What are the pitfalls of opening a new pharmacy – analysts and top managers of pharmacy chains described in detail what newcomers to the pharmaceutical business need to know
Many pharmacists and pharmacists are thinking about opening their own pharmacy business. This is evidenced by the results of a survey conducted by Katren-Style among its readers: it turned out that 37% of pharmacy employees want to try their hand at the pharmaceutical business, and 32% not only want to, but are sure that such a moment will come. Of course, the idea of creating your own pharmacy causes conflicting emotions. On one side of the balance is entrepreneurial excitement, a desire to test oneself, on the other – skepticism, amid the current crisis, more than justified. In this article, we asked the experts of the pharmaceutical market where to start by opening a pharmacy if you still decided on such a desperate step.
Let’s start with the sad. The current economic situation does not favor beginners. Experts are unanimous: starting in a falling market is not a good idea. Buyers switched to austerity mode, the average bill decreased. But even if the crisis is discounted, the factor of competition remains in the pharmacy segment: this area is staffed, if not oversaturated. Now even experienced players are forced to reduce the margin on the product and often work at zero.
There is still a high probability of government interference in the activities of pharmaceutical entities: many social obligations are transferred to the shoulders of the business, recalls business coach and pharmacist Yaroslav Shulga.
Is it possible to open a pharmacy in this situation? According to Natalia Vavilina, the head of the Pharmacy Medica network, appearing on the market is not as difficult as surviving on it: “Even if there is a hospital near your pharmacy, subject to good traffic and friendly relations with the city administration, it is not a fact that you will success. And if you can still block your mistakes in a growing market (in management, marketing, etc.), now mistakes are definitely losses. ”
In addition to the risks associated with intense competition and instability of the law, one of the main barriers to the creation of a pharmacy is the need for substantial initial capital.
Materiel – how much does it cost to open a pharmacy
To the question of whether to build a business solely on their own funds or to resort to the help of a bank, experts answer in different ways. Natalia Vavilina notes that starting with a loan in a certain sense stimulates a businessman to be active, awakens the spirit of entrepreneurship. Valentina Grishina, co-founder of a pharmacy and commercial director of Everest LLC, believes that a lot depends on the psychology of a particular person: someone will be spurred on by credit, and someone will feel depressed. “In any case, you should take money only when you are 90% sure that you can return it, given the current rather large loan rates,” says Valentina. The way out of the situation is if you have additional income that will allow you to block bank payments and not starve in that period,
“Be prepared that at first you are unlikely to be able to reach a profit level sufficient for the development of the pharmacy, but you will need to constantly have additional funds to invest in the business in order to stabilize your market position,” warns Valentina Grishina.
Spending is not only purchasing an assortment, renting a room and salary for employees, but also software, advertising, organizing events that will attract the attention of an audience to a beginner – all this costs money.
It is possible that at the initial stage the purchase of products will require an advance payment, since not all suppliers tend to trust newcomers. Gradually, you will be able to return the invested funds due to the margin on the goods. It should be adequate to the average in the region. Obviously, work with zero or, on the contrary, with an overestimated margin actually means a loss of profit.
Natalia Vavilina on how to calculate the profitability of a future pharmacy:
“First you need to do price monitoring in the nearest pharmacies, including discounters. If your pricing policy is less attractive to visitors, you will not see customers. Analyze the question of what price for the goods can be obtained from distributors. Decide on a mark-up and see how profit can cover expenses (rent, taxes, interest to the bank, if you have a loan, etc.). When all costs are taken into account, you can roughly predict your profits. I can say that today, for many, a profit of 2% of the turnover is the ultimate dream. ”
OOO or SP?
What will be the organizational and legal form of the future pharmacy – this is another issue that the novice pharmaceutical entrepreneur has to solve. “An IP or LLC will be the best solution,” says Yaroslav Shulga. – Moreover, there is no right answer to the question “Which is better?”, Since the indicated legal forms have their pluses and minuses.
Many nuances, and especially their role in the medium term, are rather difficult to predict and take into account. For example, today you do not plan to develop on borrowed funds, but after a year or two the situation may change dramatically and the legal form of an individual entrepreneur, ideally suited at the time of opening a pharmacy, can be a weak link in obtaining a bank loan. And there are dozens of such nuances. Nevertheless, if a novice pharmaceutical businessman does not have the appropriate education, then the IP form is initially excluded for him, as evidenced by the Regulation on the licensing of pharmaceutical activities, approved by Decree of the Government of the Russian Federation of December 22, 2011 No. 1081.
In addition, a pharmacy under the guise of “IP” (as opposed to LLC) is very problematic to sell as an operating successful business. It is even more problematic to allocate (bequeath) a share in this business to relatives or, for example, “let” co-owners into the business in exchange for investment. If initially 2 or more entrepreneurs plan to open one pharmacy, then the legal form in the form of IP is a huge risk for the second participant in the project, especially if the latter does not have reliable insurance in case of an acute conflict with a partner. The choice in favor of LLC will also be the most reasonable if you plan, albeit in the long term, to create a network of pharmacies. ”
Geography of success
Of great importance for the pharmacy is its location. Yaroslav Shulga notes that many processes will undergo metamorphoses as the business develops: everything can change quickly, but the location is for a long time: “Changing a bad place in form may still look like a“ move ”, but in fact it will be a start from scratch” .
A successful “geography” does not guarantee success, but a bad one will lead to a fiasco. To attract buyers to a non-winning place, you will need to significantly reduce prices or come up with a service that compares favorably with competitors.
