Profitability is the lifeblood of any business and pharmacy is no different in that respect. Clients that I work with include a mix of retailers where pricing, cost management, and stock control are paramount. In this article, we will explore what levers on profitability are available for pharmacies, including the different revenue streams and the influence you have on managing them.
Let’s first discuss what we mean by the term ‘profit’. Profit, for the purpose of this article, is the earnings of the business before interest, tax, depreciation and amortisation (i.e. EBITDA). For pharmacy owners, increasing profit generally allows savings to accumulate to invest in business improvements, higher wages to be paid to owner operators or greater returns for pharmacy owners or shareholders. The obvious levers on profitability are revenues and expenses. Let’s look at what they comprise of and how we can influence them as a lever on profitability. Revenues Pharmacies typically generate revenue from three primary sources: dispensary, retail, and professional services. They’re the levers on profitability that can be managed independently and through a variety of ways. Pharmacists, managers and your retail team all play a part. The dispensary is often the backbone of any pharmacy’s income. To strengthen and grow this revenue stream, you can build customer loyalty and relationships with local doctors. Customer loyalty is strengthened by providing great customer service that encourages customers to return time and again. There’s nothing better than feeling welcomed and remembered, having personal service and feeling cared for. Strong ties with nearby GP and healthcare practices provides patients with continuity of care. If your local GP can call you to discuss patient care and medications, and vice versa, you’ll be building trust and loyalty in the community. Retail revenues are another area of focus for increasing profitability. Cosmetics, vitamins, over the counter medications, are all vital contributors, as is your pharmacy layout and education of your retail sales team. Having a well structured retail environment encourages customers to browse and purchase additional items while waiting for their scripts. Most likely your pharmacy trades under a banner or buying group, who provides pricing guides on recommended retail pricing. You can then set your prices from the guide or modify them to reflect your location and competition. In recent years, pharmacy services have extended, largely influenced by COVID and then since in the Community Pharmacy Agreements negotiated between the Minister for Health and Aged Care and the Pharmacy Guild of Australia (refer, for example, to the 8CPA). Vaccinations, flu and covid shots, packing services for local aged care facilities and nursing homes. In some states, new legislation will soon be introduced which will enable pharmacists to write some scripts, further enhancing revenue potential. Make sure you are educated on the latest updates and understand the range of services that can be offered by pharmacies and market them to your customer base and community. It will make quite a difference to your revenues. Expenses Cost control is essential to improving profitability. For pharmacies, the major cost drivers include labour, property expenses, and stock management. From my experiences, labour can comprise around half of your monthly costs. Given rising pharmacist wages and workforce shortages, invest in both technology and training to maximise your pharmacy efficiency and effectiveness. Packing machines and dispensing robots are becoming increasingly popular, relieving staff to focus on services. Ensure your retail team has sales training to enhance customer service and drive selling opportunities. Pharmacies often face high rental costs, particularly in shopping centres and prime locations. Keep note of your lease dates and begin lease renewal discussions early to ensure you have time to compare market rates and negotiate favourable terms. Make sure to avoid clauses that tie your lease to increases to CPI. I’ve seen some lease agreements with clauses that increases rent by CPI+10% – it’s a trap to be wary of. The other area to manage carefully is stock. Take note of stock turnover and don’t over buy to avoid tying cash up in slow moving inventory. Regularly review supplier agreements to ensure you’re getting the best deals. Be cautious of sign-on bonuses or rebates that could lock you into less favourable terms in the long run. Key metrics to watch When you’re focused on profitability, the key metrics I like to track to inform your decision making are:
Improving profitability will help you to build a sustainable and profitable business. Whether through professional services, effective stock management, or maintaining competitive pricing, every small adjustment can add up to significant improvements in your bottom line. Remember, profitability isn’t just about more sales – it’s about many smart business decisions that will grow your revenues and adjust your operational effectiveness. About the author Krista Fenix is a Manager at Holman Hodge. She works with over a dozen pharmacies and has also built a close affinity with retail and hospitality clients. Personal experience working in a multigenerational family business and as a qualified Family Business Advisor brings a valued perspective to pharmacy clients, particularly those entering or exiting an ownership group. |
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Three things to think about over the Christmas break
Aligning your life and personal and business goals can set the path for a successful 2025. To guide your reflection, I like to structure my client’s thinking around the now, the where and the how.
