The Bottom Line Pharmacy Podcast: Navigating Pharmacy Chain Closure Cash Flow Challenges Featuring Greco De Valencia Y Sanchez
With Walgreens planning to close 25% of its locations over the next 3 years, many independent pharmacies will face significant cash flow challenges from underwater scripts leaving and then coming back to new scripts transferring.
In this episode of The Bottom Line Pharmacy Podcast, Scotty Sykes, CPA, CFP and Bonnie Bond, CPA join Greco De Valencia Y Sanchez as they explore:
- Navigating cash flow challenges from chain closures
- New challenges in the buying and selling process
- Buy-ins and partial buy-ins ownership options
Join the discussion with us!
The Bottom Line Pharmacy Podcast is your regular dose of pharmacy CPA advice to fuel your bottom line, featuring pharmacists, key vendors, and other innovators.
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More resources about this topic:
Blog – Pharmacy Lending: The Inside Scoop
Blog – Expanding Your Pharmacy Business Market Share
Video – The Multi Store Owners Guide to Selling a Pharmacy
If you prefer to read this content, the video transcript is below:
Greco De Valencia, VP of Pharmacy: Well, speaking of taxes, I mean Scotty you want to get into one of those subjects we were talking about. Because I mean, now it’s pretty much the deadline right? I mean isn’t it October for corporate filing?
Scotty Sykes, CPA, CFP®: 9/15 for corporate and then 10/15 for individuals. So yeah, I mean, if you’re a pharmacy out there and you hadn’t filed your tax return yet and you don’t have a legitimate excuse, you better, you got what? 13, 14 days, something like that.
Bonnie Bond, CPA: And do your CPA a favor or your accountant who’s working on it, because it’s due on the 15th, you can’t bring it in on the 15th. I mean, you we do actually do work when we do these and they actually have to be reviewed and all of that. So really, if you don’t have stuff for whatever reason to your people at this point, need to do it. But Greco…
Greco De Valencia, VP of Pharmacy: Yeah.
Scotty Sykes, CPA, CFP®: Well, if I’m a bank, if I’m in Greco’s shoes and I need numbers and they’re just dragging their feet, I mean, that’s not a good look.
Bonnie Bond, CPA: Well, if you’re looking to sell or purchase a store that doesn’t have their numbers in order, it’s a big problem. Yeah.
Scotty Sykes, CPA, CFP®: Not a good look.
Greco De Valencia, VP of Pharmacy: Yeah, you’d actually be surprised. We see that quite a bit where people are, like, let’s say May comes around and someone’s trying to buy a store. You get the end of the year 2023 numbers, like the P&L and Balance Sheet, but the Taxes are on extension. May, guess maybe, but then we could sometimes get into July, August like this time and they’re still on extension. And that can really impact things a little bit because most banks are going to approve a deal off the most recent tax year, then look at year to dates as a barometer about the trend, how things are going, is it kind of match up, yes or no, if you annualize it. But you would be surprised, we see a lot of those on extension. So, then people will get a contingent approval, but then the real…
Scotty Sykes, CPA, CFP®: The tax return.
Greco De Valencia, VP of Pharmacy: Yeah, the tax return can come in different than the end of year P&L and you could really have a mess on your hands. I’ve never quite maybe you guys can educate me a little bit like what are some I mean, other than just flat out not wanting to pay the taxes at that time. I mean, what are the reasons that people have?
Bonnie Bond, CPA: Well, the main returns that we have or that I’m personally working on right now that are on extension are for people that, and internally we do the return and we have it done on a preliminary basis and reviewed internal. They’re just waiting as long as they can to make their profit sharing payment that’s due when you file the return. So, and obviously that’s a smart thing to do for cashflow purposes. You know, you’re able to do that. But other than that, maybe a few other small things, Scotty. That’s really the only excuse I know of.
Scotty Sykes, CPA, CFP®: Well, I think, I think more or less it’s just CPAs out there just drag their feet or they’re overworked or they got more than they can handle or whatever.
Bonnie Bond, CPA:…They don’t have what they need to finish it.
Scotty Sykes, CPA, CFP®: I mean, there’s a lot of procrastinating CPAs out there too, so.
Greco De Valencia, VP of Pharmacy: Yeah. Yeah, I’ve just never, I mean, to me, it’s best if you’re, especially in the year, my own personal opinion from the bank’s perspective, you know, if you’re looking to sell, you should have that tax return finished and done and have those year to dates ready to go so that when someone gets that approval or they’re in the process of that underwriting or even preliminary discussions with the lender to see if the transaction will work. I mean, having those are just critical because I don’t see why you wouldn’t, but we see it.
