How can pharmacies achieve a profit in 2018?
The challenges for pharmacy businesses are getting greater rather than smaller, says pharmacy retail specialists RPS Ltd. Where will your profit come from this year?
Pharmacies are seeing their profits eroded – and with them, the positive growth that businesses need to buy stock, employ staff, reinvest and launch new initiatives. The government has been reducing NHS income for community pharmacy and, combined with Category M clawbacks, serious generic shortages and concessionary prices, this means that dispensing at a loss is not uncommon.
There is also competition from GP practices and internet-based pharmacies, not to mention ever-growing piles of paperwork that ultimately leave less time to provide services and train your team.
The challenge now is how to make profit and keep the business viable.
RPS spoke to a range of pharmacies to understand how they are succeeding in implementing the changes needed to grow their business in today’s challenging marketplace. Our research suggests that many pharmacies are still relying on dispensing prescriptions. Today, a broader, more comprehensive approach to pharmacy profi tability is necessary. Without profit, a pharmacy business will undoubtedly fail.
Secrets for success
The common denominator amongst these successful pharmacies was a focus on topline sales and profi tability, whether that is from dispensing, commissioned and non-commissioned services, retail revenue, team productivity and cost control.
Where to focus, and where the opportunities lie, will differ from business to business, but pharmacies need to identify the right business opportunities for them. We found that some pharmacy owners grew the number of scripts and others maximised the opportunities from services such as MURs and NMS, achieving an improvement of up to £15,000 gross profit.
Others worked on their OTC meds and retail, improving from between five and 10 per cent to even 100 per cent increases. Some pharmacies we spoke to had increased their annual profits by up to 20 per cent.
Try these three simple approaches:
- One more thing
The challenge of ‘one more thing’ has been very successful: what is the one more thing that every patient could buy from you that they will probably buy anyway?
And how do your team introduce them at every opportunity?
- What are you famous for?
What do you want to be famous for that will attract more customers and help your business benefi t from more of their spend? Aim to be known for giving great advice and recommending products and services that are right for each patient. Giving customers a great experience is a good way to help revenue and profit grow. It will help if you can encourage patients to access more services, say lifestyle check-ups, and also buy more products, such as blood pressure monitors.
- Merchandise to sell
Be sure that you understand the principles that will help to sell more through good stock management and merchandising.
It's all in the mind
To win in today’s pharmacy profession and improve in all areas of the business, contractors need the right mindset, followed through with maximum action. Thinking positively isn’t enough – it is actions that ‘move numbers’. Work towards some key targets: improve retail sales, deliver more services, achieve greater levels of sign up, to, hopefully as a result, improve profitability.
Focus on the main thing
Achieving profi ts requires a strong focus on where the greatest opportunities are for your business. Keep a track of your fi gures and, ideally, use a performance opportunity tool to help you calculate the return on investment to be gained from meeting your targets. These targets could include increased scripts, growing commissioned and private services, improved retail performance, the productivity of your team and cost management.
Implementing small improvements in many areas can add up to an exponential effect on profits. Give everyone a challenge in each area and see what happens. We have seen examples of marginal gains leading to cumulative increases of up to 40 per cent. This shows the difference that focusing on profit can make, even in increasingly difficult trading circumstances.
Find out more about RPS Ltd at pharmacygrowth.co.uk