Expansion can include finding a new location, securing additional staff, upgrading technology, and recruiting new patients and customers.
The expansion process can seem daunting to even the most seasoned pharmacy owner, but with the right business plan, it doesn’t have to be. Below are things to consider as you prepare for a loan and assess if this is the right time to grow your business.
Before you begin expanding your pharmacy operations outward, you should look inward at your own business metrics to determine if you’re ready for such a move. A good way to get a sense of your financial situation is with a small business audit. While an audit can sound like a huge headache, it’s often a necessary evil to give you a better understanding of how your business operates, uses cash, and assumes risk.
There are lots of benefits to small business audits. They offer assurance to financial stakeholders that your company’s financial statements are error-free and accurate, and can confirm that your policies and procedures are being carried out effectively. If you’re looking to secure funding from any outside sources, they’ll want proof that you’ve got your financial house in order, and an audit is a great way to provide that for them.
You can also learn a lot as an owner about your own business from an audit. Results can help locate areas that need improvement, such as staffing and product inefficiencies, identifying strengths that you’ll want to take with you when you’re expanding and weaknesses that should be fixed beforehand.
Whichever market you expand in will ultimately determine if your new pharmacy is a success or failure, so you’ll want to choose your new location carefully.
Market research can reveal important factors that will inform your expansion plan. For example, are you looking to enter the market in a rural area with little competition, or will your new spot be in a market already flooded with other chain and retail pharmacies? Does the local labor market have the skilled workers you’ll need to staff your pharmacy, and are their average wages something you can afford to add to your start-up and ongoing operational costs?
Understanding the characteristics of the specific marketing, including demographics, income levels, product preferences, labor costs, traffic patterns and more, can help you pick the best location. You can choose to hire market research professionals plus there are plenty of resources to help get started on your own. The U.S. Bureau of Labor Statistics offers useful data on average pharmacy wages by geographic location, and ideas available on how to select the best pharmacy location.
This can prove challenging for new business owners in any field, and independent pharmacies are no exception. Startup costs, including purchasing new real estate, staffing, equipment, and inventory, can add up quickly. These costs can seem overwhelming during the time when you’re waiting for your new business to turn a profit. While there are plenty of unknowns in the expansion process, one thing is for certain: you’ll probably need help financing your new business venture.
A lender will want to see the results of your due diligence – your expansion business plan. To get ready to meet with a lending officer, you’ll want to document your research and expansion plans. It can also be a good idea to run some “what if” style calculations for loan payments as part of your analysis.
One of the biggest mistakes you can make as an independent business owner is waiting too long to expand your business – or pushing for growth when you’re not ready. Having a solid expansion plan in place will give you the tools necessary to evaluate when you’re ready to grow your pharmacy, and understanding the best steps to take in order to do so in a responsible (and profitable) way. Work with your advisory team to help you make the decision on when it is a good time for you to take the next steps toward expansion.