Writing a business plan for a pharmaceutical wholesaler can be an intimidating task, especially for those just starting.
This in-depth guide is designed to help entrepreneurs like you understand how to create a comprehensive business plan so that you can approach the exercise with method and confidence.
We'll cover: why writing a pharmaceutical wholesaler business plan is so important - both when starting up, and when running and growing the business - what information you need to include in your plan, how it should be structured, and what tools you can use to get the job done efficiently.
Let's get started!
Why write a business plan for a pharmaceutical wholesaler?
Being clear on the scope and goals of the document will make it easier to understand its structure and content. So before diving into the actual content of the plan, let's have a quick look at the main reasons why you would want to write a pharmaceutical wholesaler business plan in the first place.
To have a clear roadmap to grow the business
Small businesses rarely experience a constant and predictable environment. Economic cycles go up and down, while the business landscape is mutating constantly with new regulations, technologies, competitors, and consumer behaviours emerging when we least expect it.
In this dynamic context, it's essential to have a clear roadmap for your pharmaceutical wholesaler. Otherwise, you are navigating in the dark which is dangerous given that - as a business owner - your capital is at risk.
That's why crafting a well-thought-out business plan is crucial to ensure the long-term success and sustainability of your venture.
To create an effective business plan, you'll need to take a step-by-step approach. First, you'll have to assess your current position (if you're already in business), and then identify where you'd like your pharmaceutical wholesaler to be in the next three to five years.
Once you have a clear destination for your pharmaceutical wholesaler, you'll focus on three key areas:
- Resources: you'll determine the human, equipment, and capital resources needed to reach your goals successfully.
- Speed: you'll establish the optimal pace at which your business needs to grow if it is to meet its objectives within the desired timeframe.
- Risks: you'll identify and address potential risks you might encounter along the way.
By going through this process regularly, you'll be able to make informed decisions about resource allocation, paving the way for the long-term success of your business.
To get visibility on future cash flows
If your small pharmaceutical wholesaler runs out of cash: it's game over. That's why we often say "cash is king", and it's crucial to have a clear view of your pharmaceutical wholesaler's future cash flows.
So, how can you achieve this? It's simple - you need to have an up-to-date financial forecast.
The good news is that your pharmaceutical wholesaler business plan already includes a financial forecast (which we'll discuss further in this guide). Your task is to ensure it stays current.
To accomplish this, it's essential to regularly compare your actual financial performance with what was planned in your financial forecast. Based on your business's current trajectory, you can make adjustments to the forecast.
By diligently monitoring your pharmaceutical wholesaler's financial health, you'll be able to spot potential financial issues, like unexpected cash shortfalls, early on and take corrective actions. Moreover, this practice will enable you to recognize and capitalize on growth opportunities, such as excess cash flow enabling you to expand to new locations.
To secure financing
Crafting a comprehensive business plan for your pharmaceutical wholesaler, whether you're starting up or already established, is paramount when you're seeking financing from banks or investors.
Given how fragile small businesses are, financiers will want to ensure that you have a clear roadmap in place as well as command and control of your future cash flows before entertaining the idea of funding you.
For banks, the information in your business plan will be used to assess your borrowing capacity - which is defined as the maximum amount of debt your business can afford alongside your ability to repay the loan. This evaluation helps them decide whether to extend credit to your business and under what terms (interest rate, duration, repayment options, collateral, etc.).
Similarly, investors will thoroughly review your plan to determine if their investment can yield an attractive return. They'll be looking for evidence that your pharmaceutical wholesaler has the potential for healthy growth, profitability, and consistent cash flow generation over time.
Now that you understand the importance of creating a business plan for your pharmaceutical wholesaler, let's delve into the necessary information needed to craft an effective plan.
Information needed to create a business plan for a pharmaceutical wholesaler
Drafting a pharmaceutical wholesaler business plan requires research so that you can project sales, investments and cost accurately in your financial forecast, and convince the reader that there is a viable commercial opportunity to be seized.
Below, we'll focus on three critical pieces of information you should gather before starting to write your plan.
Carrying out market research for a pharmaceutical wholesaler
Carrying out market research before writing a business plan for a pharmaceutical wholesaler is essential to ensure that the financial projections are accurate and realistic.
