How a Pharma Franchisee Can Calculate the Net Price and Profit Margin – The main motive of every business is to earn good profit margin. Are you planning to invest in pharma franchise business? Want to know how a pharma franchise can calculate the net price and profit margin? Calculation of profit is crucial of every businessman to know. The procedure differs by a few points which will be discussed below.
The estimation of good earnings in a business is crucial! Profit is the main driving force which motivates one to go through risks of investing huge time, money & energy. The pharmaceuticals domain being one of the flourishing industries of today, you can surely invest high. The satisfactory point is the main target. Thus, one needs to know how a pharma franchise can calculate the net price and profit margin.
In this post by Medrix Pharma, you will know the correct way to calculate your profit. What can you expect from a venture to what will be your return estimation? The amount differs from company to company and situation of market conditions.
Step By Step Way To Calculate the Net Price and Profit Margin For A Pharma Franchise Business
Different industries have different calculation methodologies which differ due to some of the other reason. The pharmaceuticals domain is a flourishing one. If you are new to the industry of business line, the calculation knowledge is must. One must know how a pharma franchise can calculate the net price and profit margin.
First Step: Check Market Condition
The first & foremost thing which makes the amount vary is the market conditions and economic conditions of a place. At times of good conditions, the earning are likely to be good. The pharmaceuticals industry in comparison to all the industries is the most profitable one. Thus, one can spend good investment in this industry for great returns.
No matter how much profitable your business industry is, it is sure to go through ups and downs. As a good businessman, you need to focus on these as they affect the net price and profit margin.
Second Step: Calculate Total Cost
The net price is affected by the total cost. You need to calculate the total cost. In this various indirect and direct expenses are taken into consideration. Like material cost, manufacturing cost, shipping cost, packaging cost etc. Everything is added up to take out the whole sum.
Formula for Total Cost
TC or Total Cost = Manufacturing expenses + Administration expenses + Selling Expenses + Taxes + Other Cost (Total Fixed Cost + Total Variable Cost)
Third Step: Calculate Margin Cost
When you have taken out all the total cost, then you need to take out the net rate. The following are the calculation.
Formula for Net Rate or Selling price / Final Price or Net Rate
= Total Cost X Percentage of Margin
(% of margin may differ from company to company)
It is also called Net Margin/ Net Profit Ratio/ Net Profit Margin! It helps to measure profit which you can expect.
Formula For Profit Margin
= Net Profit / Revenue Or Selling Price
*(Net Profit = Revenue – Cost)
By this formula, you get the expected margin cost. Be careful about the percentage which can be inquired from the company. This will completely dependent on the company that you are selecting for a franchise business. The difference in working and policies are the major reason behind the difference.
Fourth Step: Calculate The Realization Amount
Once you have calculated the above steps which come under simple accounting, we have the next part. Here, the deduction and additions as per pharmaceuticals domain take place. There are certain items which are needed to be adjusted to take out the whole expected profit. The end results will be the realization amount.
The following will be deducted from the revenue:
- Profit Margin
- Doctors Share under Price to Retailer (PTR)
- Stockiest share or commission.
The following will be added to the revenue.
- Company offer like 10+ 1 or 10+ 2.
- Expenses like shipping expenses or transportation expenses.
- Expenses incurred during the period of realization of products.
A pharma franchise is regarded as one of the best business ventures so far. You get to grow under mutual benefit which is the essence of this business. Medrix Pharma is one of the best pharma companies which you can trust upon. A selection of a good company is the first step to good returns and golden opportunities.