $2,911 $2,970

Profit Before Interest and Taxes $185 $54 $142 $229 $404 $273 $229 $273 $273 $98 $54 $115
EBITDA $185 $54 $142 $229 $404 $273 $229 $273 $273 $98 $54 $165
Interest Expense $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Taxes Incurred $56 $15 $40 $64 $113 $76 $64 $76 $76 $27 $15 $32

Net Profit $130 $39 $102 $165 $291 $196 $165 $196 $196 $70 $39 $83
Net Profit/Sales 3.95% 1.25% 3.16% 4.88% 8.24% 5.81% 4.88% 5.81% 5.81% 2.18% 1.25% 2.56%

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Table: Cash Flow

Pro Forma Cash Flow

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Cash Received

Cash from Operations

Cash Sales $2,854 $2,723 $2,810 $2,941 $3,071 $2,941 $2,941 $2,941 $2,941 $2,810 $2,723 $2,828
Cash from Receivables $250 $264 $426 $407 $421 $440 $458 $439 $439 $439 $439 $419
Subtotal Cash from Operations $3,104 $2,987 $3,236 $3,348 $3,492 $3,381 $3,399 $3,380 $3,380 $3,250 $3,162 $3,247

Additional Cash Received

Sales Tax, VAT, HST/GST Received 0.00% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Sales of Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Sales of Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Investment Received $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Cash Received $3,104 $2,987 $3,236 $3,348 $3,492 $3,381 $3,399 $3,380 $3,380 $3,250 $3,162 $3,247

Expenditures Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Expenditures from Operations

Cash Spending $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500
Bill Payments $72 $648 $592 $631 $716 $737 $685 $714 $684 $683 $657 $592
Subtotal Spent on Operations $2,572 $3,148 $3,092 $3,131 $3,216 $3,237 $3,185 $3,214 $3,184 $3,183 $3,157 $3,092

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Long-term Liabilities Principal Repayment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Purchase Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Purchase Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Dividends $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Cash Spent $2,572 $3,148 $3,092 $3,131 $3,216 $3,237 $3,185 $3,214 $3,184 $3,183 $3,157 $3,092

Net Cash Flow $532 ($161) $144 $217 $276 $143 $214 $166 $196 $67 $5 $155

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 Appendix
Cash Balance $1,532 $1,371 $1,515 $1,732 $2,007 $2,151 $2,365 $2,531 $2,727 $2,794 $2,798 $2,953

Table: Balance Sheet

Pro Forma Balance Sheet

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Assets Starting Balances

Current Assets
Cash $1,000 $1,532 $1,371 $1,515 $1,732 $2,007 $2,151 $2,365 $2,531 $2,727 $2,794 $2,798 $2,953
Accounts Receivable $500 $676 $819 $813 $845 $884 $883 $864 $864 $864 $845 $813 $816
Other Current Assets $50 $50 $50 $50 $50 $50 $50 $50 $50 $50 $50 $50 $50
Total Current Assets $1,550 $2,258 $2,240 $2,378 $2,627 $2,941 $3,084 $3,279 $3,445 $3,641 $3,688 $3,661 $3,819

Long-term Assets
Long-term Assets $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000
Accumulated Depreciation $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,250
Total Long-term Assets $800 $800 $800 $800 $800 $800 $800 $800 $800 $800 $800 $800 $750
Total Assets $2,350 $3,058 $3,040 $3,178 $3,427 $3,741 $3,884 $4,079 $4,245 $4,441 $4,488 $4,461 $4,569

Liabilities and Capital Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Current Liabilities
Accounts Payable $50 $629 $571 $607 $691 $715 $661 $691 $661 $661 $638 $571 $596
Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other Current Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Current Liabilities $50 $629 $571 $607 $691 $715 $661 $691 $661 $661 $638 $571 $596

Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Liabilities $50 $629 $571 $607 $691 $715 $661 $691 $661 $661 $638 $571 $596

Paid-in Capital $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200
Retained Earnings $1,100 $1,100 $1,100 $1,100 $1,100 $1,100 $1,100 $1,100 $1,100 $1,100 $1,100 $1,100 $1,100
Earnings $0 $130 $169 $271 $436 $726 $923 $1,088 $1,284 $1,480 $1,551 $1,590 $1,673
Total Capital $2,300 $2,430 $2,469 $2,571 $2,736 $3,026 $3,223 $3,388 $3,584 $3,780 $3,851 $3,890 $3,973
Total Liabilities and Capital $2,350 $3,058 $3,040 $3,178 $3,427 $3,741 $3,884 $4,079 $4,245 $4,441 $4,488 $4,461 $4,569

Net Worth $2,300 $2,430 $2,469 $2,571 $2,736 $3,026 $3,223 $3,388 $3,584 $3,780 $3,851 $3,890 $3,973

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