Market research helps you gain insight into your target customer base, competitors, pricing strategies and other key factors which can have an impact on the commercial success of your business.
In particular, it is useful in forecasting revenue as it provides valuable data regarding potential customers’ spending habits and preferences.
Your market research might reveal that wholesalers may be shifting away from traditional sales channels to more digital ones, such as online or automated ordering systems. Additionally, research may demonstrate that wholesalers may be increasingly seeking out partnerships with third-party logistics providers for more cost-effective and efficient distribution services.
This information can then be used to create more accurate financial projections which will help investors make informed decisions about investing in your pharmaceutical wholesaler.
Developing the sales and marketing plan for a pharmaceutical wholesaler
As you embark on creating your pharmaceutical wholesaler business plan, it is crucial to budget sales and marketing expenses beforehand.
A well-defined sales and marketing plan should include precise projections of the actions required to acquire and retain customers. It will also outline the necessary workforce to execute these initiatives and the budget required for promotions, advertising, and other marketing efforts.
This approach ensures that the appropriate amount of resources is allocated to these activities, aligning with the sales and growth objectives outlined in your business plan.
The staffing and equipment needs of a pharmaceutical wholesaler
As you embark on starting or expanding your pharmaceutical wholesaler, having a clear plan for recruitment and capital expenditures (investment in equipment and real estate) is essential for ensuring your business's success.
Both the recruitment and investment plans must align with the timing and level of growth projected in your forecast, and they require appropriate funding.
A pharmaceutical wholesaler might incur staffing costs such as salaries, benefits, and training for employees. They might also incur equipment costs, such as purchasing and maintaining computers and other technology, and purchasing and maintaining delivery vehicles.
To create a realistic financial forecast, you also need to consider other operating expenses associated with the day-to-day running of your business, such as insurance and bookkeeping.
With all the necessary information at hand, you are ready to begin crafting your business plan and developing your financial forecast.
What goes into your pharmaceutical wholesaler's financial forecast?
The objective of the financial forecast of your pharmaceutical wholesaler's business plan is to show the growth, profitability, funding requirements, and cash generation potential of your business over the next 3 to 5 years.
The four key outputs of a financial forecast for a pharmaceutical wholesaler are:
- The profit and loss (P&L) statement,
- The projected balance sheet,
- The cash flow forecast,
- And the sources and uses table.
Let's look at each of these in a bit more detail.
The projected P&L statement
The projected P&L statement for a pharmaceutical wholesaler shows how much revenue and profits your business is expected to generate in the future.
Ideally, your pharmaceutical wholesaler's P&L statement should show:
- Healthy growth - above inflation level
- Improving or stable profit margins
- Positive net profit
Expectations will vary based on the stage of your business. A startup will be expected to grow faster than an established pharmaceutical wholesaler. And similarly, an established company should showcase a higher level of profitability than a new venture.
The projected balance sheet of your pharmaceutical wholesaler
The balance sheet for a pharmaceutical wholesaler is a financial document that provides a snapshot of your business’s financial health at a given point in time.
It shows three main components: assets, liabilities and equity:
- Assets: are resources owned by the business, such as cash, equipment, and accounts receivable (money owed by clients).
- Liabilities: are debts owed to creditors and other entities, such as accounts payable (money owed to suppliers) and loans.
- Equity: includes the sums invested by the shareholders or business owners and the cumulative profits and losses of the business to date (called retained earnings). It is a proxy for the value of the owner's stake in the business.
Examining the balance sheet is important for lenders, investors, or other stakeholders who are interested in assessing your pharmaceutical wholesaler's liquidity and solvency:
- Liquidity: assesses whether or not your business has sufficient cash and short-term assets to honour its liabilities due over the next 12 months. It is a short-term focus.
- Solvency: assesses whether or not your business has the capacity to repay its debt over the medium-term.
Looking at the balance sheet can also provide insights into your pharmaceutical wholesaler's investment and financing policies.
In particular, stakeholders can compare the value of equity to the value of the outstanding financial debt to assess how the business is funded and what level of financial risk has been taken by the owners (financial debt is riskier because it has to be repaid, while equity doesn't need to be repaid).
The cash flow forecast
A projected cash flow statement for a pharmaceutical wholesaler is used to show how much cash the business is generating or consuming.