Bonnie Bond, CPA: If you are someone that’s selling, if you’re selling, you have to, I mean, everyone should try to keep their stuff up to date, obviously, but if you’re selling, you’ve gotta have all your Xs, your T’s crossed and all that, it’s gotta be right. It’s gotta be ready to go at any moment. Your financials, your accounting file and your tax returns. And adjusted correctly, not just something on paper.
Greco De Valencia, VP of Pharmacy: Hey, hey, Scotty, Bonnie, how much are you guys still seeing a lot of people doing the profit sharing in the pharmacies, even in today’s world of some margin?
Scotty Sykes, CPA, CFP®: Yeah, and I’ll tell you why. You know, first of all, we don’t have a lot of extensions because we’re holding the books every day, every month, every week type thing. So, you know, we get those extensions out. We knock out the tax returns. But in terms of the profits here, and yeah, we’re seeing a lot of that. fact, I got two clients implementing the cash balance plan this month for 24, but that was a big planning area last year because you were able to get the deduction for 23, the expense, and that would lower your tax due April, but you didn’t have to pay it till now. So, it was a cash flow move for pharmacy owners out there that had the cash, that wanted to bonus out their employees that way, wanted to fund their retirement and so forth.
Greco De Valencia, VP of Pharmacy: Wow, okay.
Scotty Sykes, CPA, CFP®: Yeah, we did see quite a bit of that.
Bonnie Bond, CPA: And especially with the margins being smaller these days and tighter and some people having some cashflow issues, a lot of pharmacies can’t do the profit sharing necessarily every year, but we normally see a lot of normal 401k plans that have that option. So they have the ability to do it if they feel like they can do it or they can choose not to do it, which is perfect in my opinion. So they can, you know look and see how that year went, if they had a great year, they feel like they can handle it. And they have options even within that, like how much to do. But it can be huge for the owners if set up correctly.
Greco De Valencia, VP of Pharmacy: That’s, I mean, that’s good to hear that that that’s still a viable option because, you know, I feel like in today’s, especially today, there’s like, definitely two sides of the story that are going on. I don’t know, maybe two sides of story is a bad way to say it, but I mean, there’s definitely two, two sides of things. Maybe it’s a lot. I know a lot of it is state dependent on which states have some better Medicaid, better PBM reform and things like that. But, you know, with the news of a lot of the Rite-Aids and the Express scripts, which I know we want to talk about today a little bit. We have been seeing some people are like, look, the underwater scripts have just gone up from the plans. And then we have some that are, hey, look, that is happening, but here’s how we’re doing well. So, it really is a mixed bag.
Scotty Sykes, CPA, CFP®: So, what are y’all seeing Greco? What’s the bank seeing there? You’re seeing two different kind of extremes if you will.
Greco De Valencia, VP of Pharmacy: Yeah, we are. I mean, we’re seeing so good news is we still have a lot of activity from buyers and sellers and transition. I think Scotty like that showed up in that breakfast talk that we did this summer at Cencora. There was, I mean, 150, 125 people there that were looking at probably selling or buying or looking at trying to figure out how to get it done. So, we see good activity there. We do see some steadying of the numbers with regards to margins. line revenues are obviously down from a lot of people’s financial that I think that’s because the DIR fees are getting taken out from front. But we have seen a steadying where people are saying, look, I’m not seeing it as bad as this as last year. So, it’s, you know, we’re finding some areas of positivity there. But then there are some that are just unfortunately, maybe their mix is leaning towards higher underwater reimbursements and those people are saying, look, I don’t know how this is gonna continue. But from a bank’s perspective, it’s always the ones that are gonna cash flow and debt service that we’re financing. But we just see it from all angles. I mean, that’s just kind of where it is. I’m hoping that next year doesn’t get worse.
Bonnie Bond, CPA: Well, I’m definitely, yeah, I’m definitely seeing, I think we’ve had multiple cold calls or people, you know, having consultations with us in the last little bit here, those trying to start up stores that may be backfilled from some of this Walgreens closures. We also have a lot of current clients that are looking to open another location because they see a need there and, you know, opportunity with some of that.
Greco De Valencia, VP of Pharmacy: Yeah.
Bonnie Bond, CPA: And then we actually see some cash flow crunches from some that are obviously like you talked about there. getting some of those patients coming in from it too. So good and bad.
Greco De Valencia, VP of Pharmacy: Yeah, that’s, yeah, that is interesting. So, some of our some of the calls that we’ve got from existing clients in our portfolio or individuals who have are seeing like a script lift who are seeing the scripts come over. Most of that is driven in need for working capital. So, they’re looking at maybe a month and a half worth of purchases of need of working capital. And there’s a lot of options there for people. I mean, you, we have recently launched our Express Loan. People can go on our website on Live Oak and inquire about that. Yeah, so that’s a nice thing. Yeah, that is a good thing. You know, we have not seen as much of an uptick of the people requesting to do startups. We have seen a few expansions, but I think the thing that some people are kind of rooting through right now is, what kind of prescriptions are they getting? I don’t mean to say good or bad, but what’s the spread on them? What’s the mix on them? And I think that’s something that’s still probably getting rooted through a little.
