Benchmarking is sometimes dismissed as something only large organisations worry about. But in reality, it’s one of the most valuable tools available to pharmacy owners who want to understand how their business is performing – and how it can do better.
So, what exactly is benchmarking?
At its simplest, benchmarking means comparing your pharmacy’s key financial and operational metrics, often referred to as Key Performance Indicators (KPIs), with those of similar businesses, sector averages, or best-in-class performers. It’s about gaining perspective: identifying what’s working well and where there’s room to improve.
Why benchmark your financial performance?
- Performance Comparison.
As with any business, each owner will have their own way of running their business, be it from their purchasing policies to their private sales pricing model. Benchmarking is an invaluable exercise to ensure that the policies being implemented in the pharmacy are achieving the best results. For instance, if you were generating a gross profit margin of say 41%, but the sector average benchmark for pharmacies with a similar profile was 44.50%, then straight away you know that your purchasing policy, sales pricing model or turnover mix requires review.
If your pharmacy achieved the sector average gross profit margin, there would be an additional 3.5% of turnover added to the bottom line of the business. In these challenging times with labour cost inflation and stock acquisition constraints, the additional gross profit margin could help negate these ever-increasing costs.
- Driving continuous improvement.
Tracking KPIs over time helps you assess whether operational changes are having the desired effect. To garner the most from this approach, I would strongly recommend preparing live monthly management accounts (live meaning accounts prepared within 30 days of the month’s end) Waiting until year-end to review performance makes it harder to identify what’s driving your results in real time.
- Setting realistic goals.
Using sector benchmarks allows you to set targets grounded in reality, ambitious yet attainable. Unrealistic targets, though they may seem motivating, only lead to feelings of failure and low team morale if not met.
- Strengthening Accountability.
Whether it’s purchasing or staffing, having transparent performance metrics encourages responsibility and helps keep everyone focused on results.
- Resource Allocation.
Understanding where your pharmacy is underperforming helps direct resources where they’ll have the most impact. Benchmarking can also help identify risks, justify investment decisions, and build the case for operational change.
- Increasing your business value.
For owners thinking ahead to succession or sale, benchmarking delivers tangible benefits. Pharmacies that consistently meet or exceed sector averages for key metrics over a three-year period are typically more attractive to buyers and command higher sale prices. Proven, sustained performance reduces perceived risk and smooths the transaction process.
In summary:
Benchmarking isn’t just a numbers exercise, it’s a strategic tool for performance improvement, decision-making, and long-term value creation. Whether you operate a single community pharmacy or manage multiple sites, benchmarking ensures you’re maximising the return on your hard-earned turnover.
At Fitzgerald Power, we offer all clients complimentary access to Ezora, our advanced Pharmacy Sector Benchmarking tool, which provides real-time insights and comparative data to help you stay ahead of the curve.
Whether you are a large pharmacy chain or a small independent community pharmacy, the owner should be benchmarking their KPIs to ensure they are maximising the return on the hard-earned turnover being generated.
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Over the last four decades, we have made a name for ourselves as the largest pharmacy transaction brokerage firm in Ireland. Offering creative solutions, we provide bespoke pharmacy services for businesses of all sizes, from independent single-unit operators to multinational mammoths. As one of the top accounting firms Ireland has to offer, we use our experience and knowledge of the sector to provide our clients with unparalleled pharmacy insights. For more information contact our expert team today!
