Its Your Business

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It’s your

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BUSINESS A PHARMACY NEWS PUBLICATION

BUSINESS ADVICE FOR AUSTRALIAN COMMUNITY PHARMACY

STEERING YOUR BUSINESS THROUGH THE STORMY WATERS OF 2012

CATEGORY MANAGEMENT

DEALING WITH WHOLESALERS

STORE SECURITY MANAGING YOUR SUPER

MARCH - 2012 ISSUE NO.2

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Pharmacy News Team Editor: Chris Brooker T: (02) 9422 2908 E: christopher.brooker@ reedbusiness.com.au Journalists: Nick O’Donoghue T: (02) 9422 2825 E: nicholas.odonoghue@ reedbusiness.com.au

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March 2012

CONTENTS

Kirrilly Burton T: (02) 9422 2874 E: kirrilly.burton@reedbusiness.com.au

Dealing with wholesalers

Sub Editor: Andrea Kunz T: (02) 9422 2554 E: andrea.kunz@ reedbusiness.com.au Advertising Account Manager Fiona Duke T: (02) 9422 2721 E: fiona.duke@reedbusiness.com.au Tom Rutherford T: (02) 9422 2372 E: tom.rutherford@reedbusiness.com.au

5

Category management

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Dispensary technology

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Managing your super

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Handling 2012

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Store security

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Rent

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Production Production Co-ordinator: Tracy Duff T: (02) 9422 8923 E: tracy.duff@ reedbusiness.com.au Graphic Designer Nick Cox T: (02) 9422 2166 E: nick.cox@reedbusiness.com.au Publishing Director: Suzanne Coutinho Circulation & Subscription Inquiries T: (02) 9422 2666 or 1300 360 126 Pharmacy News does not accept responsibility for claims made by manufacturers for their products. www.pharmacynews.com.au Printing GEON 20 Baker St, Broadmeadow NSW 2019 © Copyright 2012 by Reed Business Information ABN 80 132 719 861 Tower 2, 475 Victoria Avenue, Chatswood, NSW 2067 Phone (02)9422 2999 Fax (02)9422 2822

The coming storm T

he next few years promise to be trying for most community pharmacies.

The profession faces a unique set of issues, including patent expiries, rent increases, and price disclosure.

So what can the average pharmacy do to protect themselves from the worst of this? Is it too late?

In this issue we present articles covering key topics, with views and tips from leading experts.

What role does category mananagement play in keeping your store viable? How can you maximise

the return from your best categories? How can you negotiate the best deal with wholesalers? What steps can you take to improve your rental outlook?

We also look at how you can best make your super work for you, and how you can improve the security of your store.

And don't forget to let us know of any topics you want to see covered in future issues of It's Your Business.

Email me at editor@pharmacynews.com.au or visit our website: www.pharmacynews.com.au.

Regards, Chris

Average Net Distribution Period ending Sept ‘11 7102

IT’S YOUR BUSINESS | MARCH 2012 | 3

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DEALING WITH WHOLESALERS

Friends with benefits Community Service Obligation (CSO) wholesalers make natural allies for community pharmacists, sharing the same desire to succeed in a unique marketplace, writes Nick O’Donoghue.

IT’S YOUR BUSINESS | MARCH 2012 | 5

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DEALING WITH WHOLESALERS

P

harmacy’s relationship with CSO wholesalers is symbiotic, with both sides relying on each other to succeed.

Traditionally, the role of the wholesalers has been to ensure the time supply of products – particularly PBS medicines – to pharmacies, but their business offering has evolved to provide a broader line of support services.

NATURAL ALLIES Speaking to It’s Your Business, Patrick Davies, CEO of Symbion Pharmacy Services, said CSO wholesalers and community pharmacists were “tied at the hip”, and the wholesalers wanted pharmacies to be successful.

“For a pharmacist it is the largest commercial relationship – on a day-to-day basis – that they’ve got,” he said.

"They're buying the vast majority of their goods from one source, their nominated wholesaler, and we need them to pay their bills. We want them to be really successful.

“There is an enormous amount of expertise available through real people in the wholesalers, who can help store owners to be the very best that they can be in a marketplace that is constantly changing, constantly being challenged and where opportunities open and close quickly.

“On the broader business side of pharmacy, if you are looking for help, the wholesalers have a very deep understanding of the market and, really, we have exactly the same ambitions. We want the store to be really prosperous and really successful.”

est in seeing pharmacies being profitable.

“Probably as much as any other partner you'll find, the relationship should feel good,” he said.

“You should feel that if you put the effort in and work with the wholesaler, the wholesaler should be bending over backwards to try and help you," he said.

“The bank loves you to a point. They lend you some money, they want you to go on and run your business but they can’t really help you understand your marketplace well."

“The wholesaler has a perfectly tied ambition with the store owners to be successful, because if you do well, we do well. We want to sell you more, we want you to sell you more.”

OPEN AND HONEST Mr Davies encouraged pharmacists to have an open and honest relationship with their wholesaler about their plans, whether they are having difficult times, or if they need to reduce costs to expand their business.

“If those conversations are had openly with the wholesaler, the wholesaler will be able to help you through it,” he said.

“A big element of how you finance your store is through the trading account with the wholesaler, and there’s normally a way to provide a little more assistance when required.”

ADVICE

Mr Davies said wholesalers were able to provide support to pharmacists in areas of the business, where they might not feel confident.

“A pharmacist who is very good at dispensing MUTUAL INTEREST medicine might be battling with how to run the entire pharmacy A D _ P N I Y B P H A NWhile O V _ pharmacists 1 1 2 9 . pcan d look f Ptoaalternative g e 1 sources 2 6 / for 1 0 / 1 1 , 2 : better,” 3 8 PheMsaid.

“They might be very good at dealing with a health support, Mr Davies said wholesalers had a vested inter-

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DEALING WITH WHOLESALERS

“You should feel that if you put the effort in and work with the wholesaler, the wholesaler should be bending over backwards to try and help you" A D _ I M B WI L N O V _ 1 1 . p d f

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PATRICK DAVIES,CEO, SYMBION: “We have exactly the same ambitions.”

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IT’S YOUR BUSINESS | MARCH 2012 | 7

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DEALING WITH WHOLESALERS

SERVICES: Wholesalers offer far more than just deliveries.

complaint or particular issue from a patient, but they're wondering, 'how do I properly get the most out of the pharmacy that I've got?'

“From wholesalers there are services that look well beyond just placing an order and getting a truck to turn up with the products on it.

