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The Profit Vault April 2025
Your Q2 KPI Check-In Starts Now
The 3 Numbers That Can Make or Break Your Pharmacy
It’s officially Q2, and that means one thing: It’s time for a reality check. Are you happy with how your pharmacy performed last quarter? Or did you start with big goals only to get buried in the everyday operational grind? Most pharmacy owners I speak with want to see real growth but struggle to track their numbers consistently. That ends today. If you’re serious about improving your bottom line, you need to focus on the three KPIs that matter most — Inventory Turns, Payroll Ratio, and Expense Ratio. These aren’t just numbers; they’re the difference between running a thriving business and barely scraping by. INVENTORY TURNS: IS YOUR CASH SITTING ON THE SHELF? Your inventory is your biggest investment but also your biggest cash trap. If you’re constantly tight on cash, odds are your inventory is bloated. The more money tied up in unused stock, the less you have to grow your business. To calculate your inventory turns, follow this formula: Annualized Cost of Goods Sold (COGS) ÷ Current Inventory Value = Inventory Turns (Or multiply your past month’s COGS by 12 to annualize it.) The magic number you should always aim for and surpass is 24 Turns ! If you’re under 20, it’s time for a wake-up call. Here’s what to do:
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Stop overordering: Keep daily orders below your daily COGS. Return excess stock: Wholesalers will take back any eligible stock! Clear out expired products: Use a reverse distributor like Flash Returns and get credit.
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Every extra dollar tied up in slow-moving inventory is a dollar you can’t invest in marketing, new services, or staff. Fix this now before it chokes your cash flow. PAYROLL RATIO: ARE YOU OVERPAYING FOR YOUR TEAM? Payroll is your second-biggest expense, and if it’s too high, it will suffocate your profits. If this ratio is too high, your bottom line will suffer, no matter how strong your sales are. To calculate your payroll ratio, use the following formula: Total Payroll Costs ÷ Total Revenue = Payroll Ratio (Multiply by 100 for a percentage)
than done, so here are a few other options to consider:
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Work smarter: Hire interns instead of full-time pharmacists for certain tasks. Optimize schedules: Reduce unnecessary overtime and shift hours around. Increase revenue: More sales can offset payroll costs without layoffs.
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Ultimately, your payroll ratio is simply another math problem. Solve it, and you’ll free up massive cash flow. EXPENSE RATIO: ARE YOU RUNNING A TIGHT SHIP? If you don’t control your operating costs, your pharmacy will struggle to grow, no matter how much revenue you bring in. Your expense ratio, also sometimes called the operating expense ratio, is how much of your pharmacy’s total revenue is spent on
Over 13%: You’re bleeding cash. Time to take action.
Between 11%–13% is okay but not ideal: Not the worst, but not where you should be. Below 11% is strong and efficient: Keep it up! So, how do you fix a bad payroll ratio? Trim the fat. If someone isn’t pulling their weight, it may be time to let them go. Of course, this is easier said
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Turn Front-End Sales Into Pure Profit The Easy Way to Increase Pharmacy Revenue Without Filling More Scripts
HOW TO INCREASE OTC SALES IMMEDIATELY
Did you know you likely have a goldmine sitting right in your store? Over-the-counter (OTC) sales are pure cash. No PBMs, no audits, no clawbacks — just revenue you control. The question is: Are you maximizing it? Many pharmacies are bringing in $2,000 to occasionally over $15,000 monthly in OTC sales, but chances are you can always make more. When Lisa first took over her pharmacy, she barely scraped $4,000 monthly in OTC sales. Today? She’s consistently pushing $9,000 and closing in on $10,000. So, how did she do it? She tracked the right numbers, set clear goals, and gave her team the tools to succeed. Now, it’s your turn. THE 3 OTC KPIS YOU MUST TRACK If you’re serious about boosting OTC revenue, start by monitoring these three key performance indicators:
1. Set Clear Goals and Incentives
• Share OTC sales goals with your team weekly and monthly. • Offer small bonuses for hitting milestones. • Make it a competition! Team motivation drives results.
