s Planning for Profit in 2015 – Your key to Business Success | I2P: Information to Pharmacists - Archive
Publication Date 01/07/2014         Volume. 6 No. 6   
Information to Pharmacists


From the desk of the editor

Welcome to the July 2014 homepage edition of i2P (Information to Pharmacists) E-Magazine.
At the commencement of 2014 i2P focused on the need for the entire profession of pharmacy and its associated industry supports to undergo a renewal and regeneration.
We are now half-way through this year and it is quite apparent that pharmacy leaders do not yet have a cohesive and clear sense of direction.
Maybe the new initiative by Woolworths to deliver clinical service through young pharmacists and nurses may sharpen their focus.
If not, community pharmacy can look forward to losing a substantial and profitable market share of the clinical services market.
Who would you blame when that happens?
But I have to admit there is some effort, even though the results are but meagre.
In this edition of i2P we focus on the need for research about community pharmacy, the lack of activity from practicing pharmacists and when some research is delivered, a disconnect appears in its interpretation and implementation.

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Newsflash Updates for July 2014

Newsflash Updates

Regular weekly updates that supplement the regular monthly homepage edition of i2P. 
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Feature Contribution

Woolworths Pharmacy - Getting One Stage Closer

Neil Johnston

It started with “tablet” computers deployed on shelves inside the retailer Coles, specifically to provide information to consumers relating to pain management and the sale of strong analgesics.
This development was reported in i2P under the title Coles Pharmacy Expansion and the Arid PGA Landscape”
In that article we reported that qualified information was a missing link that had come out of Coles market research as the reason to why it had not succeeded in dominating the pain market.
Of course, Woolworths was working on the same problem at the same time and had come up with a better solution - real people with good information.

Comments: 5

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Intensive Exposition without crossing over with a supermarket

Fiona Sartoretto Verna AIAPP

Editor's Note: The understanding of a pharmacy's presentation through the research that goes into the design of fixtures and fittings that highlight displays, is a never-ending component of pharmacy marketing.
Over the past decade, Australian pharmacy shop presentations have fallen behind in standards of excellence.
It does not take rocket science - you just have to open your eyes.
Recently, our two major supermarkets, Woolworths and Coles, have entered into the field of drug and condition information provision - right into the heartland of Australian Pharmacy.

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The sure way to drive business away

Gerald Quigley

I attended the Pregnancy, Baby and Children’s Expo in Brisbane recently.
What an eye and ear opening event that was!
Young Mums, mature Mums, partners of all ages, grandparents and friends……...many asking about health issues and seeking reassurances that they were doing the right thing.

Comments: 1

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‘Marketing Based Medicine’ – how bad is it?

Baz Bardoe

It should be the scandal of the century.
It potentially affects the health of almost everyone.
Healthcare providers and consumers alike should be up in arms. But apart from coverage in a few credible news sources the problem of ‘Marketing Based Medicine,’ as psychiatrist Dr Peter Parry terms it, hasn’t as yet generated the kind of universal outrage one might expect.

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Community Pharmacy Research - Are You Involved?

Mark Coleman

Government funding is always scarce and restricted.
If you are ever going to be a recipient of government funds you will need to fortify any application with evidence.
From a government perspective, this minimises risk.
I must admit that while I see evidence of research projects being managed by the PGA, I rarely see community pharmacists individually and actively engaged in the type of research that would further their own aims and objectives (and survival).

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Organisational Amnesia and the Lack of a Curator Inhibits Cultural Progress

Neil Johnston

Most of us leave a tremendous impact on pharmacies we work for (as proprietors, managers, contractors or employees)—in ways we’re not even aware of.
But organisational memories are often all too short, and without a central way to record that impact and capture the knowledge and individual contributions, they become lost to time.
It is ironic that technology has provided us with phenomenal tools for communication and connection, but much of it has also sped up our work lives and made knowledge and memory at work much more ephemeral.

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Academics on the payroll: the advertising you don't see

Staff Writer

This article was first published in The Conversation and was written by Wendy Lipworth, University of Sydney and Ian Kerridge, University of Sydney
In the endless drive to get people’s attention, advertising is going ‘native’, creeping in to places formerly reserved for editorial content. In this Native Advertising series we find out what it looks like, if readers can tell the difference, and more importantly, whether they care.
i2P has republished the article as it supports our own independent and ongoing investigations on how drug companies are involved in marketing-based medicine rather than evidence-based medicine.

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I’ve been thinking about admitting wrong.

