The retail pharmacy industry has undergone tremendous change and consolidation over the last several years. In spite of the increasingly competitive landscape, some independent pharmacies are thriving. What sets these pharmacies apart from the rest of the pack? They outperform their peers by understanding what drives their business and by capitalizing on their strengths. There are multiple ways to determine business drivers. A good starting point is an independent assessment from an outside group to provide an unbiased and objective viewpoint.
A key first step in the assessment process and understanding where the business excels and what can be improved is establishing a budget and an ongoing monitoring process. Budgeting is time consuming and you may wonder whether it is really necessary as it takes you away from the day to day business. But it is vital to any business and forms the building block from which decisions should be made. Some of the key benefits of developing a budgetary process are:
- Establishing key data points to analyze and evaluate the business performance over time – Which business lines are the most profitable, growing/shrinking, etc.?
- Defining a framework for goals and measuring success – Do I have the necessary capital to expand my business?
- Benchmarking performance – How do I compare to my peers? Am I lagging, average, or best-in-class and how do I get that data?
The budgeting and monitoring process provides an objective framework for analyzing the business and determining areas of strength and areas for improvement on an ongoing basis. Seeing the numbers forces the business to take a hard look and make decisions on where and how resources should be allocated. Finally, once the budget has been established, the task of tracking performance and exposing areas of improvement becomes part of the overall and on-going operation, not a one-time annual event, with continual course corrections where needed.
-Kim Salvetti, Consultant at Revolution Advisors