Part 1: Whatâ€™s Your Pharmacyâ€™s Biggest Challenges?
As a community pharmacy owner today you are facing many challenges not only because you are a small business in a competitive market but also due to factors that are out of your control like Medicare Part D reimbursement. I wanted to provide you some comfort in knowing you are not alone and that some of the challenges are being solved throughout the country. Below are the top 5 we are seeing in the market today:
1. Lowered and delayed Medicare Part D reimbursement – This is a reality for community pharmacy owners today and will be for the foreseeable future. There isnâ€™t much you can do about it so try not to dwell on it. All you can do, as an owner, is counter the shrinking margins by relentlessly controlling expenses and by creating efficiencies within your operation.
2. Acquiring new customers â€“ This problem is created primarily because the average independent only employees 2.9 pharmacists including the owner, according to the NCPA, which means the owner is spending most of their time behind the counter instead of analyzing marketing strategies. The good news is community pharmacies are excellent at retaining a new customer due to the customer service attention given so spending time and money on new customer acquisition is worth the money.
Marketing however is not as hard or time consuming as most think it is. The key to marketing is being consistent with it and delivering the same message through multiple channels (radio, TV, website, social, direct mail, print). If you can pull yourself away from the counter for 1 or 2 days every year you should be able to develop a monthly marketing plan with the goal of accomplishing 1 to 2 marketing activities per month using generally the same marketing message. Then each week take 30 minutes to execute on that plan.
The average pharmacy, according to the NCPA, in 2010 spent $13,828 or 0.5% of sales annually on marketing activities. This number is extremely low compared to retail averages where most marketing experts recommend spending 15% of sales. The bottom line is if you want to acquire more customers you must spend more time and money on your marketing activities.
3. Knowing what technology will have the biggest impact â€“ This is difficult for a number of reasons, most pharmacists have little to no IT background, technology changes on a daily basis and we have to take the time to identify the top problems facing our businesses and then compare that to the technology solutions available along with the cost of those solutions.
Due to these factors technology acquisition is where hiring a consultant or employing an IT Director is most warranted and we would suggest doing so. However there are other sources, speak to your wholesaler many of them have technology solutions that they warrant and in many cases even have solutions for small, medium and large pharmacies. Secondly build a network of other pharmacy owners and find out what worked and didnâ€™t work for them. This is why going to conferences like the NCPA and IdeaShare regularly are so important and worth the money.
4. Keeping timely and accurate financial statements and then understanding what they mean – This is probably the most important skill a business owner can have. As a business owner you should be getting, at a minimum, accurate quarterly financial statements. This includes an income statement, balance sheet and cash flow statement. Having accurate and timely financial statements allows you as a business owner to identify problems early, allowing you to fix those problems before they become unfixable.
If you do not feel you are getting these in a timely manner talk to your accountant or contact a consultant firm like Independent Rx Consulting. They can setup these documents and in many cases deliver them to you monthly or quarterly. I would suggest ensuring the accountant has experience within the pharmacy industry as there are complexities due to accounts receivables in any pharmacy business.
Once you are getting the documents regularly you need to understand them. Take some time to speak with the consultant, accountant or even other pharmacy owners to understand what the documents tell you and what is considered a good number versus a poor number.
5. Not having perpetual inventory – Having perpetual inventory is a must and really there is no excuse for not having it. The benefits far out way the minimal effort required to setup this process.
If you are not sure where to start try speaking to your pharmacy system provider. Systems developed within the last 10 years most likely already have perpetual inventory capabilities built in and you are just not utilizing them.
Of course you probably are thinking, yes I know our system has the capability to do perpetual inventory but it will take forever to set this up because we have to count every pill in the store. Yes you do! And be sure to count every pill (please do not estimate), but it wonâ€™t take you as long as you think. I personally have done this and with one other individual it usually takes 6 hours at most. Having a perpetual inventory will save your company hundreds of thousands of dollars which is a pretty good return on investment on 6 hours of time!