A very good friend of mine once told me, “These times will change”. Now whilst that nugget of gold was told to me at a particularly bad spot in my life, it also applies when times are really good.
Now, I don’t want you to think I am a pessimist. Anyone who knows me well, knows I am a fence sitter. I like to see all perspectives and all points of view. It’s a better view of the world.
In pharmacy land, many owners are seeing some good years lately, particularly in regard to trading performance. Labour supply remains a huge issue. The data we are seeing is showing good consistent years of growth in sales, gross profit and overall earnings. And it has been really good to see. Let us not forget though, in the not-too-distant past, 2019 to be precise, retail was terrible. It was not uncommon for retail sales to decline 5% to 10% each year. Pharmacies were only held up by Dispensary and Health Service.
So, it is important we remain careful and always have an eye on the future, to know what we should be doing now.
2023 financial year has got some head winds that may impact pharmacy trading performance going forward. Keep in mind here that 2022 bought many pharmacies additional revenue streams for Covid Vaccinations and RAT sales. Potentially many of those customers were new to your store and bought other things when they were there. Without as stronger need for RAT’s and Covid Vaccinations are customer numbers likely to drop off? This issue has been raised with me a few times with owners.
We are also in an environment now of higher inflation and cost of living is up as a result. Interest Rates are growing and hitting household budgets. What impact is this going to have?
It is enough for pharmacy owners to start considering pharmacy life post-Covid in a potentially subdued consumer spending world. Keep in mind also with pharmacist wage rates a lot higher now than what they ever have been (and about time too), the pressure on earnings will be greater. I am not a crystal ball gazer, and I am potentially wrong. But its best to think ahead and plan carefully.
So, if you are a pharmacy owner, what should you be doing now?
Focus on keeping your customers loyalty
Customer numbers and script numbers rule the world in pharmacy land. Firstly, you need to be focussing on strategies that are going to grow these two key metrics. A good solid community-based marketing strategy is vital. You also need to focus on keeping those customers, creating that stickiness that keeps them coming back to you.
Take advantage of the exposure you had to all these new people, and with clever communication strategies, keep enticing them to come back to you. There are several strategies that come into play here. Excellent customer service, the atmosphere and culture in the store, loyalty programs, regular customer communications, in store events and education (blogs).
We have written a ton of articles and produced podcasts on these topics so please go to our website and have a look. Also check out our Marketing Module that can help.
Understand your budget forecasts
Many of you will also know demand for pharmacy businesses is particularly strong, with capitalisation rates falling, pharmacy business values growing, and premiums being paid. That is fantastic if you are selling. But what if you are buying?
If you are buying at 15% or lower cap rates, have you truly taken into consideration these head winds I have spoken about. Let us dig into this a bit more.
Are the premiums being paid at the moment real or artificial? Are they sustainable? With higher interest rates, higher wage costs, and potentially subdued consumer spending what does your next few years look like? What is margin of error? Meaning given the pressure on cashflow resulting from higher interest rates and higher wage costs, how much do sales and GP$ need to decline before cashflow becomes a problem? Budget for this now and understand the parameters.
I am more than happy to have prepared for this and be wrong, which if I am, then good, no damage is done. But what if I am right? Then I am in a better position than if I hadn’t done anything at all. Best to plan now and be prepared than be caught unawares.
Look after yourself and your team
Finally, I would like to say thank you and recognise the efforts of those pharmacy owners who are working ridiculous hours at the moment. Many of you are under a lot of pressure, tired, not seeing their partners and families, some even doing 7 days per week.
Why? Because they cannot access pharmacists. I take my hat off to you all. Hang in there. And most importantly be kind to yourselves, look after your physical and mental health. It creeps up when you least expect it and before too long, you realise you have a problem.
Please reach out to someone, including myself or Priya if you need a data-download and someone to talk to.