“We can help with the questions: "How do I lay out my store?"; "What products do I put in the store?"; "How should it appear in marketing materials?" and "How do I go about moving my business?"

“Wholesalers have got trained and skilled local staff who will come to you and work with you to maximise your potential as a business.”

MARKETPLACE CHANGES A number of pharmacists have already used wholesaler support services to get a better understanding of issues in the marketplace, Mr Davies said.

“They’re saying: "I don’t need help on where to locate my store or what range to put in, but I’m quite confused about what’s happening with PBS reform, I

8 | IT’S YOUR BUSINESS | MARCH 2012

don’t understand it", or "I’m confused about changes in regulations around moving licenses".

“Or things more broadly in the marketplace that are complex, that you need someone to help you sift through, again the wholesalers – Symbion at least – have people in the field who we educate and keep up to speed with what's happening in the pharmacy marketplace. It's a source of incredible knowledge for store owners to tap into.”

GETTING IT RIGHT Like all business relationships, it is important for pharmacists to choose a wholesaler that is compatible with them, Kos Sclavos, Pharmacy Guild of Australia national president believes.

“Getting the relationship right with the wholesalers is the most important element a pharmacy needs to have in place,” he said.

“As wholesalers have moved into purchasing banner groups the decision to deal with the wholesaler needs to be considered as a multidimensional relationship.”

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DEALING WITH WHOLESALERS

KNOW YOUR WHOLESALERS Feras Karem, managing director of Pharmacy 4 Less gives us his ten top tips for working successfully with wholesalers 1. Know your volume in and split into PBS, Non-PBS and OTC. 2. Look into the 3 main wholesalers API, Symbion and Sigma and formalise your agreement (in writing) in case people you are dealing with change or leave the company.

3. Explore options with short line wholesalers and remember this may impact your terms with the three big wholesalers.

4. Who do you use for generics in your dispensary?

This may influence your decision as it is easier to deal with one wholesaler for all your needs and you can leverage this in your favour for better terms.

5. Negotiate discounts based on your specific business, PBS, Non-PBS and private. Often pharmacies get big discounts on OTC and they do no volume. Check your invoices and statements to make sure they reflect agreed terms. Wholesalers make mistakes too.

6. Value relationships with wholesalers as this will become more important as the industry faces challenges. Factor this into your trading terms.

7. Length of term is an important consideration. In times of challenge, longer more stable terms may be beneficial to provide stability.

8. Read the fine print. Some wholesalers will ask for a certain percentage of your business to go through them as a condition.

9. Forward charge, time to pay will impact cash flow and this is very important in light of major PBS reform, Pfizer direct distribution and retail pharmacy competition.

10. Is there an exit clause in your trading term agreement and on what grounds do you have the right to exit?

"The decision to deal with the wholesaler needs to be considered as a multidimensional relationship."

BANNER GROUPS

PFIZER DIRECT

Banner groups, such as Priceline Pharmacy (API), Amcal and Guardian (Sigma), Chemmart and Terry White Chemists (Symbion) are run by wholesalers. Mr Sclavos said it was important that if a pharmacist is looking to join one they need to make sure they choose the right fit for them.

“You have to ask yourself if are you happy with your banner group, which may be owned by a particular wholesaler ar rangement?,” he said.

“Are you happy with the alliance with a generic supplier that a particular banner group may have, as that locks you into that generic company?”

While there are potential issues with joining a wholesaler-run banner group, Mr Davies said they offered pharmacists “a complete solution” for their stores. “ Joi ni ng a franc hi se t akes som e of t hose [phar m aci st / wholesaler] i nt eract i ons t o anot her level, ” he sai d.

“It’s a more structured relationship," he said. "They pay more money for it, but in return they get back a series of those things [advice on store lay-out,promotions etc...] as a given. It's just baked into how they do business.”

The introduction of Pfizer’s exclusive supply model – Pfizer Direct – last year, has strengthened the relationship between pharmacists and wholesalers, Mr Davies believes.

“In many ways it has reminded pharmacists of the importance of their wholesaler relationship.”

“If anything we've had a strengthening of the appreciation pharmacists have of the full-line wholesaling in this country.

“For many of them, it's not what they want and it’s impacting on their day-to-day business, so it’s sharpened the focus of the relationship and it’s been positive in that regard.”

While most pharmacists had dealt with just one wholesaler in the past, Pfizer’s exclusive supply model had created a scenario where they were dealing with multiple suppliers, and could make the community pharmacy system less efficient, Mr Sclavos said.

“You only had to deal with one supplier instead of scores of manufacturers who could each use different supply systems,” he said.

“The whole system would become less efficient, and indeed it is one of the reasons why many pharmacy owners are not happy about Pfizer’s decision to supply exclusively direct via their own arrangement.” ◆

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CATEGORY MANAGEMENT

Business success - it’s categorical Constant management of your product categories is vital to success in pharmacy, Sheree Mutton discovers.

C

ategory management is about optimising a group of interrelated products. In any retail business, category management will help lead to higher profits and customer satisfaction.

Most pharmacies group together similar products in wall bays or with signage to help direct customers to the section of the pharmacy that contains their desired product(s). However, the pharmacy industry is rapidly changing and products that were once popular may not be as profitable in the future.

Pharmacies must focus on category performance and adopt strategies that will keep customers happy and store profits high. Pharmacy managers must determine what the best and worst performing categories are and the strategies that will help make them more profitable.

Failing to manage categories may result in slow stock turnover, lower profits and missed opportunities to attract a wider customer base.

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CATEGORY MANAGEMENT

IDENTIFYING YOUR BEST CATEGORIES Most pharmacy managers and owners will pick their best categories solely on sales. but pharmacies should take other factors and influences into account including market level data and category profitability.

Hilary Kahn, the executive director of content and strategy for FeelGood Guide – a company that specialises in transforming pharmacies into highly valued health destinations, says pharmacy managers and owners need to examine their demographics and identify what they want to be known for.

“Think about what the category can do for you, not what you can do with the category,” she says.

“Categories that were once selling well are no longer performing, so pharmacies need to examine the reasons behind this.”

Kahn says supermarkets and discount pharmacies have greatly affected smaller community pharmacies, as

has the online retail industry. “Stock is driven by price and competition.”

When viewing the number of sales for each category, examine data from several months to give an accurate snapshot of how each category is performing.

Remember one customer may buy multiple products of the one item and this may affect the result. Take into account gross profit margins and determine the category leaders within the pharmacy industry.