2. Give Your Team the Right Tools
We offer all these resources and templates to members so you can educate and arm your team with the tools they need to boost sales: • Shelf talkers and in-store signage to highlight key OTC products • Bag stuffers recommending OTC solutions for common conditions • Social media promotions showcasing seasonal OTC must-haves • Quick training sessions on how to recommend the right products
1. OTC Dollars per Transaction
Every customer who walks in is a potential OTC sale. This metric tells you how much OTC revenue you’re generating per transaction.
Formula: Total OTC Revenue ÷ Number of Transactions
You should train your staff to identify complementary OTC products with every prescription, like a probiotic for antibiotics or an allergy spray for seasonal sniffles. These small recommendations add up fast.
3. Focus on Seasonal Sales
Right now, in April, customers need:
• Allergy relief (antihistamines, nasal sprays, eye drops) • Cold and flu meds (early spring sniffles are still lingering) • Sun care (sunscreen, after-sun lotion, SPF lip balm) • Poison ivy/oak relief (outdoor season is here) • Vitamin D and wellness supplements (because good health is always in demand) When you stock strategically and train proactively, you’ll see an immediate boost in revenue.
2. OTC Dollars per Prescription
Your pharmacy isn’t just about filling prescriptions but also enhancing patient health. Many prescriptions create side effects that can be managed with OTC solutions.
Formula: Total OTC Revenue ÷ Number of Prescriptions Filled
Are your pharmacists asking, “Is there an OTC product that complements this medication?” or “Does the patient need additional support for side effects?” If not, you’re leaving money and patient care on the table.
Make Small Changes for a Big Impact
3. OTC Dollars per Employee Hour
OTC sales are your best-kept secret to higher profits. Start by tracking OTC dollars per transaction, per Rx, and per employee hour. Set goals, engage your team, and capitalize on seasonal trends. If you take action today, you can increase your OTC sales by 50% this quarter. What are you waiting for?
This metric shows how well your front-end staff is driving OTC sales.
Formula: Total OTC Revenue ÷ Total Ancillary Staff Hours
Your team isn’t just there to ring up sales. Tie employee bonuses to OTC performance, and watch how quickly they start making smart recommendations.
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Fix the Leaks Before You Fill the Bucket How to Reduce Negative Margins and Keep More Cash in Your Pharmacy
WHAT IS YOUR NEGATIVE MARGIN PERCENTAGE? Before you can fix the problem, you need to measure it. Your negative margin percentage is the proportion of prescriptions you fill at or below cost. We have no universal industry benchmark, but here’s the reality — your goal should always be to bring this number down.
Every owner knows that filling prescriptions is only part of the game. But what happens when a good chunk of those prescriptions actively costs you money? That’s where negative margin prescriptions come into play. These are drugs you’re dispensing at a loss, eating away at your bottom line like a slow leak in a sinking boat. I recently spoke with a pharmacy owner who had unknowingly lost $100,000 in a single month on negative margin prescriptions. His strategy? Fill more prescriptions, focus on more profitable drugs, and try to outpace the losses. But here’s the cold, hard truth: You can’t fill a bathtub by pouring in more water when the drain is wide open. You have to plug the leaks first.
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If you’re at 10%, aim for 5%.
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If you’re at 5%, shoot for 3%.
1. Losing Money on Brand-Name Drugs You can’t win with brand-name drugs. PBMs are going to dictate the reimbursement, and in most cases, you have zero control over how little they’re paying you. If you consistently lose money on a brand-name medication, the best strategy is to stop filling it.
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If you’re below 3%, keep pushing lower.
