The pharmacy as a business: keeping an eye on the key metrics!

Why key metrics are decisive for pharmacies

Many pharmacies are still run largely out of day-to-day business. But gut feeling alone has long ceased to be enough. Modern pharmacy management means analysing developments on the basis of robust figures and taking decisions on the basis of data. Key metrics make visible where profits arise, which processes run inefficiently and which areas should be developed strategically.

The point is not to collect as many figures as possible. What matters far more is to monitor the few genuinely relevant metrics regularly — ideally monthly and in comparison over time.

Gross profit: the most important control variable

One of the central metrics in any pharmacy is gross profit. It describes the difference between turnover and cost of goods, and shows what amount is actually available to cover running costs.

Formally:

Gross profit = turnover − cost of goods

In pharmacies in particular, turnover alone says little. High-priced medicines can raise turnover massively without any improvement in the actual profit situation. That is why the gross profit ratio is frequently more relevant than pure turnover figures.

Many industry experts now regard gross profit as the real “lifeline” of the pharmacy. If it falls permanently, other areas inevitably come under pressure — staffing, stockholding and investment in particular.

Personnel costs: the biggest lever

In most pharmacies, personnel costs represent the largest single cost block. At the same time, qualified staff are decisive for the quality of counselling, customer loyalty and additional sales. The challenge is therefore not to save at any price, but to plan staff deployment productively.

The metric “personnel costs in relation to gross profit” is particularly informative. Industry analyses show that economically stable pharmacies frequently reach values between 40 and 45 per cent.

The formula is:

Personnel cost ratio = personnel costs / gross profit ⋅ 100

If this value rises permanently, the following should be analysed:

• Are the duty rosters efficient?
• Do customer traffic and staff deployment match?
• Are pharmaceutical services being used economically?
• Are there administrative processes that could be automated?

Small inefficiencies in particular quickly add up to considerable costs over the year.

Inventory turnover: do not tie up capital on the shelf

Another critical success factor is stock management. Many pharmacies tie up capital unnecessarily in slow-moving items or oversized stocks. At the same time, the ability to supply must not suffer.

The “inventory turnover” metric shows how quickly the stock renews itself.

Inventory turnover = cost of goods / average stock level

A high inventory turnover means:

• less capital tied up,
• fewer write-downs,
• higher liquidity,
• better adaptability.

Inventory turnover that is too low, by contrast, frequently indicates problems with the product range or inefficient ordering processes.

Interpreting customer traffic and average basket correctly

Many pharmacies focus exclusively on the number of customers. Economically, however, the combination of customer traffic and average basket value is more decisive.

High traffic alone does not guarantee profitability. What is relevant is rather:

• How high is the average profit per customer?
• What additional purchases arise?
• How large is the share of counselling-intensive services?
• How is the OTC share developing?

Particularly successful pharmacies manage to combine pharmaceutical competence with active recommendation management, without losing credibility in the process.

Liquidity: the often underestimated metric

Even profitable pharmacies can run into liquidity problems. Supply shortages, rising purchase prices or delayed reimbursements increasingly burden cash flow.

Liquidity development should therefore be taken at least as seriously as profit metrics. What is decisive is not only whether a pharmacy makes a profit, but whether sufficient liquid funds are available at all times.

Professional liquidity management includes:

• regular cash flow planning,
• control of outstanding receivables,
• optimisation of payment terms,
• investment planning,
• seasonal forecasts.

In economically volatile times in particular, liquidity becomes a strategic safety factor.

Metrics need context

Metrics only unfold their value in the right context. A single figure rarely delivers the whole truth. What matters are:

• comparisons over time,
• industry benchmarks,
• comparisons between branches,
• developments over several months,
• relationships between different metrics.

Rising customer traffic sounds positive at first. But if personnel costs rise disproportionately at the same time, or gross profit falls, the economic situation can worsen despite higher turnover.

That is why modern pharmacies increasingly rely on integrated controlling systems and clear KPI dashboards.

Conclusion: figures create room for manoeuvre

The economic management of a pharmacy will continue to grow in importance in the coming years. Successful pharmacies therefore see themselves not only as health care providers but also as professionally run businesses.

Metrics are not an end in themselves. They create transparency, enable better decisions and help to recognise opportunities early. Those who know their figures run their pharmacy more actively, more securely and more successfully in the long term.

Because in the end the same applies in the pharmacy: economic success does not happen by chance, but through consistent management.