For example, Terry White chemists are one of the leaders in the weight management category. Don’t ever neglect less-profitable categories in your pharmacy unless there is extremely low turnover over a long period of time. A pharmacy with a greater range of products is always more desirable to a customer.

Pharmacies should target these categories to make them more profitable or simply manage and control the amount of stock ordered and only give the products

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CATEGORY MANAGEMENT

the amount of space they deserve.

Kahn says managers need to work out whether there is room for improvement for particular categories. “I call it the inflexion point. For some categories it’s already too late,” she says.

Nick Logan, from Pharmacist Advice, says Point of Sale (POS) data helped him remove slow-selling categories. “We rearranged our stock using POS data in 2007 and while the turnover increased 10-15 per cent, the gross profit increased by almost 30 per cent. The POS data helped us ruthlessly remove dead categories like hair colours. As it turned out, all the health oriented sections were performing the best.”

PROMOTING YOUR CATEGORIES Pharmacies need to adapt their category management approach to meet shifting customer demands and market trends. The most important questions to ask are: * What are the leading brands within the category? * Have you allocated an adequate amount of space to these best-sellers? * Would sales and profits improve if they were located in a different area within the pharmacy? * Who uses the category and how often? * How big is the market for the category and is it growing or shrinking?

MERCHANDISING Nick Logan says that merchandising is the most important tool in promoting categories. “Highlighting product specials from a department in high traffic areas (front window or gondola ends) brings attention and tells the consumer that you are serious about it,” he says.

Position your best categories in a prime location in the pharmacy and when displaying your most popular products, use more faces of stock and keep them at eye-view. Encouraging companion selling through cross-merchandising will also help increase profits.

“Add-on sales need to be discussed and practised,” Logan says.

He also suggests handing out information on other products that will provide a whole solution for the customer.

12 | IT’S YOUR BUSINESS | MARCH 2012

“Think about what the category can do for you, not what you can do with the category,” HILARY KAHN, EXECUTIVE DIRECTOR, FEELGOOD GUIDE: Continual review and promotion of categories is recommended.

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CATEGORY MANAGEMENT

“Sales of other related products can be identified easily using selfcare cards. Consumers love being given some knowledge and power.�

Finally ensure each category is well-stocked, clean and presentable. Products that cannot be found easily or look dirty won’t be purchased.

PROMOTIONS Hilary Kahn also suggests promoting particular categories with samples and speaker nights. “You might have a speaker night on arthritis and focus on the category that provides relief from arthritis in the form of creams and vitamins,� she says.

Nick Logan suggests establishing a loyalty program for customers. “A loyalty program can be used to target relevant customers and really drive a performing section,� he says.

TRAINING Training staff about the products within the categories you are targeting will help propel sales even further. “Pharmacies need to allocate more time to training to build the skills of pharmacy workers,� Kahn says. More information will lead to more sales.

REVIEWING AND EVALUATING Once you have implemented the range of strategies to help you promote your categories, you need to review and evaluate their effectiveness.

Which strategies worked best and which did not influence category results? Check and analyse sales data on a regular basis and ask for feedback on promotions from customers and employees.

CONCLUSION A comprehensive review of each category within your pharmacy will enable you to evaluate the current performance and identify new opportunities for the future. An effective way of managing your categories is to think of each major category as a mini business itself. Each has its own market and unique selling opportunities.

To survive in a changing environment, pharmacies need to identify their best categories to help determine the strengths and weaknesses within the store.

This information can be utilised to develop effective category management strategies, which will give the pharmacy a competitive edge and help increase customer satisfaction and profitability. â—†

It’s your

BUSINESS

It’s your

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BUSINESS ADVICE FOR AUSTRALIAN COMMUNITY PHARMACY

Providing Australian pharmacists with the latest information and expert opinion on issues affecting the daily operation and success of community pharmacy.

DON’T MISS OUT BOOK YOUR SPOT NOW IN THE SEPTEMBER ISSUE

CATEGORY MANAGEMENT

DEALING WITH WHOLESALERS

STORE SECURITY MANAGING YOUR SUPER

Booking deadline: Friday 27th July Copies of the March issue will also be available from the Pharmacy News stand at the APP2012 Conference

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IT’S YOUR BUSINESS | MARCH 2012 | 13

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DISPENSARY TECHNOLOGY

NO TRIVIAL MATTER Long regarded as simply a useful adjunct to the operations of the dispensary, information technology – both hardware and software – is now assuming vital importance to the ongoing success of a pharmacy, as Chris Brooker discovers.

14 | IT’S YOUR BUSINESS | MARCH 2012

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DISPENSARY TECHNOLOGY

T

he importance of having up-to-date software was brought to light with the introduction of the Fifth Community Pharmacy Agreement’s Professional Practice Incentives (PPIs) last year.

To participate in the program, pharmacies needed an up-to-date software package, and this will be an ongoing factor to participation in a number of other professional practice programs.

Software providers say the ongoing, but largely underappreciated, developments in pharmacy software will bear fruit this year with the roll out of the federal government's Personally Controlled E-health Record (PCEHR), a development that many in pharmacy see as allowing pharmacists greater integration into the primary and chronic health care teams.

The importance of this, and of the range of new (mostly paid) services coming out of the 5CPA, will grow as the impact of patent expiries and price disclosure reduce PBS income into pharmacy.

Paul Naismith, CEO of Fred Health, says while technology was once largely an afterthought and an add-on in pharmacy, it was now rightly regarded as a vital and essential tool, and one increasingly worth investing in.

“Each pharmacy now has an average of six computers, compared to two or three a few years ago.”

His company provides software for more than 3000 pharmacies nationwide, and he says by and large pharmacists are in a good position to improve their IT position quickly.

“There is great demand for stable, secure internet connection, which we’re providing through Fred Net. There is ever-improving understanding among our customers as to what the optimal service they should be expecting is, and we’re finally seeing signs of improved investment in their stores”.

THE BASICS Brendan O’Loughlin, a pharmacist, and director of Pharmacy 4U, said it was essential for a pharmacy to have dispensing software that covers the basics needed to operate a pharmacy successfully. He said the software should be easy to use for the store’s regular pharmacists and include training for locum pharmacists.

Paul Naismith says you need a “solid core of infrastructure for worry-free IT” to which you can then successfully add important new software programs.

“If this core is not solid, then you’re building on a house of straw”.

