Why Your Website Is Key For Succession Planning
Like many community pharmacy owners, you probably plan on selling your business to someone else when the time comes to hang up your white coat. This means that the price you get for your pharmacy is going to have a major impact on your standard of living.
Like many community pharmacy owners, you probably plan on selling your business to someone else when the time comes to hang up your white coat. This means that the price you get for your pharmacy is going to have a major impact on your standard of living. Naturally, you want to secure the best sell price you can for your business.
What if there was one major lever you can pull, today, to make your pharmacy more valuable when it comes time to sell? There is, and our advice, if you’re not already, it’s time to get yourself established online. A website that makes it clear that you’re open for online business, helps to make your pharmacy a more attractive investment for a future buyer – and a better deal for you as the future seller. Here’s why:
Getting those profit margins up
When people come to invest in your pharmacy, they’ll be looking at a number of different metrics. One of those metrics is your net profit.
Jonathan Roberts, Director at accounting and advisory firm Moore Stephens Markhams says that "in the current market, typically, a major contributing factor to the final sell price of a pharmacy is around 5 times earnings before interest and tax."
As an experienced pharmacist, you know that it can be difficult to get expenses down. The government pays set rates for funded prescriptions, your staff wages are fairly fixed, and your rent is a function of demand for space in your area. You can’t change any of these without making significant changes to your business – like moving it to a different neighbourhood!
So in lieu of that, you need to look at new opportunities to sell more stuff to increase your revenue. That means, more feet through the door, and more eyes on what you have available in store. Your rent and wages bills are going to be the same either way so if you can get that same store, and those same staff members, serving more people per hour, your profit margins will increase – and with them, the value of your business when it comes time to exit.
Being online is about increasing the visibility of your pharmacy and everything it has to offer, with the end goal being more sales. The thing is, it’s not solely about online sales. Consumers are increasingly turning to the internet to make decisions about their healthcare, and they are using that information to inform their offline buying behaviour.
A study on consumer behaviour conducted by Google discovered that 82% of consumers first use the internet to look for information. Of the people who conduct a local search online, 76% of those visit that store within 24 hours. Furthermore, 25% of those searches result in a purchase.
That’s 2 in store purchases, for every 10 people that discover your website through a local search. What impact would that have on your bottom line, and ultimately, your business valuation?
Doing the math on ecommerce sales
If you take your website one step further, and offer the ability for customers to purchase online, whether through click and collect, or full delivery this can further increase the valuation of your business.
Within 18 months of launch some of Storbie’s ecommerce enabled pharmacy websites are now worth more than $18,000. Considering their investment was less than $3,000 this is a 500% return.
Even if your site isn’t a top performer, a pharmacy website bringing in an average of just $100 in profit from online sales alone per month, over a 12 month period, would become a $6000 business asset reflecting a 100% return on investment.
These figures don’t take into consideration web influenced sales either which would boost these returns further. Online transactions still only represent up to 11.4% of all retail sales1 yet more than half of in store sales are influenced by a digital touch point2. That’s 44.3% of your in store sales influenced by the web – is that an opportunity you are making the most of?
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Not the only metric
Getting more customers doesn’t just improve your profit margins. It also improves other metrics that buyers will be looking at, such as number of prescriptions filled per day and stock turn. Both of these are based on how many customers you have coming in the door every day – so by getting online and getting more customers in the door, you can improve all of these aspects of your business.
Your buyers are online too
It’s also worth thinking about who will be buying your pharmacy. If it’s a younger pharmacist, he or she is going to be very well versed in the online world, having been raised in it. Setting up a website will be one of the first things any person starting a business in 2019 will do and these prospective business owners will expect any business they look at to have a strong online presence – it’s the equivalent of a pharmacy in the 70s having a phone, or a pharmacy in the 80s having a fax machine. They’ll see an online presence as basic infrastructure; and if you don’t have it, they will be thinking about the costs of having to establish this themselves when they take over the business as a factor in the final price they’re willing to pay.
The flipside of course, is that if you can demonstrate the reach and performance of your online presence increasing, this gives a new buyer confidence. Roberts adds that "buyers can be much more interested in a pharmacy opportunity when the pharmacy has an online story. It gives the pharmacy an edge over one that isn’t digitally enabled."
The time is now!
So whether you’re retiring next month, next year or in the next decade, it pays to sort out your website, get your products online, and meet your customers where they are. It’s one of the best things you can do to increase your business valuation, attract the next generation of buyers and get your pharmacy to give you the retirement lifestyle you deserve.
Contributor Jonathan Roberts is a Director at accounting and advisory firm Moore Stephens Markhams providing business advisory and taxation services to pharmacy clients across New Zealand. Roberts is a regular at pharmacy industry conferences and seminars and was involved in the publication of the annual national pharmacy benchmarking survey. Request a copy of the benchmarking survey here.
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