In Home Therapies - A Business Proposal
Introduction
The stress associated with daily living has a negative impact on people of all ages. This stress comes from challenges experienced in personal and professional lives. People need an outlet to help reduce or relieve the pressures of life that has lasting effects. Massage is one way to reduce stress and helps the body release every day tensions, reduce muscle pain, and restore balance to body and mind. Imagine you are in the comfort of your home and a licensed massage therapist arrives on schedule to give that opportunity. This business proposal is for a mobile spa business that brings qualified, trained staff to your location. The services and products provided by In Home Therapies are designed to improve consumers’ wellness and quality of life.
The economy is experiencing a slow recovery from the most recent recession. Macroeconomic factors such as economic output, unemployment, inflation, savings, and investment are key indicators of economic performance. Sivy, M. (2013) states “Economic growth has averaged less than 2.25% since the recovery began and is estimated to have slowed to less than 1% in the most recent quarter” (para . 1).
A current credit market report states that Treasury prices remain high based on uncertain economic data and the looming debate in Congress on spending cuts in March (Ross, 2013). Influencing factors include the highest Treasury Inflation Protected Securities auctioned yield in a year at 0.639%. The amount of debt being bought is down domestically and slightly higher when foreign banks are included. Overall, credit opportunities are down, yields are down, but percentage rates remain favorable (Ross, 2013). Building good credit is a challenge. It may be feasible to seek credit on pre-existing loans or debt. Although that traditionally has not been the most advisable plan it applies to the current state of market credit in the slow economic recovery period.
For our purposes, the road ahead appears to be challenging for small business startups. “The rest of 2013 doesn't look promising for small-business credit, but by this time next year difficulties in the credit environment should subside and there should be better times ahead, according to findings from Moody's Analytics” (Munk, 2013). Perhaps in a year conditions for credit will improve after economic issues in Washington, such as sequestration, subside and consumer confidence is restored.
Further research from the Business Cycle Dating Committee of the National Bureau of Economic Research indicates that a trough in business activity occurred in the United States economy in June 2009. The trough marks the end of the recession that began in December 2007 and the beginning of an expansion (The National Bureau of Economic Research 2010).
The massage industry has the opportunity to attract more business from the people affected by the stress and anxiety of the economy. McConnell, Brue, and Flynn (2009) state “The responsiveness (or sensitivity) of consumers to a price change is measured by a product’s price elasticity of demand” (p. 114). The demand for massage therapy is elastic. Small changes in price cause people to consider other sources for their massage. The economy is currently in the expansion phase in the business cycle meaning income and employment is rising after the current recession (McConnell, Brue, & Flynn, 2009). But consumers are still cautious when spending money. New businesses need to be price aggressive and offer more than their competitors. An online article said, “A recent government survey showed that savings rate rose in December 2012” (ABC Digital) Meaning consumers are spending less and being more sensitive to prices. Massage therapy provided as part of a prescribed treatment by a physician or registered physical therapist is often covered by insurance.

Consumers of massage recognize the benefits massage therapy brings. Satisfied customers committed to their well-being, continue in tough economic times to justify the expense related to massage therapy. According to the Massage Therapy Industry Fact Sheet 2011, Massage therapy is evolving as an “…adjunct treatment with Western medicine (p. 1). Statistics from the American Massage Therapy Association (AMTA) illustrate the popularity of massage.
• 28% of all adults reported having had at least one massage in the past five years
• 25% of women and 10% of men reported having a massage in the past year, this amounts to 18% of all adults
• 31% did so for health reasons, including pain management, injury rehabilitation, migraine control, and overall wellness
• 86% said massage helps reduce pain
• 85% said massage boosts health and wellness
Research indicates that the average massage client is middle to upper middle class man or woman living in the Tucson, Arizona, metropolitan area. Common characteristics among clients include: Annual household income exceeding $50,000, lives or works within a 15-mile radius of Tucson, Arizona, and spends $60 per visit by the massage therapist.
This business will start with the owner working in the evenings and on weekends, and averaging 20 to 25 massages monthly. Application for a small business loan will be submitted for start-up costs and will be used to establish a business account and purchase the necessary items shown in Table 1.
One Time Costs (Fixed) Monthly Costs (Variable)
Portable massage table $500 Fuel $250
Technician stool $50 Massage supplies $100
Answering machine $100 Advertising $150
Head cradle $75 Professional membership $25
QuickBooks software $300 Laundry $125
Office supplies $200 Vehicle maintenance $50
Massage supplies – linens, towels, oils, lotions $300
Insurance - liability, workman's compensation, automobile $300
Arizona massage license and small business license $400
Website development
$1,000
Total $3,275 Total $700

