Being like Jack

Successful businesses have two things in common with Jack: they are nimble and they make their own luck

Jack be nimble/Jack be quick/Jack jump over the candlestick. How does this children’s nursery rhyme relate to business, you ask?

Jack be nimble” refers to the famous English pirate Black Jack who lived in the late 16th century and was successful in evading captors, while “candle-leaping” without damping down the flame was believed to be good luck in traditional English culture.

Still don’t see how this relates to business? Well, successful businesses have two things in common with Jack: they are nimble and make their own luck.

These traits are as important as ever because many businesses face increasing financial pressures due to a combination of economic and political factors. Some factors impacting the pharmacy sector are listed below. These all result in reduced profitability by either increasing c o s t s o r decreasing revenues.

Although inflation rates have eased a little over recent months, running costs for businesses are still increasing and, from a consumer perspective, increases in food and other living costs are reducing disposal funds. As a result, consumers and other businesses are spending less than before, impacting sales revenue.

Higher interest rates are causing pressure on those pharmacies with significant amounts of debt.

Supply chain constraints make some products difficult or more expensive to obtain, constraining sales and reducing margins.

Labour supply shortages are still causing issues for some business owners, resulting in tired, overworked staff members and higher-than-expected wage levels.

Profit is a simple thing; it equals what you sell, less the cost of what is sold (variable costs) and the costs of running the business (fixed costs). Following are five ways to improve profitability.

• Raising prices – it is vital to pass on inflationary impacts to customers. This is not possible for dispensary medicines as the Government sets the prices, factoring in an allowance for inflation (which never seems enough). Retail prices need to be monitored carefully to make sure margins are maximised.
• Increasing sales volume – this can be difficult in the current market but adding additional services, finding niche product lines and having a clearly defined business strategy will give you the best chance to succeed.
• Lowering variable costs – ensure you buy at the best possible prices while minimising wastage to maximise margins. Discounts from buying in bulk sound great, but you may not be better off if you can’t move all of the stock on time. Prompt payment discounts can also be a big factor in maximising margins, so work with wholesalers to make sure you have the best possible terms.
• Fixing underperformers – you will have product lines that don’t perform as well as others. Focus on those with the best return and clear out those that don’t provide a satisfactory return. Your point-of-sale reports should allow you to easily track the performance of different products and these should be reviewed regularly to determine what is working and what isn’t. Don’t be afraid to try something new as long as it lines up with the overall business strategy.
• Reducing overheads (fixed costs) – wages and rent generally make up a large proportion of a pharmacy’s fixed costs, but there are many others. Insurances, in particular, seem to be rising rapidly, and many businesses are reviewing their options here carefully. Anything that increases at a rate higher than inflation should be reviewed carefully.

We recommend you review your profit and loss regularly and discuss with your advisors to make adjustments where necessary. Happy candle-leaping!