The now
Key things to think about include team dynamics, process efficiency, technology and premises. Then I’ll support this qualitative information with quantitative data and insights from financial reporting. It’s a great way to set the scene around where you are to figure out the best things to tackle in the year ahead. The where This is your chance to dream big. Picture where you want to be in three years – not just professionally but personally too. Consider what success looks like for you.
The how Finally, focus on the steps that will take you from the now to the where – this is the how. It’s the plan you create to make things happen!
The Christmas break offers a rare moment to step back, think deeply, and realign your priorities. By reflecting on the now, the where, and the how, you can create a roadmap for success that integrates your personal and professional life. Remember, success doesn’t just happen – it’s planned. Use this downtime to strategise and let us help you turn those plans into reality. Wishing you a creative holiday season and a prosperous New Year!
About the author: Elena’s approach is built on deep understanding, partnership, and accountability. By combining her technical expertise with a genuine commitment to her clients’ goals, she supports their journey towards business sustainment and growth with confidence and clarity. She’s more than just an accountant – to use the cliché, she’s a trusted partner in her clients’ success. |
Buying a pharmacy? A checklist to help you prepare
If buying a pharmacy features on your New Year’s Resolutions, then take a look at our Pharmacy Ownership Readiness Checklist – we’ve put together the key factors to improve your readiness to own a pharmacy.
Pharmacy Ownership Readiness Checklist
Think through the differences between being a pharmacist and a pharmacy owner. Owning a pharmacy brings a whole lot more responsibility, financial commitment, compliance obligations and time management. Does pharmacy ownership align with your career and lifestyle goals?
As specialist pharmacy accounting and business advisors, we have an ear to the ground. Along with our network, we often know about pharmacies for sale and owners considering selling. Talk to us about your ambition. We’ll talk through the implications of different ownership models (including partnerships), along with the pros and cons of different pharmacy locations eg. Shopping strip, shopping centre, medical centre, regional etc.
Evaluate your borrowing capacity and think about how you will fund the purchase. Banks generally will lend 75% of either the purchase price or the business valuation, whichever is lower. The difference will need to be funded from personal assets like cash or equity from property. If you are acquiring a partnership interest, the existing Partners may allow you to use their equity in the business to fund your purchase. We’ll be able to share our experiences here too. An entry-level pharmacy may cost $1 – $2 million, with larger pharmacies $5 million plus, so there’s plenty of scope to consider.
When it comes to assessing the pharmacy’s suitability for you, a thorough due diligence is essential as the numbers don’t always tell the whole story. Consideration of the financial health of the business, turnover, margins, labour costs and risks eg. Lease and trading banner. There’s also the goodwill to consider (based on the location, team, culture) and other factors such as value alignment, partnership agreements (if purchasing a partnership interest), definition of clear roles and responsibilities etc. It is important to invest a considerable amount of time and resources at this stage of the process, as generally the outcome provides information of whether or not you proceed with the transaction.
Understanding and thinking through the implications of the legalities involved in buying a pharmacy is vital. Commercial terms, lease and sale agreements, partnership considerations, franchise agreements, exit and non-compete clauses – these all must be considered carefully. It’s worthwhile familiarising yourself with these kinds of things before you start the purchase process, which we are happy to help with and can introduce you to solicitors that have extensive expertise in pharmacy transactions. Equally important is to consider the legal responsibilities that accompany becoming a director of a company that owns and operates a pharmacy business. These are covered under the Corporations Act 2001, including directors must fulfill a duty of care, act in good faith and, amongst other things, obtain a Director ID. As part of your due diligence, it’s also important that you consider whether the pharmacy you are acquiring has implemented strong corporate governance practices, conflicts of interest are disclosed and ensure that they are complying with laws to mitigate any risks, including holding appropriate and valid registrations.
