Our Prime Minister, Scott Morrison, keeps using the phrase “when we get to the other side “. So far, with the vast majority of Australians observing the shutdowns, social distancing, and social isolation, Australia appears to be heading in the right direction and getting closer to “the other side”. This journey has meant the closure of tens of thousands of businesses, hundreds of thousands of jobs lost, and a change in working conditions for many. Businesses are seriously impacted in almost all instances.
For some, Covid-19 was merely the nail in the coffin that sealed an already failing business. Yet, let’s not forget there are a few winners from this pandemic. Oh, to be a shareholder in Zoom, Netflix or Amazon. Their subscriptions keep soaring. Of course these success stories are in the minority.
The journey to “the other side” provides us with the opportunity to revisit our business in what will become the new economy. With that in mind, here’s a few tips that you may want to apply to in relation to ensuring the success of your Pharmacy.
The sudden impact of the Covid-19 virus caught many businesses unaware. You should now consider steps to ensure that this does not occur again to you.
For all we know there may be another Covid-19 around the corner, or some other calamity. Sit down with your key Managers and Partners and identify the answer to “what if something like this happens again?”.
- This may involve ensuring all future leases, and potentially your current leases have escape clauses to mitigate your rental commitments in the event of a pandemic or calamity.
- Another way to future proof your business is to ensure that you have access to “emergency funds” as and when you need them. This may be in the form of establishing a regular savings account or simply a line of credit that you can draw down upon in tough times.
- Create a “sinking fund” It’s quite fascinating that as advisors to numerous businesses, including pharmacy, we often recommend to our clients that they contribute the maximum concessional amount into superannuation, being $25,000 per member. Typically, a two partner (or husband and wife) couple can therefore contribute $50,000. When providing this advice, we are often told “I can’t find $50,000” to which we then ask the question “Can you find a $1,000 a week?” The answer is almost always yes. The lesson learned is breaking down a large task into smaller meaningful bites achieves goals.
Most People Aim at Nothing and Hit It with Tremendous Accuracy
Now more than ever is the opportunity a necessity to prepare forecasts for your pharmacy. Your forecasts should consider your likely revenue and expenses, your current starting position, and the timing of all inflows and outflows to do with your business. At Rose Health, we refer to this as a 3-way forecast which includes:
- The preparation of a Profit and Loss Statement
- A Cashflow Statement
- And a Balance Sheet position.
Working closely with your Accountant who has an in depth knowledge not only of your industry but the interaction of the above will result in a very useful tool. This will allow you to stress test the impact of seasonal changes or other factors as a result of your input. Forecasts are not merely documents to be prepared for banking purposes. They are meaningful documents from which valuable decisions can be made on a regular (typically monthly) basis. In our experience, the clients that prepare goals and forecasts are often the success stories. Typically, these forward thinking clients over achieve their goals.
If Covid-19 has taught us anything it is that those engaged with their customers in the digital space are less impacted than those reliant on walk-in trade. Ask yourself:
- What are you doing to engage electronically with your customers?
- How can you become the next “Amazon pharmacy” of choice?
Pharmacies key costs (other than purchases) are wages and rent. Perhaps it’s about time to assess how you can trim these areas and reallocate these funds into drawing customers to your “E-store”. What is your offering and what is your unique point of difference that will drive traffic to your site? How are you going to capture and use this data to continually grow your database of users?
– Michael Sojka , Managing Partner at Rose Partners