3 Considerations for Opening a Second Pharmacy Location
By: Paige Otos
Successful independent pharmacies eventually reach a point in their growth when it is time to consider opening up a second location. However, determining whether you have arrived at that place is easier said than done. After all, opening a second pharmacy location is a big undertaking that carries significant risk. with it.
So how do you decide whether or not the time is right for your business to expand? Here are three key areas to consider.
As the owner or manager of an independent pharmacy, you are well aware that you work in a highly competitive market. The best location for your second store is going to be an area that is currently unserved or underserved by other pharmacies. It is important that you take the time to research the areas where you might want to operate in order to determine if you have a viable option or not.
After you have chosen your target location, such as a neighboring town, you need to focus on marketing and branding. As a new store, you have to work diligently to make sure that your prospective customers know that you exist and how you can meet their needs.
2. Structure of Company
An important determination in opening a second pharmacy location is how you will structure your business. Will this new location be the same legal entity as your current store? Or will you establish a new entity?
Two key factors in making your structure decision are how your business currently operates and what your long-term strategy dictates. Perhaps you are the sole owner of your current business, or maybe you have one or more partners. Or maybe you are looking to take on a new partner with this second venture, such as asking your lead pharmacist to partner with you.
When it comes to determining the structure of your company in light of a new location, it is best to partner with your accounting advisor in order to make well-informed decisions. Your CPA can help you in many ways, including minimizing your tax burden, helping you access the cash you need to expand, incorporating your organization, and many other strategies. You should work with your CPA to develop and carry out a long-term strategy for your business.
3. Working Capital
Before you open a second independent pharmacy location, you need to have plenty of working capital on hand. The new business will need help staying afloat for at least the first four to six months in operation. Some areas where access to plenty of working capital is key include:
- Standardizing monthly bills
- Working with inventory companies
- Covering payroll costs—these are the biggest expense, outside of inventory
- Training staff
- Calculating and covering overhead costs
- Creating a budget
- Developing a strong stockpile in the bank
Working With Your CPA to Open a Second Pharmacy Location
As you set out to determine whether opening a second pharmacy location is for you—or as you gear up to do it—partnering with your accounting advisor is the best option. They can help you along every step of the way. Your CPA can give you valuable guidance in many areas, including:
- Creating a budget that will allow for a successful launch
- Setting up accounts and licenses
- Making sure the cost of inventory is covered
- Calculating reimbursements
- Working with customers who use Medicare and Medicaid
- Setting up technology, including Point of Sale systems
Not only do you need key guidance in the above areas, but an accounting advisor with experience in the pharmacy industry can help you avoid critical errors and common pitfalls.
If you’re considering a secondary location, please consider contacting one of our advisors on how to make your second location work best for you.