Having a supportive network is a great way to progress your ambition. People like pharmacy advisors, valuers, accountants, financiers or bankers, solicitors are, of course, essential. But equally important is being able to talk to other pharmacy owners and managers about owning and running their pharmacy business, their journey and experiences along the way. Talk to us and we can introduce you to pharmacy owners who can share their experiences. There will be many challenges ahead, and being able to turn to the right people for advice will provide you a level of comfort and peace of mind! Buying a pharmacy can be a long, complex process. Being prepared, knowing the right questions to ask, familiarising yourself with the process and involving the right people are the key takeaways to facilitate the process. Buying and selling a pharmacy Pharmacy management
About the author: Serry Leombruno is an Assistant Manager at Holman Hodge. He works with a stable of pharmacy clients, supporting tax and compliance, management accounting and advisory around matters such as restructures, cashflow and transactions. Coming from commerce, with a pharmacy retail background, he has an understanding of system and process, providing insight into business improvement. |
Exiting a pharmacy business: What you need to think about
Whether you are planning to retire or move onto other ventures, there’s plenty to think about when exiting a business. As a pharmacy, with regulatory and healthcare considerations, there’s often more planning involved in the transaction. As accountants and advisors to the pharmacy sector, with decades of experience under our collective belts, this article shares some key considerations for pharmacy owners in exiting their business.
1. Timing A perspective on timing brings about considerations beyond those of your retirement or exit plans. You will have other considerations to think about that will assist in the sale and support a smooth transition:
2. Business valuation An obvious step in the sales process is your business valuation and, importantly, what you can do about it if you want to maximise value. While we’ll have a good idea as your accounting advisors, we often work with pharmacy specialists to obtain an independent business valuation. There are a number of factors that they will consider, and we’ll work closely with them to provide them with the right information:
3. Tax implications and your exit strategy Taxes and your business structure play a large part in determining how much you are left with following the sale of your pharmacy:
4. Legal considerations and regulatory compliance As you will likely know, having worked in the industry for some time, Australian laws and regulations around pharmacy ownership heavily influence the sale structure, but it’s worth us stepping them out here for those reading this article who are unfamiliar:
5. Employee transition and continuity Employees are a critical asset in any pharmacy business, and their transition to any new owners must be managed carefully. Here are a few considerations:
6. Managing relationships Your pharmacy’s success is likely built on strong relationships with customers, suppliers, and other partners. Managing and maintaining the goodwill in these relationships will likely be important in your pharmacy valuation, as well as reduce the stress in the transaction.
7. Succession planning and handover Succession planning is key to a smooth transition and so much more than a few points in this article is needed to plan appropriately. Here are a few tips:
Thoughtful preparation and the involvement of the right professional experience in the process will provide the support you need to reduce stress. Understanding the process from the buyer’s perspective is pretty useful too, so ‘A pharmacist’s guide to owning their first pharmacy’ may provide a useful read. There are many moving parts involved in exiting any business and pharmacies add another level of compliance, due to the Australian regulatory environment and different state rules. Engaging with legal, financial, and industry experts can help you make informed decisions and ensure that your exit from the pharmacy business is as successful and seamless as possible. About the author. Jacob Prestia is a Manager at Holman Hodge. He understands that his work with pharmacy clients encompasses much more than just the figures presented in compliance and management reports. He fosters personal relationships that extend to providing advisory services on critical matters such as restructures, cash flow management, and transactions, in addition to supporting clients in areas like property ownership, syndication, and development. |
Balancing passion with pragmatism
Last week, Elena Krotiris, one of our Directors here at Holman Hodge, attended Adelaide Fashion Week, taking the opportunity to enjoy the incredible talent we have in Adelaide while also supporting several clients featured in the festival. With significant experience and strong connections in the fashion, retail, and luxury markets, today’s update highlights her relationship driven approach which supports creative clients in aligning business structure, passion, and practicality for success.
The conversations Elena Krotiris has with clients to drive their business success
So many accountants claim to be ‘your partner in business’ that it has become a cliché. But if you’re a family owned or private business, with your head buried deep in the daily grind, a partner in business is exactly what you need. Someone to give you the ‘heads up’ to support you to train your team to look after the ‘daily’, while you focus on the bigger picture. Elena, whose approach balances passion with pragmatism, will help you do just that!