The cash flow forecast is usually organized by nature to show three key metrics:
- The operating cash flow: do the core business activities generate or consume cash?
- The investing cash flow: how much is the business investing in long-term assets (this is usually compared to the level of fixed assets on the balance sheet to assess whether the business is regularly maintaining and renewing its equipment)?
- The financing cash flow: is the business raising new financing or repaying financiers (debt repayment, dividends)?
As we discussed earlier, cash is king and keeping an eye on future cash flows an imperative for running a successful business. Therefore, you can expect the reader of your pharmaceutical wholesaler business plan to pay close attention to your cash flow forecast.
Also, note that it is customary to provide both yearly and monthly cash flow forecasts in a business plan - so that the reader can analyze seasonal variation and ensure the pharmaceutical wholesaler is appropriately funded.
The initial financing plan
The sources and uses table or initial financing plan is a key component of your business plan when starting a pharmaceutical wholesaler.
It shows where the capital needed to set up the business will come from (sources) and how it will be spent (uses).
This table helps size the investment required to set up the pharmaceutical wholesaler, and understand how risks will be distributed between the business owners, and the financiers.
The sources and uses table also highlights what the starting cash position will be. This is key for startups as the business needs to have sufficient funding to sustain operations until the break-even point is reached.
Now that you have a clear understanding of what will go into the financial forecast of your pharmaceutical wholesaler business plan, let's have a look at the written part of the plan.
The written part of a pharmaceutical wholesaler business plan
The written part of a pharmaceutical wholesaler business plan plays a key role: it lays out the plan of action you intend to execute to seize the commercial opportunity you've identified on the market and provides the context needed for the reader to decide if they believe your plan to be achievable and your financial forecast to be realistic.
The written part of a pharmaceutical wholesaler business plan is composed of 7 main sections:
- The executive summary
- The presentation of the company
- The products and services
- The market analysis
- The strategy
- The operations
- The financial plan
Let's go through the content of each section in more detail!
1. The executive summary
The executive summary, the first section of your pharmaceutical wholesaler's business plan, serves as an inviting snapshot of your entire plan, leaving readers eager to know more about your business.
To compose an effective executive summary, start with a concise introduction of your business, covering its name, concept, location, history, and unique aspects. Share insights about the services or products you intend to offer and your target customer base.
Subsequently, provide an overview of your pharmaceutical wholesaler's addressable market, highlighting current trends and potential growth opportunities.
Then, present a summary of critical financial figures, such as projected revenues, profits, and cash flows.
You should then include a summary of your key financial figures such as projected revenues, profits, and cash flows.
Lastly, address any funding needs in the "ask" section of your executive summary.
2. The presentation of the company
The second section in your pharmaceutical wholesaler's business plan should focus on the structure and ownership, location, and management team of the company.
The structure and ownership part provides an overview of the legal structure of the business, who the owners are and how much each has invested and owns. If you are seeking financing it is important that the reader gets a clear picture of which legal entity is receiving the funds, and who controls the business.
The location part should give an overview of the premises from which the company is operating, and why that location is of particular interest (catchment area, accessibility, amenities nearby, etc.).
When describing the location of your pharmaceutical wholesaler, you may want to emphasize its access to major transportation routes, its proximity to a major metropolitan area, and its potential for growth. The area could offer multiple options for shipping and receiving, such as airports, railroads, and highways. It could also be in close proximity to a large city, allowing for easy access to customers and suppliers. The potential for growth in the area could create opportunities for the wholesaler to expand its operations, increase its customer base, and capitalize on new markets. All of these factors could make the location an attractive choice for a third party financier.
Finally, you should introduce the management team. Explain each member's role, background, and experience.
It is also important to emphasize any past successes that the members of the management team have achieved, and how long they've been working together, as this will help potential lenders or investors understand why they should trust in their leadership.
3. The products and services section
The products and services section of your business plan should include a detailed description of what your company offers, who are the target customers, and what distribution channels are part of your go-to-market.
For example, your pharmaceutical wholesaler might offer a wide range of products and services, such as delivering quality healthcare products, providing access to competitive pricing, and offering a customized inventory management system. This helps customers get the supplies they need quickly and efficiently with minimal disruption to their operations. Additionally, many pharmaceutical wholesalers offer a variety of value-added services, such as providing advice on regulatory issues, facilitating bulk ordering, and offering online ordering options. These services help customers get the most out of their investment in pharmaceuticals, while also ensuring that they are compliant with applicable regulations.
