By Mike Jaczko, BSc Phm, CIM® and Max Beairsto, B.Sc. Pharm., MBA, CVA
Over the past several years we completed a plethora of strategic wealth plans for pharmacy owners contemplating retirement. As people age, the likelihood of requiring some form of supportive care either at home or in some kind of long-term facility increases. It’s a reality that’s growing and cannot be ignored.
Financial marketing and the media focus on the early part of funding an active lifestyle in the early part of retirement. However, we should not ignore the later years when people are dealing with illnesses or disabilities. Yes, it’s a bit morbid to think this way, but again it is a reality.
We are not suggesting buying rocking chairs and planting yourselves in anticipation of growing old, but you’d be wise not to ignore the years when you may need help with daily living activities, such as bathing, dressing and eating. Increasingly, we are encouraging a long-term care component in more and more of the plans we help build for clients.
The business oversight of many planners and others is not modelling a number of the costs associated with the later portion of retirement. As we all know as healthcare providers, long-term care is a considerable expense to prepare for, but some experts believe it will be affordable if you sell your house or if you no longer need to spend on other costs of life beyond your care.
We urge you strongly to investigate and incorporate the cost of long-term care or home care into your strategic wealth plan. Confirm how you’ll afford this type of care while you’re still looking ahead to retirement and not having to make quick, and possibly hasty decisions. Of course, everyone will experience a different journey but do spend some time understanding what care could cost in our “golden years.” Furthermore, don’t count on the government to fund your retirement.
At the risk of being accused of being pedantic, long-term care means moving into a facility, while home care means having someone come into your home to provide assistance. There are reasons that people need long-term care or home care. For one, they may suffer from dementia. They may have a spouse who can no longer provide needed care, or they don’t have any family member to provide support. Many boomers and some Gen Xers reading this article will already relate as they attend to elderly parents’ needs.
In our next post, we look at some of the costs associated with long-term care.
Mike Jaczko, BSc Phm, CIM®, a pharmacist by background, is a portfolio manager and partner of KJ Harrison, a Toronto-based private investment management firm serving individuals and families across Canada. For more information, email:email@example.com.
Max Beairsto, B.Sc. Pharm., MBA, CVA is a certified valuation analyst and business intermediary with Enterprise Valuators, an Edmonton-based valuation and business sales advisory firm. Their Pharmacy Edge division assists pharmacy entrepreneurs across the country needing transactional and valuation advice. For more information, email: firstname.lastname@example.org
By Mike Jaczko & Max Beairsto
In two earlier installments (part 1 and part 2) we identified six factors that drive the value of your pharmacy business. Here, we pick up where we left off.
#7. Competitive advantage
Your “monopoly of control,” as described by John Warrillow in Built to Sell, describes a concept that answers the question of how well your business is differentiated from competitors in your industry. Seth Godin, who wrote the Purple Cow, also laments on the importance of uniqueness and differentiation in your organization. Essentially, it boils down to developing a business where you have created your own monopoly; it is the only place where your customer can shop for your unique offering of services, products and courtesy.
The provision of unique value-added services and products is the glue linking your pharmacy business with your customers and patients. Creating some form of competitive advantage to prevent competitors from copying your activities will provide a “moat” around your pharmacy business. Some buyers will pay a premium for a niche that has barriers to competitive entry, but this can be a double-edged sword. If you have created something so far off the beaten path, it is sometimes difficult for a corporate buyer to envision your business in their fold.
Experts have identified numerous ways to create a competitive advantage, but some seem to resonate more for the pharmacy industry. Although trademarks and patents do not readily lend themselves to creating a competitive advantage for a pharmacy, developed processes, compound recipes, training programs, published articles, specialized licences or certificates, and service contracts do. Do not discount your location—and the security of your lease—as these can serve as a major barrier to entry for your competitors.
8. Patient/customer relationship
While the patient/customer relationship is somewhat related to competitive advantage, it is nevertheless deserving of recognition on its own. How likely are your patients to return to renew a prescription or re-purchase a product or, even better, refer friends and family to your pharmacy? The majority of your peers do not actively seek out or quantify the answer to this, but your corporate competitors actively pursue this information.
Stability, consistency, repeatability, reliability and sustainability are a few of the key attributes to establishing a meaningful customer relationship. Your quality marketing program needs to create name recognition (of both the business and key employees) and build customer awareness and loyalty. A long history of efficient operations, producing timely and accurate prescription output and complimentary professional advice, will drive a valuable reputation in your community.
While, the value of your business will in part, be related to the hard, tangible assets, it is the goodwill that constitutes the majority of the price a buyer will pay. Therefore, it is these softer value drivers that will help drive goodwill in your pharmacy business. Relationships and patient/customer habits remain the nectar of the valuation gods.
Mike Jaczko, BSc Phm, CIM® is a pharmacist by background, is a portfolio manager and partner of KJ Harrison, a Toronto-based private investment management firm serving individuals and families across Canada. For more information, email: email@example.com.
This article first appeared in Pharmacy Practice + Business.
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