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

Why Buying a Pharmacy is a Good Financial Investment

People ask us all the time is buying a pharmacy a good investment.  Of course have owned pharmacies and have entire business around consulting pharmacies so we say yes.  But why?  Below we have outlined some reasons:


1.   Return on Investment – as an investor myself I always ask myself what is the return?  And if you buy a pharmacy the return is better than any investment I can find.  I can put $100,000 into buying a pharmacy and in the first year return $100,000 plus gain equity in the business.  If I put $100,000 in the stock market I would at best make $12,000 on that same money, in a bond $3,000, in a savings account $1,000, in real estate $20,000. 

2.  Knowledge – why invest your money into public companies, real estate and other investments when you have no knowledge of these businesses.  I personally have been in pharmacy all my life and that is what I know so shouldn’t that be where I put most of my money?  Same with you as a pharmacist, it is what you know most so shouldn’t you consider putting your money toward a pharmacy?  
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Operating a Pharmacy is All about 3 Things!

Revenue, Inventory and Payroll.  

We hear regularly from clients, prospects and other owners that it is so hard to run a pharmacy, it is so hard to make money, it is so hard to know what to do, etc.  But in our opinion it is pretty simple, its just 3 things Revenue, Inventory and Payroll.  

In a pharmacy three areas impact profitability, how much revenue the pharmacy has, Inventory (both how much you pay and how much you have on the shelf) and how much payroll you have to support that revenue.  You have to have enough revenue to make money and inventory and payroll make up 90% of your expenses.  

So if you wake up every day, think what can I do to increase revenue, what can I do to lower my cost for inventory and find ways to control the amount of payroll needed you will have a good pharmacy.

Are we over simplifying it, maybe but if you do not have these 3 things figured out you will not have a foundation to improve in any other area, you won't have enough cash to pay staff to implement other improvements, you won't have time to make new decisions, etc.  It all begins with having processes to improve revenue, lower cost of goods and keep payroll controlled.


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Is Starting or Buying a Pharmacy Risky?

I am often asked this question.   My response is always the same.  It depends on you the individual.  Everyone looks at risk differently and everyone has a different definition of what risk is. 

I personally ask myself one question, is working for someone else safe?  Some say yes, you receive a bi-weekly check from a big company that will not fail in my lifetime and if you do a good job they will probably continue to employ you.  However to me the large company is less secure, they can make mistakes, be drastically affected by economy, go out of business or be sold and you lose your job or they have to lay you off to meet stockholder expectations.

On the other hand if you own your own business (especially a pharmacy) you can sell the business and you may be out of a job (you may not as you could work for the company that purchased your business) but at least you receive a reward in the form of money for the sale plus no one can let you go other than your customers.  In addition when you own your own business you can always advance your career, make more money and have more time and this cannot always be controlled while working for someone else.

Entrepreneurship isn’t easy and is not for everyone.  It may however come with the same amount of risk as working for someone else just different kind of risk.
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Purchase a Pharmacy? Don’t forget about the small things after purchase!

Congrats!  You have acquired a pharmacy.  The last 2 weeks of the purchase can be crazy, all the papers, emails and phone calls and you feel relieved that you get to move onto the fun stuff.  But try not to take too big of a break as there is a lot to do.  Below are some of the top things we see forgotten:

1.       Check former owners control substance procedures as they are usually outdated.

2.       Look at labor law posters, are they up to date.

3.       All of your new employees will need to complete Hippa and Fraud Waste and Abuse training even if they were recently completed.

4.       Transfer all the bills (utilities, pharmacy system, etc) into your name.

5.       Change the locks, you do not know who has a key.

6.       Change merchant service bank account information (credit card deposits) to your bank account as soon as possible.
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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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