Straight from the MD & Chairman of Thyrocare Technologies Ltd. - Dr. Arokiaswamy Velumani, intreview: # How you as a businessman can control your cost? There are two important things for you in your business 1. Product Price and 2. Product Cost You can fix the right price for your product only by controlling your cost. Before entering the laboratory testing industry, Dr. Velumani conducted market study and identified the actual costing in the industry. He found that the cost of raw material purchased by the vendor is Rs. 5 and he sells it to the laboratory company for Rs. 100. The laboratory company charges Rs. 500 from the customer for this test. Dr. Velumani brought price disruption by charging Rs. 100 instead of Rs. 500 for the same test. This helps him to: ► Increase the volume ► Increase his confidence ► Increase his network And finally, Thyrocare became a brand. Dr. Velumani advises small businessmen to do the following things to grow their businesses: ► Keep the price of their products low 1. None of the company has closed due to low pricing. 2. Most of the companies having high priced products are not able to control their costs and get closed. ► Control your cost >If you know Cost of Goods Sold (COGS), you can do business. But, if you know COGS of COGS, you can bring disruption. This means if you know the cost of goods sold of your product as well as the cost of goods sold of your vendor and the profit he is making, then you can bring price disruption and become a successful entrepreneur.   # How Dr. Velumani reduced the price of his products? ► Dr. Velumani has introduced the Buffet System in Laboratory Testing for the first time. ► He provides packages of 50, 60, and 80 tests. They are named as Aarogyam 1.1,  Aarogyam 1.2…to Aarogyam X and costs Rs. 500 – Rs. 3000 (115 tests are conducted in the package of Rs. 3000). ► These packages help the customers to get free tests along with the tests they require at the same price. ► Aarogyam also helps Dr. Velumani in the following ways: 1. The cost of collecting a specimen and bringing it to the laboratory is high. 2. However, once the specimen is entered in the machine, then 4 more tests can be conducted for extra Rs. 10 only. 3. So, the cost of performing the tests has decreased by introducing the concept of packages. 4. With the help of packages, Dr. Velumani has provided extra value to customer that helps him to retain them. # Target Customers of Aarogyam        In laboratory testing industry, there are two things: ► Diseases: In case of diseases, people suffer from fever, pain, inflammation, etc. They require sick care. ► Disorders: In case of disorder, people do not have any problem but their quality of life is poor. It mostly happens due to the changing lifestyle of people. They require preventive care. Developed countries - Preventive care is 50% India (in 1990) - Sick care was 100% Today: - India - Preventive care is 10% - Thyrocare - Preventive care is 50% As Dr. Velumani focuses on preventive care, so, their customers are the normal people and not the sick or hospitalized people. All market focuses on 1% sick person while Thyrocare focuses on 99% preventive care. So, this has: ► Increased the market size of Thyrocare ► Increased the repeat customers of Thyrocare ## How Thyrocare control their cash flows? ► Franchisees are attracted to Thyrocare because: 1. They are getting Thyrocare’s franchisee at low price 2. They are getting good margins ► Thyrocare takes Rs. 1 lakh as advance from their franchisees and gives them a credit limit of Rs. 50,000. ► This means that Thyrocare invests his franchisee’s money in the market and not its money. This is called negative working capital. ► Thyrocare has a negative working capital of Rs. 20 crores; so, it does not have to take loan from bank. ### Golden Statement: If your rate is low, people will ready to give advance. If you have reduced the price of your products but are not able to control your costs, then you will be out of business soon. Expansion without gross margin is committing suicide. So, you need to reduce your cost to reduce the prices of your products. Once you reduce the prices of your products, advance will come to you automatically. # Optimizing the Machine Usage ► If you are using a Rs. 1 crore machine only for 2 hours per day, then it will be a loss for you. ► However, if you use a Rs. 1 crore machine for 22 hours per day, then it will give you profits. >Standing Machine is a liability; Running Machine is an Asset. Whether you do any business, run your machine for 3 shifts to get profits. This will help you to get volume in your business, which will enables you to: ► Bargain with your vendors ► Keep your employees engaged in work ► Bring profit and prosperity # Summary: ► Understand your costs of goods and your vendors costs of goods ► Keep your price low and control your cost ► Attract advance from vendors by keeping price low ► Volume is everything! Business is all about volume. ► Expansion without Gross Margin is Committing Suicide