On its website, Fred Health says its dispensing system provides the following essential features: * Fast reliable dispensing process * Quick and easy internet updates * ScanCheck barcode dispensing * PBS Online enabled * Integrates with all major pharmacy POS systems * Simple workflow with user prompts * eRx Script Exchange functionality

IT’S YOUR BUSINESS | MARCH 2012 | 15

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DISPENSARY TECHNOLOGY

Software should be easy to use for the store’s regular pharmacists and include training for locum pharmacists.

EQUIPMENT OVERHAUL Brendan O’Loughlin believes you should consider investing in new hardware every three years, and use this as an opportunity to stocktake all your hardware and software requirements.

“The tax department allows you to write off your hardware over three years.

“They do this because they feel that the hardware needs updating at that point. Pharmacies should use this as an indicator to review both the software and hardware needs and do a market review”.

Paul Naismith agrees regular overhauls are essential, and should take place every three to four years.

He suggests that, to avoid high hardware costs, pharmacies could consider renting new hardware.

“More and more pharmacists are

renting the whole hardware solution, rather than buying. It shifts the cost from capital expenditure to a known, operational expense – one that you can budget for.”

“Pharmacists have generally underinvested in IT, with most spending under one per cent of their annual turnover on this, though this situation does seem to be improving.”

“It’s really essential to invest as these days you need a good system to compete, and to use technical support to deliver rewards at a time when labour costs are high.”

FULL PARTICIPATION Kos Sclavos, national president of the Pharmacy Guild of Australia, also emphasised the importance of keeping up-to-date with software requirements.

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DISPENSARY TECHNOLOGY

NEW

SOFTWARE WORTH THE RISK Martin Didzys Pharmacy in the Melbourne suburb of Altona invested in the relatively new Mountaintop dispensing software system last year, and say it is a risk that has paid off for their store.

Lina Didzys said they were not looking to change their software provider, but they already used a Mountaintop point of sale system in the store, so took up the offer to install their new dispensary software as well.

She said that there had been the odd issue during the first year, but the company's response had been efficient and effective every time.

They've been responsive, and have got everything working smoothly, which is really what you should expect from a software provider. ''We were, I suppose, a guinea pig for their software, but it's worked out well."

She says good software is essential for running a pharmacy effectively.

"You really need it these days to keep on top of things. You have to keep up with so many regulations and requirements and follow all the protocols. It's so important to have well integrated software with lots of prompts," she said.

"Our software actually helps us to keep up".

COMPUTER LITERATE: Many professional service programs will require upgraded software.

“I have stated on many occasions that all agreement programs will soon need to be loadable to the Personally Controlled Electronic Health Record. This means that PPIs can’t be recorded on a simple spread sheet.

In my view, with the majority of pharmacists undertaking GuildCare, and with the continued product development by the company, those pharmacists should be looking seriously at incorporating the software into their practice”.

Paul Naismith said a range of exciting new developments would add to the importance of having a full, well-resourced software package.

These include MedView, an eHealth initiative designed to

improve patient health outcomes by giving health care providers a combined record of a patient’s medications history.

Patients who give permission will have their records stored securely in a national repository. Health care professionals can then access this information from their existing desktop software.

Brendan O’Loughlin agrees, saying the future will see fully integrated electronic dispensing: “The standards are being finalised at the moment (a revised AS4700.3)”, he said, adding that owners should “ensure you have both Medisecure and ERX working in your pharmacy”. ◆

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18 | IT’S YOUR BUSINESS | MARCH 2012

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DISPENSARY TECHNOLOGY

E-commerce model opens new avenue for pharmacy Looking online for your business marketing makes sense, says John Gearing of Pharmacy4u.

T

he recent adoption by Discount Drug Stores of Pharmacy4u technology to provide individual e-commerce solutions for all their franchisee pharmacies indicates that they are focused on providing value for franchisees rather than their brand.

These are challenging times for this industry and most pharmacy brands and banners are seeking a point of difference to offer consumers. The “Click and Collect” business model now being used by some of our major retailers including Coles and Woolworths is ideal for pharmacy and will provide a solution for the emerging consumer demand for e-commerce services.

The solution that is being provided by Discount Drug Stores also includes full digital marketing, via email, SMS or social media.

This will allow each DDS store to send information regarding special offers, catalogues, health info and many other topics direct to their customers rather than use the letterbox route that others are using with declining results. The social media solution will allow a two-way dialogue between stores and consumers The major reason for a retailer to adopt an e-commerce strategy is to drive store traffic and engage more closely with their customers.

Only a solution that provides each pharmacy with its own individual website will provide this. ◆

IT’S YOUR BUSINESS | MARCH 2012 | 19

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FINANCIAL PLANNING

Ensuring a

retirement

Put your super to work for your business - and put your business to work for your super, says Leigh White.

20 | IT’S YOUR BUSINESS | MARCH 2012

S

uperannuation, shares, property – what is all the fuss about?

As a result of the past three years of share market volatility and economic uncertainty, particularly in Europe and the United States, many business owners are questioning whether investing in shares is the best strategy to plan for their retirement or whether they should explore other options or even reduce their super contributions to avoid further losses.

Retirement standard data, released by the Association of Superannuation Funds of Australia (ASFA), states that a couple nearing retirement need income of approximately $55,000 per annum or, correspondingly, an amount of approximately $900,000 at retirement to maintain a “comfortable style of living”.

Peter Quinn, a chartered accountant and certified financial planner, believes that many professionals, particularly in the pharmacy and medi-

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financial planning

cal sectors, would require substantially more than these amounts to maintain their existing style of living.

planning for retirement

looking for new avenues.

In terms of SMSF asset holdings, there was a significant shift away from listed trusts, other managed investments and listed shares towards safer asset investments in cash, term deposit and real property.

Let’s start with superannuation. When we examine superannuation we should consider two separate Where shoulD We inVest? components. Firstly, the structure and secondly the investments within super, according to Mr Quinn.

If we look at professionals aged over 65, typically they “When planning for retirement there is no doubt own their own home, have brought up their family that the superannuation vehicle is the best structure to and have not accumulated a great deal of superannuause to achieve this objective” explains Mr Quinn. tion. By contrast, if we look at a young professional “The second component is the investments within today with their statutory 9 per cent superannuation superannuation. Most industry and retail funds invest and the proposed increase to 12 per cent, in our opinin shares, property trusts, bonds and cash.” ion they will have substantially more superannuation at Many professionals are now taking more control retirement than the older professional aged 65, but will over their superannuation investment strategy. Last be fortunate if they own their own home.

