Business posted on 11/25/2020 7:51:11 PM by Sana , Likes: , Comments: 0, Views: 1125
Starting any business requires a great deal of effort, information, practical know-how and the same is the case with pharmacy business, you will need to consider many aspects before, during and after launching your business and this is what this article is about!
In a nutshell, by reading this article carefully with eyes popped out, you will not only learn about the options that are available to you to invest in pharmacy business but will also gain good idea about resources needed and how much you are gonna make in profits by investing in a particular idea.
Well when it comes to starting business in Pakistan, the most profitable business in my opinion is that of medicine.
From meeting with hundreds of retailers, wholesalers, distributors in medicine field I learned one thing that is, there is tremendous amount of return on investment (ROI).
Consider the following table for three major types that revolves in world of Pharmacy business.
|Sr #||Business Model Type||Initial Investment (in minimum to maximum range)||ROI (min-max range)|
|1||Retail Pharmacy||5 Lakh-25 Lakh||25-75%|
|2||Wholesale Medicine||5 Lakh-1 Caror||4-10%|
|3||Distributor Medicine||5 Lakh-3 Caror||7-15%|
As you can see, return on investment is superb in retail pharmacy business, but the problem here is, your sales are usually not that immense and so even though you get great return on investment still you don’t make that much in profits.
Sales in medicine retail business depends on the following things:
Location: If location is good, like somewhere around a hospital then sales will be immense and so return on investment will be awesome!
Discounts: If you offer discounts that most of your competitors don’t then in the long run (1-4 years) word of mouth marketing will help your business and so you will see a steady increase in sales in the long run.
Variety: Your sales will increase if you have great product variety. So don’t even think about making some good money by just having flagyl, disprin, calpol on the shelf. You need more than that!
Relationship with doctors: How about having few doctors that write a prescription that is only available with you (winks!) that is what most of these pharmacies do, giving a certain percentage of their sales to doctors and these “Qasabs” ops! I mean doctors write prescriptions that are available only with them.
Okay, when I mentioned the initial investment as 5 lakh, that doesn't mean, it is something you must have, you can start even with lesser amount but that depends on one thing, how smart you are when it comes to business, investments and all that.
If you are some genius, you will know how to manage things like having easy credit terms with your suppliers, thus buying on credit, making some deal with the guy whom property you have rented, convincing him that you will pay half rent for the time being or full rent after a certain date.
Being able to do multitasking can also cut down the initial investment cost, like managing store inventory, managing customers and managing your outlet accounts & finance and being able to make a good hot cup of “chai or coffee” when multi tasking takes its toll.
The bottom line is, some people can start a medicine retail business in 5 lakh or even lesser while others can’t start it even with 25 lakh, in other words business acumen matters a lot!
Firstly you will need a good computer software that can keep record of your outlet overall financial transactions, dealings, accounts, sales, profits, expenses, net profits, growth etc.
You can find such software by simply meeting with a medicine retailer who is using such a software and asking them where did they get it.
Secondly, you will need (at least) one guy to manage customers, like I said you can do that on your own if you are good in multi tasking and one guy to manage sales, accounts, that computer software.
If you are good at multi tasking, you can start with you and one more guy, both of you should be more than enough!
You will need to pay that guy at least 8 thousand pkr per month or more to keep him working for you.
Third, you will need to pay rent, utility bills etc, so if you are one smart guy, you can convince the other party, which in this case would be your landlord to give you free electricity, water or charge you nominally for all of that, that will save you from having your own electric meter, saving you good amount of money.
And if you are really smart, it is likely that you will convince your landlord to pay him nothing or half a rent for certain amount of time, again saving substantial amount of money.
Fourth, you will need to have a good credit policy with your drug suppliers, making sure that you can achieve the required sales in the amount of time, relaxation given to you by your drugs suppliers!
Now, I know many readers of this article would be novices with no idea on how to run business, how manage the whole business thing, from its finances to its human resources to that dreadful marketing!
Well, don’t worry, I have a super fix, that will make you a super genius in running any type of business with ease and efficiency you can’t imagine!, read this in-depth article I want to start a business but I have fears! which will teach you practically how to manage the whole business thingy, covering all of its aspects (finance, marketing, human resource) efficiently & effectively.
Here ROI is way less than Retail pharmacy but still, you can earn far more than retail because here sales exceeds sales of retail pharmacy by quite a great margin.
Here you sell, supply to retail pharmacies all over, though it takes time to really start earning some serious money in wholesale, if you already have relationships in the market, been working in the market for like few years, then the ROI in wholesale will be immediate but if you are totally novice or new to this whole wholesale thingy then it will take around 1-2 years to get some serious return on investment.
All you will need is to setup a cool outlet with some impressive, creative advertising, marketing strategy like having a different outlet mark, exterior, billboard then the rest of the market, do something that makes your wholesale outlet stand out from the crowd, be careful that “something” shouldn’t be something that harms your brand image.
Make sure that you have optimum product variety because once a party comes to you to buy and you haven’t it, it is such a turnoff to be honest and most of such clients won’t come to you for months later on.
Second make sure you know what price to quote to your target clients, what your competitors are quoting to them, what else they are offering to them, what credit policies they have etc etc all of this plays in the equation of getting higher return on your investment, so make sure you get all of these things right.
