How a Pharma Franchisee Can Calculate the Net Price and Profit Margin – Have you started your own pharma franchise business? Are you thinking of starting your own medical business? Is it right for you? Will it be profitable? If yes! Then how to calculate? All answers lie in your own salesmanship and your selling skills. The more you sell, the more will be your profit margin. But how a pharma franchise can calculate the net price and profit margin? In this article, you will read about everything.
There is no doubt that there is the greate scope of pharma franchise business. But before investing in pharma franchise company, you need to know about Net Rate or Net Price and Profit Margin in pharma franchise. These are some terms which you may have heard a lot while in the business industry. When you start a business, these are likely to be your main point of concern. If you are a pharma franchise opportunist & is a beginner, then the calculation will help you in longer terms and get a better understanding of your goals and targets. The percentage is not fixed but the sky is limitless under this type of business. Learn how a pharma franchise can calculate the net price and profit margin for better results and deeper understanding.
Know The Terms & Formulas
Calculating is not enough! It is mandatory to know the meaning of the terms “Net Rate Or Net Price” and “Profit Margin” as well. To make the point clearly, everything is dependent on the market conditions & sales in particular.
- Net Rate OR Price: In short, it is the final price of the good. It is the price at which the generics and drugs are sold to you which we call as Net rate. Then it is further sold by your at MRP or Maximum Retail Price. It is initially calculated on Total cost.
Formula for Total Cost
TC or Total Cost = Manufacturing expenses + Administration expenses + Selling Expenses + Taxes | Other Cost (Total Fixed Cost + Total Variable Cost)
Formula for Net Rate
= Total Cost X Percentage of Margin
(% of margin may differ from company to company which influenced by a number of observations like expenses, costs, market conditions and much more)
- Profit Margin
It is known by many names like Net Margin/ Net Profit Ratio/ Net Profit Margin! It is calculated to measure profit which you can expect. This varies from firm to firm due to differences in policies and strategies.
Formula For Profit Margin
= Net Profit / Revenue Or Selling Price
*(Net Profit = Revenue – Cost)
The Differences Of Prices Between The Brand Drugs and Generic Drugs
If you closely look at the rates of a branded generics and a common company, you will find a huge gap between the prices. Ever wondered why? Here are points for an explanation which will affect how a pharma franchise can calculate the net price and profit margin.
- Promotional Inputs Adds Up For Marketing Cost
A Pharma Franchise company will provide you with attractive marketing inputs. If you though they were free, then do not get distracted! They also add to the expenses as an indirect cost. Promotional inputs include calendars, pens, covers, and bags, writing pads, visual aids and much more.
- Franchise Party Costing
Though the cost is decided by the company itself but the initial sale is in the hands of you. Thus, as a franchising party, you can add some expenses which you have to spend on procurement like transportation etc. For example, A product costs MRP of Rs 35 and the company charges you Rs 10. After addition of overhead expenses like tax and transportation, there was an increase of 10% which will turn to Rs 11.
What To Consider in Calculation for The Net price and Profit margin?
While calculating there are factors to be taken into account which will be helpful to you. As we all know for a successful business, you need to have a good link of doctors besides you selling skills. If you have someone like a stockiest appointed then, changes may follow for the same. We give a step to step introduction for deduction process to get the final position:
- Deduct the profit margin being offered by the pharma company. If you have 10 plus 1 or 10 plus 2, then the expense would increase by the same.
- Doctors also have a share in it which is around 20% to 30 % (can alter also) under Price to Retailer (PTR). Deduct the amount you got from the first step.
- The last step is for those who have hired a stockiest. Deduct the commission amount being promised by you to him. The calculation will be done on amount you achieved from 1st
- The resultant is the realization amount.
Amendments are made in the assessment each year and differ company profile to regulation. Thus, it is better to have a connection with your company for better calculations and exact measurement of margin. knowing about the products list and their price is a good way.