When operating on thin margins, as independent community pharmacies do, it’s essential to keep profits high and costs low.
If you take on too much overhead, or if costs inflate at a much higher rate than your revenue increases, your financials could slip into the red.
While maintaining a balance between costs and profits is imperative to the long-term success of your business, it can be difficult to manage. Fortunately, there are tools that can help you maximize your profits while minimizing your costs.
Here are six ways you can keep your profits high and costs low.
1. Order strategically
Whether it’s ordering with the wrong form of payment, placing your order at the wrong time, or ordering unnecessary products, improper inventory levels can drive your pharmacy’s costs up and cut into your margins.
One often-overlooked strategy that can help improve your inventory levels is the method of payment you use to purchase your inventory. By strategically selecting your payment method—credit card, line of credit or electronic funds transfer (EFT)—and scheduling your ordering, you can maximize your cash flow.
Don Raby, CPA, CGMA, Chief Financial Officer at PBA Health, a pharmacy services organization based in Kansas City, Mo., said that ordering with a credit card can optimize your cash flow when you order at the beginning of the billing cycle. It also allows you to take advantage of credit card rewards. If you use a line of credit to purchase your inventory, Raby said that you can maximize your cost of goods while also getting 30-day or 45-day terms if you order at the right time. This payment method can improve your cost of goods from 12 to 15 percent.
Learn more about the benefits and drawbacks of various payment methods, and discover which methods give your pharmacy the right blend that works best for your business.
2. Don’t let expired drugs go to waste
To keep profits high and costs low, you can’t let expired drugs sit on your shelves. Focus on minimizing excessive and wasteful ordering by having a plan to make the most of expired drugs.
Partnering with a returns company can make handling unused, unneeded and expired drugs simple. And, some returns companies, like Returns Solutions, will conduct a strategic analysis of your ordering habits to help you identify ways to order better, such as ordering smaller bottles of slower-moving drugs, utilizing next-day delivery options, and delaying putting prescription labels on bottles to reduce the amount of un-returnable products.
3. Join a buying group
Maximizing your pharmacy’s profits starts with getting the best cost of goods possible. Consider joining a buying group, so your independent community pharmacy can benefit from improved pricing.
ProfitGuard, a buying group service from PBA Health, can help your pharmacy improve your cost of goods, and even secure you with regional chain-like pricing. The expert contract negotiators with ProfitGuard will leverage the buying power of small regional groups of pharmacies to get your group multiple national wholesaler bids, and the best overall cost of goods.
4. Offer high-margin products and services
Keeping profits high and overhead low requires focusing on providing high-profit margin products and services.
Strategically design your front end around high-profit margin opportunities. Stock items such as first aid and wound care products or compression stockings in your front end to maximize the value of your space.
And, offer high-margin back-end services, such as specialty care or compounding services.
5. Know and track your metrics
Tracking the right pharmacy metrics can help you determine if you’re being successful at keeping your profit margins high and your costs low, along with helping you identify areas where you can improve.
If you’re not already tracking key metrics and measuring which directions they’re trending, now’s the time to start.
Begin with the basics, such as calculating your pharmacy’s key expenses, including overhead and payroll costs. Also, track the trend lines of metrics, such as total sales and profitability, to make sure you’re improving on these measures year after year.
Tracking these metrics can identify areas you may need to cut, and they can pinpoint opportunities to maximize your pharmacy’s profitability.
6. Focus on revenue-generating opportunities
Administering in-demand pharmacy services, such as flu shots or providing medication synchronization services, transforms your expertise into a revenue stream, which can keep your profits high.
Spend your time focused on providing and promoting your pharmacy’s services, and leave dispensing to your pharmacy’s automation.
If you need help starting more patient care services, consider partnering with a company, such as Creative Pharmacist, that can help you implement—and monetize—pharmacy services and programs.
Learn how your pharmacy can be profitable while helping patients stay healthy. Offer high-margin preventative care products and services at your business today.