The lower your negative margin percentage, the healthier your pharmacy’s financial future will be. WHY ARE YOU LOSING MONEY ON PRESCRIPTIONS? You have two main culprits when it comes to negative margins:
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TAKE A BREAK
ARBOR ARIES
DIAMOND FOOLS GARDEN KITE RAINBOW SHOWERS
BASEBALL CHERRIES CHOCOLATE DAISY
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YOUR TOP 5 PRESCRIPTIONS COULD BE GAME-CHANGERS Discover How Your Most Profitable Prescriptions Are Hiding in Plain Sight
You’re probably constantly battling slim margins and unpredictable reimbursements. But what if we told you that your most profitable prescriptions are hiding in plain sight? Instead of scrambling to fill more prescriptions at a loss, it’s time to zero in on those that bring in the highest profit per dispensing. KNOW YOUR TOP 5 MONEY- MAKERS. Your top five most profitable prescriptions aren’t just the drugs you fill most frequently. They’re the ones that generate the most profit per single dispensing. These are the prescriptions that put the most money back into your business, and once you identify them, you can double down on attracting more of those patients. We recently worked with a pharmacy owner who discovered that generic Accutane was one of her most profitable prescriptions. Once we identified this, we knew that we needed to craft a strategy to get more of these high-margin prescriptions through her door. Fortunately, Lisa was able to share her own journey into becoming the go-to pharmacy for Accutane prescriptions through her “Accutane Kits.” TURN YOUR MOST PROFITABLE SCRIPTS INTO STRATEGIC GROWTH. Once you know which prescriptions are bringing in the highest profits, the next
step is leveraging that knowledge to attract more of those scripts. It’s time to create a strategy that makes your pharmacy the go‑to destination for these prescriptions. For example, at Lisa’s pharmacy, she built a generic Accutane program designed explicitly for dermatologists. The key was to make it easy for dermatologists to send their Accutane patients to her pharmacy by:
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Streamlining the prior authorization process
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Offering patient counseling services to ensure compliance Creating educational materials for both doctors and patients Guaranteeing fast turnaround times for prescriptions
provide resources to make it easier for them to send their patients to your pharmacy.
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2. Create specialty services: If applicable, you can offer quick prior authorization assistance or guarantee fast, reliable
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And guess what? It worked. Before long, Lisa’s pharmacy was filling almost every Accutane script in her city. IDENTIFY YOUR MOST PROFITABLE PRESCRIPTIONS. If you don’t know your top five most profitable prescriptions, it’s time to dig into your pharmacy data. Look at the total profit per prescription and which prescriptions consistently bring in the highest dollar amount per fill. Your pharmacy management system should be able to generate these reports easily. If it can’t, you need a better system. CATER TO THE RIGHT PATIENTS AND PRESCRIBERS. Once you know your top five, the goal is simple: Attract more of those patients and build relationships with the prescribers who write them. Here’s how you do it: 1. Reach out to local prescribers: If you identify a high-profit prescription, find out which doctors prescribe it most often. Schedule meetings, drop off informational packets, or
service, so prescribers prefer sending patients your way. 3. Market directly to patients: Leverage social media, email marketing, and in-store promotions to encourage patients to transfer these prescriptions to you. START SMALL AND SCALE UP. If the idea of revamping your approach feels overwhelming, start with just your top five. It’s much easier to build targeted programs around five prescriptions than to try to cater to your top 20 all at once. Once you’ve successfully grown these areas, expand to your top 10, top 15, and beyond. Filling more prescriptions won’t save your pharmacy if you’re losing money on the wrong ones. Identify your most profitable prescriptions, create a plan to attract more of them, and watch your bottom line grow.
Are you ready to start maximizing profits? Run your report today and start building a strategy that actually makes you money.
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Walk the Success Tightrope
Balancing Business Innovation and Risk Management
Innovation is the key to success for any growing business. It’s the force that drives new products, services, and ideas. By fostering an environment that promotes innovative thinking and experimentation, businesses can stand out from the competition and meet evolving customer needs. However, venturing in new directions always comes with risks, and balancing risk with innovation is critical to ensuring a business’s long-term stability and growth. UNDERSTANDING RISK IN BUSINESS Whether your business is long-established or in the early stages, all businesses face daily risks. Any major business decision or initiative has the potential to fail. Innovation opens the door to new opportunities but also carries the risk of financial uncertainty, operational challenges, or reputational problems. While risk is inevitable, businesses can proactively identify potential issues and implement mitigation strategies. USING STRATEGIES TO BALANCE RISK AND INNOVATION Finding the proper balance between risk and innovation is a challenge. It’s about promoting unstifled creativity while ensuring new initiatives stay on budget and don’t interfere with current processes. A few strategies can help businesses strike this delicate balance. Make risk and innovation work together. Successful businesses don’t see risk management as separate from innovation; they treat them as complementary — rather than competing — forces. Integrating risk considerations into the innovation process enables teams to make smarter decisions. The key is to assess potential pitfalls early so vulnerabilities can be addressed proactively without hindering creative development. Promote a risk-aware culture. Teams should feel empowered to suggest new ideas, but they should also value risk management. Promoting a risk-aware culture means equipping team members with the knowledge and tools to evaluate and report potential risks. Businesses can achieve this through training programs and company- wide communication channels. Rewarding calculated risks and recognizing risk management efforts also helps create a risk-aware team. Start small and scale strategically. Companies can employ pilot programs to test new ideas and prevent the fear of risk from hindering innovation.
