The first thing I like to do when I meet a pharmacist is ask them to tell me about their pharmacy. This simple question can uncover a critical vulnerability – many pharmacies rely heavily on a single factor to determine their success. For example, your pharmacy might have a medical centre right next door, driving 90% of scripts, a strong aged care packing contract, or a corporate office nearby with high foot traffic. But what happens if this local lifeline disappears? Even something as simple as a local supermarket closing can redirect scripts to the next town. These scenarios are risks that can threaten your business overnight. The unthinkable does happen.

However, the good news is that you can plan to help mitigate external risks to your business. These include:

1. Plan from a Position of Strength

Risk mitigation starts before the crisis – not during or after. When options become limited, your ability to respond diminishes. Focus on building resilience now. When buying a pharmacy you should consider any “concentration risk” and how to mitigate the pharmacy’s dependency on that revenue stream.

2. Keep Your Finances Fit

• Be meticulous with your lease and loan terms, know your bank covenants
• Never cross-subsidise the cashflow or equity of one pharmacy with another—or worse, with personal assets like your home, if it can be avoided, better to make the hard financial decisions and conserve cash
• If you must, ensure any security is released as soon as practical by the bank…you’ve earned that right.
• Understand your insurance policies and what you really are covered for and the excesses that apply

3. Manage Your Balance Sheet

• Maintain healthy working capital: debtors, inventory, and prepayments should be as lean as possible.
• Have a cash buffer or contingency plan
• Stretch payments to suppliers within industry norms to preserve liquidity.
• Generate sales aggressively but stay within commercial market parameters.
• Have a positive relationship with your bank, meet with them even when times are good, my golden rule is never surprise the bank
• Temporarily restructure your debt obligtions

4. Act Quickly and Seek Help

If something changes in your business environment, don’t avoid decision making. Instead, take decisive action and consult experts early. The sooner you respond, the better your chances of navigating uncertainty. Pharmacy is a dynamic industry, and while you can’t predict every challenge, you can prepare for them.