There are three major levers for pharmacies to consider for business survival during the coronavirus pandemic, say Bruce Annabel and Mal Scrymgeour
Cometh the Hour is a truncation of an old English phrase, ‘Cometh the hour, cometh the man’ meaning either that every person (or industry) is particularly good at a certain task, and when the appropriate opportunity arises, that person can prove themselves. Or, it can also refer to an ideal scenario where a person is most needed, they suddenly come to the rescue.
Some in the industry believe that pharmacy is in the role of rescuer in this health crisis. It’s more complicated than that and probably not the positive news that some have hoped for. After an initial uplift in sales, if anything, this crisis puts more financial pressure on pharmacies than ever before. We’ll explain more in this article.
There are three major levers for businesses to pull: Respond, Recover and Thrive.
To respond, you need to prepare and manage continuity in your business. We could phrase it survive, because that is in fact what it is. Determine your priorities. There are four key focus areas:
- Stay well. If you and your team are not well, the business does not function, or perhaps even open. If you are not well, you cannot perform your role in helping the community survive and recover from the health crisis. Staying well is job number one. It must always be the first priority.
- Get product. The wholesalers are working very hard under difficult circumstances to ensure supply, we saw their excellent efforts during the recent bush fires earlier this year. However, wholesalers rely on suppliers who in turn often rely on other suppliers further down the supply chain. The concept of ‘Just in Time’ manufacturing and keeping the lowest levels of stock that you practically can, is suddenly a deeply flawed model. Without doubt, there will be a ‘supply chain bubble’ that we anticipate having an impact in late April and May. This bubble has been created by three things:
- Manufacturers ceasing manufacturing for various periods of time
- Restricted movement of freight, especially air freight where capacity has dropped alarmingly – the ability to fill gaps in supply chain quickly is suddenly reduced
- Panic buying as people try to secure products, which in turn creates gaps
- For products made in the US and Europe, this bubble will be months long. Get used to shortages and out of stocks.
- Sell/distribute product. That might mean you continue to retail as you are, it might mean you have a ‘restricted access pharmacy’ where you can service customers, but with no contact. Deliveries might be something you find your business having to do in a big way, particularly for older people at home including those supported by the In-Home Care packages. If you have an online store, this might suddenly become a large part of your business. If you don’t have an online store, you might find that you need a team taking phone orders or making outbound calls. The upshot of this is that the potential to keep operating might mean more labour and different ways of working requiring different skills. Telehealth interactions demand will increase. That will change the economics, HR and reinvent the concept of professional service while altering your management approach of the business very quickly.
- You need to communicate clearly to five groups:
- Suppliers and wholesalers
- Your bank, accountant and financial advisor
Your team need to know what is happening, management of different scenario’s and how to stay well. Your customers need to know how you are operating, what you can and can’t do and most importantly, the rules of engagement including how to deal with fearful customers. Understand what your stretched suppliers and wholesalers can and can’t do. Your financial advisors/accountants will need to understand what changes are taking place and assist you manage the business through this health crisis. Fortunately, pharmacy is an essential service and a critical support resource for consumers.
There has been a huge reactionary spike in sales but that is about to slow and it’s reasonable to assert that more stock and your labour costs may increase as detailed above. However, as time progresses slowing sales may fall below historical levels for a time until latent demand returns. During that time, it’s important to ensure sufficient funds are retained to pay for the purchases made during the spike, i.e.: conserve cash, manage it carefully and manage overheads carefully. It is not a pretty situation and will imperil many pharmacies.
Those with debt should alert their financiers that they may need to take advantage of the loan repayment moratorium offered and interest capitalisation packages. Fortunately, interest rates have fallen to an all-time low that will assist cash flow management. In addition, small business financial support and initiatives such as payroll tax support is available on a state by state basis.
The fifth group must be considered and that is dealing with state and federal governments to source every support initiative available. Get in touch with your financial advisers for details.
The situation will keep changing and communication with all groups is a must.
Whatever way you look at it, this crisis is unlikely to be short lived and when we emerge through the other side the world will be a bit different to what we have known. The travel industry will obviously be different, we will be hugely dependent on technology and probably become quite adept at using it plus home deliveries will be a strong channel. The shape of industries will change. Recovery is unfortunately, going to be a medium-term play. What do you need to do?
There are six areas you will need to address:
- Management team. For smaller businesses, this is often the owner or a couple of partners making the decisions. For the larger businesses these teams may largely be in place. Our very strong recommendation is to get a core group of executive level advisors, often this means getting expert help. You’ll need financial advice (typically your existing provider/bank/accountant). Strategic advisors/industry experts. Working with your Doctors will be more critical than ever. What shape does this take? It will need to be much more structured than the previous low-key relationships most of us have had in the past. Operational expertise – often this comes from you. As you’ve seen with many larger businesses already, hard decisions might need to be made. Often you’ll need support in making those decisions.
- The existing skills you have employed in the business might not be what you need moving forward. Digital might suddenly be critical and that might mean you need to onboard that expertise either internally or externally.
- Financial continuity. This will be crucial as inventory and wages costs are likely to increase, your pricing will need to move. With a jump in prices due to short supply, you’ll need to remain competitive too. Staying on top of costs and adjusting pricing will be absolutely critical for your businesses to survival. It’s now a weekly task as a minimum. It’s not going to be an easy road ahead. External advice would be smart to get. And now.
- Supply Chain. Work closely to fully understand the supply chain issues with your wholesalers and suppliers. Networking with pharmacies in your trade area to swap stock may need to be broadened well beyond the existing network
- Customer engagement. Suddenly email groups, marketing, advertising, phone lists, social media and community engagement become critical. The old product and price advertising catalogues aren’t quite so relevant. Expertise, advice and product availability will be the new black. Have you noticed price is no longer the big issue it was? It has been replaced by simply being in stock.
- Digital capabilities. What has been seen as nice to have suddenly becomes a must have. We recommend investigating Microsoft Teams as an option for communicating with others in a business context. We’ve found it to be excellent.
The focus right now is maintaining the business and responding to the crisis. Thriving and looking at a future model is probably some way off yet. However, smart businesspeople are not only navigating the current crisis, but also looking beyond and seeing what a new future might look like. Without the benefits of a crystal ball, it is difficult to envisage just what this looks like, but we can put in place a framework to work through the options.
There are four key points:
- Post event review. What has happened, how have we responded, what do customers want, and how do they transact in this new paradigm?
- Marketplace review. What does the competitive and supply landscape look like? How will it change? What is our role in the new world? What is our market position?
- Recovery and contingency planning. The future will continue to evolve and even if we determine a course of action, it will likely change. We’d recommend developing a minimum of three scenarios.
- Financial restructuring. Some businesses will escape unscathed or potentially better off than they were, some will become insolvent. Whatever the case it is highly likely that the financial situation will be different. Once you have determined the steps above, you can look at your financial options.
We are in unprecedented times. Rapid adjustment is required. Things will be different. Your priorities are clear.
Respond – stay well is priority one, and survival of you, your team and your business.
Recover – get expert help, make decisions and do so fast.
Thrive – in time, plan.
Your country and your community need you, Cometh the hour….