Business Plan Sample Pharmacy

Sample Business Plan, Sample Pharmacy 1

This business plan is only a sample. The name of the actual business and the owners have been changed for confidentiality reasons. For business plan services, email [email protected].

Sample Business Plan. Sample Pharmacy

Sample Business Plan. Sample Pharmacy

Written by Vinil Ramdev

+91-90040-84813, [email protected], www.startupgrowthexpert.com



Table of contents

Executive Summary 1.0 Objectives 1.01 Mission 1.02 Keys to success 2.0 Company summary 2.01 Company ownership 2.02 Past performance table 2.03 Company locations and facilities 2.04 Sales literature 3.0 Product and service summary 3.01 Product and service description 3.02 Competitive comparison 3.03 Fulfillment 3.04 Technology 3.05 Future products and services 4.0 Market Analysis Summary 4.01 Market analysis table 4.02 Market segmentation 4.03 Target market segmentation 4.04 Market needs 4.05 Market trends 4.06 Market growth 5.0 Service business analysis 5.01 Industry participants 5.02 Distribution patterns 5.03 Competition and buying 5.04 Main competitors 5.05 Value proposition 6.0 Sales strategy 6.01 Pricing strategy 6.02 Promotion strategy 6.03 Sales forecast table 6.04 Explain Sales forecast 6.05 Sales program 7.0 Marketing plan



7.01 Strengths 7.02 Weaknesses 7.03 Opportunities 7.04 Threats 7.05 SWOT analysis 7.06 Competitive edge 7.07 Positioning statement 7.08 Strategy pyramid 7.11 Distribution strategy 7.12 Strategic alliances 7.13 Milestones table 7.14 Milestones explanation 8.0 Web plan summary 8.01 Website marketing strategy 8.02 Development requirements 9.0 Management summary 9.01 Organizational chart 9.02 Organizational structure 9.03 Management team 9.04 Management team gaps 10.0 General assumptions table 10.01 Profit and loss table 10.02 Projected profit explanation 10.03 Break-even analysis table 10.04 Break-even analysis explanation 10.05 Benchmarks chart 10.06 Key financial indicators 11.0 Cash flow table 11.01 Projected cash flow explanation 11.02 Balance sheet table 11.03 Balance sheet explanation 12.0 Financial plan summary 12.01 Long-term plan 12.02 Valuation 12.03 Investment offering 12.04 Use of funds 12.05 Use of funds explanation 12.06 Payback 12.07 Ratios table A. Appendix B. Sources



Executive Summary

Sample Pharmacy is in the retail pharmacy business. It is located in Bangalore, India. Sample Pharmacy

presently owns 3 retail outlets in Bangalore, India.

Sample Pharmacy’s primary products are prescription medicines.

Sample Pharmacy is positioned as a premium pharmacy that caters to the upscale clientele. Customers shop from sample Pharmacy for the following reasons:

Knowledgeable pharmacist

Availability of medications

'WOW factor' - Fun, Service & Refreshing Ambience Sample Pharmacy is founded by experienced entrepreneurs who have passion and skill for business. Revenues of Sample Pharmacy is expected to grow at 3.6 times in the fiscal year 2008. Sample Pharmacy’s purpose is to create a vision in the hearts and minds of its community as a company that cares about the welfare of its employees, the quality of its products and services, and the honesty and integrity of its business relationships. 1.0 Objectives

Break even by March 31, 2008

EBIDTA in excess of Rs I0 Lakhs for the FY ending March 2009

EBIDTA in excess of Rs 20 Lakhs for the FY ending March 2010

EBIDTA in excess of Rs 30 Lakhs for the FY ending March 2011 1.01 Mission Sample pharmacy is in the retail pharmacy business. Sample Pharmacy’s vision is to provide its

customers with a great store ambience, hygiene, good assortment of merchandise, great service and

convenience.

Sample Pharmacy’s purpose is to create a vision in the hearts and minds of its community as a company

that cares about the welfare of its employees, the quality of its products and services, and the honesty

and integrity of its business relationships.

Sample Pharmacy’s ideal team member is humble, respectful, customer centered (has the needs of the

customer in mind), has integrity, honesty & a high moral code and sets the highest standards of

excellence in his endeavors.



Sample Pharmacy’s customers buy from them because their staff members welcome them with a

beautiful smile, greet them by saying "Good Morning", "Thank You", "Welcome" and help them in

making an informed decision. Besides Sample Pharmacy’s customers like Sample Pharmacy’s store

ambience & hygiene, service, product availability and trust the quality of Sample Pharmacy’s products.

1.02 Keys to success

The keys to Sample Pharmacy’s success are:

1. Good Customer Service 2. Inventory Management 3. Effective Operations

2.0 Company summary

Sample Pharmacy is a company incorporated in December 2005. The core business of Sample Pharmacy is pharmacy retail.