Bonnie Bond, CPA: That’s a great point.
Scotty Sykes, CPA, CFP®: Well, pharmacies have to, in this environment, Greco, they have to be looking at every script and picking through those unless you’re just an extremely high-volume store and you’re able to just kind of absorb some of that. But these other stores, normal pharmacies, you really, really have to pick through every one and know what you’re feeling and whether you need to keep servicing them as a patient. Unfortunately. Is that what you guys are seeing?
Greco De Valencia, VP of Pharmacy: Yeah, Yeah, I think what we’re seeing is ones where it was pretty much like the independent and then the chain. I think they kind of knew like what to expect and now that they’re getting them, they’re figuring it out. But I think what’s kind of throwing some people more off is when there was one that was say, just far enough away where maybe they didn’t service as many of those patients, so they were a little unaware of what kind of mix that might be. And then now that that closure has happened or is going to happen, they’re capturing those prescriptions and people are kind of figuring that out a little bit. But you’re right, people are really having to look at, okay, what am I getting myself into with these? Yes, the volume is good, but is it good volume? And some people who have done a pretty thoughtful job of getting the right mix in their business. How is this going to affect it? So, we are seeing a lot of that, but I think the Express Loan is a good option for people that are looking on the working capital. And like I said, the activity on the buying and selling, I still think that’s the best way to step into a good cash flow in store that you know day one. And then you can plan for the changes and plan for some of the improvements that you want to do. But these express scripts … I mean, these chain closures, they’re I mean, they are still ongoing and they’re going to impact people. You know, I think we’re waiting to see if it’s a you know, you can put the stamp of a good or a bad thing on it.
Bonnie Bond, CPA: If someone’s interested in the express loan, how long does that process take start to finish in a perfect scenario?
Greco De Valencia, VP of Pharmacy: Well, the nice thing is, they’ve created an online application. So, you can basically just go to Liveoak.com. You can go ahead and just, you know, Google the bank, Live Oak Bank, and you can go on and they have an online application that you can just go through. No, no, no, it’s a, no, no, you don’t have to be. And yeah, so it’s a nice, they’ve done a very thoughtful job of creating an online
Scotty Sykes, CPA, CFP®: Do you have to be a current customer of Live Oak?
Greco De Valencia, VP of Pharmacy: No, no, no, it’s a, no, no, you don’t have to be.
Bonnie Bond, CPA: You don’t? That’s nice.
Greco De Valencia, VP of Pharmacy: And yeah, so it’s a nice, they’ve done a very thoughtful job of creating an online you know, application for it. it’s, you know, you don’t have to do as much like you would for the traditional 450 and up type loans, you know, where you have to kind of work through the lender a little bit more, not that people don’t like talking to me, but the thought is that…
Bonnie Bond, CPA: And how much, what level did these go to? What’s the max on these?
Greco De Valencia, VP of Pharmacy: I believe they’re going up to $500,000 now. But I mean, ideally, they’re really intended for that $50,000 to $200,000. I think that’s the majority of what people are looking for. And they’re open for all small businesses. But for the pharmacy space, what I’m seeing is pretty much where people are going to need that probably a month to a month and a half worth of inventory, purchases, working capital, whatever you want to call it.
Bonnie Bond, CPA: Great.
Scotty Sykes, CPA, CFP®: So, on this Rite Aid closure, Greco it is interesting because you got the independents kind of shrinking as well. You got the chain shrinking. I there’s really a mess in pharmacy right now. Congress has got to do something to get this right. mean, there’s going to be people not able to get medications. I mean, it’s really a terrible situation.
Greco De Valencia, VP of Pharmacy: Mm -hmm. I know. Yeah, I mean, I encourage everybody to go on LinkedIn and search Jay Phipps. You know, he was at the summer at the Cencora Show. He just did a great post talking a lot about education, about the need for PBM reform. It was a great post. And I mean, this is straight from the mouth of an owner who works in the community and serves his patients. And he addressed that very issue, Scotty. So, I agree with you. I think something has to be done. And he does call out for individuals, reach out to your local representatives and educate them on what’s needed. So, something’s got to happen because, you know, open enrollments coming up, right, for Medicare. So, I know pharmacies are gearing up for that. I don’t, you know, I mean, if some of these challenges that we’re seeing on the Medicare reimbursement side, on the Part D side, it does continue. Yeah, I don’t know. What’s that going to be like?
Bonnie Bond, CPA: Man, I know one thing, we have a lot of clients that are jumping into that as well and getting their, since they’re doing the work in the pharmacy enrollment, mean the insurance enrollment anyway, they’re getting their insurance license and they’re at least benefiting from that to an extent.
