Critical Business KPIs for Every Pharmacy Owner
What if you had more clarity around which numbers to track in your pharmacy? What if you had the confidence to know exactly what to focus on? The answers to these questions can be found in understanding and measuring the critical pharmacy business KPIs.
At PDS, our mission is to equip pharmacy owners with the knowledge and tools needed to succeed in this industry. We put a lot of muscle into researching the metrics that are fundamental to rapid and sustained pharmacy growth. We've identified that the most vital key performance indicators (KPIs) fall in the four areas of your business: Growth, Finance, Team, and Operations.
With this 360-degree approach, pharmacy owners are able to get laser-focused on the areas of their business they want to improve.
In our on-demand webinar, Critical Business KPIs for Every Pharmacy Owner, we examine eight of the most important metrics every pharmacy owner should track and measure. These metrics cover all four areas of a pharmacy business. Measuring each of them and taking action on the data will fast-track your pharmacy to greater efficiencies across your business and lead to improved operations and an increased bottom line.
Watch the Critical KPIs Webinar and Learn:
- A breakdown of eight of the most critical pharmacy business KPIs
- How to calculate them
- What they mean to your pharmacy
- How to improve upon your numbers
After watching the webinar, you will gain the clarity and confidence you need to make the right business decisions. With increased efficiencies, you'll be able to provide your patients with the quality of care they deserve, while providing your pharmacy the profits it needs to thrive.
What Pharmacy Business KPIs Should I Focus On?
We thought you'd never ask. Here is a rundown of the eight critical business KPIs across all four areas of your pharmacy. Make sure to watch the webinar for a deep dive into each measurement and why it's essential to your business.
Business KPI 1: Volume
A mistake many owners make is assuming volume equals profit and equate increasing dispensing activity with increased profits. The key is targeting your approach to acquire the right volume. Whether it is a prescriber who gives you more profitable prescriptions or a local employer who has a good insurance plan, seek on improving the volume that is more profitable for your business.
Now that you know that you need profitable volume, learn more about the types of marketing to help you find it in the webinar.
Business KPI 2: GM/Rx
When you track your gross margin per prescription, you're measuring how effective you are at dispensing. You must keep tracking this measurement to spot the trends in your pharmacy so you know where to focus your efforts. Increasing your GM/Rx has a direct impact on your ability to pay expenses, the profitability of your pharmacy and, of course, your bottom line. One way to increase your GM/Rx is to diversify your business, such as the prescriptions you're dispensing, your prescribers, or your insurance groups.
The webinar will show you how to calculate this business KPI and teach you several tactics to increase your gross margin per prescription.
Business KPI 3: Payroll Ratio
The payroll ratio is a spending ratio, but it's also an efficiency measurement. The goal ratio for pharmacies is less than 13.6%. A higher ratio could be a symptom of a number of issues and does not necessarily mean that you have too many people on your team. The solution lies in evaluating each employee and determining how to increase their efficiency in producing more revenue.
On the webinar, you'll learn how to calculate this business KPI and how to find solutions to increase your team's efficiency so you can then create a plan to lower this ratio.
Business KPI 4: Net Dollars/Prescription
Often a metric most owners aren't tracking, your net dollars per prescription measures your bottom line. This number will reveal any significant gaps you had between your gross margin per prescription on the top and how much you have left to your bottom line. If you have a healthy gross margin per prescription, but a lower net dollar per prescription, that tells you that you need to dig deeper in your data to understand what is happening. The best way to understand is to review your financial statements regularly, at least monthly. The initial review will show you where you may be spending too much or what areas of your business you should optimize that will reflect on your bottom line. Monthly reviews will ensure that you are making progress towards improving your net dollars per prescription.
Watch the webinar to learn how to calculate this business KPI and discover ways to improve upon this number.
Business KPI 5: Rxs/Employee hour
Your prescriptions per employee hour lets you know what your employees produce and measures their true output. Begin by tracking this metric over a month to get an understanding of your benchmark and then begin to put a plan in effect to make improvements. The first step in an improvement plan is to work on your team culture and training so that you know if you have the right employees in the right seat on the bus. The right employees mean filling your team with high-performers so that you're increasing the amount of prescriptions you fill without increasing payroll hours, therefore increasing your efficiency. It is important to break this out and measure by department if you have a pharmacy that offers compounding or DME.
Learn how to calculate this business KPI and find ways to increase your employee effectiveness in the webinar.
Business KPI 6: OTC $/Employee Hour
Increasing your over-the-counter (OTC) sales increases your bottom line and therefore important to measure your OTC dollars per employee hour. An effective way to improve upon this number is to create an incentive program for your employees to track who sold the most OTC dollars per hour. There are many creative ideas you can use that will empower your employees and allow them the flexibility to succeed.
For ideas on incentives you can implement, how this can look like in your pharmacy, and how to calculate this business KPI, watch the webinar.
Business KPI 7: Return to Stock %
As an efficiency metric, this business KPI measures the percentage of prescriptions you fill and then get returned to stock (RTS). RTSs are extremely wasteful in an already tight workflow system. There are a number of reasons why you're filling prescriptions that are not being picked up. Measuring this KPI will allow you to root out the problem, whether the patient is unaware they have a prescription to be picked up, a high copay, or something that indicates a workflow issue in your pharmacy.
Although an unpleasant reality, another benefit of tracking your return percentages by employee is that it could expose nefarious activity by someone on your team. Find out how to calculate this measurement to spot red flags and more in the webinar.
Business KPI 8: Inventory turns
If you want to run a leaner, more profitable pharmacy, you must start with your inventory. Most pharmacies have far too much inventory on their shelves and this is one of the biggest causes of cash flow issues. At a minimum, you should review your inventory turns annually, with your goal being a ratio greater than 16. PDS members have access to an inventory optimization program that they are guided through with their PDS team. If you're not a PDS member and want to improve this ratio, there are ways to find the right balance of inventory for your pharmacy.
Watch the webinar to calculate this business KPI and discover ways to increase this ratio, such as working with your wholesaler and setting ordering limits to get your inventory down.
I understand my pharmacy business KPIs... now what?
PDS has solutions that will improve your business KPIs and transform your pharmacy into a leaner, stronger, more efficient business that will elevate both your patient care and your profits. Call us at (800) 987-7386 or fill out the form below to take the first steps to a better pharmacy.