2.01 Company ownership Sample Pharmacy is a privately held company with majority of its shares held by its Founder and Chairman NAME WITHHELD . 2.02 Past performance table FY 2007 Sales Rs 3,139,121 Gross Margin Rs 533,650 Gross Margin 17.00% Operating Expenses Rs 2,500,000 Inventory Turnover 3.76 Balance Sheet FY 2007 Current Assets Cash Rs 308,375 Inventory Rs 1,387,725 Other Current Assets Rs 1,123,045 Total Current Assets Rs 2,819,145 Long-term Assets Long-term Assets Rs 3,525,054 Total Long-term Assets Rs 3,525,054



Total Assets Rs 6,344,199 Current Liabilities Other Current Liabilities (Interest free) Rs 270,400 Total Current Liabilities Rs 270,400 Long-term Liabilities Rs 2,950,000 Total Liabilities Rs 3,220,400 Paid-in Capital Rs 5,000,000 Earnings (Rs 1,876,201) Total Capital Rs 3,123,799 Total Capital and Liabilities Rs 6,344,199 Other Inputs Payment Days 7 2.03 Company locations and facilities Head Office: GF 2, 301.11 Mezzanine Floor, Mosque Rd. Frazer Town, Bangalore 560005 Sample Pharmacy Store Locations: Store 1: GF 2, 301.11 Pentagon Complex, Mosque Rd. Frazer Town Bangalore 560005 Sample Pharmacy’s Frazer Town location was the first location opened by Sample Pharmacy. The Frazer Town location opened for business on May 14, 2006. Store 2: #150/4, Bearing No 86/1, New Tippasandra Main Road, HAL 3rd stage, Bangalore 560075. Sample Pharmacy’s Tippasandra location is the second location opened by Sample Pharmacy . It opened on May 14, 2006 shortly after the opening of store 1. Store 3: Esteem Plaza, #359/20, 13th main road, Sadashivnagar, Bangalore 560080. Sample Pharmacy’s sadashivnagar location opened on May 22, 2006. All Sample Pharmacy’s locations are leased premises. Sample Pharmacy stores range in square footage from 120 sq. ft. - 430 sq. ft. 2.04 Sales literature

Sample Pharmacy’s sales flyer will present a very professional image of its business. It will be designed by a good graphic designer.



The objective of the sales flyer and sales brochure is to present a very professional image of our business and position ourselves as a trusted business. This sales flyer will be part of its marketing program where it will be used as newspaper inserts and distribute it to our geographic target.

3.0 Product and service summary

Sample Pharmacy will sell prescription medications and OTC medications primarily through its retail outlets. Sample Pharmacy’s primary focus will be prescription medications and OTC medications. However Sample Pharmacy may carry a range of toiletries and daily use items like shampoos, conditioners and other skin and hair care items.

3.01 Product and service description

Sample Pharmacy’s primary business will come from prescription medications and OTC medications. The price range will be at the maximum retail price (i.e. suggestive retail price). Sample Pharmacy will also evaluate other revenue streams like advertising and selling shelf space.

3.02 Competitive comparison

Sample Pharmacy will position itself as a premium pharmacy that caters to the upscale clientele.

The top three reasons customers shop from sample pharmacy is:

Knowledgeable pharmacist Availability of medications 'WOW factor' - Fun, Service & Refreshing Ambience

3.03 Fulfillment

Sample Pharmacy plans on buying products directly from distributors. Distribution is a major concern for Sample Pharmacy. Lot of prescription medication distributors do not supply to organized retailers as the chemist association in the city wants to thwart the competition from organized retailers.

However, Sample Pharmacy can go to the physical location of the distributors and buy products directly from their counter. However, there are distributors who do supply to Sample Pharmacy at their place of business.

3.04 Technology

Today, a lot of good retail businesses use technology to manage their business better.

The first area of concern is the Point Of Sale (POS) software. A good Point Of Sale (POS) software allows the user to serve his customers quickly. It allows the user to obtain specific reports like VAT returns, category & sub-category sales, customer databases with customer information, purchases made by the customer for a particular period, prescriptions of the customer and average ticket price per customer.



Preferably Sample Pharmacy would like the customer relationship software to be integrated with the POS software. The customer relationship software should tell what customers are buying and will use statistical analysis to tell what they will buy next. It should also have the names, addresses and contact information of customers. It should make it easy to profile and segregate customers based on certain demographic parameters. If it can profile customers on psychographic factors, that's even better.

3.05 Future products and services Sample Pharmacy is evaluating selling products online. Sample Pharmacy may prepare a separate business plan for the online retail business when decides to go ahead with the project. 4.0 Market Analysis Summary

The entire volume of business for prescription medicines and over-the-counter medications is about Rs 1 lakh per day in Frazer town (2 km radius around our store), Rs 2.85 lakhs per day in Tippasandara (1 km radius around our store), and Rs 1.93 lakhs per day in sadashivnagar (2 km radius around our store). This is got by calculating the entire sales of all the pharmacies put together. Sample Pharmacy did a market research through its internal team to determine the results. This also includes a small percentage of personal care products.

Sample Pharmacy will do a market survey that gives information about the 3 greatest fears and three benefits that customers face when they buy from a pharmacy. Sample Pharmacy will focus on diabetic patients in and around its two km radius. According to information from sources on the internet and the Deccan Herald - the local newspaper, there are at least 500,000 diabetic patients in Bangalore. Sample Pharmacy will need to do another market research that tells them how many diabetic patients are there in its geographic target market. Sample Pharmacy’s target market focus will be:

2 Km geographic radius

High & Mid income prospects

Diabetic Patients

Young mothers and women between the ages of 26 - 45 4.01 Market segmentation Sample Pharmacy will initially target the following 3 segments:

1. The modern women & young mother - Women between the ages of 26-45 2. Diabetic Patients 3. Incidental shoppers

4.02 Target market segmentation



According to a survey done by Sample Pharmacy, it found that there are at least 4 gynecologists and/or pediatricians in the 2 km radius of each of our locations. This shows that there are substantial amount of women who use these services and therefore have a need for medications. If it is estimated that there are 20 footfalls per day in each of these clinics, then that is about 80-100 customers per day in this segment alone. Focusing on women (with children) will help other categories of products like skin care, hair care & baby care as well. According to a local newspaper source on the internet, the entire city of Bangalore has about 500,000 diabetic patients. Sample Pharmacy assumes that there is a good chance that a sizable amount of diabetic patients live in its geographic target. Sample Pharmacy is fairly certain about sadashivnagar where there are about 3 diabetic clinics. However, Thippasandra and Frazer town are locations where market research should help Sample Pharmacy. Sample Pharmacy’s third market segment is the other category. These are incidental and convenience shoppers who live in the neighborhood. Sample Pharmacy will not go after them consciously. Sample Pharmacy’s main focus will be on the first two groups: The Modern Women & Diabetics. 4.03 Market needs The three basic needs (according to Sample Pharmacy) that buyers look for in a pharmacy is:

Safety of medications

Hygiene

Availability of medications

Knowledgeable pharmacist Sample Pharmacy plans on doing market research that will either agree or disagree with its opinion.

The research should talk about the needs of each segment i.e Women (gynecology), pediatric, Diabetic and Cardiac

4.04 Market trends Today, there are not many players in the organized retail pharmacy market. Most of the pharmacies are owned by independent mom & pop operations. However things are changing now. Lot of big players are entering the market. Huge companies get into the retail sector and start multiple store chains. And they bypass the supply chain by buying directly from stockiest or even the manufacturer. They cut out the distributor and thus can pass on the benefit to the customer by offering a 10-15% discount. However it's difficult for the independent retailer to offer such discounts as these margins go to the distributor. Another trend that is happening is that a lot of companies are trying to sell consumer goods like shampoos, soaps and others through retail pharmacies. The reason for doing that is because consumers tend to trust pharmacists more than departmental stores and because pharmacies are more hygienic. This trend was spotted by an article in the financial times.



4.05 Market growth The pharmacy market in India is growing at about 9% annually. At the moment, in our current geographic targets the total volume of business is about Rs 400,000 per day. i.e Frazer Town = Rs 93,000; Tippasandara = Rs 265,000; Sadashivnagar = Rs 129,000. Sample Pharmacy expects this growth to be in proportionate to the national growth. 5.0 Service business analysis Sample Pharmacy’s business fits into 3 industries; one is the retail industry that is valued at 180 billion dollars, the pharmaceutical industry that is valued at approximately 93 billion dollars and the personal care market at 3.7 billion dollars. However, Sample Pharmacy’s core business will come from diabetics in its immediate 2 km radius. According to a dietician in the Indian Bureau of Marketing and research, the diabetic market in India in valued at $100 million or Rs 500 Crores. Sample Pharmacy’s immediate 2 km radius should have at least 1000 diabetics that spend Rs 1000 per month. That comes up to Rs 1 million in monthly sales. Sample Pharmacy also plans on targeting women and children. The reason for this is that there are sizable gaenocologists and pediatrics in the area. The retail pharmacy industry is dominated by many independent retailers, it is fairly unorganized at the moment. There are a few organized players like Trust, Subiksha, Apollo and LifeKen. The Reliance Group, India's largest conglomerate is planning on getting into the retail sector shortly. This should increase competition in the retail sector. 5.01 Industry participants The pharmacy retail industry is made up of many small independent retailers or mom & pops. The industry is fairly unorganized. In each of Sample Pharmacy’s locations, there are at least 10 pharmacies in the two kilometer radius that compete with Sample Pharmacy There are very few regional and national chains. Among the regional chains, Lifeken pharma, Trust, Apollo & Subiksha are some of the major players. Most of the pharmacies do not offer discounts, however subiksha offers a 10% discount on all medications & a newly launched pharmacy chain ayurvadulu offers a 4% discount to all customers and 14% discount to senior citizens. Although they offer a discount, their pharmacies are not very clean and hygienic. 5.02 Distribution patterns In prescription medications, the supply chain goes from the manufacturer to the stockists to the distributor and then to the retailer. In FMCG products, the products are sold from the manufacturer to the distributor and then to the retailer.



However, the reliance group, one of the largest conglomerates in India is planning on acquiring many of distributors and consolidating the industry. They plan on being a national distributor. This should level the playing field as many of the independent retailers have a chemist association that boycotts distributors for supplying to organized retailers. Therefore, many distributors are reluctant to supply to organized retailers. Since Sample Pharmacy is an organized retailer, the problem of boycott is taken care by consolidation from the reliance group. 5.03 Competition and buying Most customers buy medications & toiletries from places that are close to their homes. Most business is generated through word of mouth. Multi-Chain stores like lifeken, apollo and trust don't really have great advertising campaigns. Their business is primarily through word of mouth. There are some other customers who buy specialty medicines from specialty pharmacies like cash pharmacy in Bangalore. 5.04 Main competitors The following are some of Sample Pharmacy’s main competitors: 1. Surana Medicals, Frazer Town: Been in the market for a long time, the awareness about the store, location, established base of regular customers, fairly organized store are some of his strenghts. No real good customer service, no organized brand identity and no active marketing plan are some of his weaknesses. 2. Balaji Medicals, Sadashivnagar: Been in the market for a long time, good awareness about the store, established base of regular customers, good availability of medicines are some of his strenghts. Poor customer service, poor presentation of the store are some of his weaknesses. 3. Medicine House, CMH road: Highly visible location close to a major hospital, good inventory of medicines and experienced staff are some of his strengths. Below average work culture, delays to customer requests are some of his weaknesses. 4. Prakash Medicals, 80 ft road: Highly visible location, huge inventory of products and experienced staff are some of his strenghts. Delays in customer requests and unorganization are some of his weaknesses. This clearly shows that there is a big opportunity in the retail pharmacy market for a really well organized, customer oriented and hygienic pharmacy. 5.05 Value proposition Sample Pharmacy’s value proposition is knowledgeable pharmacist, availability of medicines and 'wow factor' - fun, service and refreshing ambience. 6.0 Sales strategy



Most of Sample Pharmacy’s sales will come from its retail outlets.

Each sales associate will be trained to be a customer relationship associate using our sales processes modeled after Rick Segel's and Brian Tracy's sales methods.

Home deliveries will be made to customers for extra convenience. Sample Pharmacy will use soft suggestive selling techniques to increase our average ticket size (ATS). A database of customers with demographic information about what they buy and when they buy have to be maintained. Most likely Sample Pharmacy will use salesforce.com as our database vendor.

6.01 Pricing strategy Most of Sample Pharmacy’s prices will be manufacturer suggested prices. Moreover, it is hard to charge higher prices for the same product and the same brand. However, Sample Pharmacy should have a mark-down section in its stores, that way Sample Pharmacy can offer a discount on some products. This will ensure that products sell faster than normal, build traffic, have customers come back to its stores more often and develop a perception among customers that our pricing is competitive. 6.02 Promotion strategy The following will be Sample Pharmacy’s promotion strategy for the fiscal year 2007-08.

1. An awareness campaign throughout the year by farming its geographic target 2. One launch event or anniversary celebration per year 3. Two health camps per store per year. 4. One charity event per year. 5. Two contests per year. 6. 22 Q&A answer ads in Frazer times, 4 profile ads per year (one every quarter), 1 sale ad per

year. 7. 1 sale per store per year. 8. Direct mailers to diabetics, genecology, cardiac, pediatric and dermatology patients every

quarter i.e. 4 times a year. 9. Direct mailers of birthday cards with a gift coupon every month. 10. Market research (internal) twice a year. 11. Market research through an external agency, if required, once a year. 12. One Diwali promotion a year. 13. One Christmas and New Year promotion per year. 14. Listing on Just dial 15. Listing on the Yellow Pages 16. Implementation will be measured by filling up the pre and post promotion form.

6.03 Sales forecast table FY 2008 Prescription Medications Rs 8,912,198 FMCG Rs 5,800,333



Total Sales Rs 14,712,531 Direct Cost of Sales Cost of goods sold PM Rs 7,397,124 Cost of goods sold FMCG Rs 4,814,277 Subtotal Direct Cost of Sales Rs 12,211,401 6.04 Sales forecast explanation Sample Pharmacy expects sales to be 60% medicines and 40% FMCG. Sample Pharmacy believes sales will increase to average sale of Rs 30,000 per day per store by the end of the fiscal year 2007-08. Sample Pharmacy expects its sales to increase by 15% on average every month during the fiscal year 2007-08. In the fiscal year 2008-09, Sample Pharmacy expects sales to increase by Rs 14,000 on average every month for prescription medicines and Rs 10,000 on average for FMCG products. 6.05 Sales program All Sample Pharmacy sales associates will be extremely presentable. They will wear uniforms at all times of work and present a consistent and professional image of the company. They will be trained in its sales processes. Every new hire has to be trained in its sales process before they get involved in any interaction with the customer. 7.0 Marketing plan Sample Pharmacy marketing strategy is to improve the image of its company by improving the quality of its ads and its communication materials. Sample Pharmacy realizes that its business cards, envelopes and letterheads are tools to promote its business. Therefore Sample Pharmacy will get them designed by a good graphic designer thus presenting a classy upscale image of its business. It’s sensory package has to be upscale & exciting. The store interiors & store front should not have anything that is printed from it’s computer on an A4 sheet or cut in pieces of paper as this makes its business look extremely unprofessional. All communication material has to be finished up by a good professional designer to give its business a strong professional image Store staff have to always wear uniforms and present a professional image of the business. The core value proposition of Sample Pharmacy is knowledgeable staff, availability of medicines and the 'wow' factor - service, fun & refreshing ambience. 7.01 Strengths

Good ambience: Our stores are very nicely designed & soothing music is played in the background to provide our customers a great shopping experience.



Continuous improvement: We constantly strive to improve ourselves & get better at what we do all the time.

7.02 Weaknesses

Owners are still climbing the retail learning curve

Certain operational weaknesses as the operations manual is still being developed

Cash flows are uncertain, since the last 10 months

All stores are not as professional as they need to be, employees need to wear uniforms, the store displays need to be much more clearly organized

There are certain missed accountabilities

Marketing needs to be more active, we have to have solid promotions strategy, solid research methods, spread the word and be well known in our communities.

7.03 Opportunities The retail pharmacy industry is fairly unorganized. Most pharmacies in Sample Pharmacy’s communities are fairly unorganized, unhygienic and lack good customer service. There is a great opportunity for a pharmacy to provide good service in a hygienic & dynamic atmosphere. 7.04 Threats

Emerging Competition from organized retailers; Reliance, India's largest conglomerate plans on venturing into the pharmacy retail space. And there are also rumors that other organized retailers may follow suit.

Possible price ceiling by government regulation: Since medicines are important to the community at large, the government may have a price ceiling on the pricing of medicines.

7.05 SWOT analysis Sample Pharmacy’s strengths include our wonderful store ambience and continuous learning attitude of its organization. Some of its weaknesses is that customer service needs to get better, Sample Pharmacy needs to get better people and Sample Pharmacy needs to have much more active marketing and promotion activities. Sample Pharmacy’s opportunities are that there are not that many organized players in the market and the competitors are nothing special. Sample Pharmacy’s threats are that there is such a big gap for an organized retailer that it seems attractive for large retailers to enter the market. However, Sample Pharmacy does believe it can beat anybody of any size if it focuses on being the best. 7.06 Competitive edge Sample Pharmacy’s competitive edge is the trust we generate among our customers by positioning ourselves as a world class pharmacy. Also, the design of Sample Pharmacy’s stores and the ambience give Sample Pharmacy a distinct competitive edge with our competition. 7.07 Positioning statement



For the person who has a need for medications in its geographic target, who is usually between the age of 25-45 with middle to upper-middle class income. Unlike, many mom and pop operations, who's pharmacies are cluttered, dusty and customer service is poor to non-existent, Sample Pharmacy operated pharmacies are organized, hygienic, have a great atmosphere and are positioned in a manner where people trust the quality of its products. 7.08 Strategy pyramid

Sample Pharmacy’s main strategy is to position itself as a pharmacy that can be trusted. This is done by portraying a professional image where all employees wear a uniform and the store is neatly organized. Providing good customer service where staff welcome them with a beautiful smile and even carry customer's bag to the car. Sample Pharmacy will use consultative selling and relationship selling methods to position itself as a pharmacy that customers trust. All Sample Pharmacy communication materials will be professionally designed by exceptionally good graphic designers to portray a strong image of its business.

Position ourselves as experts in our field Sample Pharmacy will have banners in front of its stores that have a punch line that says "Prescription medicines is our specialty." Sample Pharmacy will have flyers giving a brief description of its business and its staff will distribute these flyers to its geographic target. Sample Pharmacy will have a small 3 page brochure giving a brief description about its business. 7.09 Distribution strategy Sample Pharmacy’s distribution strategy will be mainly through its retail outlets. Sample Pharmacy will also offer home delivery of medicines as this will be convenient for its customers. 7.10 Strategic alliances It may be beneficial to have tie-ups with doctors and clinics around the area where doctors give Sample Pharmacy customers a discount. This should help the doctors as this will bring them more customers and will help Sample Pharmacy customers as this will give them benefits to shop at Sample Pharmacy stores. It also brings Sample Pharmacy closer to doctors as this will help Sample Pharmacy promote its business in their clinics. It may also be beneficial to have tie-ups with other brands where they give us coupons and other incentives for customers to purchase their products. Sample Pharmacy is still developing plans for co-marketing programs with its vendors. 8.0 Web plan summary



Initially, Sample Pharmacy will not sell products online however Sample Pharmacy may sell products online at a later period which is undecided. Sample Pharmacy will however have a discussion board, groups, events and articles that change on a frequent basis, this will keep its customers coming back and involved in the website. 8.01 Website marketing strategy Section omitted 8.02 Development requirements Section omitted 9.0 Management summary Sample Pharmacy’s philosophy is to hire people who are humble and have a quest for excellence. For Sample Pharmacy to be successful, Sample Pharmacy should be extremely organized. Sample Pharmacy will need solid sales people with excellent salesmanship skills, A great manager who can motivate and discipline these sales people and a good solid marketing manager. Sample Pharmacy will have to prepare very clear job descriptions and clear position statements where every person is aware of what results he or she is responsible for. Sample Pharmacy will have to have a list of requirements for every position when they interview him so that they make good hiring decisions. 9.01 Organizational chart Section ommited 9.02 Organizational structure Sample Pharmacy’s organizational structure will have one managing director, one accounts department that is outsourced, one operations manager that will handle store operations. At the store level we will have 8 pharmacists and 3 housekeepers. The pharmacist’s shifts will be scheduled in a manner such that there will 2 pharmacists during peak times. 9.03 Management team Section omitted 9.04 Management team gaps Section omitted 10.0 General assumptions table



General Assumptions FY08 FY09 FY10 Current Interest Rate 14% 14% 14% Long-term Interest Rate 14% 14% 14% Tax Rate 33% 33% 33% Other 10.01 Profit and loss table

Pro Forma Profit and Loss

FY 2008 FY 2009 FY 2010 FY 2011 FY 2012

Sales Rs14,712,531 Rs29,550,232 Rs32,800,757 Rs36,408,840 Rs40,413,813

Direct Costs of Goods Rs12,211,401 Rs24,526,692 Rs26,896,621 Rs29,855,249 Rs33,139,327

Franchise fee Rs294,251 Rs591,005 Rs656,015 Rs728,177 Rs808,276

------------ ------------ ------------ ------------ ------------

Cost of Goods Sold Rs12,505,651 Rs25,117,697 Rs27,552,636 Rs30,583,426 Rs33,947,603

Gross Margin Rs2,206,880 Rs4,432,535 Rs5,248,121 Rs5,825,414 Rs6,466,210

Gross Margin % 15.00% 15.00% 16.00% 16.00% 16.00%

Operating Expenses

Sales and Marketing Expenses Sales and Marketing Payroll Rs0 Rs120,000 Rs132,000 Rs145,200 Rs159,720

Total marketing expenses Rs349,992 Rs360,000 Rs360,000 Rs360,000 Rs360,000

Other Sales and Marketing Expenses Rs0 Rs0 Rs0 Rs0 Rs0

------------ ------------ ------------ ------------ ------------

Total Sales and Marketing Expenses Rs349,992 Rs480,000 Rs492,000 Rs505,200 Rs519,720

Sales and Marketing % 2.38% 1.62% 1.50% 1.39% 1.29%

General and Administrative Expenses General and Administrative Payroll Rs1,160,000 Rs1,030,800 Rs1,138,000 Rs1,266,000 Rs1,392,100

Depreciation Rs240,000 Rs300,000 Rs315,000 Rs330,750 Rs347,288

Rent Rs780,000 Rs819,000 Rs859,950 Rs902,948 Rs948,095

Printing & Stationary Rs30,000 Rs30,000 Rs31,500 Rs33,075 Rs34,729

Postage Rs6,000 Rs6,000 Rs6,300 Rs6,615 Rs6,946

Payroll Taxes Rs12,000 Rs12,000 Rs217,950 Rs240,503 Rs263,037

Office expenses Rs6,000 Rs6,000 Rs6,300 Rs6,615 Rs6,946

Outlet maintenance Rs27,600 Rs27,600 Rs28,980 Rs30,429 Rs31,950

Owners association fees Rs54,000 Rs56,700 Rs59,535 Rs62,512 Rs65,637

Telephone Rs108,000 Rs113,400 Rs119,070 Rs125,024 Rs131,275

Electricity Rs132,000 Rs132,660 Rs139,293 Rs146,258 Rs153,571

Professional fees Rs180,000 Rs198,000 Rs207,900 Rs218,295 Rs229,210



Legal fees Rs84,000 Rs92,400 Rs97,020 Rs101,871 Rs106,965

Travel & conveyance Rs7,200 Rs8,400 Rs8,820 Rs9,261 Rs9,724

Bank charges Rs91,992 Rs91,992 Rs96,592 Rs101,421 Rs106,492

Staff welfare Rs30,000 Rs31,800 Rs33,390 Rs35,060 Rs36,812

------------ ------------ ------------ ------------ ------------

Total General and Administrative Expenses Rs2,948,792 Rs2,956,752 Rs3,365,600 Rs3,616,635 Rs3,870,775

General and Administrative % 20.04% 10.01% 10.26% 9.93% 9.58%

Other Expenses: Other Payroll Rs153,000 Rs168,000 Rs183,000 Rs192,150 Rs201,757

Consultants Rs12,000 Rs12,000 Rs12,600 Rs13,230 Rs13,892

Other Expenses Rs0 Rs0 Rs0 Rs0 Rs0

------------ ------------ ------------ ------------ ------------

Total Other Expenses Rs165,000 Rs180,000 Rs195,600 Rs205,380 Rs215,649

Other % 1.12% 0.61% 0.60% 0.56% 0.53%

------------ ------------ ------------ ------------ ------------

Total Operating Expenses Rs3,463,784 Rs3,616,752 Rs4,053,200 Rs4,327,215 Rs4,606,144

Profit Before Interest and Taxes (Rs1,256,904) Rs815,783 Rs1,194,922 Rs1,498,200 Rs1,860,066

EBITDA (Rs1,016,904) Rs1,115,783 Rs1,509,922 Rs1,828,950 Rs2,207,354

Interest Expense Rs579,246 Rs417,275 Rs548,678 Rs505,989 Rs456,914

Taxes Incurred Rs0 Rs119,552 Rs213,261 Rs327,430 Rs463,040

Other Income Advertising Rs74,000 Rs120,000 Rs126,000 Rs132,300 Rs138,915

Licensing sadashivnagar Rs126,500 Rs143,750 Rs150,938 Rs158,484 Rs166,409

Total Other Income Rs200,500 Rs263,750 Rs276,938 Rs290,784 Rs305,324

Net Other Income Rs200,500 Rs263,750 Rs276,938 Rs290,784 Rs305,324

Net Profit (Rs1,635,650) Rs542,705 Rs709,921 Rs955,566 Rs1,245,436

Net Profit/Sales -11.12% 1.84% 2.16% 2.62% 3.08%

10.02 Projected profit explanation Sample Pharmacy is expected to achieve profitability in about two years from opening. i.e. Profitability is expected in the fiscal year 2009. This is due to its high overhead costs and high rentals in certain locations. 10.03 Break-even analysis table Monthly Revenue Break-even Rs 1,697,933 Assumptions



Average Percentage Variable Cost 83% Estimated monthly fixed cost Rs 288,649 10.04 Break even explanation Sample Pharmacy predicts that its break even to be about 18,00,000 in sales per month. After calculating income from advertising and licensing its sadashivnagar outlet, Sample Pharmacy predicts that its break even will come down to Rs 17,00,000 per month. Sample Pharmacy predicts that it will break even by March 31, 2009. 10.05 Benchmarks chart Section ommited 10.06 Key financial indicators Sample Pharmacy is expected to grow at around 3.6 times in the fiscal year 2007. This is mainly due to higher marketing budgets, effective marketing and effective sales training. Sample Pharmacy’s gross margin is expected to be between 14% - 17%. Sample Pharmacy’s inventory turnover is expected to be 12 to 15 turns per year. Sample Pharmacy does not plan to sell on credit. 11.0 Cash flow table

Pro Forma Cash Flow

FY 2008 FY 2009 FY 2010 FY 2011 FY 2012

Cash Received

Cash from Operations Cash Sales

Rs14,712,531 Rs29,550,232 Rs32,800,757 Rs36,408,840 Rs40,413,813

Cash from Receivables

Rs0 Rs0 Rs0 Rs0 Rs0

Subtotal Cash from Operations

Rs14,712,531 Rs29,550,232 Rs32,800,757 Rs36,408,840 Rs40,413,813

Additional Cash Received Non Operating (Other) Income

Rs200,500 Rs263,750 Rs276,938 Rs290,784 Rs305,324

Sales Tax, VAT, HST/GST Received 8.00% Rs1,177,002 Rs2,364,019 Rs2,624,061 Rs2,912,707 Rs3,233,105

New Current Borrowing

Rs0 Rs0 Rs0 Rs0 Rs0

New Other Liabilities (interest-free)

Rs0 Rs0 Rs0 Rs0 Rs0

New Long-term Liabilities

Rs1,500,000 Rs0 Rs0 Rs0 Rs0

Sales of Other Current Assets

Rs0 Rs0 Rs0 Rs0 Rs0

Sales of Long-term Assets

Rs0 Rs0 Rs0 Rs0 Rs0

New Investment Received

Rs0 Rs0 Rs0 Rs0 Rs0

Subtotal Cash Received

Rs17,590,033 Rs32,178,000 Rs35,701,755 Rs39,612,332 Rs43,952,241



Expenditures

Expenditures from Operations Cash Spending

Rs1,313,000 Rs1,318,800 Rs1,453,000 Rs1,603,350 Rs1,753,577

Bill Payments

Rs14,552,977 Rs28,375,508 Rs30,706,949 Rs34,007,668 Rs37,592,855

Subtotal Spent on Operations

Rs15,865,977 Rs29,694,308 Rs32,159,949 Rs35,611,018 Rs39,346,432

Additional Cash Spent Non Operating (Other) Expense

Rs0 Rs0 Rs0 Rs0 Rs0

Sales Tax, VAT, HST/GST Paid Out

Rs1,177,002 Rs2,364,019 Rs0 Rs0 Rs0

Principal Repayment of Current Borrowing

Rs0 Rs0 Rs0 Rs0 Rs0

Other Liabilities Principal Repayment

Rs0 Rs0 Rs0 Rs0 Rs0

Long-term Liabilities Principal Repayment

Rs152,636 Rs236,140 Rs284,198 Rs325,642 Rs375,423

Purchase Other Current Assets

Rs70,500 Rs0 Rs0 Rs0 Rs0

Purchase Long-term Assets

Rs0 Rs0 Rs0 Rs0 Rs0

Dividends

Rs0 Rs0 Rs0 Rs0 Rs0

Subtotal Cash Spent

Rs17,266,116 Rs32,294,467 Rs32,444,147 Rs35,936,660 Rs39,721,855

Net Cash Flow

Rs323,918 (Rs116,467) Rs3,257,609 Rs3,675,672 Rs4,230,386

Cash Balance

Rs632,293 Rs515,826 Rs3,773,434 Rs7,449,106 Rs11,679,492

11.02 Projected cash flow explanation Paid-up capital + Loan from the director = Rs 73,60,000 approx.

The business will need about Rs 15,00,000 to fund its working capital requirements. The business

expects positive cash flow from the month of December 2008 onwards.

11.03 Balance sheet table

Pro Forma Balance Sheet

FY 2008 FY 2009 FY 2010 FY 2011 FY 2012

Assets

Current Assets Cash Rs632,293 Rs515,826 Rs3,773,434 Rs7,449,106 Rs11,679,492

Accounts Receivable Rs0 Rs0 Rs0 Rs0 Rs0

Inventory Rs1,391,653 Rs2,157,591 Rs2,366,071 Rs2,626,339 Rs2,915,237

Other Current Assets Rs1,193,545 Rs1,193,545 Rs1,193,545 Rs1,193,545 Rs1,193,545

Total Current Assets Rs3,217,490 Rs3,866,962 Rs7,333,051 Rs11,268,990 Rs15,788,274

Long-term Assets Long-term Assets Rs3,525,054 Rs3,525,054 Rs3,525,054 Rs3,525,054 Rs3,525,054



Accumulated Depreciation Rs240,000 Rs540,000 Rs855,000 Rs1,185,750 Rs1,533,038

Total Long-term Assets Rs3,285,054 Rs2,985,054 Rs2,670,054 Rs2,339,304 Rs1,992,017

Total Assets Rs6,502,544 Rs6,852,016 Rs10,003,105 Rs13,608,294 Rs17,780,290

Liabilities and Capital

Current Liabilities Accounts Payable Rs446,632 Rs489,538 Rs590,843 Rs653,402 Rs722,280

Current Borrowing Rs0 Rs0 Rs0 Rs0 Rs0

Other Current Liabilities Rs270,400 Rs270,400 Rs2,894,461 Rs5,807,168 Rs9,040,273

Subtotal Current Liabilities Rs717,032 Rs759,938 Rs3,485,304 Rs6,460,569 Rs9,762,553

Long-term Liabilities Rs4,297,364 Rs4,061,224 Rs3,777,026 Rs3,451,384 Rs3,075,961

Total Liabilities Rs5,014,396 Rs4,821,162 Rs7,262,330 Rs9,911,953 Rs12,838,514

Paid-in Capital Rs5,000,000 Rs5,000,000 Rs5,000,000 Rs5,000,000 Rs5,000,000

Retained Earnings (Rs1,876,201) (Rs3,511,851) (Rs2,969,146) (Rs2,259,225) (Rs1,303,659)

Earnings (Rs1,635,650) Rs542,705 Rs709,921 Rs955,566 Rs1,245,436

Total Capital Rs1,488,149 Rs2,030,854 Rs2,740,775 Rs3,696,341 Rs4,941,776

Total Liabilities and Capital Rs6,502,544 Rs6,852,016 Rs10,003,105 Rs13,608,294 Rs17,780,290

Net Worth Rs1,488,149 Rs2,030,854 Rs2,740,775 Rs3,696,341 Rs4,941,776

11.04 Balance sheet explanation Sample Pharmacy’s projected financial statements show that it will not have difficulty meeting its debt obligations as long as it meets its objectives. Sample Pharmacy has taken a fairly conservative approach to its financial planning. The business will see an increase in net worth from 2009 onwards. 12.0 Financial plan summary Sample Pharmacy’s goal is to break even much faster than what it has forecasted in its financial plan. Sample Pharmacy plans on raising Rs 40 lakhs in equity. Part of the capital will be used to finance its operating expenses and the remaining will be kept as cash reserves that may be used to pay off existing debt, acquire other businesses and/or generate additional revenue streams. 12.01 Long-term plan

Sample Pharmacy’s growth in FY 2008 is expected to be 3.68 times from its previous year. In FY 2009 Sample Pharmacy expects 100% growth in revenues and the fiscal years 2010, 2011 and 2012 sales is expected to grow at about 11%.

12.02 Valuation



Sample Pharmacy has valued its company at Rs 90,00,000. New issues of its stock is priced at 2.5 times the face value. 12.03 Investment offering At this point Sample Pharmacy may get in investors who invest Rs 40 lakhs into the company for about 25 - 30% of the total capital structure. Sample Pharmacy would ideally prefer 1 to 4 investors. The price of the shares is very nominally priced at 2.5 times the face value. 12.04 Use of funds Working capital Rs 1,500,000 Cash reserves (for acquisitions or debt) Rs 2,500,000 Total Rs 4,000,000 12.05 Use of funds explanation

About Rs 15,00,000 will be used for working capital purposes. We will have some additional funds as cash reserves to retire existing debt or for acquisitions, capital improvements or other opportunities that may come up.

12.06 Payback Sample Pharmacy does not plan on paying its investors any dividends. Sample Pharmacy’s philosophy is to reinvest the money back into the business and increase shareholder value. Sample Pharmacy plans on a management buyout by 2012 at 3 times the original investment of the investor. This buyout will be financed by internal accruals, provided there are enough cash reserves. Sample Pharmacy predicts it will have cash reserves to buy back 50% of the shares. 12.07 Ratios table

Ratio Analysis

FY 2008 FY 2009 FY 2010 FY 2011 FY 2012

Sales Growth 368.68% 100.85% 11.00% 11.00% 11.00%

Percent of Total Assets Accounts Receivable 0.00% 0.00% 0.00% 0.00% 0.00%

Inventory 21.40% 31.49% 23.65% 19.30% 16.40%

Other Current Assets 18.36% 17.42% 11.93% 8.77% 6.71%

Total Current Assets 49.48% 56.44% 73.31% 82.81% 88.80%

Long-term Assets 50.52% 43.56% 26.69% 17.19% 11.20%

Total Assets 100.00% 100.00% 100.00% 100.00% 100.00%

Current Liabilities 11.03% 11.09% 34.84% 47.48% 54.91%

Long-term Liabilities 66.09% 59.27% 37.76% 25.36% 17.30%

Total Liabilities 77.11% 70.36% 72.60% 72.84% 72.21%

Net Worth 22.89% 29.64% 27.40% 27.16% 27.79%



Percent of Sales Sales 100.00% 100.00% 100.00% 100.00% 100.00%

Gross Margin 15.00% 15.00% 16.00% 16.00% 16.00%

Selling, General & Administrative Expenses 26.12% 13.16% 13.84% 13.38% 12.92%

Advertising Expenses 2.38% 1.22% 1.10% 0.99% 0.89%

Profit Before Interest and Taxes -8.54% 2.76% 3.64% 4.11% 4.60%

Main Ratios Current 4.49 5.09 2.1 1.74 1.62

Quick 2.55 2.25 1.43 1.34 1.32

Total Debt to Total Assets 77.11% 70.36% 72.60% 72.84% 72.21%

Pre-tax Return on Net Worth -123.38% 19.62% 23.58% 26.84% 28.39%

Pre-tax Return on Assets -28.24% 5.82% 6.46% 7.29% 7.89%

Additional Ratios Net Profit Margin -11.12% 1.84% 2.16% 2.62% 3.08%

Return on Equity -109.91% 26.72% 25.90% 25.85% 25.20%

Activity Ratios Accounts Receivable Turnover 0 0 0 0 0

Collection Days 0 0 0 0 0

Inventory Turnover 8.65 13.82 11.89 11.96 11.96

Accounts Payable Turnover 33.58 58.05 52.14 52.14 52.14

Payment Days 6 6 6 7 7

Total Asset Turnover 2.26 4.31 3.28 2.68 2.27

Debt Ratios Debt to Net Worth 3.37 2.37 2.65 2.68 2.6

Current Liab. to Liab. 0.14 0.16 0.48 0.65 0.76

Liquidity Ratios Net Working Capital Rs2,500,459 Rs3,107,024 Rs3,847,747 Rs4,808,421 Rs6,025,721

Interest Coverage -2.17 1.96 2.18 2.96 4.07

Additional Ratios Assets to Sales 0.44 0.23 0.3 0.37 0.44

Current Debt/Total Assets 11% 11% 35% 47% 55%

Acid Test 2.55 2.25 1.43 1.34 1.32

Sales/Net Worth 9.89 14.55 11.97 9.85 8.18

Dividend Payout 0 0 0 0 0



Appendix

Section Ommitted Usually includes entrepreneur resumes and profiles. And market research information.



Sources

Section omitted.

Business Plan Sample Pharmacy

Documents

Transcript of Business Plan Sample Pharmacy