Inside: How do you keep your new pharmacy business idea from failing? Test it with tried-and-true methods to minimize risk and maximize success.
You’ve got a great business idea to add a new stream of revenue or expand the services at your independent community pharmacy. Now what? Before you implement big changes, it’s important to vet your idea and test it on a smaller scale. That minimizes the number of things that can go wrong and will cushion the blow if your idea doesn’t turn out to be as good as you thought. Follow these steps to make sure your business idea will actually help your business.
1. Do some research
The first step to determining an idea’s viability is evidence. Don’t let whim and intuition guide your decisions. What data exists to back up your idea? The process of finding that will help you flesh out your idea and take it from a thought to a plan.
Identify a target
Determine which market you’re targeting. Every type of patient will require a different approach. Affluent consumers behave differently from bargain hunters. Younger generations are more likely to embrace newer modes of communication. Uninsured patients are price sensitive.
Once you’ve identified your target group, it’s time to learn everything about them.
Ask questions such as:
- How many people in this demographic live in my market?
- How much money do these people have to spend?
- What are the best ways to market to these groups?
- What specific challenges do these patients face that I can address?
- Why would these patients be interested in my idea?
Crunch the numbers
It’s impossible to know if a business idea will succeed without considering the financials. Pull out your books and talk to other owners to answer key questions about the financials:
- How much will this idea cost to implement?
- How much will I charge for this product or service?
- What are the margins on this product or service?
- Will I need to hire more people?
- Will I need to expand my space or buy new equipment?
- How will I fund this idea in the beginning?
- How long will it take this idea to be profitable?
Be aware that you’ll need even more specific financial information if you intend to take out a loan or convince others to invest in your idea. If you’re using money you already have on hand, you still need to make a strong case to yourself.
2. Find the flaws
Some failures can be prevented with enough honest foresight. The first step to testing a new idea is to interrogate it—you want to identify every weakness, every potential problem. Knowing what’s wrong with your plan can help you make adjustments from the beginning, which is easier and less expensive than correcting as you go. Here are some questions to ask yourself when evaluating your new business idea:
- Do my patients need this new product/service?
- Am I trying to sell an additional service to existing patients or attract new patients?
- Will my product/service be useful to patients?
- Does this idea make sense in the market I live in?
- How would this differentiate my business from its competitors?
- How might my competitors respond?
When you identify a potential pitfall, determine how you can avoid or prevent that problem by accounting for it in your plans. If you find a truly fatal flaw that can’t be fixed, you’ve at least done yourself the favor of scrapping an idea without losing the time and money that would go into a failed initiative.
3. Get feedback
Don’t just run your idea past your friends and family. Seek feedback from members of the target consumers. Ask them what they think of your idea and how they would improve or change it.
One way to get useful feedback is to survey your existing patients. Target patients who match the demographic you’re aiming for and ask them to complete a survey on their attitudes about your idea. Offer them some incentive, like a small free item or a front-end discount, for completing the survey.
You can get more detailed, qualitative feedback with a focus group. SCORE, an organization dedicated to advising and mentoring small business owners, has some good advice for running an effective focus group:
- Choose a group that represents your target customer
- Create a script or checklist to make sure you’re covering the same topics in each session
- Focus on the customer, not just your idea
The feedback you get from customer surveys or focus groups should help you fine-tune your plan. It may even identify some red flags you missed when you were looking for flaws in your plan.
4. Try it on a smaller scale
When you’ve refined your idea as much as you can, the next step is to try it out. Start a pilot program to test your idea on a smaller, more manageable scale. For example, if you have multiple locations, start by rolling out a vaccination program at just one location. Or limit your new smoking cessation group to five or ten patients.
This part of the process has several important goals:
- Gather as much data as possible
- Figure out the logistics of executing this idea
- Identify problems with the idea
Be sure to set a reasonable start and stop date for this pilot program. The trial period should be long enough to see how your idea works, but short enough to force you to evaluate your program rather than letting it run on unanalyzed.
Marketing a pilot program will be different from marketing a program you’ve fully committed to. If your new business idea is a service, you may need to directly invite specific patients to participate rather than broadly advertising the service. This ensures you can control the number of participants rather than getting too many or too few.
5. Get feedback again
Running a pilot program brings you a new pool of patients to potentially provide feedback. At the end of your trial period, distribute a survey or hold a focus group to learn more about what the patients liked and didn’t like about your program. This feedback will help you perfect the details of your plan.
While your first survey or focus group dealt primarily with attitudes and hypotheticals, your post-pilot feedback will focus on patients’ experience with your new product or service. You may even find that patients’ theoretical attitudes differ greatly from their reactions to real-life experience.
Ask questions like:
- What did you like about this product/service? What did you dislike?
- Would you use this product/service again?
- Would you recommend this product/service to a friend or family member?
- Was this product/service easy (or convenient)?
- Did you feel the price for this product/service was too low, too high, or just right?
- What could be done to make this product/service better?
6. Adjust your plan (or toss it)
After running a pilot program and soliciting feedback, you should have plenty of data to help you decide what to do next. The small-scale trial will give you a better idea of the true cost and profit potential of the idea, while your patient surveys and focus groups can help you gauge the demand for your product or service.
If the results are mostly encouraging, use your data to perfect your plan to launch a larger-scale version of your idea. For example, if the cost of supplies is higher than you expected and eats too much into your margins, consider switching vendors or choosing slightly different supplies to cut costs.
On the other hand, your test may reveal that your idea just isn’t viable. That’s never a fun lesson to learn, but you’ll be glad you minimized the fallout by testing your idea on a smaller scale.
Thoroughly vetting your new business idea can mean the difference between a successful launch and a major flop.
An Independently Owned Organization Serving Independent Pharmacies
PBA Health is dedicated to helping independent pharmacies reach their full potential on the buy side of their business. The company is an independently owned pharmacy services organization based in Kansas City, Mo., that serves independent pharmacies with group purchasing services, expert contract negotiations, distribution services, and more.
PBA Health, an HDA member, operates its own VAWD-certified warehouse with more than 6,000 SKUs, including brands, generics, narcotics CII-CV, cold-storage products, and over-the-counter (OTC) products.
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