Mark Neuenschwander

Editor's Note: This is an early article by Mark Neuenschwander we have republished after the soul-searching surrounding a recent Australian dispensing error involving methotrexate.
Hmm. There’s more than one way you could take that, huh? Like Someday when I get around to it (I’m not sure) I may admit that I was wrong about something. Actually, I’ve been thinking about the concept of admitting wrong. So don’t get your hopes up. No juicy confessions this month except that I wish it were easier for me to admit when I have been wrong or made a mistake.
Brian Goldman, an ER physician from Toronto, is host of the award-winning White Coat, Black Art on CBC Radio and slated to deliver the keynote at The unSUMMIT for Bedside Barcoding in Anaheim this May. His TED lecture, entitled, “Doctors make mistakes. Can we talk about it?” had already been viewed by 386,072 others before I watched it last week.

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Dispensing errors – a ripple effect of damage

Kay Dunkley - BPharm, Grad Dip Hosp Pharm, Grad Dip Health Admin, MPS, MSHPA

Most readers will be aware of recent publicity relating to dispensing errors and in particular to deaths caused by methotrexate being incorrectly packed in dose administration aids.
The Pharmacy Board of Australia (PBA), in its Communique of 13 June 2014, described a methotrexate packing error leading to the death of a patient and noted “extra vigilance is required to be exercised by pharmacists with these drugs”.
This same case was reported by A Current Affair (ACA) in its program on Friday 20 June

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Take a vacation from your vocation

Harvey Mackay

Have you ever had one of those days when all you could think was, “Gosh, do I need a vacation.”
Of course you have – because all work and no play aren’t good for anyone.
A vacation doesn’t have to be two weeks on a tropical island, or even a long weekend at the beach. 
A vacation just means taking a break from your everyday activities. 
A change of pace. 
It doesn’t matter where.
Everyone needs a vacation to rejuvenate mentally and physically. 
But did you also know that you can help boost our economy by taking some days off? 
Call it your personal stimulus package.

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Explainer: what is peer review?

Staff Writer

This article was first published in the Conversation. It caught our eye because "peer review" it is one of the standards for evidence-based medicines that has also been corrupted by global pharma.
The article is republished by i2P as part of its ongoing investigation into scientific fraud and was writtenby Andre Spicer, City University London and Thomas Roulet, University of Oxford
We’ve all heard the phrase “peer review” as giving credence to research and scholarly papers, but what does it actually mean?
How does it work?
Peer review is one of the gold standards of science. It’s a process where scientists (“peers”) evaluate the quality of other scientists' work. By doing this, they aim to ensure the work is rigorous, coherent, uses past research and adds to what we already knew.
Most scientific journals, conferences and grant applications have some sort of peer review system. In most cases it is “double blind” peer review. This means evaluators do not know the author(s), and the author(s) do not know the identity of the evaluators.
The intention behind this system is to ensure evaluation is not biased.
The more prestigious the journal, conference, or grant, the more demanding will be the review process, and the more likely the rejection. This prestige is why these papers tend to be more read and more cited.

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Dentists from the dark side?

Loretta Marron OAM BSc

While dining out with an elderly friend, I noticed that he kept his false tooth plate in his shirt pocket. He had recently had seven amalgam-filled teeth removed, because he believed that their toxins were making him sick; but his new plate was uncomfortable. He had been treated by an 'holistic dentist'. Claiming to offer a "safe and healthier alternative" to conventional dentistry, are they committed to our overall health and wellbeing or are they promoting unjustified fear, unnecessarily extracting teeth and wasting our money?

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Planning for Profit in 2015 – Your key to Business Success

Chris Foster

We are now entering a new financial year and it’s a great time to reflect on last year and highlight those things that went well and those that may have impacted negatively in the pursuit of your goals.
It's also a great to spend some time re-evaluating your personal and business short, medium and long term goals in the light of events over the last year.
The achievement of your goals will in many cases be dependent on setting and aspiring to specific financial targets. It's important that recognise that many of your personal goals will require you to generate sufficient business profits to fund those aspirations

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ReWalk™ Personal Exoskeleton System Cleared by FDA for Home Use

Staff Writer

Exoskeleton leader ReWalk Robotics announced today that the U.S. Food and Drug Administration has cleared the company’s ReWalk Personal System for use at home and in the community.
ReWalk is a wearable robotic exoskeleton that provides powered hip and knee motion to enable individuals with Spinal Cord Injury (SCI) to stand upright and walk.
ReWalk, the only exoskeleton with FDA clearance via clinical studies and extensive performance testing for personal use, is now available throughout the United States.