4. The market analysis
When you present your market analysis in your pharmaceutical wholesaler business plan, it's crucial to include detailed information about customers' demographics and segmentation, target market, competition, barriers to entry, and any relevant regulations.
The main objective of this section is to help the reader understand the size and attractiveness of the market while demonstrating your solid understanding of the industry.
Begin with the demographics and segmentation subsection, providing an overview of the addressable market for your pharmaceutical wholesaler, the key trends in the marketplace, and introducing different customer segments along with their preferences in terms of purchasing habits and budgets.
Next, focus on your target market, zooming in on the specific customer segments your pharmaceutical wholesaler aims to serve and explaining how your products and services fulfil their distinct needs.
For example, your target market might include hospitals and large medical facilities. These customers would purchase large quantities of pharmaceuticals often, making them the ideal target for a pharmaceutical wholesaler. Additionally, these customers would need to work with a reliable supplier to ensure that they have the medications they need when they need them.
Then proceed to the competition subsection, where you introduce your main competitors and highlight what sets you apart from them.
Finally, conclude your market analysis with an overview of the key regulations applicable to your pharmaceutical wholesaler.
5. The strategy section
When you write the strategy section of your pharmaceutical wholesaler business plan, remember to cover key elements such as your competitive edge, pricing strategy, sales & marketing plan, milestones, and risks and mitigants.
In the competitive edge subsection, elaborate on what makes your company stand out from competitors. This becomes especially important if you're a startup, aiming to carve a place for yourself amidst established players in the marketplace.
The pricing strategy subsection should demonstrate how you plan to maintain profitability while offering competitive prices to attract customers.
Outline your sales & marketing plan, detailing how you'll reach out to new customers and retain existing ones through loyalty programs or special offers.
For the milestones subsection, outline your company's achievements to date and your main objectives for the future, complete with specific dates to set clear expectations for progress.
Lastly, the risks and mitigants subsection should address the main risks that could affect your plan's execution. Explain the measures you've put in place to minimize these risks, assuring potential investors or lenders.
Your pharmaceutical wholesaler could face the risk of theft. This could occur both internally, if employees attempt to steal medications, as well as externally, if criminals attempt to break into the warehouse and steal medications. Your pharmaceutical wholesaler may also face the risk of financial losses due to the cost of purchasing medications and the possibility of not being able to sell them in a timely fashion. In addition, changes in regulation or the cost of medications could also lead to financial losses.
6. The operations section
In your business plan, it's also essential to provide a detailed overview of the operations of your pharmaceutical wholesaler.
Start by covering your team, highlighting key roles and your recruitment plan to support the expected growth. Outline the qualifications and experience required for each role and your intended recruitment methods, whether through job boards, referrals, or headhunters.
Next, clearly state your pharmaceutical wholesaler's operating hours, allowing the reader to assess staffing levels adequately. Additionally, mention any plans for varying opening times during peak seasons and how you'll handle customer queries outside normal operating hours.
Then, shift your focus to the key assets and intellectual property (IP) necessary for your business. If you rely on licenses, trademarks, physical structures like equipment or property, or lease agreements, make sure to include them in this section.
You may have key assets such as inventory and customer data that could be considered intellectual property (IP). These assets could be protected by copyright laws and other regulations. Additionally, the wholesaler might also have trade secrets such as supplier relationships, pricing information, and product formulations that could be protected as IP.
Lastly, include a list of suppliers you plan to work with, detailing their services and main commercial terms, such as price, payment terms, and contract duration. Investors are interested in understanding why you've chosen specific suppliers, which may be due to higher-quality products or established relationships from previous ventures.
7. The presentation of the financial plan
The financial plan section is where we will include the financial forecast we talked about earlier in this guide.
Now that you have a clear idea of the content of a pharmaceutical wholesaler business plan, let's look at some of the tools you can use to create yours.
What tool should I use to write my pharmaceutical wholesaler's business plan?
In this section, we will be reviewing the two main options for writing a pharmaceutical wholesaler business plan efficiently:
- Using specialized software,
- Outsourcing the drafting to the business plan writer.
