Apr 2019 2 Minutes
Business Health Checks Help
A business health check is very important. Just as people would visit your pharmacy for their health needs, it is also important to assess your business’ health. At Walker Wayland, we use Key Performance Indicators (KPIs) and business ratios to calculate various indicators and key drivers in your pharmacy. KPIs and ratios help identify:
- gross profit margins and percentages
- average basket size
- percentage of new customers
- wages to turnover and gross profit
- net profit to turnover
- sales per square metre of rented space
- rent to turnover
...and many others!
On their own, these ratios and KPIs don’t mean much. However, when they’re compared to other pharmacies via benchmark comparisons to your previous performance or to your budget, then they can start to give you a good indication of what’s happening within your business. This can then lead to some “what if” calculations. What would be the annual turnover if changes such as the following could be effected?
First we analyse the current performance:
|Pharmacy’s annual sales||$1.8M|
|Number of customers||1,745|
|Frequency of the visits||5 times per annum|
Number of visits is calculated as 1,745 x 5 = 8,725
If the number of customers could be increased by 5%, the frequency of visits increased by 10% and the selling prices improve by 2%, what would be the result?
|Customers||1,745 + 5% = 1,832|
|Frequency of visits||5 + 10% = 5.5|
|Number of visits||1,832 x 5.5 = 10,076|
|Average sale||$206.30 + 2% = $210.42|
|Projected annual turnover||10,076 x $210.42 = $2,120,191|
This is an improvement of $320,191 from the current annual sales of $1.8M.
What marketing strategies would you need to conduct to get this type of incremental improvements in number of customers, customer visits and selling price?
This could include strategies like a revamp of your website, newsletter to customers and prospects, social media and customer information sessions.
What else would you need to do to get this growth ??
Based on gross profit percentage of 34%, which would probably have increased, the pharmacy should have generated an extra gross profit from this activity of approximately $112,000 ($320,000 x 35% gross profit). There might be a few extra expenses that have been incurred in marketing activities. The business should be around $100,000 bottom line result better off.
If you would like some assistance in preparing these types of calculations and implementing strategies for your pharmacy, please don’t hesitate to contact the Walker Wayland Health team.