December, 2011, the Australian Taxation Office (ATO) So, where is that money going to come from? If issued a report titled Self-managed superannuation you plan to continue working for the next 20 years funds: a statistical overview 2008/09, suggesting that or more, and you expect superannuation to be your Australians are choosing SMSFs because they want main source of income, then finding ways to get your more control over their superannuation. own business to work harder for you may make a lot According to the report, self-managed superanof sense. nuation funds (SMSF) have been the fastest growing What is the ansWer? sector within the Australian superannuation industry in the five years to 30 June 2010, comprising “99 If you own your own business, occupancy costs are percent of the number of funds and over 30 percent probably one of your top three expenses, along with of the $1.23 trillion total super assets”. cost of goods and salaries. Depending on your location, At 30 June 2010, there were around 425,000 your rent may be your second highest expense.

SMSFs holding almost $387 billion in assets. There One investment option, only available within a were 810,000 members in the SMSF sector, making SMSF, that has particularly captured the interest of up around seven per cent of the 11.6 million investors who are looking to aggressively grow their members in Australian super funds. super is the ability to borrow funds to purchase a During this five year period, total super assets commercial premises or an investment property. This grew by 60 per cent, while SMSF assets grew by type of complex strategy isn’t suitable for everyone, 122 per cent. This indicates that people are seekbut through using their super, or pooling balances with A D _ P N I Y B P H A Ning O Vgreater _ 1 1 3control 3 . p dover f the P a retirement g e 1 2future 6 / 1and 0 / 1 a1 partner , 2 :or4family 4 Pmembers, M to make a deposit, the

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financial planning

One investment option...that has particularly captured the interest of investors is the ability to borrow funds to purchase a commercial premises or an investment property.

SMSF can then borrow the remainder and gain exposure to residential or commercial investment property.

“Previously, the superannuation fund was not permitted to borrow, so the super fund needed sufficient cash to purchase that property with its existing cash reserves. Now, as a result of the changes in legislation, the superannuation fund is permitted to borrow under certain strict conditions,” explains Mr Quinn.

Essentially this strategy involves purchasing a property in an SMSF and using the annual super contributions and the rental income to pay off the debt on the property loan.

“For business owners this strategy enables them to purchase their business premises in their superannuation fund. Rather than paying rent to a landlord, the business entity pays rent to their self-managed superannuation fund that acquires the business premises and becomes the landlord,” Mr Quinn said.

Hypothetically, let’s say you wish to purchase a $550,000 commercial premises for your business. Then let’s say you and your spouse have a combined superannuation value of $100,000 currently in your existing superannuation fund.

The first step is to set up a Custodian Trustee to act as the legal owner for the property and your own SMSF. The existing superannuation is supplemented with a limited recourse loan of $450,000. This loan amount will be repaid at say 7.5 per cent over 20 years.

Your rent quickly helps build the equity in your own SMSF. Your business will then pay an annual rental amount of say, $50,000, the same market rental cost that your business would have otherwise paid to a landlord. Your business’s rent plus any further super contributions, helps reduce the loan in your superannuation fund while the capital value of the property increases.

Ideally, the asset will grow in value and by utilising your SMSF you will minimise your tax and future capital gains tax liabilities.

22 | IT’S YOUR BUSINESS | MARCH 2012

What are the benefits? * Your SMSF can acquire property worth more than its available funds. * If your property rises in value as historically tends to be the case, your capital gains are multiplied. * Interest on the borrowed money is generally tax-deductible, which can potentially reduce your SMSF’s tax liability. * When you retire and commence your pension, you can lease your business premises to a new owner – and the rental income received from the property will be 100 per cent tax exempt. * Your assets are secure as the lender does not have recourse to your SMSF’s other assets in the event of a default.

What are the risks? * Just as gearing magnifies your potential returns, it also magnifies your potential losses. * Any accumulated equity cannot be accessed. * There are restrictions on alterations to the property. * If interest costs significantly outweigh investment returns, this shortfall must be funded. It may be covered by the income from non-geared investments or you may need to contribute additional funds to your SMSF. * Changes in interest rates can impact on your gearing strategy.

“There is a bit of thinking to do before setting up an SMSF and for further peace of mind, an important part of planning a comfortable future is checking your personal insurances and estate planning are in order,” said Peter Quinn. ”Protecting your assets through life insurance and ensuring that the loved ones and beneficiaries you’d like to pass your assets on to end up receiving them gives you peace of mind.”

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is this really suitable for me?

Investing in property must be consistent with your SMSF investment strategy.

This SMSF strategy is rarely suitable for conservative investors.

Your finances should be in order and you should have an historical record of your cash flow, particularly if you plan to borrow from a bank.

There are rules and regulations in the area of gearing in super. From the outset, it is essential to get the details of borrowing and purchasing the property. Enlisting the help and advice of an experienced, self-managed super advisor can help maximise your chances of gearing successfully. u The information in this document does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. It is important that your personal circumstances are taken into account before making any financial decision and it is recommended that you seek assistance from financial adviser.

Peter Quinn, Director, Quinn Financial Planning, SMSF Specialist Advisor. email: pq@quinns.com.au, or go to: www.quinnfinancialplanning.com.au

A D _ I Y B Q U I MA R _ 1 2 . p d f

Pa ge

1

1 3 / 0 2 / 1 2 ,

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IT’S YOUR BUSINESS | MARCH 2012 | 23

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HANDLING 2012

I will survive Kirrilly Burton investigates how the average community pharmacy, pounded by waves of significant business hits in 2012, can minimise the damage.

Should pharmacies batten down the hatches or focus on new strategies?

H

aving already been hit with record bankruptcies and supply chain turmoil, pharmacy faces a host of threats in 2012 including higher than expected price disclosures, ‘blockbuster’ drugs coming off patent, tighter wholesaler profit margins and rent increases.

PRICE CUTS Of major concern is the minimum 23 per cent price reduction on F2 drugs which takes effect on 1 April, 2012.

However, last year, a Macquarie Equities Research report warned the reductions on all medicines as a result of price disclosure could be even higher.

“There is a risk that this figure will be far bigger than the estimates suggest given the first round of price disclosure cuts saw price reductions between 15-72 per cent for a range of drugs,” the report’s authors claimed.

Six of the 14 drugs had incurred a second price disclosure reduction of between 12 and 35 per cent,

24 | IT’S YOUR BUSINESS | MARCH 2012

the report stated.

Speaking to It’s Your Business, John Bronger, former national president of the Pharmacy Guild of Australia, described the PBS reforms as a “grab for cash,” to balance the Budget and warned that the price cuts will lead to medicine shortages.

