Competition . . . Not Necessarily a Bad Thing

Knowing and studying your competitors is an ongoing project. Competition may well dictate much of your operating strategy. The depth and breadth of your competitors will dictate how aggressive your operating plan should be. It is very important to think through the consequences of your operating and marketing strategies so that you can anticipate competitor reaction. Never operate blindly. You should not be obsessed with your competition, but should always be well versed in how they operate their businesses. Expand upon what they do right and learn from what they do wrong.

Another thing to remember: Good competition benefits your business, while bad competition hurts you. No competition at all tells us that the new business venture is likely to be ahead of its time. There are advantages and disadvantages to be first in the marketplace. The main advantage is that as long as you remain creative, the other players have to play “catch up”. Conversely, being first typically requires longer staying power because you are paving new ground. Also, you may open the door for the competitor with more resources, making it more expensive for you to stay in the game.

A great example of being ahead of your time is Netscape. According to Tom Friedman’s “The World is Flat”, Netscape drove Internet communications to a whole different level and likely was the greatest influence on where we are today. But, lo and behold, along came Microsoft. Because of the impact of its operating system technology, Microsoft was able to give away that for which Netscape had to continue to charge. Don’t you think this adversely impacted Netscape’s value? But, we wouldn’t cry too much for John Barksdale, one of Netscape’s founders and leader. He literally changed the world for the better and achieved what most of us only dream of.

Building Patient / Customer Loyalty

As a pharmacy owner, your business thrives on repeat business.

Picture this, a customer walks into your pharmacy and hands you a new prescription. If on a maintenance drug, you hope they come back next month for the refill. Keep in mind the chains offer money to transfer prescriptions to their stores. So, you have that to consider. Besides hoping they will come back isn’t a good idea if you want to be a successful business owner. You need to be more proactive than that. If they are on a one time medication such as an antibiotic or pain medicine, you may never see them again.

Regardless of the prescription type, the action you take next is very important. One thing you can do is look at the Rx’s you filled from the day before. Print out a list of the patients with new prescriptions. During slow times, have your employees make a few calls.

Here is a sample of a simple script:

Pharmacy Employee - Hello Mrs. Smith. This is Tom from Pharmacy R Us. Yesterday you came in with a new prescription and I wanted to follow-up to see if you have any questions.

Mrs. Smith - So nice of you to call. No one has ever called me from a pharmacy before and I have tried all of the chains. (See you have already impressed Mrs. Smith).

Pharmacy Employee - So, how is the new medicine? Do you have any questions or concerns that our Pharmacist can answer for you? I will be happy to put the pharmacist on the phone if you need to talk to him/her.

Mrs. Smith - No, I really don’t have any questions yet. Can I call you if anything changes?

Pharmacy Employee - yes, please do. We don’t think any question is too silly. So, please call us if anything (regardless of how small it may seem) concerns you. Our goal is to build a long-term relationship with you. What concern you, concerns us. We look forward to seeing you next month.

Mrs. Smith - Wonderful! Thank you!

Do you see how simple and painless that call can be? The best part is it doesn’t cost you a dime. Your employees have slow times of the day and can make these calls easily.

Now, Mrs. Smith may or may never call with a question or 2. If she calls, be sure to take care of her with enthusiasm. She has friends who would love to have that kind of experience with their pharmacist as well. Thus, this not only builds customer loyalty but can help bring in new customers too.

You don’t need to try to compete with the chains by throwing money out there. You can if you want. However, doesn’t it make more sense to provide your patients with the best customer service possible?

Is it time to revisit your business formation?

As your pharmacy business grows and changes, you may find that you need to change the legal entity in which you operate. Please note we are not accountants or attorneys. Thus, we strongly recommend that you seek professional advice before deciding if and when you need a change. The following are simple definitions to get you started.

Proprietorship

By definition, a proprietorship is individual ownership d/b/a (doing business as). A proprietorship requires the least legal assistance in formation and is the least expensive structure to maintain. There is one drawback. Any liability associated with your business becomes your personal liability.

C-Corporation

A C-Corporation is the most common legal entity for fairly substantial size corporations (multiple stockholders). It provides insulation from personal liability except in cases where the principal owner has provided personal guarantees. The corporation files income taxes and is taxed on company profits. All employees, including the principal owner, must be salaried in order to take money from the company. Otherwise, all revenue going to management and shareholders would be considered dividend income subject to double taxation (first to the company and then to the individuals receiving dividend income).

S-Corporation

An S-Corporation has the same corporate characteristics, regarding liability issues, as the C-Corporation. But it functions like a proprietorship, where income distribution is concerned. The "S-Corp" is required to file a corporate tax return; however, income (or losses) flow directly through to the shareholders, on a pro-rated basis, as personal income (or loss). Thus, the

corporation itself is not taxed.

Limited Liability Corporation or LLC

Instead of stockholders, the LLC has members. Its characteristics are similar to that of a partnership; however, it may have a bit more insulation from individual liabilities for its manager.

Partnership

A Partnership is similar to an LLC, in that it has a general partner (active in the business) and may contain passive investors.

There is some flexibility in your business structure selection. For example, you can go from operating as a proprietorship to operating as a corporation. There are also mechanisms that will allow you to elect to change from a C-Corporation to an S-Corporation, or the reverse. Generally, you can only change your mind one time. Once again, we encourage you to seek

professional help in determining which option is best for you.