You’ve signed the papers and now the keys are in your hot little hands. You’re now on the biggest adventure of your career. Beezwax Business Solutions founder Pasquale DeMaria pens a letter to those standing on the threshold of their first pharmacy – and takes a walk down memory lane himself.
“Here’s the keys – good luck!”
And with that, you’re left to run the first pharmacy you’ve ever owned.
Sure, you’ve managed pharmacies before. Even run them as if they were your own. But nothing can truly prepare you for that moment when you jump in the deep end – and you don’t know how to swim.
My moment came in the first few hours of walking in my new shop door. I was greeted warmly by the outgoing owner, given a brief tour and even introduced to a few regular customers. Then came a phone call from the lawyers who were trying to settle the purchase of the business.
“Hi Pasquale,” the voice say. “The landlord is refusing to hand over the lease until their legal fees are paid. The bank won’t settle until we have a lease.”
I tried to explain that I was already in the pharmacy and had started working.
“They’re not interested. You need to go and pay them before we can settle.”
How could this happen? I was sure that I’d gone through every contingency in my mind. I’d read the contract of sale but only glossed over the lease, assuming it was pretty straight forward. I made my way to the landlord’s lawyer and made the deposit using internet banking on their computer. Wow. Day One and I’m already $10,000 down in budget.
While the situation is obviously different for everyone, there’s almost always a moment that hasn’t been accounted for when taking over a new pharmacy. As the say, assumption is the mother of all f*** ups. It may be that you assumed the bank would provide you with an EFTPOS terminal, or the previous owner chooses not to stay on for a few days to hand the business over (even though it’s written into the contract) or there’s such little stock left on the shelves that your first wholesale order blows a hole in your already tight budget.
This is a letter to those first time pharmacy owners (including myself) with some things I wish I knew before taking the plunge.
Ownership.
It sounds good, doesn’t it? How will you update your LinkedIn profile once you take over? Pharmacy Owner, Pharmacy Proprietor, CEO – x pharmacy? And the conferences! Finally, you will be able to attend all those conferences that your previous boss went to. Weekend work? Pffft, you‘ll be able to find someone just like you when you first started your career. Hungry and dedicated to the cause.
I can’t deny the romance of the thoughts that run through your mind while making the decision to become a pharmacy owner.
Now that I have gone through it and have seen many others do the same, let’s shed some light on those often unspoken aspects of purchasing a pharmacy.
Align yourself with industry specialists
When I was a young pharmacist looking to buy, I was astounded by the lack of freely available information on what pharmacies were currently for sale. Pharmacy brokers would often not take your queries seriously, or would try to sell pharmacies that had been on the market for a long time due to a high asking price. There was often an assumption that because you were young, you had to buy a particular type of pharmacy.
This changed once I aligned with pharmacy specific accountants that had existing relationships with most of the pharmacy brokers in town. They were able to articulate exactly what was being sought and then like magic, different pharmacies started being offered for consideration!
These accountants also had relationships with pharmacy lenders. Unfortunately, you can’t just walk into a bank and ask for a loan to buy a pharmacy. At any one time, some banks have an appetite for pharmacy lending and some don’t. Some put onerous covenants on the performance of the business and others do not. You, as a young pharmacist, do not have ready access to this information. Accountants that look after multiple pharmacies know what the current lending landscape is and can advise on what sort of deposits are required and what interest rates are being charged.
While the accountant that your family uses for their business may be great for them, there are certain idiosyncrasies with pharmacy that they need to be aware of. Unless they have prior experience with pharmacy, they just won’t know what to look out for. Something as simple as being set up on monthly rather than quarterly BAS, so you can receive regular refunds, is a common example of what gets missed by non-pharmacy accountants.
With everything being internet based these days, take the time to speak with at least three or four different pharmacy accountants. They don’t all need to be located close by. Video calls and email make it easy. Ask your pharmacy colleagues who they are using and do some Google research.