Greco De Valencia, VP of Pharmacy: Yeah, doing like a Medicare agent. yeah, yeah. No, you’re right. We have seen that. yeah, and I think that’s great. I mean, those were some of the things that like this summer walking away from a lot of the shows, that was something that was on a lot of people’s discussion points is doing that. Yeah.
Bonnie Bond, CPA: A lot. Yep. Yep, that was huge. Because they say they do the same amount of work. And obviously it’s all for the number one goal is patient care. So they’re doing that anyway. They’re trying to find the best plan for them that particular year. So why not get a small profit from your work that you’re doing to help the patient? So I think it’s great. Yep. So we’re seeing that a lot.
Greco De Valencia, VP of Pharmacy: Yeah, absolutely. Yeah, then, you know, I some of the, I know people are doing cash pricing, you know, know people are doing that, people are doing a lot of the trying to get more of the at home style of reimbursement, almost like it would be for long -term care, but servicing patients at home. You know, I walked away this summer with a good sense that people had a really good positive attitude that the DIR fees are clearer, even though they haven’t gone away, at least you can see it on the upfront. And I walked away with people having a good idea, like some of the things that we just talked about, as far as strategies to go into. But at the end of the day, I do agree with what Jay said, which is if real reform doesn’t occur, you know, yeah, these Medicare patients and the pharmacies that service them, the independents, are gonna be continuing to get pressed. Now I know NCPA is doing a lot of good work on that as well.
Bonnie Bond, CPA: Yes, obviously. Yeah, I know they’re on top of it. Speaking of NCPA, that convention is coming up, trade show in October. Obviously, we also like to plug the ownership workshop that they do prior to the show, which is great. You’re gonna be there. I will be there. Ollin will be there. Jeff Baird from Brown and Fortunato, some others. So, I always like to plug that. That’s a great two-day…
Greco De Valencia, VP of Pharmacy: Yeah, I will be there.
Bonnie Bond, CPA: Program there for anybody looking to buy a store, do a startup, any of that. That’s coming up as well. And I know they probably have a couple spots left if you want to make a last minute reservation for that.
Greco De Valencia, VP of Pharmacy: That really is and has always been that really has been one of the one stop shops where I mean, it’s like drinking through a water, a water hose. It’s a lot for people. I’ve kind of, you know, I’ve been doing it for so long and just been doing this for so long. You know, it’s you forget that some of these people who are just doing it for the first time are like, oh my God, you’re getting hit with a lot of information, but it really is the best one stop shop for people when you think about the legal, accounting, lending, and navigating through the X’s and O’s of ownership. really, yeah, marketing, I mean, it really hits everything.
Bonnie Bond, CPA: Marketing, I mean it…Everything.
Scotty Sykes, CPA, CFP®: You could cover a week, a whole month of that stuff.
Bonnie Bond, CPA: You could and then hearing from no, obviously we’re not pharmacists but we try to be really good at what we do but it is also nice to have they usually have two or three experts those that have had really great success that are pharmacists and have multiple stores So it’s always great to hear from them people that are actually on that side of the bench So if you don’t take our word for it, you can take it from them
Greco De Valencia, VP of Pharmacy: Yeah. Absolutely.
Bonnie Bond, CPA: But yeah, we just had, we had a call with a client this morning that mentioned it again. They, don’t even know why it came up, but they, they were like, the best thing we ever did was went to that. They’ve had, you know, a very successful pharmacy, you know, six or seven years in, and they were like, that’s the best thing we ever did. We hear that a lot from people that did it. They’re like, yeah, we met y’all 10 years ago at the so -and -so workshop.
Greco De Valencia, VP of Pharmacy: Yeah. Same. We get, we, we’ve got quite a bit of clients from that, but you know, also I think the interesting thing is, is you always kind of think about it like people who are about to do something either about to buy or about to start, but it seems like every, every time they have those, there’s at least one or two current owners who have owned a store for like two or three years or five, whatever it is. And they’re there and their main reason for being there is just like, listen, we just want to hear what are we or what are we not doing? And I’ve always found that like really cool because that just means that you can never stop getting educated. And that’s the whole idea behind continuing education, I guess.
Bonnie Bond, CPA: Yeah, we, it used to be, we would always look at it as, we’re planting some seeds. And we’d hear from people a couple of years later when they finally pulled the, you know, they decided to do it. But no, usually we’ve picked up, we usually pick up one or two clients immediately. Like you said, they’re there already. I always find it interesting that people are there that are not pharmacists at all. There’s usually one or two that are just like, I just, I just want to own a store. I want to own my pharmacy. I’m like, all right, cool.
Scotty Sykes, CPA, CFP®: Yeah, they’ve already signed the lease and all this stuff,
Greco De Valencia, VP of Pharmacy: Yeah, that way, yeah, that way. Yeah, if you already signed the lease, that’s the one where it’s like, all right, now you’re really into it.
