September 10, 2016
The long, busy days were getting to Frances Schneider, PharmD. As a pharmacist at a busy retail chain that sometimes did 900 prescriptions a day, she wasn’t able to help patients the way she always wanted.
“I felt like I was working an assembly line and I just hated it, that’s just not what I went to school to do,” she says.
Frances and Bryan SchneiderShe decided she wanted something different and made the decision with her husband Bryan Schneider, PharmD, to open their own independent pharmacy from scratch in the small town of Smithton, Illinois, just outside of St. Louis.
Bryan Smithton would keep his retail pharmacy manager job to offer the couple stability while they opened the new venture.
It was a risk, and a scary one at that, but it was a risk they were willing to take after consulting with industry experts.
Schneider and her husband aren’t alone. According to data from the National Community Pharmacists Association, there are 22,478 small business community pharmacies in the U.S..
Amanda Kennedy, PharmD, says she and her business partner De Andrea Hogg, PharmD, took a “huge risk” leaving behind their retail chain jobs to form Well Lake Specialty Pharmacy in Humble, Texas just outside of Houston.
Their goal is to provide customers with a higher level of customer service than what the surrounding retail chain pharmacies provide.
“We are real passionate about treating people like people and not like dollar signs or numbers and that’s why we both became pharmacists, so that we can help people in the community,” Kennedy says.
The pharmacy opened its doors in November of 2015. The biggest challenge to-date for the duo has been getting the word out about their pharmacy.
While initial marketing efforts such as direct mailers and speaking with area physicians yielded modest results, Hogg says the pharmacy has been most successful by getting out in the community itself.
“Since a lot of our neighbors have small children, they really love community-based events like school carnivals and Fourth of July celebrations, so for us, it’s really key to get out in the community and show our faces at those community events to let them know we are here,” she says.
Turning to Outside Assistance
Kennedy and Hogg also sought help from RxOwnership, a division of McKesson designed to give independent pharmacists the tools and assistance they need to succeed.
According to Chris Cella, RPh, national vice president of McKesson’s RxOwnership division, the company helped 446 start-ups throughout the country last fiscal year.
The company helps pharmacists buy, sell, or start-up a pharmacy and offers consultative or advisory services at no charge.
“Our main focus at the RxOwnership division is to help keep independent pharmacies independent,” Cella says.
Even veteran independent pharmacy owners, like Chris Cornelison, BS, turn to others for help when starting new pharmacies. Cornelison bought his grandfather’s pharmacy, Iuka Discount Drugs, in 2000 just a few years after graduating from pharmacy school. But when he wanted to open his own pharmacy from scratch in 2012, he turned to Pharmacy Development Services.
The company provides coaching for independent pharmacy owners about all aspects of pharmacy ownership—whether it’s determining the difference between cash flow and profit, writing a business plan that addresses specific needs in the community, or when to start marketing the business.
“As a pharmacist, you get taught a lot in school about drug interactions, disease states and all that. As a pharmacy owner, you don’t get as much business background, so it’s really helpful to get that background through some type of business coaching,” Cornelison says, who has always worked in an independent setting.
Now, with two successful stores—Iuka Discount Drugs and Saltillo Pharmacy and Solutions—up and running in Mississippi, Cornelison has also created his own supplement company, Solutions RX, that focuses on drug nutrient depletion and replacement.
“It's going great,” he says. “I absolutely love what I do, I love every day of it.”
Finding the Customers
One of the biggest challenges for any start-up is finding its customer base.
“Start-ups are inherently much more risky than buying an already established successful pharmacy that’s been in the community for perhaps 30 years or greater,” says Jimmy Neil, general manager of pharmacy lending at Live Oak Bank.
It’s riskier because customers in any town are all receiving their prescriptions from somewhere else—whether it’s from a retail chain, mail order pharmacy, or another independent, before the new independent pharmacy arrives.
“When you build a brand new pharmacy, to get people to come in the door you have to change the buying behavior,” Neil says. “People inherently don’t like change.”
Frances and Bryan Schneider have worked hard to get people in their community to change their buying behavior.
Frances Schneider says in addition to a Facebook page, newspaper ads, and website, the pair has worked closely with the physician in town and physicians in the surrounding area to get their name out and make sure they are stocking the drugs most commonly used by doctors in the area. They’ve also gone to community events and passed out merchandise with the store’s name and logo on it.
“Even though we are on the main drag, we still have people walk in everyday and say, oh I just realized there’s a pharmacy in town,” she says.
One way Cornelison says he got people into his Saltillo Pharmacy and Solutions store was by offering regular classes on diabetes care, Medicare, and overall wellness.
“When you have those days, obviously you have a lot of people who are already using your pharmacy, but 40 to 50 percent of those people will be new patients a lot of times,” he says.
Having a partnership served as an advantage for Well Lake Specialty Pharmacy. Kennedy says in the early days when business was slow, she and Hogg could divide their time. One stayed at the pharmacy to help customers and the other went out into the community, whether it was to speak with doctors or attend community events.
