#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 protected].
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: [email protected]