Bonnie Bond, CPA: There’s always like one guy or girl in the very front row that asks lots of questions and you can see them the whole time. They’re just like, I messed that up. Mess that up. Mess that up.
Greco De Valencia, VP of Pharmacy: I’ll never forget that one year where there was the gentleman, the husband and the wife, and they had like owned their store. I mean, they were well into their, what you would think was retirement, but they were like, no, we’re still going strong and got our stores and we’re just here to continue to learn. I thought that’s pretty cool.
Bonnie Bond, CPA: Sometimes they’ll send people that have been before will send other staff members or maybe a younger person that they’re looking to maybe buy in or whatever in the store. They’ll like go to this workshop. You’ll learn so much. So it’s really, it’s really great.
Greco De Valencia, VP of Pharmacy: Speaking of buy -ins, know, now that the SBA is allowed for buy -ins, partial buy -ins, we have actually seen, I’m not gonna say a big uptick, but we have seen a few come across, which is kind of nice to hear that, you know, that is something that people are still looking at and under the right structure and terms, can be good thing for people. So, we are seeing some of that, so.
Scotty Sykes, CPA, CFP®: So, the PIC Greco, looking to get a little skin in the game. Is that what you’re about?
Greco De Valencia, VP of Pharmacy: Yeah, yeah, yeah, like a partial buy-in where people can, know, like, you know, say you’re buying in 60, 80, whatever the percentage is. We are seeing some of that come up. And if anything, as an option in a plan full exit out, you know, maybe someone isn’t ready to get out now for whatever reason, but they wanna be able to kind of start that slow exit out. And it’s just a nice thing. we have, mean, not a, I mean, it always comes up as part of the discussion and options when people are looking at deals, if it’s not just a straight ahead, look, I’m selling and I’m out. But we have seen and we’ve even seen a couple people who have seen discussions online, you know, through platforms like this about the option of it and have come and said, hey, listen, this is something we’re interested in, can we learn more? It’s still not a majority of what we do, but it’s nice to see that those, you know. Now that, like I said, SBA allows for it, people are taking advantage of at least knowing the option. That’s good.
Bonnie Bond, CPA: Is there any difference in what you’re doing with that versus like a junior partnership? I know we always get that question. Like, how do you feel about junior partnerships? And it used to be everybody was like, don’t do them. And now, I mean, is that similar?
Greco De Valencia, VP of Pharmacy: Yeah, yeah, I you know, I think with the with the partial buy ins, it essentially kind of is almost like a junior partnership. I think you have to know what you’re getting into with both, right? Like what percentage are you going to be? What’s your role? What are the terms and requirements if you do a partial buy in through the SBA with an SBA lender? So, all those kind of factors come into play because based on the post transaction ownership, whatever percentage people might have will play into who has to guarantee personally and who doesn’t. But also it comes into knowing what the rules and regulations are gonna be with regards to that ownership structure, who’s gonna have control, what’s the operating agreement gonna look like. I think historically people have always kind of said, well, junior partnerships are tough because you can’t really get them financed from anywhere. The only way you could really do it was through sweat equity or coming up with your own money to put into the thing. Yeah, the nice part is now that at least there’s that option to be able to get it financed if it works. And then of course there’s always the option for people to do a partial buyout or a stock redemption if you have two partners that just are saying, look, one wants out, the other one wants to stay in. We’ve always have done those.
Scotty Sykes, CPA, CFP®: And that junior partnership a big issue there in the past was that there was no lending like you said Greco, and now that there’s banks like yourself out there who know pharmacy and are willing to do that it’s changed that whole game and the junior partnership a lot of that was the Junior partner was picking that up as income on like the w2 and so they’re paying tax on…
Greco De Valencia, VP of Pharmacy: Absolutely. Yeah.
Scotty Sykes, CPA, CFP®: So anyway.
Bonnie Bond, CPA: Well, I think the bottom line here is that there’s lots of opportunity for people, even in today’s climate with a lot of the different things going on to possibly buy a store, get their own store, start a new store. I mean, there’s lots of options here.
Greco De Valencia, VP of Pharmacy: I mean, absolutely. There are still, I mean, you know, we’re still very active in lending in this space. mean, we’re, if anything right now, at least you have a clearer picture from a bank’s perspective. I feel we have a clearer picture on what businesses are going to do. And then once you get a full year of 24, we’re into 25, assuming people actually file their 24 tax returns on time. You know, now you’ve just got a continued clear picture of what the trends of the pharmacy are. And with the possibility of there being now an ease in the interest rates coming up and hopefully going forward as long as the trend continues or what the feds wanna see, I think it’s gonna make for a clearer process. I will never say easier because if there’s one thing I’ve learned doing this, the process of buying and selling is never easy, but at least it can be lot clearer.
