Opening a successful new pharmacy starts with a well-thought-out business plan
• RxOwnership® has helped thousands of pharmacy owners get started.
• Key lessons learned: understand the basics, develop a business plan, assemble a team and pick a good location.
• A business plan is foundational. Understand all of the essential elements.
• Focus on financing; lack of working capital is the #1 reason for failure.
• After developing your plan, regularly review and revise it.
Turning your passion into reality
Have you thought about opening your own independent pharmacy?
Perhaps you work at a chain and want to run your own business. Maybe you’ve worked at an independent pharmacy and want to go out on your own. Or, perhaps you own one pharmacy and see an opportunity to acquire another.
It is important to know the positives and challenges of starting an independent pharmacy.
The rewards of starting and running a successful independent pharmacy can be significant. But just opening a pharmacy and simply expecting it to automatically be successful is unrealistic. It takes hard work and careful planning.
Lessons from RxOwnership
RxOwnership is a confidential, no-fee resource that supports current and future pharmacy owners in buying, starting and selling independent pharmacies.
To date, RxOwnership has been involved in more than 6,000 transactions involving independent pharmacies. Chris Cella, R.Ph., national vice president for RxOwnership, states, “We’ve seen it. We understand it.”
RxOwnership has found there is much to consider before opening a new pharmacy.
Business plan essentials
Among RxOwnership’s tools and resources is a list of essential elements of an effective business plan. Also, Cella points out, “There’s no need to do it alone.” Whether you choose to work with RxOwnership or another resource, “use the expertise of people who have done this before.”
Business plan essentials:
• Mission statement
• Executive overview
• Ownership structure (sole proprietorship, partnership, etc.)
• Financial plans and projections
• Competitive analysis
• Demographic analysis
• Competitive advantage: what will differentiate you?
• Pharmacy services and offerings
• Marketing plans
• Future plans/exit strategy
To highlight a few business plan essentials:
• Demographic analysis: This is about determining the opportunity in a location. It entails understanding the age, income and ethnic makeup of a community to understand who you would be serving.
• Competitive analysis: Understand how many competitors are in a market and the strengths and weaknesses of each. A “SWOT analysis” (strengths, weaknesses, opportunities, and threats) is a good exercise. Cella says, “Just because there’s somebody in a market doesn’t preclude you from going in, but you need to identify their weaknesses to find your pharmacy’s advantage.”
• Differentiation: The pharmacy landscape is already competitive. So, how will your pharmacy attract and retain enough customers to build a successful business? What will set you apart? Define how your pharmacy will be different and better. For example, your pharmacy may be in a clinic setting that will fill prescriptions and work with prescribers to keep patients healthier. Also, think about distinctive services such as medication synchronization, compliance packaging, compounding, immunizations and unique offerings like DME and/or nutraceuticals.
Focus on financing
RxOwnership has seen that the #1 reason start-up pharmacies fail is not lack of intelligence or effort. It is lack of working capital.
“It can take 15–24 months to break even,” Cella said. “During that time the pharmacy still needs to pay staff, rent, utilities and its wholesaler. Better to get plenty of funding up front. Having your project properly capitalized will help keep your business plan on the right track,” he said.
Budget for marketing before and after you open
Not budgeting enough for marketing is another common mistake. “You need to build in a marketing budget both pre- and post-opening,” Cella said. At least three months before opening, you need to market to prescribers and the community, explaining when you will open and what services your pharmacy will offer. Then, budget for grand opening events and for the rest of the year.
Learn and revise your plan
After your pharmacy opens, review the plan at least quarterly. Compare where you are with what you expected and make adjustments. “Your business plan should not be created and shelved,” Cella said. “It’s a living document that needs to be changed and massaged as your business grows.”
Learn more about RxOwnership
This post is related to:Buying/Selling of a Pharmacy & Franchising