The value of certainty cannot be overstated, can it?
In the past, Community Pharmacy Agreements provided a sense of security for the community pharmacy industry, offering a clear outlook for the next 5 years. It allowed owners to grasp their business model, profitability, and cash flow, providing a foundation for continued funding from the banking system. However, the world of pharmacy is currently far from certain due to a hastily implemented, non-consultative policy by the Health Minister. Uncertainty now looms over numerous aspects of community pharmacy, leaving owners worried about their future income, cash flow, business worth, and overall sustainability. This uncertainty has cast a shadow over every facet of this vital industry, which plays a crucial role in community health.
Nevertheless, business doesn't wait for anyone. It persists, in one form or another, whether we embrace it or not. In these circumstances, it is essential to ground yourself and consider which aspects of your world are within your control and influence, and which are not.
· You have the power to harness your physical, mental, and emotional energies. You have control over how you emotionally react to this situation. After conversing with numerous owners, the range of emotional responses has been extensive. Some have adopted a mindset of "not ideal, but let's formulate a strategy and make the most of it," while others have expressed their frustrations through expletives, panic, and a negative outlook.
· You are in control of your business, so make sure you bring your mind back to what you can change in your business to reduce the impact.
· You are in control of your advocacy on this matter.
Keep in mind that you are still the owner of a business, so it's crucial to adopt the mindset of a business owner. Although we are still a long way from reaching a final policy outcome, there is still plenty of work to be done. With that in mind, here are my top recommendations for you.
Leadership and Culture
First and foremost, this is where you need to be right now, you need to show leadership! Your team are looking up to you for leadership, guidance, and security. They want to know their jobs are safe, that you value them. That leadership then sets the tone for the culture of your store. You need to work with your team, with positivity and courage, and together formulate a well-structured thought-out strategy to tackle this issue, to get your team on board and get them advocating for their pharmacy and for their industry. You need to be positive and not be too emotional.
Business Strategy
The basics of pharmacy business is still the same. They haven’t changed at all. You should be focussing on the basics.
· How will you grow your income?
· How will you reduce your expenses?
· How will you preserve your cashflow?
In my opinion, cutting staff and reducing wages is a last resort measure.
Patient’s numbers, script numbers
Despite these changes, and despite the uncertainty at present, the business model does not change. In a very simplistic way, you are still moving volumes of products at a profit margin to generate profitability. That model still exists, and your patients still need to be front and centre, it has just become more critical. This area has got to be a top priority.
· What is your strategy to grow patient numbers?
· What is your strategy to improve patient loyalty?
· What is your strategy to grow the number of times they visit your store?
· What is your strategy to grow backet size?
Marketing strategy, improving the patient experience, and your internal systems and procedures around patient loyalty should be your key considerations.
Pricing
This is an opportunity to review your pricing. Obviously, your main lines should remain competitive, but perhaps the pricing of some of your other lines need to be reviewed and increased. Do you cease the $1 discount? Don’t forget your high school economics theory relating to Price Elasticity of Demand. What products have elastic demand and are sensitive to price changes? What products have inelastic demand and are not sensitive to price changes. The KPI is Gross Profit Dollars. Some pricing adjustments will be necessary. This is the unfortunate cost of the policy. No one wins.
Services
Take a moment to evaluate the services you offer. Which profitable services should you prioritise and maintain? Which non-profitable or marginally profitable services should you consider discontinuing? Moreover, what new services could you potentially introduce? After conversing with several pharmacy owners, it seems that certain services are not being fully utilised or emphasised. Perhaps it is time for pharmacies to explore the possibility of introducing patient-funded services. Remember the age-old adage, "people don't appreciate what they receive for free." For instance, have you considered implementing delivery and packaging fees?
Expenses
Often when times are busy, or buoyant, expense management is often neglected. Spend some time in running the ruler over your expenses and look at what can be cut back. Remember, every little bit helps. I would still be focussing on revenue opportunities first, but expense management is still important. Look at expenses from a return on investment and opportunity cost perspective.
Rent
It would be good to get some comments from the experts here. Are there any avenues for rent reduction negotiations? It is not my field of expertise. But worth raising for discussion.
Staffing
It feels like just yesterday when pharmacy owners were desperately seeking more staff. Many voiced their concerns about being understaffed, working excessive hours, and struggling to prioritise services while neglecting important aspects of their pharmacies. However, now we find ourselves in a situation where hours might be reduced, and staff members face redundancy. In my opinion, reducing staff hours and resorting to redundancies should be considered as a last resort. Instead, I see this as a valuable opportunity to reassess your staffing structures and uncover untapped potential. This is your chance to finally shape your teams the way you've always envisioned. To put it another way, what opportunities have you missed by not having adequate staffing? Now is the time to seize the opportunity. A well-designed staffing structure can also contribute to revenue growth.
Loan repayments
Speak with your bank manager and/or finance broker about changing your loan repayments to help preserve cashflow.
Drawings
Do I dare even mention this? The reality of business is you can only take what the business produces. If income drops, so does your drawings. Again, this would be a last resort. But I have seen it before, owners taking drawings regardless of what it costs the business.
Do your numbers – Budgets and Forecasts
You should be doing a multi-year profitability budget and cashflow budget to see where you are financially positioned over the next few years after you have made these changes. Let the numbers drive your decisions.
Community engagement
Engage in conversations with the doctors and allied health professionals in your local community to explore collaborative efforts that can mutually benefit all parties involved, including yourselves and your patients.
Analyse your figures and strategies to determine the necessary steps for your business to tackle this situation. Remember, you have full control over your business and the strategies you choose to implement. Take action immediately and allow yourself a three-month timeframe to execute your plans before September 1, 2023 arrives.
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