Scotty Sykes, CPA, CFP®: There’s always gonna be curve balls. Always.
Bonnie Bond, CPA: Man, we had, I can’t go into it obviously, but we had one we were working with for six months that just went to shit last week. Out of nowhere, out of nowhere. Like something you would never think happens. And I’m like, this cannot be happening right now.
Greco De Valencia, VP of Pharmacy: You know, to borrow a phrase from Jeff Baird when he always says, you know, keep that kumbaya stage, keep that honeymoon stage going. And if you can do that, then that’s great because I agree with you, Bonnie. It’s not a matter of if, it’s a matter of when.
Bonnie Bond, CPA: And this is one that you like, you eat it because at the beginning I was like, man, this is going to go so smooth. It just was a great situation. Everything was great. Everybody was getting along and it’s.
Greco De Valencia, VP of Pharmacy: Yeah, I’ve actually, I’ve made it a rule on my team. We can’t say, this is going to be an easy one. No. You’re not allowed to, yeah. That’s like, know, yep, no chirping. It’s like, you know, the rest.
Scotty Sykes, CPA, CFP®: It ain’t done till the…til the ink’s dry.
Bonnie Bond, CPA: I knew better, still, I was like, this one is gonna be a breeze. No.
Greco De Valencia, VP of Pharmacy: I know what you mean. I think the thing we always do is we’re just, you get excited when you’ve got two people and we do the same thing. I do the same thing. You get excited when two people, you got a transaction, especially if it’s a nice big one, it’s a fun one to work on. And it’s a gut blow when that, whatever the thing changes. I think sometimes, obviously if it’s a material change in the numbers, that’s…not much you can really do, right? I mean, it obviously makes for a tough conversation with everybody because the parameters of the lending or the parameters of the deal has changed. But sometimes it’s just people are not ready. They get cold feet, they get whatever it might be and things change. And I think that’s the toughest one for everyone to swallow.
Scotty Sykes, CPA, CFP®: That’s why it takes a long time to plan to prepare to get out and plan to get in and so. Greco, on well, going back to the Rite-Aid thing, so, because, so what are you guys seeing? I mean, are you kind of pushing folks to that express loan? If a Rite Aid, you’re seeing a bunch of scripts, a Rite Aid closed. What are you telling pharmacy owners that are coming to you guys on that? I’ve got a Rite Aid down the street that closed, I’m getting a lot of volume coming in the door, I need some help. What’s your response to that?
Greco De Valencia, VP of Pharmacy: Well, I think if you’re an existing owner and you’re getting the volume in, you know, have to know is it what kind of, what kind of scripts are you, what’s the mix, right? And I think the good news is people can start to see that. I’m going to say relatively quick, but then what does it mean long term going on when those patients are now in your store and what if plans change and things like that? So, for the immediate need, if they’re seeing that, and they feel like, listen, we’re picking up X number of scripts and here’s what we feel good about it. We need a couple hundred thousand for working capital. Yeah, I mean, I think the Express Loan is a great option for it. For individuals who are looking to do expansions into a marketplace because there’s been an exit of a pharmacy, you know, the first question we’re always gonna ask them is how’s your first store doing? How’s your first two stores doing? What are they performing like? And what’s the market look like that you’re gonna enter into? If a chain is leaving, a lot of the times the great part about the independents, they can come in and they can operate on a much smaller overhead. But the reimbursements on those prescriptions could be different. The buying power on those prescriptions, the drugs that you need, they’re gonna be different. So, the margin is gonna be a little different. I think where, and this also, applies to the people who might be thinking about starting up. I think you have to work with the wholesaler that you have to see if they can do any kind of data analytics on the number of prescribers, the number of lives, what kind of prescriptions. And I tell you, some of this information that they have access to is really, really good stuff. So, I think you have to work with your wholesaler first and foremost to see if they can get that so you can have a good idea about what am I gonna enter into and is it a good move? Because we wanna make sure people are doing things in a thoughtful way that aren’t gonna put their first, their original stores at any kind of risk.
Scotty Sykes, CPA, CFP®: Mm -hmm. I like that Express loan because as you know, you know you can grow yourself into a lot of trouble because your wholesaler is due in 10 or 15 days, but you’re not getting reimbursed for 20-30 days so that cash flow issue can really hurt you
Bonnie Bond, CPA: Yeah. And a small increase in some of these, you know, backfill situations will make it even worse. Which is huge. Yeah.
