Is your pharmacy a top performer? It's time to see how you measure up

As Peter Drucker famously said, "If you can't measure it, you can't manage it." When it comes to measuring performance, pharmacist-owners often operate in a business vacuum. They might talk to a neighbouring business, a fellow pharmacist in the next community, or an entrepreneur friend (but probably not a pharmacist-owner).

But they do not have reliable, objective reference points against which to assess their progress. Without these reference points, it can be challenging to set goals and objectives and even more difficult to gauge whether those goals are being met. 

Now the idea of "measurement" comes in. By constantly monitoring key figures, businesses can identify areas of improvement and work to optimize their operations. Of course, measurement is not always easy, and it requires careful planning and execution. It may involve cutting costs, streamlining processes, or making other changes that boost efficiency and bottom-line results.

While metrics are essential for effective management, it is valuable to remember that not all numbers are created equal. Focusing too narrowly on the wrong information can do more harm than good, and a lack of reliable benchmarking data can lead to suboptimal decisions. The key is to select statistics that are closely aligned with your business goals and provide insights into the underlying drivers of profitability and growth.

A best practice for management is to make benchmarking a regular and routine activity to identify problem areas upon which your company can improve. Benchmarking your company at its most basic form means measuring specific Key Performance Indicators (KPIs) against those of your peers who could be considered best-in-class.

So how do you start? There are four essential steps:

• What? – Choose a product, service, or department to benchmark
• Who? – Determine the best-in-class comparator and the metrics to benchmark 
• How? – Gather information on ways to improve your metrics
• Do? – Adopt processes and policies to move your metrics forward

 We have worked with pharmacies of all sizes and shapes and have identified 12 “profit factors” that can drive profitability in your business, ranging from scalability and reliable financial records to “softer” business aspects such as customer relationships and succession planning.

There are several different profit factors that you can benchmark, but two of the most important ones are operational efficiency and waste reduction. If you can find ways to improve in these areas, you'll be well on your way to increasing your profits. To get started, we recommend you begin measuring in six areas: professional services, inventory, wages, prescription filling, compliance pack assembly and checking, and department contributions to profitability. Any pharmacy can thrive with the right mix of focus and effort. We have seen it: with the right approach, even the most challenging situations can be turned around. 

This series of articles will explore how to benchmark and what data to use for each of these areas. Decades of experience allow us to provide some tips on making the most of your benchmarking data. But for now, we want to leave you with an understanding of two things. First, benchmarking is essential because it can help you improve your pharmacy's operations and maximize its profitability (and, ultimately, its value). And second, you can do it – and we will show you how in this series.

Because (to paraphrase Drucker), if you can't benchmark it, you can't manage it.

We hope that you find these articles helpful and they provide you with the tools you need to make informed decisions about your business. Thank you for taking the time to read them.

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