But it is unlikely that you will do something so unique that the same competitors will not be able to repeat it. “A successful place is a fairly broad concept,” explains Yaroslav. “This is not only“ passing traffic quantitatively, ”it is also a competitive environment, and the quality of this environment, and proximity to objects of social and other infrastructure.”
If you are lucky enough to own a room with a good location, this is only half the battle. It is necessary to make repairs that will comply with the numerous sanitary standards for pharmacies. You need to take care of the technical equipment for storing drugs, cash registers, competent lighting, ergonomic display cases.
In addition, clean interior design will also require money. Such seemingly trifles as the purchase of a cooler for visitors, household and office supplies, also need to be written in the column “expenses”.
When your fully equipped pharmacy begins to attract customers, do not rush to relax – it is likely that, seeing such success, a couple more pharmaceutical entrepreneurs will “join” you.
The principle of Figaro?
The issue of recruiting personnel also needs to be addressed “ashore”. Staffing can be complicated by the fact that in your area there are no decent educational institutions that train pharmacists. How will you look for employees: do this yourself or contact a personnel specialist? Do you have any people with whom you would like to cooperate with whom you could trust? Can you provide them with favorable conditions: a decent cash reward, a convenient schedule, advanced training?
“If you intend to replace everyone in the pharmacy with yourself, then you must be a universal soldier, but this is almost impossible,” says Valentina Grishina. – Even with phenomenal knowledge, you need to have like-minded people to whom you can delegate part of the authority. Believe me, there is a lot to do in a small pharmacy, and this is not only the order and sale of medicines. ” Accounting, marketing, employee training – to be Figaro, who manages to work efficiently in all areas, will fail. “After all, what is“ came 500 product items ”? – continues Valentine. – This means that you need to look at each package not only for its expiration date, but also check the series, check the goods for rejection and the correctness of the accompanying documents before they enter the sales area for sale. So, there is no way to cope here alone. ”
Natalia Vavilina has a different point of view: “It is easier for a small business to survive than a large one, but only if the owner is fully committed to the cause.
According to the laws of the economy, if the owner himself sits in a pharmacy, his revenue increases by 30%. Of course, at the same time, he needs excellent pharmaceutical education, knowledge of sales techniques and high communication skills.
If you can cheaply rent a small room in a good place, sell the goods yourself (and clean, perhaps, too), then there will be profit, but again very modest, because we are considering a single pharmacy. ”
Friend or foe business – pharmacy franchise
A franchise business can be a solution to problems – the question is the price that will have to be paid, and not only in a financial sense. The entrepreneur who is under the tutelage of the franchisor is not completely free to make decisions and display business creativity, he must coordinate many points with the “owner”.
Thus, he cannot fully call this business his own. Of course, there are pluses: you will get an experienced mentor who will share knowledge and give his “name”. You will appear on the market under a brand already known to the public. Providing advertising, fast promotion – these are bonuses to open a pharmacy franchise. “The franchise looks attractive to someone who is not yet confident in their abilities,” says Valentina Grishina. “But is it worth it to enter the market at all if you doubt your potential ?!” Of course, it’s profitable when a status organization takes you under the wing, but ask yourself the question of whether you want to be a gear in someone else’s mechanism … Or you can take the risk and start your own business, though it’s not so grandiose yet, but with its own name. ”
By the way, even if you have money, it is not a fact that the franchisor will be interested in you. A serious company will not cooperate with a person who cannot clearly determine how it will conduct business, where the pharmacy will be located and who will work in it.
Opening a single pharmacy, you need to understand that, despite the super efforts, this business will not give a solid turnover, therefore, it will not be able to interest suppliers. It is they who give discounts and bonuses to networks: a large order – favorable conditions.
“Today it’s almost impossible to survive a single pharmacy,” says Yaroslav Shulga. – There are examples of successful single pharmacies, but if you look at them under a microscope, what will we see? Often, by the will of fate or thanks to the vision of the founder, an extremely successful place was chosen for the pharmacy. Often the owner himself and her “head”, and does not disdain work at the first table and other functions. And if the premises are owned – it is both a savings on rent and insurance against the unpredictability of the landlord.
All this allows you to level out the disadvantages of a single pharmacy. And yet the owner of a successful “loner” will not succeed in feeling like a solid businessman, but he will have to be guaranteed to experience some injustice in competition with pharmacy chains. Here are marketing contracts, individual conditions for working with distributors, direct deliveries, and a host of other attractive moments that a single pharmacy will probably never see. Of course, there are associations of pharmacies that do not lose their “loneliness” and touch the advantages of the networks, and still open a single pharmacy, especially in a rented room – a dubious pleasure.” In case you want to buy medicine, you can get in touch with the best pharmaceutical exporters online.
What qualities should a person go to the pharmaceutical business?
“I would single out calling, the sincere interest in pharmacy retail, as the main success factor,” said Yaroslav Shulga. – The profitability of this business is extremely low; it is not comparable in its profitability with business projects that are much less complex in organization and less responsible to society. Moreover, the state regularly intervenes in pricing and assortment policy. That is why, if a person does not have a vocation specifically for the pharmacy business, you should not deal with it. I have no doubt that a competent manager is able to manage both the oil refinery and the federal pharmacy chain, but I have often seen how bright managers who came to the pharmaceutical business from other industries try to transfer their experience from the banking, restaurant and hotel sectors to pharmacies and fail . Pharmacies must be loved and understood.”
How to open your pharmacy?
What are the pitfalls of opening a new pharmacy - analysts and top managers of pharmacy chains described in detail what newcomers to the pharmaceutical business need to know