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Attracting and Retaining Great People

Barry Urquhart

Welcome to the new financial year in Australia.
For many in business the past year has been described as a challenging period.
Adjectives are a key feature of the English language.  In the business lexicon their use can be, and often is evocative and stimulate creative images.  But they can also contribute to inexact, emotional perceptions.
Throughout the financial pages of newspapers and business magazines adjectives abound.
References to “hot” money draw attention and comment.  The recent wave of funds from Chinese investors, keen to remove their wealth from the jurisdiction and control of government regulations is creating a potential property bubble in Australia.

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Updating Your Values - Extending Your Culture

Neil Johnston

Pharmacy culture is dormant.
Being comprised of values, unless each value is continually addressed, updated or deleted, entire organisations can stagnate (or entire professions such as the pharmacy profession).
Good values offer a strong sense of security, knowing that if you operate within the boundaries of your values, you will succeed in your endeavours.

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Evidence-based medicine is broken. Why we need data and technology to fix it

Staff Writer

The following article is reprinted from The Conversation and forms up part of our library collection on evidence-based medicines.
At i2P we also believe that the current model of evidence is so fractured it will never be able to be repaired.
All that can happen is that health professionals should independently test and verify through their own investigations what evidence exists to prescribe a medicine of any potency.
Health professionals that have patients (such as pharmacists) are ideally placed to observe and record the efficacy for medicines.
All else should confine their criticisms to their evidence of the actual evidence published.
If there are holes in it then share that evidence with the rest of the world.
Otherwise, do not be in such a hurry to criticise professions that have good experience and judgement to make a good choice on behalf of their patients, simply because good evidence has not caught up with reality.

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Laropiprant is the Bad One; Niacin is/was/will always be the Good One

Staff Writer

Orthomolecular Medicine News Service, July 25, 2014
Laropiprant is the Bad One; Niacin is/was/will always be the Good One
by W. Todd Penberthy, PhD

(OMNS July 25, 2014) Niacin has been used for over 60 years in tens of thousands of patients with tremendously favorable therapeutic benefit (Carlson 2005).
In the first-person NY Times best seller, "8 Weeks to a Cure for Cholesterol," the author describes his journey from being a walking heart attack time bomb to a becoming a healthy individual.
He hails high-dose niacin as the one treatment that did more to correct his poor lipid profile than any other (Kowalski 2001).

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Culture Drive & Pharmacy Renewal

Neil Johnston

Deep within all of us we have a core set of values and beliefs that create the standards of behaviour that we align with when we set a particular direction in life.
Directions may change many times over a lifetime, but with life experiences and maturity values may increase in number or gain greater depth.
All of this is embraced under one word – “culture”.
When a business is born it will only develop if it has a sound culture, and the values that comprise that culture are initially inherent in the business founder.
A sound business culture equates to a successful business and that success is often expressed in the term “goodwill” which can be eventually translated to a dollar value.

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ReWalk™ Personal Exoskeleton System Cleared by FDA for Home Use

Staff Writer

Exoskeleton leader ReWalk Robotics announced today that the U.S. Food and Drug Administration has cleared the company’s ReWalk Personal System for use at home and in the community.
ReWalk is a wearable robotic exoskeleton that provides powered hip and knee motion to enable individuals with Spinal Cord Injury (SCI) to stand upright and walk.
ReWalk, the only exoskeleton with FDA clearance via clinical studies and extensive performance testing for personal use, is now available throughout the United States.

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Pharmacy 2014 - Pharmacy Management Conference

Neil Johnston

The brave new world of health and wellness is not the enemy of Pharmacy, it is its champion.
Australian futurist, Morris Miselowski, one of the world's leading business visionaries, will present the Opening Keynote address on Pharmacy's Future in the new Health and Wellness Landscape at 2.00pm on Wednesday July 30.
Morris believes the key to better health care could already be in your pocket, with doctors soon set to prescribe iPhone apps, instead of pills.
Technology will revolutionise the health industry - a paradigm shift from healthcare to personal wellness.
Health and wellness applications on smartphones are already big news, and are dramatically changing the way we manage our personal health and everyday wellness.

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Generation and Application of Community Pharmacy Research

Neil Johnston

Editor’s Note: We have had a number of articles in this issue relating to pharmacy research.
The PGA has conducted a number of research initiatives over the years, including one recently reported in Pharmacy News that resulted from an analysis of the QCPP Patient Questionnaire.
Pharmacy Guild president, George Tambassis, appears to have authored the article following, and there also appears to be a disconnect between the survey report and its target audience illustrated by one of the respondent comments published.
I have asked Mark Coleman to follow through, elaborate and comment:

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Planning for Profit in 2015 – Your key to Business Success

Chris Foster

articles by this author...