“While client relationships are often punctuated by quarterly meetings about your profit and loss,” says Elena Krotiris, Director at Holman Hodge, “you have to bring more than just technical expertise to the table.” For her, it’s all about understanding the goals, and how the pieces of the business fit together; and this takes a partnering approach.
“Technical expertise is a given,” Elena says. “But to truly add value, I need to understand what you’re trying to achieve in your business—the content, the people, and the relationships.”
Elena’s work with clients is anything but typical. She spends significant time advising on day-to-day operations, often visiting client premises to discuss actions and strategies. Her goal is to financially educate her clients so that numbers and evidence become an integral part of their decision-making processes, helping them navigate the sometimes overwhelming learning curve that comes with business growth.
“There’s a massive learning curve for business owners in growing their business,” Elena notes. “There’s a lot to learn about accounting, reporting, and what the numbers actually mean. Business owners need to understand all of this and more – what cash they need to keep on hand, what projects to invest in, and what people they need to achieve their goals.”
One of the most impactful tools Elena uses in her advisory role is an approach she calls Diagnostic Analysis. It’s changed the way she partners with clients, starting with a deep dive into where the business is now, where they want to be, and how to get there.
“It starts with a conversation about where the business is now, how we do things, who we have in our business, and our current position,” Elena explains. “I like to speak with key people in the business to gain a true understanding of this. What an owner thinks and what individuals in the business think can at times be polar opposites.”
Having gained a deeper understanding, the next task is to align operations, people, and roles to support the business and owner’s strategic goals. “It’s bigger than the business itself because a business owner is part of the business, and the business is part of their life,” she says. This holistic view is central to how Elena works with her clients.
But it’s not just about numbers and strategy. Elena takes on a coaching role, holding her clients personally accountable for the decisions they make and the goals they set. “I like to work in partnership, partnering with people, working together and learning how to be better in business together,” she says. “It’s great when you get that fit with clients, and that can only be done through facilitating a conversation.”
It’s these conversations that drive her coaching approach. They help clients to create action plans, prioritise tasks, and adjust strategies as circumstances change. “We all need to write our plans down, but they don’t need to be a glossy document,” Elena advises. “We need to set goals, track them, check in, and create an action plan.”
One of the biggest challenges for business owners is balancing passion with pragmatism, especially when emotions can cloud judgement. “Although our business may be our passion, it’s dangerous to make decisions based on emotions,” she cautions. “That’s when I provide the reality check.” She finds that it is common in family and privately owned businesses, that the business has evolved from personal passion or creative endeavour. Elena’s coaching approach, insights from keeping in touch with the people in the business, and reliance on financial measurement is the reality check that her clients need.
Elena works with a range of clients, from hospitality, retail and pharmacy to labour hire, professional and medical services. But she has a particular affinity with clients in the creative industries—artists, designers, and fashion professionals—who often face unique challenges in balancing creativity with commercial success. Her experience in these sectors allows her to provide tailored advice that respects the creative process while ensuring financial sustainability.
“It’s great to work with clients who are passionate about what they do,” Elena says. “When we can combine their passion with the right business strategy, that’s where the magic happens.”
Elena’s approach is built on deep understanding, partnership, and accountability. By combining her technical expertise with a genuine commitment to her clients’ goals, she supports their journey towards business sustainment and growth with confidence and clarity. She’s more than just an accountant—to use the cliché, she’s a trusted partner in her clients’ success.
Image: Paul Vasileff, Designer & Founder at Paolo Sebastian on the left, with Elena and Chris Kontos, Creative Consultant (right)
“We love working with Elena and Krista at Holman Hodge. They are an extension of our team and have helped guide and shape the direction of our brand over the past years.”
Paul Vasileff, Designer & Founder at Paolo Sebastian
First Image: The panel at the Adelaide Fashion Week Icons Only Lunch. Facilitated by Poh Ying Leow, the panel included Adelaide Lord Mayor, Dr Jane Lomax Smith, Fashion Editor, Anna Vlach, Designer & Founder at Paolo Sebastian, Paul Vasileff, Director and CEO Adelaide Fringe, Heather Croall AM, and Creative Consultant, Chris Kontos.