Pharmacy Business Plans

As pharmacy owners make the decision to obtain financing they need to have an understanding of what it takes to get a business loan into process. All business loan requests will begin with the clear communication of the facts, which influence a Funding Source to consider the transaction. This communication comes in the form of a business plan.

Great insight into the pharmacy owner’s company comes from the business plan. Therefore, a plan needs clear and concise data stating the products, service provided, who they are, their track record, the funding request, financial statements, and other informative information. Pharmacy owners must use the plan to effectively communicate their strategies, and their commitment to the success of the project. It is advisable for the person requesting a loan, to have a good understanding of all the elements necessary to make a successful plan.

Many new business owners are so caught up in the excitement of their new venture, they assume everyone else including investors and lenders, will have that same enthusiasm, that they put off completing the best business plan they are really capable of. This is a major mistake. As the saying goes, "those who fail to plan, plan to fail." To expand on that, plan with depth, provide information overload, and provide details, details, details.

Unless the owner can communicate all the details, the Lender will not have the ability to complete a through analysis of the data, and come to a sound business decision. Some new business owners will spend too much time trying to market their project to funding sources, when the project has no chance of being funded due to the poor quality of the business plan, or the lack of understanding the pharmacy industry by the lender. There are a number of books and sources available to assist the pharmacy owner develop a better understanding of writing and presenting a business plan.

When approaching a Funding Source, business owners should remember that if a person is job hunting...does a quality resume, or a sloppy one have the greatest possibility of assisting the job hunter? The answer, of course is "quality." When seeking capital for a pharmacy, the same is true concerning business plans. Someone who really wants to obtain funding will put out the effort so they can show their Funder they have thought through all the details and have the ability to communicate those details to others.

However, many of these deals fall apart due to the fact the "Plan" is not adequate and will never be successfully accepted by a Funder. Clients need to understand that the expectations, of successfully funding a project, diminish greatly when they are unable to present a quality business plan. Submitting an inadequate business plan, or completing a plan with partial effort will not get successful results. Garbage in, garbage out.


                Basic Guidelines and Elements of Business Plans

For loan consideration, Clients will need to provide extensive information. Include supporting documents. It is beneficial in our analysis and reduces the time until closing if the information provided to us is detailed and organized. It is better to provide more information and details than less. The package should be laser printed, organized, bound, and tabbed. Make sure any copies of articles, or other documents are clear and readable.

GENERAL
* Detailed explanation of purpose of loan.
* Dollar amount required. Include breakdown of intended use of funds - e.g. inventory
purchases, furniture and equipment, leasehold improvements, etc.
* List collateral, estimated value, purchase price, and construction date.
* Description of plan to repay the loan. Include time-line and sources of funds.

HISTORY OF BUSINESS
* History and nature of business: include 3 - 5 years of past financial statements (showing the
most recent 2 years on a monthly basis) and tax returns with all schedules, A/R and A/P aging
schedules, and reports on any contracts in progress.
* Ownership structure: list the principles and their percentages of ownership.
* Legal structure: proprietorship, partnership, or corporation.

ADDITIONAL FINANCIAL INFORMATION
* Cash flow projections (monthly) for at least three years with written rationale.
* Personal tax returns with all schedules for the past three years.
* Personal financial statements of borrowers.

BUSINESS ACTIVITY
* Type of business.
* The outlook concerning the industry.
* Company's growth strategy. (Rapid, moderate, surviving, ...)
* External factors, which could impact the industry. (Regulatory, economic, technological, ...)
* Facilities and/or improvements needed and the costs associated with them.
* Production strategy and plans, including production organization and personnel.
* Projected changes in inventory control, purchasing, or other related activities.

MANAGEMENT
* Names and functional responsibilities of key management.
* List of professional advisors.
* Management's resumes.

MARKET INFORMATION
* Products and pricing.
* Competition and key competitive factors.
* Market area and demographics.
* Main customers and selling terms.
* Major suppliers and their selling terms/agreements with you.

ADDITIONAL DOCUMENTS
* Property and equipment appraisals.
* Lease agreements.
* Color pictures of facility (inside and out).
* Description of property, facility, and surrounding neighborhood.
* Location map

CHRONOLOGY OF ACTIONS TO BE TAKEN
* The timing and amount of new debt, or new equity to be raised.
* Any renovations, expansions, and installation of equipment.
* The completion of any research and development.
* The implementation of marketing strategies.
* Risks and costs associated with the above.


                                       Business Plan Check List

This list is not “all inclusive” and it needs to be adjusted so it is specific to your business. Remember include details, details, details. Business Plans, which are only 20 pages, usually are not effective. Don't be afraid to offer 200 pages of well thought out, organized detail. Laser print the results, tab, organize, and bound the material. Do not include faxed copies, or poor quality copies.
A complete package must have all the relevant information needed to make a sound business decision, including:
1. One page clear and concise Executive Summary.
2. Funding request.
3. Statement of use of funds. Must be specific and detailed.
4. Business description.
5. Resumes of all principals.
6. Personal financial statements of all principals.
7. Mission Statement.
8. History of the business.
9. Marketing Plans.
10. Local Marketing Strategies.
11. National Marketing Strategies.
12. Industry Outlook.
13. Situation Analysis.
14. Customer profile.
15. Geographic market factors.
16. Competition.
17. Strengths and weaknesses.
18. Operational plans.
19. Personnel.
20. Training.
21. Purchasing.
22. Suppliers.
23. Business Functions.
24. Uniqueness.
25. Future Growth.
26. Ownership & management.
27. Licensing.
28. Trademarks.
29. Description and valuations of real estate and assets.
30. Letter of Intent from other investors.
31. Supporting third party articles.
32. Detailed five-year financial projections. First 3 years in month-to-month format.
33. Company, real estate, and industry comparisons.
34. Details of principals past successes and failures.
35. Letters of Reference from past customers, clients, etc.
36. Pictures of real estate, buildings, equipment, products, etc.

When you have questions about pharmacy finance, pharmacy business plans, or other aspects regarding financing a pharmacy please contact Washburn and Associates.