“To a certain extent we have to have a stuff-up like this for the Government to realise how valuable the system is. We just hope that in the process, they don’t destroy the system,” he said.

THE PATENT CLIFF The patent expiry on 18 May, 2012 of Lipitor (atorvastatin), which cost the PBS $598 million in 2010, will amplify the impact of price cuts.

Other key drugs will also come off patent this year, which will dramatically slow PBS growth.

Analysts at Macquarie Securities forecast the Government reforms and loss of these blockbuster drugs will halve PBS growth, dropping from an average of 8.6 per cent a year between 2000 and 2008 to four per cent annually from 2011 to 2016.

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HANDLING 2012

SHORT TERM STRATEGIES

CUSTOMER ENGAGEMENT

Bruce Annabel, a business consultant at JR Pharmacy, agrees the profession has never been under so much pressure, but says there are some short term strategies pharmacies can employ to overcome the profit impact, such as negotiating good deals with their generic suppliers and increasing substitution rates.

However, he warned this will not be a viable long term strategy as “price disclosure bites” inevitably reduces “easy discounts” in two to three years.

Cutting staff and staff hours is another obvious strategy, but Mr Annabel believes there has been too much focus on the reduction of wages to sales ratio, and not enough on the productivity of the staff or

Looking to the longer term, Mr Annabel is adamant pharmacies who simply ‘batten down the hatches’ will not be successful.

“Battening down the hatches to me means trying to buy better, everyone works a bit harder, trying to trim wages, advertising and other overhead costs, but it doesn’t do a thing for their top line,” he says.

Instead, to reduce dependence solely on the PBS he recommends pharmacies leverage it to embrace a ‘customer engagement model,’ in which the pharmacist is front of shop interacting, with customers and offering valuable advice and health solutions.

Initially, pharmacies should embrace the Phar-

“The focus has to go off just the product and the margins onto the patient and the outcome where the product is part of how they deliver the solution.” investment in skill sets.

“If you cut wages, you cut your service levels.

If you cut your service levels then you are cutting your own throat because it diminishes any advantage pharmacy may have.”

For example, he said successful pharmacies were employing more pharmacists than was needed to handle the prescription flow, in order to increase the level of skills available to attract more customers and add value.

E MANAG K C O T S YOUR

macy Practice Incentive (PPI) programs under the Fifth Community Pharmacy Agreement (5CPA).

“These are great opportunities to interact with the patient. For example you are getting paid to recommend to a patient who is on a number of medications a dose management pack which helps them manage their medication and reduces drug misadventures significantly and also ensures that they actually take them,” he said.

Other opportunities include services focused on

We can increase your cashflow with single unit ordering & better buying Contact our Sales Team today on (03) 9860 3300 or go to www.pharmacyalliance.com.au

IT’S YOUR BUSINESS | MARCH 2012 | 25

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HANDLING 2012

cardiovascular disease, mental health, diabetes, obesity, asthma, allergies, wound care and pain.

He also recommends providing health solutions to accompany specific prescription sales, for example the pharmacist recommending fish oil to customers who have bought statins, based on research showing around 73 per cent of sales from a typical community pharmacy are derived from dispensing, with more than 80 per cent of this on the PBS. “The focus has to go off just the product and the TRIMMING COSTS: The future lies elsewhere in pharmacy.

margins onto the patient and the outcome where the product is part of how they deliver the solution,” he says.

CATEGORY CULLING Cutting lines in non-profitable departments that customers buy elsewhere will also increase profits and de-clutter the store, increasing visibility and access to better selling categories.

On the flip side, pharmacies need to focus on developing strong departments that cater for specific customer demographics such as patients with obesity and then add expertise by employing a nutritionist.

“I’m seeing really successful pharmacies doing very well in their front of shop categories who have built a big baby section and employ a paediatrics’ nurse in the pharmacy with a consulting room,” Mr Annabel said.

ONLINE ADVANTAGE Another key strategy to drive up business is developing online business, which Mr Annabel says provides an alternative channel to improve the customer’s experience by allowing pharmacies to promote special offers and services, a prescription management service and granting customers a first look at new products or services.

THREATS TO DIVERSIFICATION While Mr Bronger agrees pharmacies cannot afford to batten down the hatches, he warned there were some key threats to diversification.

“Have a look at the amount of money that is allocated to the PBS to supply and have a look at the amount of money that is allocated for services and you just say, come on, it’s a pimple on a pumpkin.”

In the wake of the price drops, diversification will also be stymied by banks tightening up credit policies for pharmacies, he said.

THE FUTURE Mr Annabel predicts a bleak future for pharmacies who fail to break away from the old community pharmacy model, but a window of opportunity for change. “The new generics are coming in and for the next couple of years it will be enough to cover whatever they are going to lose, but that won’t last.” ◆

26 | IT’S YOUR BUSINESS | MARCH 2012

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HANDLING 2012

Compliance: defining a new role for pharmacy Are the golden decades of pharmacy over for Australia? Or are we entering a new era where increasing levels of customer care and medication/disease monitoring will redefine the role of pharmacy. Erik Louwerens of PDLA Pharmacy P/L gives his view on the state of pharmacy.

M

any prescription products are losing patents, and few innovations are being announced or introduced. Patent expiry traditionally creates an opportunity for pharmacy.

But since 2008 the Commonwealth has moved to retain large amounts of the generic rebates and discounts. In the coming years very large prescription products will lose their patents and the profitability of Australian pharmacy will be under serious pressure.

Developments in pharmacy show a movement towards front of shop turnover.

However the big supermarkets also wish to play a significant role in this market and price competition puts pressure on profits.

COSTS RISING Healthcare costs across the world are rising due to ageing and evidence based medicine.

Without fundamental change, healthcare financing is unsustainable.

International literature demonstrates the unimaginable lack of treatment adherence, averaging around 50 per cent lost to treat-

ment after 12 months. Lack of treatment compliance in heart disease alone suggests a financial cost to the community of more than $15 billion per year in Australia. No wonder all stakeholders wish to improve compliance to medication.

COMPLIANCE MONITORING There are many good reasons why the pharmacy should play a central role in the monitoring and management of compliance.

Manufacturers of prescription medication and advocacy groups have invested large budgets and years of intelligence in designing disease management or patient support programs.

Almost all these programs are run with the help of the prescribing doctors or in direct contact with patients.

Limitations to this model are the infrequent doctor-patient contact and the voluntary nature of patient relationships. As argued by key pharmacy opinion leaders, the pharmacist is key to workable solutions.

