Professional services are attracting more and more attention, especially from an investment standpoint. According to a recent survey of small business owners, two-thirds of Canadian entrepreneurs (63 per cent) report that the professional services sector is an attractive investment opportunity. Industry data shows that the sector created 85,000 new jobs in 2013 and now represents the fourth-largest sector by employment in Canada.
Professional services within the health care sector, such as pharmacies, are attracting particular interest, given the sale of Dell Pharmacies to Rexall a few years ago and Loblaw Cos. Ltd.s' acquisition of Shoppers Drug Mart Corp.
There are 33,000 licensed pharmacists in Canada, compared to 10 years ago when there were fewer than 25,000, according to the Canadian Pharmacists Association. Roughly 60 per cent of pharmacists are women, with an annual income ranging from $80,000 to $95,000. Meanwhile, polling firm Pollara has found that nearly half of small business owners believe that the professional services sector will grow over the next five years.
However, the opportunities that pharmacies can provide may not be under consideration by current and potential business owners.
Those who are cautious about investing in a pharmacy can be assured by important trends that will support pharmacies in the long term. Consider the fact that Canada's aging population continues to create an increasing demand for prescription drugs. These drugs continue to be perceived by consumers as relatively low cost due to our entrenched public health care system and the existence of private health insurance coverage plans.
The perception of low cost is due to the fact that the consumer pays very little of the cost directly. Roughly half is picked up by the provincial government plans. A further 35 per cent or so is funded by private health care plans maintained by employers. The patient doesn't feel the financial impact directly but the pharmacy still gets paid.
Meanwhile, there's an expectation that pharmacies will benefit from continued government efforts to move the delivery of basic health services to less expensive delivery channels, such as flu shots, inoculations, etc. that can now be administered at the pharmacy level. That means revenue streams that are predictable and non-cyclical – attractive traits for a business owner.
Depending on what kind of business you want to run, pharmacy operations offer several different kinds of options:
Examples of pharmacy franchises include Shoppers Drug Mart and Jean Coutu.
Franchising arrangements vary from one franchisor to another in the pharmacy industry.
Franchisees are well supported by central head office, but at the same time they possess some autonomy with local initiatives such as marketing. Examples of banner pharmacies include Guardian, IDA, PharmaChoice, Remedy'sRx and Uniprix. These represent what many Canadians characterize as more traditional, community-based pharmacies entrenched in residential neighborhoods across the country. They gain a competitive advantage from the proximity and relationship between the pharmacist and his or her local customers. These independently-owned pharmacies are mid-size, ranging from 2,000 to 6,000-feet with about 80 per cent of revenue derived from prescriptions.
Independent pharmacies aren't affiliated with any corporately run brand, franchise or chain program. Typically the name of the store is unique and the owner controls all facets of the operation.
To enter the pharmacy business, assistance from a financial service professional will certainly be required. Pharmacies typically require a number of credit facilities in order to function, such as operating lines of credit, term loan financing, acquisition and succession financing, equipment and leasehold financing and real estate financing.
Meanwhile, an entrant into the field who wishes to be more than just an owner and learn to be a pharmacist needs to consider the costs of training.
Mark Shoniker is the director of professional services, commercial banking at BMO Bank of Montreal.