Last week, I set out the six key stages of creating an effective business plan for your pharmacy. These were: defining in a mission statement why your pharmacy exists; analysing its strengths, weaknesses, opportunities and threats (a Swot analysis); developing your plan; making a budget; putting it all down in writing; and committing to making it a ‘living’ document that you and your staff review and refine regularly.
I also explained that making time for business planning now can reduce the time you need to spend fighting fires later. But this is only true if you make a good business plan. Most pharmacy owners would benefit from writing – or at least reviewing – their business plan. But how do you know if you’re on the right track?
Think back to the last time you prepared a business plan – it may have been some years ago, and was most likely created for presenting to your bank manager. If you were to revisit that plan now, you would probably be surprised by how little your pharmacy resembles what you predicted the business would look like.
The reality is that most business plans fail. To ensure yours does not, here are some of the traps to avoid:
Pitfall 1 – Writing a ‘dead’ document`
A business plan that is created for a one-off purpose and then discarded will always become obsolete quickly. Making your plan a ‘living’, continually updated, document is essential if you don’t want the whole process to fail. A regularly reviewed and updated plan can be the spur to look critically at your business on an ongoing basis.
Pitfall 2 – Being over-optimistic
Most business plans promise too much – especially in regards to predicted sales – or often massively overestimate the size of the market. Research your local area, and the customers and patients that your pharmacy will serve, thoroughly. Too many business plans concentrate on their strengths and opportunities and ignore the threats and weaknesses when carrying out their Swot analysis.
Pitfall 3 – Ignoring the competition
Business plans commonly assume that other pharmacies will not respond to a new rival, or they will not execute initiatives of their own. Study pharmacies and other healthcare providers in your area and try to second-guess their plans. A living document should also take this potential threat into account.
Pitfall 4 – Always prioritising the new
Too many business plans depend on doing something new – such as new clinical services – instead of improving how things are currently done.
Pitfall 5 – Ignoring inherent risks
Ask yourself, what are the risks attached to your plan? Think these through and predict the costs of failure, as well as the rewards of success. As well as profit and loss, these factors may include customer footfall, patient satisfaction and your relationships with local GPs.
Pitfall 6 – Profit or turnover?
There’s an old accounting adage that applies to pharmacy: turnover is vanity, but profit is sanity. If you plan to expand your business, this should result in increased profits – not just sales. Expanding your pharmacy requires finance, people and other resources – so ask yourself honestly: do you have adequate resources?
Remember, a good business plan is as much about the process as the final document. Being aware of the potential pitfalls will open your eyes to the realities of your business, and keeping the plan updated will help you stay on the right track.
Umesh Modi is a chartered accountant and a partner at Silver Levene. This article is for guidance only. Professional advice should be taken before acting on it.