Table 1 - Start-up Costs

Increasing Revenue
This type of business is in a pure competition market structure (McConnell, Brue, and Flynn, 2009). Businesses compete by creating a brand, providing customer service, discounts, coupons, and product differentiation. Revenue is increased by growing the client base through superior service, client referrals, and customer retention. New customers can be attracted using sales websites such as Groupon or Living Social. A percentage of these sales will result in repeat customers.
The mobile spa offers a unique opportunity for individuals to afford the comforts of massage in the home. In today’s fast-paced economy, in home comforts become very popular. Credit market projections indicate the timing for a mobile spa is on target. Minutes of the Federal Open Market Committee indicate a growth in real GDP will increase from 3.5 to 4.4 percent in 2012 and from 3.7 to 4.6 percent in 2013 (Minutes of the Federal Open Market Committee, 2011). Projections indicate the growth in real GDP is attributed to an increase in financial market conditions and an increase in available credit to households and businesses (Minutes of the Federal Open Market Committee, 2011). The projection further indicates a steady decrease in unemployment (Minutes of the Federal Open Market Committee, 2011). These projects in the market are indicative of an increase in available money, which also indicates room for customer growth and retention.

Determining Profit-Maximizing Quantity
Calculating the quantity that maximizes profits requires the understanding of the economic concept of marginal analysis. Marginal analysis is the study of incremental changes in profit. The quantity that maximizes profit is determined when marginal profit shifts from positive to negative. When expenses rise to point that no longer maximizes profits, marginal profit becomes negative. Assuming each appointment sells for $60, as sales increase, so do the costs associated with additional labor, quantity discounts, and other variable costs. Therefore, if In Home Therapies (IHT) books 20 appointments, the profit would be $500; for 30 appointments, $800; for 40 appointments, $900; and for 50 appointments, the profit would decline to $775.
“Marginal profit is defined as the change in profit for each additional unit sold (Huter, 2012, p. 2). Assuming a unit is an increment of 10 appointments, increasing sales from zero to 20 appointments produces a marginal profit of $500. An increase in sales to 30 appointments produces a marginal profit of $300. From 30 to 40, $100; and from 40 to 50, -$125. In this example, the profit-maximizing quantity is 40 appointments. Beyond this point, marginal profit becomes negative because it is likely that variable costs will rise, thereby reducing net profits.
Assuming IHT grows and implements an automated scheduling system and incorporates tablet computers to communicate schedules to the staff, the total profit for booking 50 appointments rises to $1050, a marginal profit of $150. To find a new profit-maximizing quantity, the assumption is the marginal profit for selling 60 appointments is $100 - the profit-maximizing quantity still has not been reached. The sale of 70 appointments produces a total profit of $1100 and a marginal loss of $50. Thus, the new profit-maximizing quantity is 60 appointments.
Marginal analysis can be compared to the effects of international economy. In calculating the GDP the formula C + I + G + (Ex-Im) is used. The Ex-Im expresses the net imports. International economy has an impact on the GDP because as exports increase, the GDP increases (International Finance, 2000-2013). As with marginal analysis revenue increases as sales increase and expenses decrease. As exports increase, international economy increases, GDP increases, this causes an increase in sales and revenue.
Suggested Mix of Pricing and Non-Pricing Strategies
Consider several factors affecting business such as customer demands, competitors and their existing products, and travel expenses for the therapists. The four stages in the business cycle of an economy are peak, recession, trough and expansion/recovery (Tucker, 2010).A trough stage in the economy results in a high unemployment rate. Increases in the cost of goods do not occur as consumer demand and confidence levels remain low. The economic stage of the business cycle dictates pricing and non-pricing strategies. Options for pricing strategies may include: Geographical pricing (fuel use and cost and travel time), package pricing, and discounts for obtaining pre-set levels for the number of appointments, and planning for seasonal events. Examples of seasonal events include Christmas, Valentine's Day, Mother's Day, prom, and New Year's Day. Discounted pricing offered for regular customers on their birthdays is also a pricing strategy. Additional pricing strategies involve creating new contacts with health care providers, especially chiropractors, and partnering with health insurance companies that offer alternative care for their members. Hotels that do not offer their own spa services can suggest the mobile spa service to guests. This involves establishing a relationship with the hotel’s concierge staff. Options for non-pricing strategies include: advertising with local newspapers, distribution of fliers, extended daily hours, and networking through charities, women’s groups, country clubs, wedding planners and membership with the Tucson Chamber of Commerce. Advertising draws attention to the brand and makes consumers aware of sales and promotions. Longer operating hours allows the opportunity to service more customers. For example, increasing geographic boundaries for service and extending hours on the weekends are non-pricing strategies.
How to Create or Increase Barriers to Entry
The massage therapy business produces a standardized product. New companies can enter or exit the industry very easily. IHT differentiates its product through delivery. Services can be provided in the home or workplace. Technical skills and proper licensing are necessary to compete in the spa industry. Satisfied customers result in repeat customers and through networking often result in new clientele. A quality staff with expertise in spa treatments, services, and products of the profession will increase the ability to create barriers for entry.

