How to Identify the Right Goals When Acquiring a Pharmacy
By John Pross |
Let’s take up that last point in more detail by way of example.
Our hypothetical pharmacy owner had established a rock-solid store—we’ll call it Pharmacy A—by following best practices for patient care, staff management and inventory control. Pharmacy A offered immunizations, medication therapy management and medication synchronization, all of which tightened bonds with the patient community.
However, Pharmacy A’s owner wasn’t satisfied with the status quo. He sought to develop additional revenue streams in areas such as long-term care, hospice and 340B contracting. He knew he had the experience and expertise to convert aspirations into action and started looking for a separate location to make the plan become reality.
What he found may have turned away many pharmacy owners interested in expansion: Pharmacy B, the acquisition target, was in dire financial condition and could barely pay its bills. Nonetheless, Pharmacy A’s owner saw things differently. Pharmacy B served a demographic conducive to his long-term goals. He saw that, with a change in ownership and effective management moving forward, Pharmacy B could duplicate the performance of his showcase store while diversifying avenues of income. He had found a diamond in the rough, so to speak.
After closing on the deal, the owner appointed one of his key employees to run Pharmacy A, which continues to operate at an industry-leading level. Meanwhile, the owner has taken control of Pharmacy B, stabilizing it for pursuit of his broadening business objectives.
Taking the first stepLike the pharmacist described in the situation above, you may find yourself striving for a higher ideal in the pharmacy world. Particularly if you’re considering your first pharmacy purchase, you should think through what you want to accomplish in both the short and long term.
The following preliminary questions will help you sort through the variables:
- Do you have a
specific location in mind?
Licensure will dictate your options by state, but you may have preferences within a given state.
- Would you rather
practice in an urban, suburban or rural setting?
Gather family feedback if relocation would be required.
- What type of pharmacy
do you want to run?
Most buyers are looking for a traditional retail pharmacy, but other options are available for specialty, compounding and long-term care settings. If you’re interested in providing specific services, you’ll need to make sure when buying a pharmacy that it currently offers those services or has the capacity to add them in the future.
- What are your
expectations for physical footprint?
A high-volume store will require a lot of space, whereas an apothecary-type shop could fit in a much smaller building.
- How much experience
do you have running a business?
You’ll need a thorough understanding of labor and inventory costs, as well as the timing of accounts receivable and accounts payable and how to assess store performance in relation to peer benchmarks.
- How much do you know
about the community in the target store’s area?
You may be able to glean some broad information from U.S. Census Bureau data, but you’ll need to evaluate things firsthand. When you’re serious about a potential pharmacy acquisition, take an observational tour within a 2- to 5-mile radius of the target store and check these items off your list:
- Immerse yourself in the culture surrounding that pharmacy.
- Gauge how the area is trending. Is it vibrant and growing or is it vacant and struggling?
- Make note of competition (e.g., other independent pharmacies, big-box stores, chain and grocery store pharmacies), as well as the other types of businesses in the area.
- Determine the proximity to potential prescribers in health-related businesses (e.g., doctors’ offices, rehab clinics and assisted/skilled nursing facilities).
- Assess traffic patterns and whether the store
has adequate parking.
Looking out on the horizonMost pharmacy buyers follow a blueprint of getting settled into a new acquisition before refining their long-term goals. Community demographics, such as a large diabetes population, will likely dictate what will work best in terms of future pharmacist-specific offerings. But it’s ideal to keep an open mind to making changes over time in response to consumers’ growing desire for more customization.
In fact, this is one of the greatest benefits of owning an independent pharmacy. Because you aren’t controlled by a corporate entity, you have the freedom to make changes as needs arise. You can adapt as quickly or as carefully as you like in keeping up with your community. Whether you prefer to develop a five-year strategy prior to pharmacy acquisition or adopt more of an ad hoc approach to growing your business, the choice is yours so long as you’ve answered the right questions before you put in an offer.
Finding a pharmacy that meets your criteria today and is flexible enough to make adjustments over time is crucial to the long-term success of your business. That, in combination with your continuous, in-depth interaction with your patients, will put you in great position to capitalize on evolving community needs. As you listen to what your patients want, you’ll gain insight into how your pharmacy should adapt. And by responding in kind, you’ll get a leg up on competitors who won’t be able to match your agility.