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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Working Capital - the Key to Pharmacy Ownership Success

You have heard the expression CASH IS KING. Nothing could be truer when you buy or start a community pharmacy. Below we have outlined the working capital needs for both starting and buying a pharmacy.

Starting a Pharmacy
The number one reason for a startup pharmacy to fail is not having enough cash in the first couple of years of business. On average in the first 6 months of operation a pharmacy will have approximately $75,000 in expenses per month. Day one you have $0 dollars of revenue. In month one you may have sales of $25,000.
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Pharmacies - Are you Compliant with the Affordable Care Act?

Are you compliant with the affordable care act? 

The Affordable Care Act requires employers to provide employees with a notice of the availability of the Health Insurance Marketplace (the “Exchange”) that will be available Jan. 1, 2014. This is a requirement of all employers, regardless of size.

Employers were required to distribute the notice by October 1, 2013. If you have not yet done so, you should discuss it with your financial advisor or insurance agent. There are two model notices (depending on whether or not the employer offers a health plan) which can be found on the Department of Labor website under the “Notice to Employees of Coverage Options” section.
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Pharmacy Accounts Receivable - What They Tell You

What is Your Accounts Receivable Balance Telling You?

To effectively manage your pharmacy business, you must understand what your accounts receivable data is telling you. Poor management of your accounts receivable can result in cash flow problems. Successful accounts receivable management includes a process to review your accounts receivable on a weekly or monthly basis.

The first step in reviewing your accounts receivable is to obtain an aging report from your accounts receivable software. This is a report that lists all your accounts receivable and shows the aging of each receivable (current, 30 days, 60 days, 90 days, 120 and over). In reviewing this report, you should be focusing on all accounts 60 days and over. Once accounts age 60 days, it is important to start making calls. You may need to call the customer to ensure the insurance information in your system is correct, or you may need to call the insurance company to ensure the prescription was billed correctly. If phone calls do not produce a result, friendly reminders by letter are the next step. Once all your efforts are exhausted, it is time to turn the account over to collections.

Another quick way to monitor the overall health of your receivables is through ratios. These should be examined monthly.
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