February 26, 2018
Inside: Your pharmacy business is booming, so you want to open new locations. Learn how to know when it’s time to expand your pharmacy business.
If you’re thinking about expanding your independent pharmacy to additional locations, congratulations.
Your pharmacy business is succeeding.
Revenue is coming in and your profits look solid.
So, you wonder if you should ride the wave to new pharmacy waters.
That’s a good question to ask because you shouldn’t take expanding your business lightly.
Expansion requires a huge investment. It involves financing a new location, new employees, and new operations. And finding new patients.
Expansion comes with risk. Just because your current pharmacy is successful doesn’t mean your next pharmacy will thrive. Even worse, the profit from your current pharmacy business could end up paying for the losses at your new location.
Expansion requires dedication. If you decide to push your pharmacy to its limits, you’ll push yourself to your limits, too.
But if expansion is right for your business, it can reap huge returns.
So, before you take the dive, you’ll want to do some serious evaluation.
To help with that, answer these seven questions before you expand your pharmacy business.
Is expansion on your mind?
You have a lot to consider before adding a new pharmacy location.
Answer these questions before you break ground.
A surge in profit might put expansion on your mind.
But a surge could subside as quickly as it swelled.
Six months of big profit doesn’t necessarily promise six more months of profit. A host of factors affect a business’s profitability, and some of them might have nothing to do with the business itself.
Only a steady year-over-year stream of profit should give you confidence for pharmacy expansion. That consistency indicates your pharmacy is doing what it needs to do to keep growing.
No magic number can predict sustainability. But three years of steady profit is a safe measurement to use for most small businesses.
If you want to repeat your success in a new pharmacy location, you need to replicate the way you achieved that success.
Franchises best represent this model because they solely exist to grow.
For example, consider McDonald’s. It grew from a tiny burger shop to an international success by replicating what made it profitable.
Every McDonald’s uses the same brand and image. You’d recognize the golden arches anywhere in the world.
Every McDonald’s in the U.S. offers the same menu for basically the same prices.
But just as important, franchising includes more than looking the same and selling the same. It involves replicating operational processes and procedures that make the company run.
Does your pharmacy have an effective workflow in place that you can replicate successfully with different managers and employees?
Does your pharmacy have an established process for operations that you can implement in a new location?
Make sure you have the right training and resources in place to replicate these processes before your expand your pharmacy business.
Funding successful expansion requires considerable upfront investment.
Most likely, it’ll take time before the expansion starts generating returns. It needs time to establish a patient base and to start earning steady revenue to support itself.
That means you’ll need to have funds on hand to cover expenses for as long as the expansion takes to start turning a profit.
Do you have the cash stability to support an expansion?
You’ll want to sit down with a financial expert to map out costs and measure those against your current financials.
When you can’t get patients their prescriptions on time because of high-demand, it’s time to expand your pharmacy business.
Patients of independent pharmacies expect personal care. That means meeting their needs, spending time with them individually, and having their prescriptions ready when they need them.
If your patients’ needs have outgrown your pharmacy, you’ll need to expand to meet them.
And, when you can’t handle all your patients’ demands, use it as a sign to justify an expansion.
Have you noticed that your patient base isn’t changing? You’re not losing patients, but you aren’t gaining any either?
Although it sounds counterintuitive, a patient plateau could indicate it’s a good time to open a new location.
The primary motivation for a patient’s choice of pharmacy is convenience, with location topping the list.
No matter how much patients might want to use your pharmacy, many won’t if it means driving to the opposite side of town.
It’s possible that your pharmacy has maxed out your patient base for your location.
But a new location in another part of town, or in a new city, could capture a brand-new patient base. One that could increase profits.
When you opened your current pharmacy, you likely established goals you wanted to achieve.
Those goals could take the form of financial milestones, community accomplishments, or customer numbers.
Before you start peeking over the fence to supposedly greener pastures, make sure that you’ve checked off those pharmacy business goals. Or, make sure you’re on track to reach them.
Expanding your pharmacy business will take up your time and attention.
That means you’ll have to entrust your current business to one of your managers while you invest your time in the expansion.
Can your current managers keep the pharmacy running when you’re not around? Do they have the dedication and skills to keep the profits steady when you step away?
If you don’t have managers you can trust with the reins to your business, expanding your pharmacy business will stretch you thin. You’ll be overworked, stressed out, and your current pharmacy business will suffer.
But if you do have managers you trust, you’ll have freedom and peace of mind to pursue the expansion wholeheartedly.
You may be swimming in profits, but ask yourself these questions before you expand your pharmacy business to other waters.
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