How to Increase Product Differentiation
The fact that this business is a mobile massage therapy business differentiates it from other massage therapy small businesses. The flexibility that a mobile business offers means that the therapist can go to client’s homes and businesses. To increase product differentiation, the massage therapist can expand the business by going into businesses and offering chair massage. Today, more businesses are offering chair massages for the employees as a “perk” of the job. If the employees determine this as favorable, employers will continue to offer this service. Having the necessary equipment to go to homes and businesses differentiates this mobile massage therapy business. The structure also allows for the owner of the business to determine his or her calendar, and set appointments based on the limited scope of the evening and weekend start up. In essence the business owner takes his or her office wherever is necessary.
Ways to Minimize Product Costs
Transportation costs can be reduced by targeting specific geographical areas by days of the week. Overhead and administrative costs are kept low because the owner of the new company oversees all aspects of operation. Laundry services can be minimized by purchasing a commercial quality washer and dryer at the onset of the business venture. Last, massage supplies purchased in bulk leads to greater cost efficiency.
Conclusion
In conclusion the objective of this business proposal is to create a mobile massage therapy business. This venture does have fixed and variable costs. The owner, licensed in massage therapy essentially will have his or her office with him minimizing overhead costs.
The business of massage therapy is not new; however, the mobile component adds flexibility and convenience to the consumer. People today are more health conscious and the medical community and employers are embracing the benefits massage therapy offers. The emerging thought process lends itself to wellness and spending based on the product and services offered.

References
Board of Govenor’s of the Federal Reserve System (2011). Minutes of Federal Open Market Committee (January 25-26, 2011) Retrieved from www.federalreserve/gov/monetarypolicy/fomcminutes20110126ep.htm
Huter, S. (2012). How to Calculate the Profit-Maximizing Quantity. Retrieved from http://www.ehow.com/how_6713701_calculate-profit_maximizing-quantity.html International Finance (2000-2013). Effect on Imports, Exports, and GDP. Retrieved from www.infoplease.com/cig/economics/effect-import-export-gdp.html.
McConnell, C. R., Brue, S. L., & Flynn, S. M. (2009). Economics. Principles, Problems, and
Policies, Eighteenth Edition.
Munk, Cheryl W. (20 February, 2013). Entrepreneur.Tough Credit Conditions Predictedfor the Remainder of 2013. Retrieved from: http://www.entrepreneur.com/article/225871#
The National Bureau of Economic Research (2010).Business Cycle Dating Committee. Retrieved from: http://www.nber.org/cycles/sept2010.html
Ross, Jason. (February, 2013). Cohen Financial. Credit Market Report. Retrieved from: http://www.cohenfinancial.com/content.cfm/credit_market_report.
Sivy, M. (January 16, 2013). What the Current Economic Outlook Means for American Families. Time. Retrieved from: http://business.time.com/2013/01/16/what-the-current-economic-outlook-means-for-american-families/#ixzz2KXlnLZoe
Tucker, Irvin B. Survey of Economics, Seventh Edition. Copyright Cengage Inc. (2010)
“2011 Massage Therapy Industry Fact Sheet.”American Massage Therapy Association. AMTA, 2011. Web 13 Sept. 2011.