3 Easy Lessons That Can Solve Your Independent Pharmacy Problems

MARCH 28, 2016
As an independent pharmacy consultant, I am now revealing some of my most significant and powerful money-making tools.
 
Take note of these 3 lessons for independent pharmacy owners:

Lesson 1: Analyze everything. 
 
It’s your job as the leader to determine what’s working and what’s not. Weekly and monthly analyses should reveal certain trends. Also, when you dig deep enough, you will find other numbers that can relate to industry norms, as well as other meaningful ratios within your own business. For instance:
  • Do you have an adequate financial reporting system?
  • What is the trend in your natural med business?
  • What is the trend in your compounding?
  • Also, how do these numbers compare with last year’s on a monthly basis?
  • What is your gross profit monthly? Do any trends exist?
  • Are you getting the same low prices you expect from your wholesaler? How do you know?
Some other things you may want to know are:
  • What is the ratio of gross profit dollars to payroll dollars? How does that relate to industry norms?
  • How many gross profit dollars does each department produce per square foot?
  • How profitable is your traditional script department when you factor in cost of labor?
  • Is your marketing delivering the sort of return you expect of any other investment? And are you getting sufficient leverage from your marketing?
On a deeper level, you should analyze how you think and how you solve problems. Do you make snap judgments, or do you take the time to think them through? (A complete analysis of this subject can be found in my book, Secrets from the Archives of High Performance Pharmacies, in the chapter on the 6-step management process.

One example of a productive analysis: A number of years ago I had a client whose gift department occupied one-third of his total space. He maintained, when I visited his pharmacy, that the gift department was contributing 40% of his net profits. Upon doing something called a distribution cost analysis, I proved to him that not only was it not contributing 40%, it wasn’t contributing even 1%. In fact, it was losing money! Within 2 years, he discontinued his gift department. His profits shot upward.

Get close to your numbers, analyze them, and constantly update your financial reporting system so that you can use it as a basis for creating a wealthier future.

Lesson #2: Create a learning environment. 
 
Create an environment where people avidly want to learn more and more so they can be of greater help. In so doing, you create a more knowledgeable work force. At the same time, you not only get your employees aligned with your goals, you also increase their job satisfaction.

Then, encourage your people to make an increasing number of decisions for themselves, especially regarding anything that affects their work and their future. Again, they will become happier and more productive workers.

One of the better things you can do is to challenge them to set goals. Once they achieve one goal, encourage them to set an even higher one. Doing so on a quarterly basis enables you to critique or compliment them monthly and give them significant feedback at the end of the quarter.

Building more strength into your organization is something you should want to do day-in and day-out. As I see it, doing so is part of your personal mission. In the process, train them in everything they need to know, and even try cross-training. When you do, you can choose someone as your second-in-command. She should be trained and mentored to administer all the daily tasks. Then you can delegate those tasks to her and free up time to do the rest of your mission, which is building your business bigger and making it more profitable.

Don’t forget to tap into the collective genius of your staff. Your staff has more talent and more wisdom than you give them credit for. All pharmacy staffs do. The problem is: you’re probably not tapping into that wealth of talent, intellect, and savoir faire that is available.

Asking their opinions is a good starting point. Holding staff meetings is a much more elevated approach. At these meetings, meaningful questions can be asked, and solutions to problems can be found. These meetings should be held monthly at the minimum. The deeper-seeded your problems are, the more frequent your staff meetings should occur.

You’ll be amazed at the results you can achieve when you employ this particular approach to motivating, as well as problem solving, within your own pharmacy.

Lesson #3: Embrace strategies and create marketing that increases bottom line (net) profits. 

Differentiation is the essence of strategy and the prime source of competitive advantage. You earn money not just by delivering valuable services to your patients, but also by being different from your competitors in many ways.
 
The more ways you differentiate, the greater your pulling power— as long as these differences are beneficial to both current and future patients. In this manner, you serve your core patients better and more profitably.

In reality, the best place to commence differentiating your pharmacy is to create your vision. That vision should not be of your pharmacy as it is today, rather it should be of the pharmacy you would ultimately like it to become in the future. Then you can identify more elements that differentiate you from the chains and other independents, should they exist in your trading zone. Here’s the good news:
  • You need an additional income stream to offset what you’ve been losing because of the insurance payment fiasco. That income stream can easily be had by slowly but surely installing a sustainable natural medicine supplement business. You do it 1 product at a time. Each is designed to alleviate the aches, pains, or other maladies within 1 particular disease state. When you advertise each high-margin product in a meaningful manner and you turn your product rapidly— within 60 days and sometimes within 30 days— then you’ll start to see your cash flow surge.
  • Your front-end should never look like CVS, Rite Aid, or any other chain. In reality, toothpaste, Pepto-Bismol, and cough or cold syrups will not provide you with the proper income. They certainly don’t fulfill your mission of being all about health for your patients. Your front-end should contain higher quality natural medication supplements at sensible prices. Your natural medications should have a featured display up front where the patient can see them upon entering.
  • The ambience of your store should be superior to that of the chain stores. You should become a destination point because people not only find the products that can improve their health, they also find your ambience to be enthralling. Color and lighting make a big difference, as does relaxing music.
When you share your knowledge and inform and educate large numbers of patients, you explode your cash flow income and bottom-line profits.

The Pharmacy Sage can be reached at (518) 346-7021 or Lester@ThePharmacySage.com.


Lester Nathan, MS
Lester Nathan, MS
A powerhouse in the world of independent pharmacy, Lester offers free business resources for Pharmacy Owners on his website, ThePharmacySage.com. Offering insight, wisdom, and strategy, Lester is an esteemed voice in pharmacy business. Lester helps his clients increase patients and profits in spite of the 3rd party payment fiasco.
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