Testing in a controlled environment allows teams to push boundaries, learn from failures, and refine ideas without putting the company at risk. After refining an innovation, businesses can scale strategically through a phased rollout, allowing continuous monitoring before full implementation. Take a multilevel, cross-functional approach. Balancing innovation and risk management requires a multilevel approach involving everyone from C-suite executives to frontline employees. Executives establish the vision for innovation and acceptable risk, mid-level managers support training and open discussion, and frontline contributors implement fresh approaches. Smart businesses also form cross-functional teams to combine perspectives and better understand potential risks when innovating new products and services. Leverage data and analytics. Data and analytics can help businesses turn risk into advantage. Predictive models and real-time data help identify trends and potential challenges. When armed with the right data, decision-makers can remain agile to respond to changing market dynamics. Data also provides actionable insights to help measure the feasibility of new initiatives. STRIKING THE RIGHT BALANCE Balancing risk and innovation helps businesses maintain a competitive edge and achieve long-term sustainability. It’s not about choosing one over the other — it’s about finding harmony between creativity and caution. With the right balance, businesses can adapt to new opportunities and challenges and quickly bounce back from setbacks.
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STOP GUESSING, START GROWING If you ignore your KPIs, you’re playing a losing game where you’ll always work harder and see no real improvement. But when you track Inventory Turns, Payroll Ratio, and Expense Ratio, you take control of your pharmacy’s success. Need help? We’ve got on-demand courses that walk you through every step. Plus, our office hours are on Tuesdays at 10 a.m. Central, and Mike’s implementation calls happen Monday through Friday at 2 p.m. Central.
running the business. Expenses often include rent, utilities, payroll, marketing, and other overhead costs necessary to maintain daily operations. Your total operating expenses do NOT include your inventory costs! Follow this formula to get your expense ratio:
Total Operating Expenses ÷ Total Revenue = Expense Ratio
Your goal? Stay under 19%. If your expenses are creeping higher, you need to cut costs and boost efficiency. Here’s where to start: • Audit your overhead: Are you spending money on things you don’t need? Cut it. • Negotiate your lease: Your landlord would rather keep you as a tenant than risk a vacancy. • Save on office supplies: Ink, toner, and other costs add up fast. Look for better deals. • Meet with your accountant: Regular P&L reviews help you stay ahead of financial trouble. If your expense ratio is bloated, every dollar you make is just covering your costs instead of fueling growth. That’s a recipe for frustration.
Start tracking today, and make Q2 the quarter where everything changes.
HAVE A LAUGH
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The KPI That Rules Them All
IF YOU’RE NOT TRACKING NET PROFIT, YOU’RE GUESSING
You’ve got a million things demanding your attention — inventory management, payroll, patient care, compliance, and marketing. But ultimately, one number determines whether you’re winning or losing: net profit dollars. This is the money you keep after paying all your expenses. It’s your business’s bottom line, the metric that tells you if your pharmacy is thriving or just scraping by. Unfortunately, many independent pharmacies are operating in the negative when it comes to net profit dollars, and that needs to change. You can fill more prescriptions, expand services, and drive traffic all day long — but if your bottom line isn’t improving, you’re just spinning your wheels. The key is strategic growth. Let’s break down how to track, analyze, and, most importantly, increase your net profit dollars so your pharmacy is set up for long-term success. FOCUS ON WHAT MOVES THE NEEDLE. We’ve already covered steps to boost net profit dollars: evaluating three vital KPIs, eliminating negative margin prescriptions, increasing OTC sales, and maximizing your most profitable prescriptions. If you haven’t implemented these yet, you need to start there. Fixing these fundamental areas will create an immediate and lasting impact. However, once you’ve addressed the obvious leaks in your business, the next step is working smarter, not harder. This means taking a big-picture approach to where your pharmacy is headed. STRATEGIZE PROFIT GROWTH. Filling prescriptions is only part of the equation. To actually increase net profit dollars, you need a sustainable plan. That means: • Tracking trends over time: If your net profit isn’t steadily increasing each month, find out why. What’s holding you back? • Investing in high-margin opportunities: Not all revenue is created equal. Focus on areas with higher profitability, such as cash-based services, clinical programs, or niche prescription markets.
