Our latest thoughts and inspirations on buying a pharmacy, starting a pharmacy, and ongoing pharmacy operations

Buying or Starting Your Second Pharmacy

You own a pharmacy and want to expand to multiple locations.  You think to yourself getting financing will be easy as I have one successful business and already received funding for the first one.  Know this, it isn’t that easy.

Regularly we have owners who have already found their second pharmacy to purchase or have a great start up opportunity but cannot get the project funded.  I am sure you are thinking, they must not have a very good first business.  Wrong!  They have great businesses but either have poor financials that do not reflect how good their businesses are or they have “hidden” cash for taxes purposes.

When expanding your business whether through additional locations or simply getting capital to add a compounding lab the bank looks at your global cash flow inclusive of the new debt.    We see regularly owners maxing their 401k’s, buying robots, giving bonuses, etc and then their cash from year to year looks lower than what it really is and the bank cannot fund the new project.

So remember if your plans include expanding your operation and you will require capital, find a good accountant, get proper financials and when making decisions think about your free cash flow as it is represented on your tax return.
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If you want to own a pharmacy you have to be a sales person!

I go to a lot of pharmacy conferences, read a lot of pharmacy articles, follow all the pharmacy trade blogs/social sites and rarely do I see anything related to sales.  Knowing how to sell can be the difference between having an okay pharmacy and having a great pharmacy.  No longer can you have a great location and simply expect people to walk through your door.  In today’s pharmacy environment you have to create several lines of revenue, retail prescriptions, long term care, compounding, transitions of care, med-sync, MTM’s, immunizations and more.  Gaining this business requires a sales plan.  To have a sales plan you must gain the necessary skills to conduct sales calls. 

I know that most pharmacies are retail businesses but pharmacy is a relationship business and to drive revenue through relationships you have to be able to sell.  I know what you’re thinking, I do not want to be a car salesman.  But salespeople have a bad reputation because the sales people who annoy you they are not selling right.  Below are some resources about selling the right way, hopefully this helps you build relationships and drive more revenue to your pharmacy. 

Books

1.       Solution Selling: The Strongman Process by Ed Wal - https://www.amazon.com/dp/1910563110/ref=wl_it_dp_o_pC_S_ttl?_encoding=UTF8&colid=285HW3RI6Q5E8&coliid=I1HG5VOUIX4DRG

2.       The Greatest Salesman in the World by Og Mandino - https://www.amazon.com/dp/0552682004/ref=wl_it_dp_o_pC_nS_ttl?_encoding=UTF8&colid=285HW3RI6Q5E8&coliid=I3VSM9QV68QM7N

3.       Spin Selling by Neil Rackman - https://www.amazon.com/SPIN-Selling-Neil-Rackham/dp/0070511136/ref=sr_1_7?ie=UTF8&qid=1491759102&sr=8-7&keywords=best+sales+books

Blogs

1.       The Sales Blog - https://thesalesblog.com/

2.       Hubspot Sales Blog - https://blog.hubspot.com/sales#sm.0000e67z0z7wdd1h11htqukg1ou7m

3.       A Sales Guy - http://www.asalesguy.com/
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Buying or Starting a Pharmacy? Look at the Whole Opportunity!

When you venture into owning a business, of course you have to make the decision based on if it is a good financial decision or not.  However sometimes determining if a business venture is financially wise requires one looking at the opportunity as a whole.  Every business is not necessarily right for every person.  For example if you were born, raised and still live in a town you have a much better opportunity to start a pharmacy than someone who lives 60 miles away. 

Other items to consider are:

·         Does the opportunity improve your current pharmacy through staffing, economies of scale or purchasing power?  Or maybe the new opportunity allows you to now service compounding or specialty from your other store?

·         Can you buy the building and stretch the loan over 15 years or 25 years improving cash flow? Or does the building allow you to create another asset that is funded by the pharmacy?

·         Are their doctors or other healthcare referral sources that only you have which can drive significant growth?

·         If buying a pharmacy can you drastically improve the cost of goods sold upon buying?  Or once you take over, will the payroll reduce significantly allowing you to have a more profitable business?

These are just some examples, but remember to analyze the opportunity from all angles as it may not make financial sense but there may be a much larger return hidden in the details.
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7 Items to Know Before Starting or Buying a Pharmacy

Consider these points as your explore the idea of being a pharmacy entrepreneur.

1.       Accounting – owning a business requires a basic knowledge of financial statements and how cash flows through a business.  Having this skill will allow you as a new owner to better manage the business.

2.       Management – with a business comes people and people require managing.  Experience with managing people will greatly assist you as an owner.  Pharmacies tend to have 3-6 people in a small space so properly managing expectations and culture can make or break the business.

3.       Your personal financial situation – You should have a good grasp of your monthly expenses and your cash position.  You need this for two reasons, buying or starting a pharmacy will require a cash injection and you need to understand what cash you have available for the investment.  Second an understanding of your monthly personal expenses allows you to gage how long of a period you can go without a salary in case the business needs you to not take a salary.

4.       There are going to be times where you ask yourself, why did I do this? – things are going to happen (robbery, building damage, natural disaster) and cash will get tight at times and it will be stressful.

5.       Understand truly why you want to own a business – I think this is really important because when things like the above happen it keeps you motivated to push through.

6.       Team – you need a team, accountant, attorney, financial advisor and mentor.  Make sure you have these people it will make life so much easier.

7.       It’s not going to be a quick process – everyone going into owning a business believes they will purchase or start a business and it will be profitable and easy to manage within 6-12 months.  The reality is the process will take 3-5 years and you have to be ready to weather that storm.
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Buying a pharmacy is a marathon not a sprint.

I know I know, something about being a marathon not a sprint is the oldest most over used term in business.  The reality is, buying a pharmacy does takes time and if you really think hard about acquiring a pharmacy, this will be very evident.

Whether it is your first pharmacy or your tenth choosing the right acquisition could lead to more personal and financial success than you have ever imagined, but it could also bankrupt you, cause health problems due to stress and ruin relationships. Remember this is a big deal, your house probably cost you between $100,000 and $300,000. A new pharmacy will most likely cost more than $1,000,000 - like owning 4 to 10 houses.  
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