Chris Foster is a Chartered Accountant and partner in Green Taylor Partners, with over 33 years experience in working with small/medium business clients. Chris's interest in pharmacy goes back to his mother, who as a registered pharmacist, managed a pharmacy for over 26 years. Chris has worked with pharmacy clients for over 26 years and has an in-depth knowledge of those factors that make a business profitable and successful. Chris is a true believer in practicing what he preaches thus is a successful business owner and investor in his own right. Green Taylor Partners was also ranked in the top 8 firms in Australia by business performance in the 2011 Australia wide survey "The Good, the Bad & The Ugly" as conducted by Business Fitness. Chris can be contacted for an obligation free discussion about your business performance on 03 53824761 or email: chris.foster@greentaylor.com.au

We are now entering a new financial year and it’s a great time to reflect on last year and highlight those things that went well and those that may have impacted negatively in the pursuit of your goals.
It's also a great to spend some time re-evaluating your personal and business short, medium and long term goals in the light of events over the last year.
The achievement of your goals will in many cases be dependent on setting and aspiring to specific financial targets. It's important that recognise that many of your personal goals will require you to generate sufficient business profits to fund those aspirations

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Now many of these goals will be part of a medium to long term plan for your personal and business life - and it's amazing what can be achieved by identifying, documenting and planning your life around clear goals. Having clear goals provides you with the tools to enable you to benchmark opportunities as you encounter them and determine whether, if taken advantage of, will advance towards your end destination. In other words, they help filter out the "noise" of short term gratification that normally derails you from achieving what's important to you in life.

With this background in mind, this article focuses on the short term financial plan for your business ie the next 12 months. This is a small cog in your overall medium to long term plans, which in effect, is a bunch of short term plans over the planning period.

I would estimate that only 20% of SME businesses would set themselves financial targets -and of the 20% that have financial targets, only 20% of those would set those targets in a planned, methodical way. Most would simply take last year and add or deduct a %, without any analysis as to what really happened in that year - although this is arguably better than having no plan at all.

The Profit Planning Model

The diagram below identifies the key components of a profit planning model used by many businesses. With each Key Performance Indicator (KPI), specific strategies will need to be developed with the aim of achieving the targeted KPI. Further, you must as best can be done, estimate where you currently stand with these KPIs.


Number of Opportunities X Conversion Rate = Number of Sales

Number of Sales X Av. $ Sale = Sales Revenue


Sales Revenue - Cost of Sales = Gross Profit


Gross Profit - Overheads = Net Profit


The profit performance for any business can be broken down into these components which can be planned and monitored on a day by day basis. In other words, it's much easier to influence these components in a positive manner to achieve a profit improvement than just saying "I want to improve profit". This is because profit is simply a residual result of a number of key business processes.


As you can see, it's a fairly simple formula - and the actual numbers for each KPI targeted will vary depending on your chosen business model ie the KPIs for a low price, high volume business will be much different to a higher price, greater service model.


Let's have a look at each KPI:


Number of Opportunities: This is the number of prospects that a business is able to attract. In a retail business, this may simply be the number of people who walk in the door. Most businesses do not measure this but it can be one of the most powerful numbers. In a sense it's a reflection on the effectiveness of the marketing efforts of the business as well as the quality of the customer service experience offered by the business. There are many ways of measuring this KPI


Conversion Rate: This is a fraction of the number of sales made divided by the number of opportunities. This is a reflection of many factors but essentially an indication of the effectiveness of your selling systems, customer experience and merchandising presented by the business. This is a critical KPI for a business because if this is relatively low and the business owner is unaware of this, a decision may be made to spend more on advertising and marketing based on the presumption that more customers are needed. However, by putting in place strategies to improve the conversion rate, profitability can be improved substantially without the cost of additional advertising costs. Again, very few business owners measure this because they don't measure the number of opportunities.


Number of Sales: This is simply the Number of Opportunities multiplied by the conversion rate


Average $ Sale: This is the $ size of the average sale of a business. It is calculated by dividing the net of GST sales for a period by the number of sales. Again, this KPI is impacted by the quality of the selling experience, including merchandising, product knowledge of the team as well as awareness of cross selling and up selling opportunities. You can break this up into segments for the business as part of your of business planning process.