Using an online business plan software for your pharmaceutical wholesaler's business plan
Using online business planning software is the most efficient and modern way to create a pharmaceutical wholesaler business plan.
There are several advantages to using specialized software:
- You can easily create your financial forecast by letting the software take care of the financial calculations for you without errors
- You are guided through the writing process by detailed instructions and examples for each part of the plan
- You can access a library of dozens of complete business plan samples and templates for inspiration
- You get a professional business plan, formatted and ready to be sent to your bank or investors
- You can easily track your actual financial performance against your financial forecast
- You can create scenarios to stress test your forecast's main assumptions
- You can easily update your forecast as time goes by to maintain visibility on future cash flows
- You have a friendly support team on standby to assist you when you are stuck
If you're interested in using this type of solution, you can try The Business Plan Shop for free by signing up here.
Hiring a business plan writer to write your pharmaceutical wholesaler's business plan
Outsourcing your pharmaceutical wholesaler business plan to a business plan writer can also be a viable option.
Business plan writers are experienced in writing business plans and adept at creating financial forecasts without errors. Furthermore, hiring a consultant can save you time and allow you to focus on the day-to-day operations of your business.
However, hiring business plan writers is expensive as you are paying for the software used by the consultant, plus their time, and their profit margin of course.
From experience, you need to budget at least £1.5k ($2.0k) excluding tax for a complete business plan, more if you need to make changes after the initial version (which happens frequently after the initial meetings with lenders or investors).
You also need to be careful when seeking investment. Investors want their money to be used to grow the business, not spent on consulting fees. Therefore, the amount you spend on business plan writing services (and other consulting services such as legal services) needs to be negligible relative to the amount raised.
The other drawback is that you usually don't own the business plan itself: you just get the output, while the actual document is saved in the consultant's business plan software - which makes it difficult to maintain the document up to date without hiring the consultant on a retainer.
For these reasons, outsourcing the pharmaceutical wholesaler business plan to a business plan writer should be considered carefully, weighing both the advantages and disadvantages of hiring outside help.
Ultimately, it may be the right decision for some businesses, while others may find it beneficial to write their business plan using online software.
Why not create your pharmaceutical wholesaler's business plan using Word or Excel?
Using Microsoft Excel and Word (or their Google, Apple, or open-source equivalents) to write a pharmaceutical wholesaler business plan is a terrible idea.
For starters, creating an accurate and error-free financial forecast on Excel (or any spreadsheet) is very technical and requires both a strong grasp of accounting principles and solid skills in financial modelling.
As a result, it is unlikely anyone will trust your numbers unless - like us at The Business Plan Shop - you hold a degree in finance and accounting and have significant financial modelling experience in your past.
The second reason is that it is inefficient. Building forecasts on spreadsheets was the only option in the 1990s and early 2000s, nowadays technology has advanced and software can do it much faster and much more accurately.
And with the rise of AI, software is also becoming smarter at helping us detect mistakes in our forecasts and helping us analyse the numbers to make better decisions.
Also, using software makes it easy to compare actuals vs. forecasts and maintain our forecasts up to date to maintain visibility on future cash flows - as we discussed earlier in this guide - whereas this is a pain to do with a spreadsheet.
That's for the forecast, but what about the written part of my pharmaceutical wholesaler business plan?
This part is less error-prone, but here also software brings tremendous gains in productivity:
- Word processors don't include instructions and examples for each part of your business plan
- Word processors don't update your numbers automatically when they change in your forecast
- Word processors don't handle the formatting for you
Overall, while Word or Excel may be viable options for creating a pharmaceutical wholesaler business plan for some entrepreneurs, it is by far not the best or most efficient solution.
- A business plan has 2 complementary parts: a financial forecast showcasing the expected growth, profits and cash flows of the business; and a written part which provides the context needed to judge if the forecast is realistic and relevant.
- Having an up-to-date business plan is the only way to keep visibility on your pharmaceutical wholesaler's future cash flows.
- Using business plan software is the modern way of writing and maintaining business plans.
We hope that this practical guide gave you insights on how to write the business plan for your pharmaceutical wholesaler. Do not hesitate to get in touch with our team if you still have questions.
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