• Optimizing operations: Even small efficiency improvements, such as smarter staffing, better inventory management, or renegotiating costs, can add up to significant savings over time. • Leveraging patient relationships: Patients who trust your pharmacy are more likely to follow your recommendations for additional OTC products, new services, or long-term medication management.
MAKE NET PROFIT DOLLARS YOUR PHARMACY’S PRIORITY.
Every decision you make impacts your bottom line. If you’re not actively working to increase net profit dollars, your business isn’t truly growing. It’s just surviving. So, ask yourself: Is my pharmacy more profitable this month than last month? If the answer is no, it’s time to take action. Track your numbers, adjust your strategy, and ensure every part of your business works toward one goal — increasing the money you get to keep. Because at the end of the day, profitability isn’t just about staying open — it’s about building a thriving pharmacy that serves your community for years to come.
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417 Ravenaux Dr. Southlake, TX 76092
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INSIDE THIS ISSUE
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Second Quarter Check-In: Are Your 3 Vital KPIs on Track? Stop Leaving Money on the Counter — Boost Your OTC Sales Now Are Negative Margin Prescriptions Draining Your Profits? Why Your Top 5 Prescriptions Matter More Than You Think
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Secrets to Smart Business Innovation
Your Net Profit Dollars Are Talking — Are You Listening?
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secondary wholesalers. We can bet that their prices will almost always beat post- rebate primary wholesaler prices. Don’t be afraid to shop around and look for the best prices for your generics! STRATEGIZE TO REDUCE NEGATIVE MARGIN PRESCRIPTIONS. • Audit your prescriptions: Run a monthly report to see which prescriptions cost you money.
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Set a goal and stick to it: If your negative margin percentage is
This might sound extreme, but most patients don’t mind splitting their prescriptions between providers. We’ve had great success recommending that patients get their expensive brand-name medications from mail-order or Amazon pharmacies while continuing to use our independent pharmacy for everything else. RetailMyMeds can help you coordinate these mail-order or Amazon prescriptions so you can continue offering these brand- name drugs without losing money. When explained properly, patients are more than happy to make that adjustment— especially if it keeps their local pharmacy in business. 2. Losing Money on Generic Drugs Unlike brand-name drugs, you do have control over generic purchasing. If you’re losing money on generics, it usually means you’re buying poorly. Your sourcing strategy needs a major overhaul.
high, work toward reducing it step by step. Start with small, realistic goals and always track your progress. CLOSE THE DRAIN BEFORE YOU ADD MORE WATER. To grow your pharmacy, you need to start with a strong foundation. Too many owners focus on increasing revenue without realizing their negative margins are swallowing those gains whole. Before spending time and energy trying to boost your profits, ensure you’re not actively losing money on what you’re already doing. Fix the leaks first, and then you can focus on filling the bucket. The pharmacies that thrive in today’s market aren’t the ones filling the most prescriptions. They make smart, strategic decisions to keep every dollar they earn. Now’s the time to take control of your negative margin prescriptions and put that money back where it belongs — in your pocket.
Identify patterns and make adjustments accordingly.
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Use alternative dispensing strategies: For brand-name drugs that are consistently reimbursed below cost, guide patients toward mail-order or Amazon pharmacy. Modify your generic purchasing: If you’re losing money on generics, work with secondary wholesalers such as Real Value Rx, BluPax Pharma, and JamsRx. You can even try marketplaces such as RxCherryPick, PrimeRx Market, or EzriRx.
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One effective approach? Start purchasing your generics from
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