Sales Revenue: This is the result of multiplying the Number of Sales by the Average $ Sale


Cost of Sales: This is the cost of the products that you sell. Your aim should be to minimise the cost of sales as much as possible subject to the requirements of your business model. Such things as taking advantage of prompt payment discounts and special deals on good, saleable stock will ensure that you minimise your cost of sales as well as minimising theft and damage to stock.


Gross Profit: This is the result of deducting the Cost of Sales from Sales Revenue.


Overheads: These are the costs of keeping the doors open. In most businesses, these are essentially fixed. Major overheads include wages, rent, advertising and buying group/service fees. An assessment of these costs should be made in preparing your profit plan for the coming 12 months. Your budgeted expenses will also be determined by the business model

that you are pursuing. That said, you should look at each of your expenses and determine whether they are adding value to your business.


Net Profit: This is the result of deducting your overheads from your gross profit.


Now let’s examine how you build a profit plan, utilising those indicators.

I'll go through two simple approaches - one based on targeting a desired profit level and the second aimed at devising a profit plan based on what you might consider an achievable sales target. The second approach may be one that you may wish to consider in a changing market where sales may be reasonably expected to drop. Of course, this second approach may be considered a little defeatist and would only be considered if a full strategic analysis of the business determined that there was no scope to increase or maintain sales in the environment the business operates in - this is unlikely!

Approach 1

Let's say that your business profitability in the previous financial year looked something like this:

Sales $1500000

Less Cost of Sales 975000

Gross Profit 525000

Gross Profit Margin 35%

Less Overheads 250000

Net Profit 275000

Number of Sales 60000

Av. $ Sale $25

Number of Opportunities 80000

Conversion Rate 75%

All figures GST exclusive

Now, say you wish to target a profit of $350000. You believe this be feasible within your existing cost structure. You also believe that your gross margin will fall to 34%.

Your target sales will now look like this:

Overheads $ 250000

Target Profit 350000

Target Gross Profit 600000

Target Sales @ 34% GPM 1764705 ($600000/34%)

So, you need to find an extra $264705 in sales. Now, discounting in order to boost sales generally fails, unless you have lower costs than your competitors or are able to cut your costs. According to Reed Holden of Holden Advisors, US based pricing specialists, you need to innovate for growth.

So let's look at what you could do:

1. Improve effectiveness of your marketing, to increase the number of opportunities (or store traffic). If you were able to increase the number of opportunities by, say 1%, there would be 800 more opportunities. If 75% were converted in sales, there would be 600 extra sales at $25 = $15000 extra sales


2. If you were able to improve your merchandising and customer service and increase the conversion rate on sales to 80%, together with the increased opportunities in 1) above, there would be 80800 opportunities converted at 80% at $25 per sale = Sales of $1616000 - an extra $116000 in sales


3. If you were able to improve your merchandising, product range, customer experience and sales systems so that you were able to increase your average $ sale (by add on sales and/or up selling) to $27.30, your sales would be 80800 opportunities, converted at 80% at $27.30 per sale = $1764672 - your targeted sales level!

Put simply, a 1% increase in the number of opportunities, a 5% increase in your conversion rate and 9% increase in your average sale has produced the required increase in sales and a $75000 or 27% increase in profit! Of course you can explore variations in each of the 3 factors above to work out your profit plan. You could also consider increasing your prices, which we know has the biggest impact on profit, but is the most challenging to implement! The key is, of course, to develop and implement strategies aimed at improving each area - much easier said than done. This is why some businesses do much better than others - they are continually working on their business, building strategies, testing them and implementing those that are successful - then starting the whole process again!

Approach 2

Let's say that you have undertaken strategic planning and as a result, you believe that sales next year look to be around $1600000. The gross profit margin (GPM) predicted is around 34.5%. You wish to target a profit of $290000. To achieve the desired profit, what must you budget your expenses to be?

This is calculated as follows:

Sales $1600000

Less Cost of Sales 1048000

Gross Profit @ 34.5% GPM 552000

Less Target Profit 290000

Target Expenses 262000

You would then closely review all expenses and assess each on their effectiveness in delivering value in accordance with your business model. Be very careful as costs can be cut that much that you deliver insufficient value to your customer - as a result, you don't deliver the required number of customer opportunities, don't convert them at the required rate and/or don't sell at the required av. $ value to achieve your target sales.

My preference is to work under Approach 1 as it is a much more positive approach which can lead to the development of innovative initiatives that can take your business to a new level.

I wish you the best in your development of your financial plan for the new financial year. I am happy to answer any questions that you may have - you are welcome to email me at the following address: chris.foster@greentaylor.com.au



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