What needs to be done to get a better grip on treatment compliance? Studies suggest

that frequency of awareness and education communications will improve ‘health literacy’ and compliance to medicines. Direct customer contact and professional intervention are fundamental to conscious self-motivation.

The pharmacy is the ideal healthcare hub that offers frequent patient contact and a potential ability to utilise all available information to the benefit of patients’ health management.

A small variety of automated systems offer assistance to the pharmacy to coordinate information and activities. However we should not underestimate the complexity of bringing information and communication together in an ethically responsible way!

Systems are now being developed to deliver on the broader goal of improving customer relationships across many service areas.

Pharmacies need to invest in automation of customer support processes and train staff to better educate patients. Increased efficiencies in store processes should help “the pharmacist emerge from behind the dispensary”, to quote PSA president, Grant Kardachi. ◆

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SECURITY

P

harmacists face security threats both external and internal. They must deal with after hours break-ins as well as in-store shoplifting — or as it is known in the trade, ‘shrinkage’.

However, experts believe pharmacy is no longer the soft touch it used to be.

David Roddis, head of intermediary at Guild Insurance has seen improvements since the mid-nineties when, along with service stations, pharmacies were frequent victims of armed hold-ups.

Pharmacies had, through initiatives like Guild Watch, put a lot more effort into security, he told Pharmacy News last year.

“Ten to 15 years ago, armed robbery was a huge issue. Today we have reduced it considerably, we have 5000 pharmacies and probably have 50 or 60 armed holdups a year.”

However, Roddis explained that thieves are always looking for ways to breach pharmacy security.

“The style of burglary is a fairly mixed bag. The ram raids are the expensive ones. You can have a ram raid that costs a pharmacy $80,000 in damage for the sake of a couple of hundred dollars worth of drugs.

We don’t see a lot of those — a couple or so each year — but it has a huge impact on the pharmacy when it happens.”

28 | IT’S YOUR BUSINESS | MARCH 2012

Pharmacies have a tougher time with crime than most other retailers. They stock highly desirable product — both cosmetic and narcotic — and they open long hours. Graeme Smith investigates the options for improving store security.

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SECURITY

SHOPLIFTING

ELECTRONIC SURVEILLANCE The cost is a no brainer.

Pharmacy has particular weaknesses that make it attractive to shoplifters Patrick Pinnell, director of Instore Technologies

Shoplifting, although less destructive physically, gradually leeches profit from the pharmacy.

Patrick Pinnell, director of Instore Technologies, said pharmacy has particular weaknesses that make it attractive to shoplifters.

“In pharmacy, the service levels required are quite high because of the script side of the business and you don’t have staff all over the pharmacy. Fragrances range in price from $30 to $300. Skincare is expensive and regularly used. These are physically small items that can be easily slipped into a pocket.”

He says retail shrinkage (excluding supermarkets) is typically three to four per cent of turnover: “So if a typical pharmacy turns over $2.5 to $5 million — even two per cent of $5 million is $100,000. In country areas and smaller shops we don’t suggest they are suffering from the same level of risk so we halve that again.”

At a time when pharmacies are being squeezed with rising costs and tighter margins, that’s a huge potential financial hit.

“When we talk about measures to counter that, some say they can’t afford it or don’t want to sink the money into it at the moment. But they fail to realise they’ve already spent the money buying the stolen stock — at many times the cost of a protection system,” said Pinnell.

VALUE FOR MONEY David Roddis said that security technology had improved during the past 10

years, but pharmacists should still expect a high level of back-up service.

“The product now is more reliable. The old days of false alarms shouldn’t be happening. A lot of it is to do with older products and sensors that are still in place.

The newer products are a lot less vulnerable to false alarms.

“One of my biggest bugbears is that security companies don’t help our pharmacy clients. Pharmacists should be speaking to their security companies and getting value for their money. If the company is not giving value, go and get another company.”

Roddis said that although the quality of security companies varied, the Guild didn’t recommend particular suppliers, as the market was forever changing with frequent new entrants and ownership changes.

He advised pharmacists to insist that their companies conducted regular reviews.

“They should be walking through your pharmacy, making sure your systems are still working and adequate for the task, and testing the equipment you have in place.

WHICH SYSTEM? Most pharmacies have alarm systems but Roddis said that once a thief was in the premises, the damage was largely done.

A cheap, effective and underused enhancement to the traditional alarm system is a glass break sensor, he said.

“They are such a simple tool,

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SECURITY

SECURITY CHECKLIST ☛ Do I have deadlocks or good quality locks on all doors? ☛ If there are any windows that can be opened, do I have keyed window locks installed? ☛ Are windows constructed of reinforced safety glass? ☛ Are premises well lit with external lighting after hours? ☛ Is the pharmacy protected against ram raids? ☛ Do I know what security protection neighbouring premises have? ☛ Do I have motion sensors in the roof cavity? ☛ Do I advertise the security features I have in place? (e.g. premises protected by monitored alarm) ☛ Do I have glass break sensors?

Source: Guild Insurance

“Deterrence is the name of the game and today’s technologies are making criminals think twice.”

Phil Brown, national retail manager, ADT Security

and yet so effective. If you’ve got someone who’s on drugs it doesn’t matter what sort of protection you have in place, they’re probably going to break in....”

“However, 80 per cent of claims are opportunistic break-ins. If a person tries to break the pharmacy window, that will set the sensor off, activating the audible alarm in the pharmacy and also the monitored alarm offsite. That person now has two options: they can continue trying to break in or they can run off and try somewhere else.”

Roddis says that the number of glass break sensors required depends on the size of the shopfront exposed. As a rule of thumb, one glass break sensor may cost approximately $300 to $350 installed to an existing security system.

Your security company should be able to advise on the exact number you need and where to place them.

Instore Technologies’ Patrick Pinnell says a typical electronic article surveillance (EAS) set-up might cost around $20,000.

“A pharmacy that previously had no protection measures would look to reduce theft by 75 per cent after installing EAS, so the cost benefit of EAS becomes a no-brainer. Very rarely do you see a store take more than 12 months to pay back the cost.”

LOCATION, LOCATION Are you better off in a shopping centre or a

30 | IT’S YOUR BUSINESS | MARCH 2012

strip location?

“A shopping centre is more secure than a high street pharmacy as far as burglaries are concerned, said Roddis.

“But when you start talking shoplifting and the like, shopping centres may be worse because of the traffic moving through them.”

Security, such as electronic article surveillance (EAS), to reduce shrinkage, works on the visual and audible deterrence principle rather than tagging every item of stock. Tagging is confined to the highest value items.

