How to Calculate Profit Margin in PCD Franchise Business? – Profit is a driving force every business. Franchise business works largely on margins they get on sales and marketing. It is a work of complete relax and good connection. There are multiple of pharma companies and every company provided their own products list. If you take a look at the pharmaceuticals industry then you will know that there are multiple of healthcare segments. They all offer different profit margin. You should know how to calculate profit margin in PCD franchise business.
If you are searching for a good way of calculating the profit margin then takes a look at the following.
What Factors Effect Profit Margin in a Pharma Franchise Business?
Before starting on the calculation part is important to know the factors which will affect your investment planning in long run. What all are a part of the long run business which will affect you.
- Economic conditions & market conditions are crucial. Thus, business cycle during a recession or slow down can see fewer profits which can be opposite during boon.
- The promotional inputs are a part of the indirect cost for you. This is a benefit but costs you indirectly.
- You can add additional charge as procurement cost which was spending on transportation etc. Like an article was of MRP 35 which costs you Rs10. After all the cost being calculated, you came to an increase of 10% which makes it Rs 11.
- Doctor and stockiest share % will be deducted which will be charged from your profit.
- You need to make research about the demand where you want to have your business.
- Ask some experienced franchise owners and take their advice. It will help you list companies better.
Steps To Calculate the Net Price and Profit Margin for Pharma Franchise
It is as simple and easy to calculate! Just follow the steps as given below. Look at the steps on how a pharma franchise can calculate the net price and profit margin which are as follows:
Calculate Total Cost:
This is done on raw material cost and by adding manufacturing cost. Thus, the total cost of production is important. The formula is as follows:
TC or Total Cost = Manufacturing expenses + Administration expenses + Selling Expenses + Taxes + Other Cost (Total Fixed Cost + Total Variable Cost)
Calculate Net Rate
Call it MRP or Maximum Retail price or Retail price, these are the price at which the company sells the product in the market. This is the base price at which you will be receiving concessions.
Net price = Total Cost X Percentage of Margin
(% of margin may differ from company to company)
Calculate Profit Margin
Call it Net Margin/ Net Profit Ratio/ Net Profit Margin; it is the main thing of concern for you. It varies company to company to due differences in policies and strategies.
Profit Margin = Net Profit / Revenue or Selling Price
*(Net Profit = Revenue – Cost)
Other Calculation
It does not end here, there are other factors too:
- (-) The profit margin.
- (+) If the company offer like 10+ 1 or 10+ 2 with the similar increase.
- (-) Doctors share under Price to Retailer (PTR).
- (-) Stockiest share amount.
- You are left with realization amount.
*Step 3 and 4 are to be deducted from the amount you procured in 1.
Conclusion:
The percentage is all dependent the condition of the market and company policies. Regular annual assessment changes and amendments are made by the company which is an important point to look at. The greater the profit margin, the greater will be you share. If you are a manufacturer then additional expenses in the process will be taken into consideration for better calculation. SwisscheM Healthcare is a top pharma franchise company in India to bring you good profit margin for the franchise. Connect with us now for more.