Ask them:
- What their annual fees are. Will they reduce them for a first time pharmacy owner?
- If they will provide due diligence on the pharmacy purchase for free as a first time owner.
- Do they have relationships with any lenders for non-pharmacy lending.
- What other non-pharmacy services are they able to offer.
- Are they willing to work with you online via video conferencing and email.
Once you have decided on one, put your trust in them. They are on your side and genuinely want to see you succeed. If you’re not sure about something, ask. It’s the only way you will learn.
Do your homework
There are certain things you need to understand when owning a pharmacy that you were not taught at uni. Many pharmacy owners prefer to keep the performance of their business under wraps, so the chances are you haven’t seen how the business is really doing during your pharmacy management career either.
You need to be financially literate. You need to understand what a balance sheet is and what a profit & loss report is. You need to understand the difference between an asset and a liability. You need to understand how to record the transactions that occur in your business. What system will you have for petty cash spending?
Take the time to read and understand your contract of sale and your lease. Understand what information your lender wants prior to settlement. Get them to give you a list and make sure you have all the information well before settlement date.
What software is being used in the pharmacy for point of sale and dispensing? It can be overwhelming trying to learn a new system as well as everything else that is happening during the change of ownership. If you’re not familiar with the software, read up on it. Do they have online help? Are you able to get in touch with the software company for a demo? This way, you’re not walking into the pharmacy blind. You can’t assume the previous owner will be there to hold your hand.
Read the Pharmacy Industry Award. You need to understand it as it dictates what you are required to pay your staff. Seek advice from payroll specialists if you have existing employees being paid outside of the Award.
Make time to interview the staff. This can be difficult as pharmacy owners will generally only tell their staff they are selling the business a few days before the sale is scheduled to go through. Insist that you would like to interview the staff prior to settlement. It’s easy to fall into the trap of wanting the existing staff to like you so that the business can keep functioning as normal. Have a list of interview questions. Ask them, what would they do to improve the business? What are their plans for the future? Your staff are the most important aspect of your business, so you need to make sure you have the right people around you.
Beware of committing to pharmacy banner groups or wholesalers as soon as you walk in the door. Ask for a month or two to evaluate the business and how the banner group fits with your vision. Banner group fees should be the responsibility of the previous owner to pay out, should you decide to move away from the existing arrangement. Ask if the wholesaler is able to provide delayed payment terms for the first month of orders while you are restocking the pharmacy.
Read, ask questions, take a short course. Whichever way works for you, make the commitment to learn what you do not know.
Lifestyle
Keep in mind why you decided to buy a pharmacy in the first place. It’s far too easy to spend hours upon hours working, as there’s always something that needs to be done.
Try not to take work home with you if you can help it. Sure, there will be times when something just needs to be done within a certain timeframe. But try to make home a place of rest and connecting with loved ones. You don’t want your family to be looking forward to seeing you all day and then you come home and lock yourself in your office while you complete your bookwork.
Staying healthy is also important when you own a pharmacy. You want to be setting a good example for your customers and family on how to stay well and prioritise your health. We all know that taking a lunch break is often a luxury we can’t afford. You’ll just do this script…and as you counsel the patient, three more scripts come in and you’re back working again. But try to take 10 minutes of alone time to eat a healthy lunch, gather your thoughts, even do some light stretches. Your body will thank you for it.
If the business allows, take holidays. You bust your arse working all year and your family also pays a price by not having you around as often. Take a couple of weeks off to reconnect with them and with yourself so you stay fresh. A burnt out pharmacy owner can be cranky and irritable and that rubs off on your staff and customers, which will ultimately see your business suffer.
Now having said all that, owning a pharmacy can be financially and personally rewarding. You are in control of a business and set the course for helping maintain wellness in your community. You share in the highs and lows of people’s lives and help them achieve their goals. It’s hard work, but you knew that anyway!
Now…
Here’s the keys – good luck!