Greco De Valencia, VP of Pharmacy: Yeah, I think for the working capital side, the Express loan is a good option that people should explore. And you know, it’s not the only option, right? I mean, it’s one of the options that we’re offering, I, you know, there’s, I know owners that go through a litany of options. They either work with the wholesaler to increase the credit lines. I don’t know how often that is successful or not. People have dating again, don’t know how successful that is. But you know, some people are also, they’ve been saving up cash and they just want to fund it themselves. Some people are doing lines of credit. Then we, of course, we have our express loan options that are out there for people, which is more of like a lump sum working capital, you know, infusion, but smaller. And then on the expansion side, that’s still, in my opinion, getting into the 500 and up because depending on the area, I still think to start a pharmacy today, if you were just like started from scratch, whether it be in an expansion or just a strict startup, you probably need $500,000 minimum to get that going. I think, and that’s right, right. And that’s really where, yeah.
Bonnie Bond, CPA: That’s what we tell people. They don’t like to hear it. But it’s all about the growth. If you’re going to be successful, you want to grow quickly. And if you grow quickly, you’re going to run out of cash.
Greco De Valencia, VP of Pharmacy: Yeah, and that’s where that Express loan just I don’t think is a good, I personally don’t think is the right fit for that. Unless for some whatever reason people are like, no, listen, I’m in a market where I can do it for under 500, let’s just say. But other than that, I think that. Again, options, people just need to look through it, think through it, and be aware of what you’re getting into too. I think that’s the biggest thing. How are gonna staff it? I still hear staffing being an issue for some stores.
Bonnie Bond, CPA: And they’re having to pay a pretty penny for the staff these days. I heard that again this morning, someone was saying. Locations are different. Payroll’s hot.
Scotty Sykes, CPA, CFP®: Payroll is tough right now because you got this shrinking reimbursement. Margins are different then you’ve still got the same payroll so it’s
Bonnie Bond, CPA: Expensive to live so people with inflation’s high.
Greco De Valencia, VP of Pharmacy: Yeah. Yeah. Well, I mean, geez, the my state, my state of California. mean, I had an owner, I had an owner joking with me he goes I walked into Panda Express and on Panda Express on the sign, it said inquire inside how you can reach compensation totals. Now we don’t know what goes into that, but compensation totals of a hundred thousand dollars. And he goes, Greco, if that’s on the sign of Panda Express, I got to have a hard time getting staff and techs and things like that. He goes, that’s, that’s the thing that we’re struggling with. And so, like in a state like mine, you know, that you’re right, Bonnie, cost of living is higher, but then also our minimum wage requirements are a lot higher. And then you add this competition from other places, you know,
Bonnie Bond, CPA: Speaking of that, I don’t know if you’ve ever been to a Buc-ees Greco. You don’t strike me as a Buc-ees type, but just saying. I’ve only been once, but when I went… Do you don’t know what Buc-ees is? Okay.
Greco De Valencia, VP of Pharmacy: I don’t know, Buc-ees. What’s Buc-ees? No, see, I just, that right there, anybody who is probably, just label, I just called myself out as a West Coaster right there by asking what Buc-ees I don’t know about these. Okay, what about, you ever been to an In-N-Out? No, you haven’t, huh? Cause they’re only in California.
Bonnie Bond, CPA: A hundred percent!
Greco De Valencia, VP of Pharmacy: Okay, sorry.
Bonnie Bond, CPA: Now, for the first time last year, I had an In -N -Out cheeseburger and it was life -changing. Scotty was with me. He took us through. It was supposed to be like a one mile walk in Vegas and it ended up being like five miles. Anyway, we got it and it was the best thing.
Greco De Valencia, VP of Pharmacy: I don’t want to ask why in Vegas you needed the burger, but that’s what leave what statement.
Bonnie Bond, CPA: We just decided, well, there was another guy there, employee with us that loved it. And he was like, I can’t believe you haven’t had this. And so we had to go get it.
Scotty Sykes, CPA, CFP®: We went for lunch and they were building the new racetrack around.
Bonnie Bond, CPA: We kept getting rerouted and anyway Buc-ees is a gas station. You need to look this up when you get out get off. It’s a very big southern thing but why I brought it up everywhere everywhere but with that when I went the last time there were signs as you were walking into the entrance like every foot was a huge sign about you can make a hundred grand here as the manager 80,000 is this… Whatever, 70 if you do this, like they were promoting very high salaries, you know, for the gas station. So.
Greco De Valencia, VP of Pharmacy: All right, Buc -ee’s, what state? Yeah, yeah, I mean, it’s a real thing. So I think, you know, the good owners.
Bonnie Bond, CPA: That really went off mark, but anyway, we went down to Buc-ees in and out thing really quick, but hey, it’s important.
Greco De Valencia, VP of Pharmacy: Hey, that’s all right. When I was in Texas for the first time, this is a long time ago, I’ve been to Texas a long time, love all my Texas clients, love all the states, especially the Southern ones too. And if anybody wants to take me to a Buc-ee’s next time, I’m happy to go check it out.
Bonnie Bond, CPA: Hey, I think Buc-ees may have started in Texas.