Phil Brown, national retail manager for ADT Security said pharmacies now have the benefits of a coherent security system to prevent both customer and staff theft.

“Deterrence is the name of the game and today’s technologies are making criminals think twice.

“We are continuing to work with our retail customers to help them maximise and add technologies like cameras, video analytics and antitheft tags to target shoplifters and organised retail criminals.

Patrick Pinnell puts it this way: “Without an EAS system, it’s like having the door to the pantry open and saying, ‘Please take me’.

“A number of pharmacists we run into are a bit naïve. They think they are losing stock and that’s just that. What really doesn’t sink in is that shop theft equals profit loss.” ◆

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To take the right course action and protect your pharmacy and merchandise, visit www.adtsecurity.com.au/essentials or call NSW/VIC/ACT/TAS (02) 9947 7043 QLD/NT (07) 3318 6974 SA/WA (08) 9479 2839

*Offer ends 31 March 2012. See www.adtsecurity.com.au/essentials for the full terms and conditions.

Master Licences: VIC No. 65201491P | WA No. SA40562| SA No. ISL152299 | NSW No. 405187443 | ACT No. 17501009

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RENT

Avoiding the rent trap The increasing amount of turnover being eaten up by rent has been a hot topic in pharmacy in recent years. Is the situation getting worse, or are there signs of improvement?

Leading pharmacy business experts give their opinions and tips to It’s Your Business.

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he Pharmacy Guild of Australia’s 2011 Rental Report highlighted the impact of the rent situation and voiced the concern of many in pharmacy.

Are the concerns as warranted as most embattled owners believe? And what steps can owners take to help improve their rental position?

Speaking to Pharmacy News last year, Kos Sclavos, national president of the Pharmacy Guild, said research had shown many pharmacy owners were effectively working for their landlords.

Mr Sclavos said data from the report indicated landlords were taking up a significant proportion of pharmacy profits.

Case studies of horrendous rent reviews continued to filter through to the Guild, Mr Sclavos said.

“Frank Sirianni has detailed the affordability issue, for example when you consider the pharmacy profit together with the owner’s rent, in some cases the landlord is getting 90 per cent of that ratio. In essence the pharmacist is working for the landlord,” he said.

Leasing consultant Phil Chapman, from Lease One, told delegates to the Guild’s 2011 rental symposium that pharmacists were “up against it”, with landlords taking advice from consultants who “inflate the figures”.

“They sometimes put figures on it [a pharmacy’s income] that include GST, which automatically inflates the figures by 10 per cent. In other words, they are saying to the landlord you

can afford to charge 10 per cent more,” Mr Sclavos said.

Delegates were also warned shopping centre owners were flying in “rental assassins” to negotiate new rental agreements with pharmacy owners, and Mr Sclavos emphasised the need to recruit experts to fight for a better deal.

SigNS of chaNgE While this scenario seems to be all too common, there were some signs of owners having a rethink on the high-rent strategy.

Peter Marshall, a director of Pharmacy Solutions Australia, said that anecdotal evidence was emerging that showed some shopping centre landlords had begun lowering rents to keep pharmacies in business.

He said this trend seemed to be ongoing, and that, in general, “there’s a continuing trend of landlords coming to the table, hearing what pharmacists have to say. There may be a trend of slightly dropping rents”.

However, he did say that shopping centre pharmacies were generally those under the most rental stress. In most cases rent accounted for not less than seven per cent of turnover, at a time when margins were shrinking and front of shop sales down.

“If someone is in trouble, they need to go to their landlord. Most of them are willing to come to the table as, especially in shopping centres,

IT’S YOUR BUSINESS | MARCH 2012 | 33

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RENT

Before entering into lease negotiations, it is vital that pharmacy owners prepare by knowing their operation, the shopping centre and their landlord.

Peter Marshall provides the following tips for pharmacists concerned about their rent, facing negotiations, or simply seeking to buy into a rental situation.

1 - Pharmacy owners need constant, greater awareness of their business and of what percentage of their turnover that they're paying in rent.

Analyse where your business is currently at, not just once or twice a year. Constantly analyse your figures, he advises.

2 - If your rent is creeping up, take action straight away. Talk to the landlord, and talk to a rental negotiator.

3 - If you're considering getting into a high rental situation, don't do it, unless you're really confident and have a good business track record.

34 | IT’S YOUR BUSINESS | MARCH 2012

they’re not going to want to lose the pharmacy from their suite of services.

The other tenants aren’t going to be happy about that.

“There have been enough pharmacies under receivership in major shopping centres for landlords to take notice.”

Shopping centre pharmacies could consider other options, such as reducing the size of their store, he said.

“Most shopping centre pharmacies are too large anyway. Rather than go to the wall, you can consider reducing the size of the store to lower your rent and get another tenant in.”

Bruce Annabel, pharmacy business consultant, agreed that many pharmacies were too big and were struggling to make a profit because they required too much rent and high fit-out costs to justify the size of their market.

“With the price cuts we will see in the next few years with price disclosure, they will become less and less viable.”

WhaT To Do? Phil Chapman said that before entering into lease negotiations, it was vital that pharmacy owners prepare by knowing their operation, the shopping centre and their landlord.

“Specific research prior to entering into your lease negotiations is mandatory. You need to understand your operation. Occupancy costs, turnover per square metre are vital,”

he told delegates to the 2011 Pharmacy Women’s Conference.

“Research your centre and know about the property that you are in.

Quite often when you get very shop blind, you work a tremendous lot of hours and sometimes you are not aware of what is happening just in your immediate backyard.”

“Is the fruit shop paying his rent?

Has the newsagent renewed his lease? Know those things because they will have an affect on the value of your lease and the renewal of your lease when it comes time.”

Knowing the landlord is essential before entering lease negotiations, he said.

“The property investors and the fund managers are driving these properties and you need to know the processes of the landlords as well,” he said.

Mr Chapman advised speaking to the landlord at least 18 months prior to a leasing event such as the expiry of the lease or a market review due to different budgetary systems amongst property owners.

“Time is of the essence when negotiating and managing a lease - the earlier you start the process will lead to better leveraged negotiations and outcomes.

“Too often we see disappointing results because we’ve left it too late to renew our lease or start the process,” he said. ◆

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*Offer ends 31 March 2012. See www.adtsecurity.com.au/essentials for the full terms and conditions.

Master Licences: VIC No. 65201491P | WA No. SA40562| SA No. ISL152299 | NSW No. 405187443 | ACT No. 17501009