mechanism to track the success of advertising and promotion-
al strategies, so future advertising dollars can be spent effi-
ciently. One simple technique: when gathering information
from new patients, include a question that asks how they
learned about the pharmacy service.
Financial Plan
The financial section in the business plan gives a dollars-
and-cents view of the proposed service. This section shows
the revenue a new service is expected to generate from
sources such as consulting fees and product sales, and antici-
pated expenses, which typically include staff time, marketing
costs, rent, utilities, supplies, and equipment. The plan
should project a break-even point for the service (the point in
time when revenues will meet expenses).
Typically, the business plan includes projections of rev-
enue and expenses for years 3 and 5 after start-up.
15
A clear
explanation of the underlying assumptions upon which the
projections are based should be included. For example, if the
revenue projection for the first year is based on 10 patients
per week using the service, the plan should state why this
number of customers can reasonably be expected. Generally,
it is best to use moderate assumptions and avoid inflated
estimates that are unlikely to be realized. The plan may
include low, moderate, and high estimates for revenue, based
on varying assumptions for the level of demand.
To develop the financial section, pharmacists need to look
critically at all potential sources of income and the costs asso-
ciated with their proposed services. A pharmacy business
reference such as the Digest from the National Community
Pharmacists Association can be useful to help estimate key
financial information, such as gross margins and cost of
goods.
16
This annually updated publication compiles and
summarizes comprehensive financial data from independent
pharmacies nationwide.
Pharmacists may want to consult with an accountant for
help in generating financial projections and statements, espe-
cially if a loan is needed to start the service. Lenders usually
require a set of financial statements that provide an overview
of the pharmacy’s past, present, and forecasted financial sta-
tus. These historical and pro forma (projection) statements
typically include
5
:
▲ Income and expense statements, which show profit and
loss for the business at the end of a given time period
(e.g., annually).
▲ Balance sheets, which are position statements that show
assets and liabilities (i.e., how much is owned and
owed) on a given date.
▲ Cash flow statements, which show the flow of money into
and out of the business.
Projecting Revenue
When estimating projected revenue, consider income from
both product sales and fee-based services. For example, a
consulting service on nonprescription medications and other
over-the-counter products may provide significant revenue
from product sales. Also consider sales of nonpharmacologic
products, such as monitoring devices for hypertension or dia-
betes, other self-care products, and books that may be related
to the targeted services.
Fee-based compensation is another potential revenue
source. If cash-paying patients are a primary market, the plan
should explain the proposed fees and the rationale for setting
them. Also describe how the service fee will be structured.
For example, a service that requires multiple visits (e.g., a
smoking cessation, weight loss) may be segmented into
sessions that can be purchased individually or at a more
economical “package price” for the entire program.
In addition to payment from patients, the plan should
provide information on other potential purchasers of the
pharmacy service. If the market analysis identified local
employers as key stakeholders, the plan may include projec-
tions for their payment for various worksite services, such as
disease state management, smoking cessation, or immuniza-
tion programs. Anticipated revenue from third-party payers,
such as health insurers or Medicaid/Medicare, also should be
described, as appropriate.
Projecting Expenses
The financial plan should estimate initial and ongoing
expenses for the service. This will help to demonstrate that
the pharmacy has sufficient cash flow and adequate capital
reserves until the service surpasses the break-even point.
Briefly, projected expenses in these general categories should
be included
9
:
▲ Start-up costs. These expenses include the cost of train-
ing (e.g., travel to a continuing education program) and
any changes the pharmacy layout needs to accommo-
date the service. Other start-up costs may include new
technology (e.g., computers and software for docu-
menting the service, a bone densitometer for an osteo-
porosis screening service) and supplies.
▲ Fixed costs. These costs remain constant as the volume
of service delivery changes. For example, a monthly
newspaper or television advertisement would be a fixed
cost. Other examples of fixed costs include salary,
utilities, insurance premiums, and building rent or
mortgage.
▲ Variable costs. These costs fluctuate as the volume of
service delivery changes. The biggest expense in this
category is typically the cost of professional time for
the pharmacist(s) who provide the service.
Because financial forecasting is based on a number of
uncertainties, some flexibility must be built into the plan.
Include contingency measures in the event that demand for
service is lower (or higher) than anticipated. For example, if
the break-even point is not reached in the proposed time
frame, are additional funds available to ensure adequate cash
flow? Alternatively, if the service is immensely popular, will
Monograph 23: Writing a Business Plan for a New Pharmacy Service 7