• LATEST PHARMACY NEWS AND EDITORIAL

    LATEST PHARMACY NEWS AND EDITORIAL

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

Owen BonDurant, President: Owen is 2nd generation (his Dad is part owner in a 9 store pharmacy chain) in the pharmacy business and has worked in independent pharmacies since before he can remember. He has worked in almost every role a small pharmacy has to offer from cleaning the bathrooms, working as a pharmacy technician, marketing, starting and running a durable medical equipment company and managing employees. Owen graduated from Miami University of Ohio with a degree in marketing and a minor in management information systems (MIS). After graduating he briefly worked for Western and Southern Financial Group before deciding he wanted to return to the pharmacy industry where he started medical equipment business for a chain of 9 independent pharmacies. From there he moved to Chicago and started working for Experian QAS and for the last 7 years has been selling software to major retail organizations along with managing the Midwest sales team. Recently the itch to come back to the pharmacy industry, as it truly is all he knows, and Independent Rx Consulting was born.

What are the key pharmacy accounting and financial metrics?

It is easy to be distracted from the core procedures and processes that drive our businesses. Distractions occur every day, from customer issues, new opportunities, to personal obligations. So how do we stay focused? One way is to track and measure key metrics that impact your business, but what are these? We believe in 3 core areas to focus, below we outline these along with metrics to follow. Hopefully this helps you manage your business without surprises!

1.       Revenue

·         Script Count – compare 2 week periods

·         Sales Revenue – compare in 4 week periods

·         Revenue/script – review monthly

·         Total Patients – compare in 4 week periods

·         Lost Patients – review monthly

·         Transferred Patients – review weekly

·         Revenue per payer – review monthly

2.       Cost of Goods Sold/Inventory

·         Gross Margin Dollars – review monthly

·         Gross Margin % - review monthly

·         Gross Profit/Script – review monthly

·         Deposits vs Purchases – these are real dollars spent – review monthly

·         Slow Mover Report (inventory not used for 100 days) – review monthly

·         Total Inventory – review monthly

·         Margin per payer – review monthly

3.       Payroll

·         Labor dollars per script – compare every 2 weeks

·         Labor dollars as a % of sales – compare every 2 weeks

·         Overtime – review amount every 2 weeks
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What is the Purpose of Due Diligence when Buying a Pharmacy?

Due diligence from a buyers perspective three main objectives. Below outlines each:

1.       Determine if the business you are exploring the purchase of is what you expected. In other words is there a reason not to buy the pharmacy? Objectives include, finding out is the pharmacy revenue accurate, are script counts correct, are control substance %’s acceptable, etc. You should strive to verify all operational and financial information.

2.       Pharmacy Transition – Once you know the business is what you expected, then you want to gather information that will assist you in transitioning the business after acquisition. Some objectives of this diligence include, what is current wholesale agreement, what health benefits are provided, what staff is staying or not staying, what marketing is done.

3.       Legal – you should have your attorney gather and review information to ensure legally you can buy the pharmacy and that also the pharmacy does not have a legal concern that would cause you to not purchase. Examples include, assisted living contracts, PBM contracts, lease, UCC checks, etc.
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Think Bigger when Starting a Pharmacy

I am asked a lot, what is the difference between very successful pharmacy businesses and those that are just okay. My answer is always the owner thinks bigger. Your typical pharmacy is primarily retail and will do traditional marketing, provide the typical services, rely on great service and market to 2 or 3 mile radius. All these are important but the great pharmacies will go big and do things that are uncomfortable. Examples include:

·         Looking at the target market not just as a 2 mile radius but as a 10 or 20 or even 50 mile radius.

·         Seeing the customer as not only the patient walking in the door but also as the prescriber, hospital, facility, pharmaceutical reps, other businesses in the community, etc.

·         Not being afraid to seek out multiple lines of business, compounding, long term care, retail and specialty.

·         Owning multiple pharmacy locations not just in the local area but maybe hours away or even a full state or two away.

·         Creating programs specifically designed for a doctor’s office, hospital or other partner.

·         Focusing on one or two disease states to drive business from a large community of patients.

·         Having a call center to attract and solicit new patients.
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What should be in a Pharmacy Business Plan?

You probably read a lot about if you should even have a business plan or not. We think you should but not like those taught in academia. We have a plan for our businesses every year, they help us have a goal, understand how we are going to execute on that goal and what we need to reach the goal. So if you are starting or buying a pharmacy you should probably have a plan and here are our thoughts on what should be included:

1.       Goals: what are your 1, 2 and/or 5 year goals?

2.       New Customers: How are you going to gain new customers? In a pharmacy you always have to be gaining new customers as people move and pass away and at a minimum you have to replace them.

3.       Customer Retention: How are you going to retain customers? You can spend all this time gaining new customers but if you lose too many all that effort goes to waste.

4.       Products & Services: What products & services are you going to provide?

5.       Personnel: How many people do you need to operate your business and execute on numbers 1, 2, & 3 above?

6.       Tools, Technology & Equipment: What other tools, technology, and equipment do you need to reach our goals and execute your plan?

7.       Operations: how are you and your team going to deliver on the above? What process are good and which if improved will make the largest impact on your goals.
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Starting, Buying or Own a Pharmacy? Read These Books

Every year I set a goal for the number of books I want to read during the course of the year (last year it was 24 and I read 27) and try to ensure at least ¾’s of these books will help us make a positive impact on the pharmacies we own, our consulting practice or our clients. The below list outlines some of my favorites and the lessons learned from each. Hopefully these will help you too.

The E-Myth Revisited by Michael Gerber – this book outlines why individuals with a technical skill who start businesses tend to fail or not grow. This applies directly to the pharmacy industry where pharmacists start pharmacies because that is what they know. In many cases, however they are not as successful as they should be. He outlines what technical professionals “pharmacist” need to know to be business owners within their field. I would highly recommend this to anyone interested in buying or starting a pharmacy and any current owner of a pharmacy.

Ready, Fire, Aim by Michael Materson – what I really like about Michael is he simply outlines what you as the owner or CEO need to do to grow your business and the barriers you will face along the way. For this reason it is the best business book I have read in many years. For me it made it very clear what we need to do to take our businesses to the next stage of growth and what we can do to help our clients grow into extraordinary pharmacies.

The Lean Startup by Eric Ries – Both Eric and Michael Materson take similar approaches to innovation. The concept is to introduce new products and processes quickly and with very little cost. For any business owner, including us, it is difficult to create change in the organization. There are a million reasons, you may not have enough cash, not enough time, your employees are stretched too thin or maybe you are just a new startup. This book will provide you insight and guide you through constant innovation which will lead to profits and growth.

Traction by Gino Wickman – As an entrepreneur and leader every day it is difficult to find time. For me it was always difficult to know what 2 or 3 items I should focus on and how to get our team to focus on them as well. Gino provides the Entrepreneurial Operating System (EOS) and it will allow you to not be overwhelmed, have fun and improve your business.

Bold by Peter Diamandis – this book is about big ideas, some of which seem crazy. But I think it applies to pharmacy today because the industry is changing, being disrupted and we as entrepreneurs within the industry must think differently in order to thrive in the future. Go into this book with an open mind and be prepared to think how could we as a company do something completely different.

Solution Selling by Ed Wal – if you have ever spoken with me or seen any of my other postings about books, this book is always on the list. First Ed, personally taught me much of what I know about how a business works and how to sell to any organization. I consider him a mentor to me and many others. But also it is my opinion (and Michael Materson’s) that as an owner of a business you must also be its number one salesperson. This book will teach you how to sell, follow it, try everything in it and you will sell!
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