DRIVING PLANNING Succession Planning in Pharmacy


Less than a third of family businesses make it to the second generation. Feargal McCormack, Managing Director with PKF-FMP Accountants looked at succession planning in Pharmacy with key pointers in running a family business as to often is the case in community Pharmacy.


W


ithin family businesses there is a reality that must be considered. Only 30% of


family business’ survive the second generation. There are unique dynamics of family businesses (such as a community pharmacy or group of community pharmacies), which make them different from non-family businesses.


One question you should be asking yourself is, “How does the proprietor reconcile his/her own and their family’s aspirations with the commercial goals of the business?” Research evidence shows that family- owned companies outperform public companies over time. They might be more conservative in a boom, but they do better in a downturn


The Advantages The overriding characteristic that distinguishes most family businesses, is a unique atmosphere that creates ‘a sense of belonging’ and an enhanced common purpose among the whole work-force.


Although intangible, this factor manifests itself in a number of very concrete and positive attributes, that can serve to give family businesses a significant competitive edge.


The Disadvantages Family businesses are prone to some serious and endemic disadvantages. In the same way that family businesses strengths are not unique to family firms, neither are their weaknesses, but family businesses are particularly vulnerable to specific failings. Many of the problems, hinge on the inherent conflicts, that can arise between family and business values


There are also many pitfalls such as: • Inherent conflicts between family and business values


• Older generation resistant to change.


• Lack of structure – ad hoc management style.


• Emotional Issues. • Lack of financial resources to fund succession.


• Lack of formal business strategy. • Leadership and legitimacy.


Key challenges for success You want to be able to control events, you don’t want events to control you and so it is important to plan early for succession. Succession is a process and not an event and so you must ensure that your management structure is fit for purpose. You should also ensure there is a sound business and management information systems to hand over to the next generation.


Take advantage of outside help, such as a succession facilitator. Pick the right people for the job – not just because they are family and note regulations relating to the operation of a pharmacy.


Develop a business succession strategy – this really is key.


When turning to the transfer of a community Pharmacy avoid emotional and family strains, by not fudging the decision. For example, don’t defer the decision to the next generation.


Pharmacy owners should consider their preferred future role – in say 1, 5 and 10 years – filling prescriptions, or managing the business, or somewhere else?


Feargal McCormack, Managing Director, PKF-FMP Accountants


Have the courage to take decision re family business succession now and then communicate decision in an open and transparent way to family members.


Ensure responsibilities are defined and appoint a clear leader, do not leave it to a committee.


Business Succession Options Succession confronts the founder of a family business with a complex set of options. Each option carries its own distinctive set of advantages, opportunities and threats. Key factors are: The availability of potential family and non-family successors, who are willing and able to carry on the business.


Financial Security Financial security is important to a successful retirement/planned succession for the community pharmacy business owner – a statement of the obvious perhaps, but many owners in fact, neglect their personal finances.


People who own successful enterprises, often tend to believe that the business itself represents their personal nest-egg and that it will, in some unspecified way, guarantee them financial security, when the time comes for them to step down.


Effective Planning Financial peace of mind is a crucial ingredient in a successful retirement / transfer of business.


There are two schools of thought on the best way for business owners to engineer this security.


• Ongoing Cash Withdrawal • Building up Balance Sheet and restructuring


Common misconceptions The most common? That the oldest Child should take over as Managing Director. This is not always the case and should never be assumed.


All children should have equal shareholdings in the company even if no involvement with the company – often active and passive shareholders have very different objectives and this can cause conflict.


Business cannot run successfully without the founder – with proper structures and systems in place, next generation can succeed – give them a chance!


To conclude, avoid major potential family conflict and business deterioration. In the context of a community family pharmacy have the courage to plan and agree business succession now, don’t defer the decision to the next generation. Communicate outcome decision in an open and transparent way to all family members.


Having a goal, a plan, desire and confidence to achieve your goal isn’t enough. Complete commitment is the only way to achieve success. It sustains you when you feel like quitting, and rewards you when you succeed.


Persistence beats resistance – keep the passion - Winners never quit and quitters never win. n


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