How to Calculate Profit Margin in PCD Pharma Franchise?
When you launch a new business, the first thing you look at is the profit capability. We know that the pcd pharma business is amongst the high-earning businesses. Still, you should be careful about calculating profit margins.
Pharma companies offer PCD franchise opportunities to their clients in various states at different investment models and profit schemes. It is possible to calculate profit details by considering various factors that impact the calculation.
Factors that might impact the calculation
Though a pharma business is amongst the profitable businesses, you should be careful while calculating the profit margin. The possibilities of making a profit are wide. One is the gap between what rate you got from the company and what MRP you put. But it is not sufficient. Several other factors also play a critical role.
- Market conditions and economic status of a market. For example, the price of medicine in one geographical region is different from the other. Therefore, you should know the exact price for accurate profitability calculation.
- You need channel partners to take the business forward. Doctors, physicians, and specialists who will prescribe the drugs, brokers, and agents who will reach them are important links. You will have to give fixed and variable remuneration to the sales staff. It has to be calculated accurately while assessing profitability.
- Pharma companies have different profit margin calculations for different franchise partners. It is due to the difference in their company policies. It is a good idea to talk to the pharma company and get a fair idea about that. You should not work on assumptions.
A sample calculation
As mentioned earlier that there are several ways of calculating profitability, here is a sample way. It will give an easy insight into it.
To calculate the sales margin, you need either MRP or the selling price of the product or medicine. When you deduct the percentage margin offered by the company, then you get your sales margin. Or you can take the discounted value of the medicines purchased.
Take an example. If you take a medicine with MRP 50 rupees. If the company offers a 60 percent margin, then the purchase price is 30 rupees. So, the difference of 20 rupees will be the profit.
Add the value of free products to your profitability.
Calculate entire revenue through sales first and then deduct the commission from it. Thus, you will arrive at an accurate figure of profit.
Add all expenses so that you arrive at the right business cost.
Conclusion
It is very much important to calculate each line item accurately. Thus, you can decide whether your business is giving you the expected return or not.
Since the pricing policy of every pharma company is different, it is not possible to follow one common calculation formula. One should invest some time in that.
If it looks difficult, then a consultant can be hired for that. Financial experts offer their services online. You can hire one and get an accurate calculation of profitability. This blog has given a general guideline for that.
If you are looking for PCD pharma franchise set up and wish to partner with us through a franchise, then our company greets you for a long term relation. Irene Pharma is one of the best PCD pharma companies in India with leading manufacturing and marketing of Pharmaceutical formulations.
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