In case you don’t know, I will suggest that before you go for investing, spend at least 3-6 months with someone that is running such a business model type successfully, learn from them and then decide.
This way you will learn most of the tricks of the trade along with almost the whole trade itself, making you smart enough to avoid mistakes, errors that can harm your business seriously!
Well, there is a legal aspect to drugs business, which I thought I would mention in the end of this article, but I think that won’t be wise, there are certain, specific legal requirements that you have to fulfill if you want to start a drug business in Pakistan, be it retail, wholesale, distribution.
So once you read this article, check this article by PCDA (click on this) that mentions legal requirements you need to fulfill to start a drug business in Pakistan. You will also learn from this article how to fulfill these legal requirements.
And if that above link is broken then check this link for legal requirements.
You will have to fulfill those legal requirements if you want to start drug business in Pakistan.
Okay now let’s get back to starting and managing wholesale Medicine Business.
First you will need, is a computer software, just like one you need in retail pharmacy business to keep record of your finances, accounts, sales etc.
Secondly you will need at least one guy to manage clients and you or one more guy to supervise while one to get supplies from your suppliers, warehouse and one to manage warehouse.
You can cut down the need for having a warehouse manager by having warehouse somewhere near, around your wholesale outlet.
Thirdly you will need a vehicle to get supplies from suppliers, from warehouse to your wholesale outlet, for that again you will need a driver, again if warehouse is near, around your wholesale outlet, you won’t probably need a driver then.
Fourth you will have to give full time, focus to your wholesale business (even to your retail business too!), you won’t be able to relax much if you want your business grow, though you can hire a trust worthy guy that act on your behalf in your absence, but then that would mean increasing the operating cost of your business further.
Fifth you will need to pay utility bills, rent etc on monthly basis along with salaries to the guys you hired, this will be around 20-50 thousand Pkr per month or more depending your operating expenses and other variables involved.
Sixth you will also need to deal with pesky drug inspectors who at times would want you to bribe them because that's the ugly business culture of Pakistan, so make sure you know what drug business mistakes can make you an easy target for drug inspectors and how to avoid them.
Seventh, there will be clients who won’t pay you on time or would want you to just forget about your money, so you need to be really careful in initial days of your business in making deals with your clients that you can afford in case things go awry!
Once you gain experience, knowledge about market, clients, you will know how to deal with such specific clients.
Here ROI is always slightly greater (in percentage) than wholesale due to the fact that you act as a company distributor, that slight difference in percentage actually results in far more profit, ROI than wholesale, retail medicine business.
Again here sales volume matter, sales volume in distribution business is fairly large than that of wholes simply because you are the company sole authorized distributor in a given region and so you alone can sell the company products in that region, that kind of gives you a monopoly in the market.
Distribution also gives you reasonable leverage in sales, as being sole distributors you don’t need to worry about the clients, your sales are always healthy unless you are distributing products of a local, newly started drug company or brand, as such brands have very small niches with not much growth potential.
That is why I stated the initial investment cost of distribution being equal to that of wholesale, you can get a local, newly started drug company distribution easily with that much amount, buying certain percentage on cash and certain percentage on credit and voila you become a distributor!
The real money in medicine distribution lies in the philosophy of investing huge amount of money in a multinational brand, thus acquiring their distribution and making huge gains in terms of ROI.
Location: Although location carries same importance as in case of wholesale and retail medicine business but if you are a sole distributor of a multinational brand, with healthy market demand, in a given region then location doesn’t really matter.
Although it is wise to have your outlet location at such a place which is easily accessible and since you will be the sole dealer, the clients will come anyway.
But such distributions are hard to achieve as they demand hell of a money to be invested in.
Relationship with Company, Wholesalers, Retailers: Relationships plays a vital role too, especially when you are having distribution of a company that isn’t that well known, having low product demand, in that case you will need rich, beneficial relationships with your target clients to get the job done, to get that healthy ROI.
Relationship with your supplier, brand you are having distribution rights for, is also key, having healthy relationships will get you far more flexible credit policy from the company and at times will result in special discounts, other perks that you may haven’t have if such relationships weren’t there.
Annoying Distributors, Wholesalers, Retailers: yes they do exist, world is full of them and they will make you hate your life!
Distributors become annoying when they start selling products to your target clients, in your region, to which only you are supposed to have sole right.
Wholesalers, retailers become annoying when they start to dealing with other region distributors instead of you, this is something that can hurt your ROI.
The good thing is if your company really cares about her distributors, she won’t allow such things to happen but again its Pakistan and most of the time its not the case, trust me!
So you need to be really vigilant about this, at times you won’t be able to completely stop it but you can minimize the damage by talking to the company in a language that she understand.
Such situations are more common in local Pakistani drug manufacturing companies compared to multinational brands.
Make sure before going for distribution, the distribution contract document account for such violations, damages and bound the company and its distributor to not violate such terms and conditions.
That means thoroughly reading and understanding the distribution contract document of the company before signing on it!
The company may also provide special benefits, perks to certain distributors, make sure you know the reasons behind such actions and if such reasons are “justified reasons”.
Like I said in the beginning it requires huge investment unless you want to get your entrepreneurial career launched with mediocre local company based in Pakistan.
You will need the following things: