How Most Pharmacy Owners Program Their Businesses Unknowingly For Failure


pharmacy owners

Most hard working pharmacy owners in Nigeria will never become rich and the reason is very simple. If you think I do not know what I am talking about, then answer these simple questions as CEOs of success businesses have at their finger tips. Can you tell me the following figures for your business.

What are your RETURN ON ASSET and RETURN ON INVESTED CAPITAL?

WHAT IS YOUR BREAK EVEN POINT?

WHAT IS YOUR INVENTORY TURNOVER RATE?

WHAT IS THE PROFIT PER EMPLOYEE in your business? etc.

If you are like most Nigerian business owners and pharmacy owners, I can bet that you cannot answer any of these and if you can not answer them, how do you expect to build a successful business?

If you are like the majority of the pharmacists and do not know your profit per staff, it means that you do not even know which set of staff are more valuable than others or if you are getting less from a staff in relation to what you are paying them. Even Jesus tell us that this is a critical success factor by this story of a business owner.

In the bible Jesus told a story of a business owner that gave his three staff five talent, two talent and one talent. He asked them to go and invest it and left them for a while to do business with his money. Unlike most Nigerian pharmacy owners, he at the end of the month calls each of his staff to account to measure the returns on the investment he has made in them. He immediately fired the unproductive staff and empowered the productive ones. The critical lesson too is that Jesus concluded by saying that funds was taking from low productive staff and given to highly productive staff.

I will strongly suggest you do these simple calculation to determine if you are paying your staff more than they really are worth. Determine your net profit for  a month which you can calculate like this

GROSS PROFIT = TOTAL SALES IN A MONTH – COST YOU BOUGHT THE PRODUCTS THAT GAVE YOU THAT SALES

EBIT = GROSS PROFIT – COST OF OPERATING YOUR BUSINESS IN A MONTH

Your EBIT means your Earnings (profit) BEFORE INTEREST AND TAX

Your EBIT means your profit in a month. To now find out how valuable your staff are too you, divide your profit with the total of their salary. For example, if you made a profit of 1000000 in a month and have six staff whose total salary is 500000 then your profit per staff  ratio will be 2:1.

This means that for every one naira you spend on salary you make 2. Now when you consider it for a staff that is earning 100,000 and you take him or her out and still make 1000000 profit, then you are now making N2.5 for every N1 you spend in salary.

What this means is that if you have four pharmacists each earning 100,000 and two sales support staff each earning N50,000, you can fire the worst among the pharmacists and use three to maintain or increase your profit or your can fire the sales support staff and get your pharmacists to do everything including cleaning the store and thus increase your profit.

The point is that if you do not understand how to do these basic calculations, you will be working hard and the salary weight of your less productivity staff will keep you poor and broke.

Unfortunately, most Pharmacy owners will never calculated the value of their staff and more unfortunately rarely fire those who are low productive and even pay the less productive staff equally with the very productive staff.

Kindly watch the video below for more instruction on how to grow your business  and contact me on 08023622171 or corporatekanselor@gmail.com

One thought on “How Most Pharmacy Owners Program Their Businesses Unknowingly For Failure

  • November 7, 2015 at 9:52 am
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    Hi Ifeanyi, I always look forward to your posts, they’re quite enriching. I suggest you redesign your blog so that the comments section will come directly under each post. It’ll help facilitate more conversations on the blog.

    On this post, I’ll like to contribute further to the EBIT. Where possible the business owner should also include two important elements. Depreciation and Amortization, to make it EBITDA. To factor in Depreciation into your accounting is key, because as a pharmacy owner, some of your assets( furniture, shelves, ACs, signage, computers, Refrigerators, Vehicles etc) will depreciate over 3-5 years and will need to be replaced. Eventhough you’re not running these expenditures now, you can’t really say you’re making profit if you’re not making enough money to cover these costs. Amortization is also important for some fixed assets like buildings etc. Even if you own the property where your store is located, you must factor the cost into your accounts. In simple terms, The business ought to be able to pay you back for the property or at least pay you the equivalent of what you’ll earn if you rented it out to someone else.

    Also, in calculating Profit per Staff ratio, the business owner needs to include himself and his own salary. What you see often is that most small business owners are not able to separate their personal finance from that of the business. You need to pay yourself a salary for the work you do for your pharmacy. And don’t run your personal expenses from your stores’ income.

    Reply

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