Estimating Demand Revenue an illustration

1. Estimating Demand & Revenue � an illustration DR. HAPPY TOOTH wants to assess demand for tooth whitening and root canal surgery in Berrien Springs, Mich. Census Data for Berrien Springs: Population = 12,800 20% - Under 20 yrs old = 2560 people 22% - 21 to 40 yrs old = 2816 people 26% - 41 to 60 yrs old = 3328 people 23% - 61 to 80 yrs old = 2944 people 9% - over 80 years old = 1152 people Target Markets: Tooth Whitening > 21 to 40 year olds = 2816 people Root Canal Surgery > 41 to 80 year olds = 6272 people

2. Estimating Demand - Year 1 Target Markets: Tooth Whitening > 21 to 40 year olds = 2816 people Root Canal Surgery > 41 to 80 year olds = 6272 people First-year Assumptions: Dr. Happy Tooth assumes he can capture between 2 and 5% of the target market for tooth whitening in his first year of operation (due to limited competition for this service). He also assumes he can get between 1 and 3% of the relevant root canal population. Thus, we generate the forecast below, noting optimistic, pessimistic, and most likely scenarios: Optimistic Pessimistic Most Likely (5%) (2%) (3.5%) Tooth Whitening Clients 141 56 99 (3%) (1%) (2%) Root Canal Procedures 188 63 125

3. Estimated Revenue - Year 1 If the standard fee for tooth whitening is $300 and the standard charge for a root canal is $500, Dr. Happy Tooth can use the projected demand figures to estimate the revenues that would be generated under each assumed condition (see revenue estimates in red below): Optimistic Pessimistic Most Likely (5%) (2%) (3.5%) Tooth Whitening Clients 141 56 99 Est Whitening Revenue $42,300 $16,800 $29,700 (3%) (1%) (2%) Root Canal Procedures 188 63 125 Est. Root Canal Revenue $94,000 $31,500 $62,500 TOTAL REVENUE $136,300 $48,300 $92,200

4. Estimated Demand - For Year 2 Target Markets: (Assume general population growth of 1% for Year 2) Tooth Whitening Population � Year 2 > 21 to 40 year olds = 2844 people Root Canal Surgery Population � Year 2 > 41 to 80 year olds = 6335 people Second-year Assumptions: Dr. Happy Tooth assumes that due to his growing reputation, he will capture between 3 and 6% of the target market for tooth whitening in his second year of operation. He also assumes he will attract between 1.5 and 3.5% of the relevant root canal population as his referrals grow. Thus, the second-year forecast is developed below, noting optimistic, pessimistic, and most likely scenarios: Optimistic Pessimistic Most Likely (6%) (3%) (4.5%) Tooth Whitening Clients 171 85 128 (3.5%) (1.5%) (2.5%) Root Canal Procedures 222 95 158

5. Estimated Revenue - Year 2 If the standard fees for tooth whitening and root canals remain at $300 and $500 respectively, revenue projections for the second year of operation at Dr. Happy Tooth would produce the following results�given the assumed growth in the general population and in the attraction rate of the two target populations. (second year revenue estimates are in green below): YEAR 2 PROJECTIONS Optimistic Pessimistic Most Likely (6%) (3%) (4.5%) Tooth Whitening Clients 171 85 128 Est. Whitening Revenue $51,300 $25,500 $38,400 (3.5%) (1.5%) (2.5%) Root Canal Procedures 222 95 158 Est. Root Canal Revenue $111,000 $47,500 $79,000 TOTAL REVENUE - YR 2 $162,300 $73,000 $117,400

6. Dr. Happy Tooth � A SummaryCustomer and Revenue Projections For 2 Years CLIENTS Optimistic Pessimistic Most Likely Tooth Whitening � Yr 1 141 56 99 Tooth Whitening � Yr 2 171 85 128 Root Canal � Yr 1 188 63 125 Root Canal � Yr 2 222 95 158 REVENUES Tooth Whitening � Yr 1 $42,300 $16,800 $29,700 Tooth Whitening � Yr 2 $51,300 $25,500 $38,400 Root Canal � Yr 1 $94,000 $31,500 $62,500 Root Canal � Yr 2 $111,000 $47,500 $79,000 TOTAL REVENUE - YR 1 $136,300 $48,300 $92,200 TOTAL REVENUE - YR 2 $162,300 $73,000 $117,400 TOTAL REVENUE -2Yrs $298,600 $121,300 $209,600