“Sometimes people don’t realize how much work it is,” she says of the constant efforts needed to continue to market the business.
A Welcome Change
Well Lake Specialty Pharmacy and Smithton Pharmacy are still new to the market, with less than a year in business under their belts.
Schneider says she’s so happy she took the leap and enjoys more job satisfaction than ever before. As an independent owner, she has the opportunity to get to know her patients and provide a higher level of care.
The pharmacy is still growing, and Schneider says she may soon add gifts and cards to the front end, but she’s able to pay her bills every month. Her biggest struggles have been convincing the community that independent doesn’t mean more expensive as well as competing with mail order pharmacies.
Schneider says she draws support from her husband, family and other local pharmacy owners, with whom she meets with every two months.
“They give me the drive to keep going when I get frustrated,” she says. “This was and still is at times a nerve wracking experience but many of the patients are so grateful that we are in the community, which reminds me that what I am doing is serving a community that needed a pharmacy.”
FACT BOX #1:
Top Tips for Starting an Independent Pharmacy
1. Seek Out Experts: Starting a pharmacy isn’t just about providing top clinical care. . . it’s also about becoming a business owner and that often means assuming a new set of skills and responsibilities. Whether it’s seeking help from an accountant or finding someone to help with data analysis, human resources, ordering the inventory, or coordinating with the Drug Enforcement Agency, independent pharmacists may want to look outside their own four walls to find the help they need to set them up for success.
Chris Cella, RPh, national vice president of McKesson's RxOwnership division, says pharmacists who start a new business from scratch may be taking a much larger risk than those who buy an existing pharmacy. This makes solid advice all the more essential. “There’s a greater opportunity for failure if you are not fully prepared,” he says.
2. Prepare a Solid Business Plan: Business plans are often seen as a necessary, and sometimes tedious—a part of the process to securing a business loan. But, experts say a business plan shouldn’t just be seen as one more item on the to-do list. Rather, they should be viewed as an opportunity to thoroughly research and plan a business strategy—from consumer analysis and marketing plans to financial estimates and projections.
“This is you planning for war,” says Dan Benamoz, MEd, CPCC, and CEO and owner of Pharmacy Development Services.
3. Find a Great Location: It’s often said that location is everything—and that rings true for pharmacies as well. Jimmy Neil, general manager of pharmacy lending at Live Oak Bank, says location is a key consideration in loan applications. Location decisions shouldn’t be made based on what is best for the pharmacist or the financial incentive the strip mall is offering. They should be based on what’s convenient for the target customers.
4. Identify Your Niche: Before the doors open, independent pharmacy owners need to know what role they will play in the market and how they will make a profit. Experts recommend spending time to research what customers in the area want or are lacking rather simply planning what they’d like to do at the pharmacy. Neil says customers won’t magically switch from the big box store across the street without having a compelling reason to move their business. “You’ve got to provide a compelling product. So what are you going to do differently?” It can be anything from packaging, to home delivery, or something in the front end of a store, he adds.
5. Wait to Hold a Grand Opening: Grand openings are an ideal opportunity to introduce a business to the community, but there is often nothing worse than a bad first impression. Experts recommend new pharmacies open their doors a few weeks or months before hosting a grand opening celebration to give the store time to iron out any kinks and make sure all systems are in place before the large customer event.
Top Mistakes to Avoid:
1. Undercapitalizing the business: One of the biggest mistakes a start-up can make is not having a clear understanding of the financials involved. Experts recommend new business owners know exactly what kind of working capital will be necessary to get the business up and running. Pharmacy is unique in that pharmacy owners have to order and pay for drugs before they get reimbursed by insurance companies, which creates the need for significant capital upfront. Neil says typically at Live Oak Bank, they like to see pharmacists with capital of at least $100,000 or at least 50% of their liquid assets when approving loans.
2. Undervaluing the role of marketing: Experts say the old adage “if you build it, they will come,” just isn't a reality for most pharmacies. Marketing plays a key role in determining which businesses will find success. Liz Tiefenthaler, president and co-founder of Pharm Fresh, a company that provides marketing services to pharmacies, says she recommends pharmacies plan to spend about 1.5% of projected growth sales on marketing. At a bare minimum, she says, pharmacies should spend about $15,000 in marketing costs the first year. The money doesn’t just cover paying for a website and grand opening, but should also fund on-going targeted marketing efforts throughout the year.
“If you only do it one time, people aren’t going to remember. Our world is too busy,” she says.
3. Failing to seek outside assistance: Pharmacists who try to go it alone may soon find they are in over their head. There are a number of firms, including McKesson's Ownership Rx division, Pharm Fresh, and Pharmacy Development Services, that specialize in helping independent pharmacies find success. In addition to financial, marketing, or set-up assistance, independent-owner Amanda Kennedy, PharmD, also recommends that pharmacists talk with other independent pharmacists in their region to learn what works in their area.