Scotty Sykes, CPA, CFP®: It did.
Greco De Valencia, VP of Pharmacy: Really? Okay. Okay. Well, yeah, they people, you know, they there was always that thing about what a burger and they were like, well, you never had a what a burger. So it took me to what a burger. Pretty good. You know, same as In-N-Out too. I like In-N-Out as well. But…
Scotty Sykes, CPA, CFP®: Cook out, I like cook out. Nobody knows about cook out.
Bonnie Bond, CPA: In-N-Out is better.
Greco De Valencia, VP of Pharmacy: I’m a little more of a, I’m assuming cookout barbecue? That the same?
Bonnie Bond, CPA: They have everything.
Greco De Valencia, VP of Pharmacy: That’s an actual restaurant?
Scotty Sykes, CPA, CFP®: Cook out restaurant.
Bonnie Bond, CPA: It’s a fast food restaurant. But you can get a tray, Greco and you pick three things, which would normally be like a meat and two sides, but you can get like chicken nuggets, a hot dog, and a hamburger. Like all those things are on your side. They don’t care. You can get like a burrito, you know.
Scotty Sykes, CPA, CFP®: Their food is on the side, so like, yeah.
Greco De Valencia, VP of Pharmacy: I like it. I’m here for it. I’m with it.
Bonnie Bond, CPA: Some tater tots and a hot dog. Those are your three.
Scotty Sykes, CPA, CFP®: And there is no kale salad, drink, ginger root and turmeric.
Bonnie Bond, CPA: But you can get a bacon milkshake, which I have not tried. It sounds disgusting, but I have not tried this, but it is on the menu,
Greco De Valencia, VP of Pharmacy: A bacon milkshake man
Scotty Sykes, CPA, CFP®: I will take a hard pass on that by the way.
Greco De Valencia, VP of Pharmacy: I got a buddy in North Carolina that every time if we go to a Chick -fil -A and I order the kale side salad, he just like stares at me and goes, dude, you’re not in California. Would you please stop? Gotta stay healthy.
Bonnie Bond, CPA: I’ve had that, it’s not bad.
Scotty Sykes, CPA, CFP®: No, can’t do kale. got, I got sick on kale food poisoning on kale one time and so I never again, but it was bad.
Greco De Valencia, VP of Pharmacy: Ooh, that sounded nice.
Bonnie Bond, CPA: That’s right. That was like one of your favorite little like side dish salad -y things from that place.
Scotty Sykes, CPA, CFP®: God, it was terrible. Greco, anything else you wanna cover?
Greco De Valencia, VP of Pharmacy: No, I mean, I think we hit it.
Bonnie Bond, CPA: I think we wrapped it up right there with all those important topics at the end.
Scotty Sykes, CPA, CFP®: A lot going on, man. There’s just a lot going on in pharmacy right now. mean, it’s just changes and PBM and closures and different areas of revenue now. 503B compounding, long -term care I mean it’s just change in reimbursement. I mean, there’s all kinds of stuff. And I think this payroll thing we just touched on is huge too. It’s, I think there’s a lot of opportunity in pharmacies to get more efficient, more lean technology in there.
Greco De Valencia, VP of Pharmacy: Yeah.
Scotty Sykes, CPA, CFP®: A.I. is coming up around the corner or it’s already here and how that’s going to impact pharmacy operations. So just a lot out there, Greco.
Bonnie Bond, CPA: It’s all these different streams of revenue everybody’s jumping into to try to make it, you know. So, it’s hard to keep your hand and fingers on everything that’s going on and understand it.
Greco De Valencia, VP of Pharmacy: Mm -hmm.
Scotty Sykes, CPA, CFP®: But all that being said, I mean, I think it’s all good. I think it’s, things are moving in the right direction, for sure. I just gotta get this PBM reform done. Which has bipartisan support, which passed the Senate in January. Didn’t pass the House, or it was one or the other, passed the House, didn’t pass the Senate. Because there was tax changes in there.
Greco De Valencia, VP of Pharmacy: Yeah, that’s true.
Scotty Sykes, CPA, CFP®: So, it’s close. It’s, it’s close. So hopefully, depending on this election, what California decides over there.
Bonnie Bond, CPA: How California decides the election.
Greco De Valencia, VP of Pharmacy: Don’t blame me for that, all right. I contributed with In-N-Out and good kale. That’s where it… Yeah. No, you’re right, Scotty. I mean, we did touch a lot. I mean, we hit everything from the fact that I can’t put together a front and a back nine to…
Bonnie Bond, CPA: Now I’m hungry, so that’s not good.
Greco De Valencia, VP of Pharmacy: Yeah, to interest rates droping hopefully and seeing some easing there and obviously these chain closures, people continuing to work through that, opportunities out there for people to take advantage if it makes sense. And we ran through the restaurants, the food that’s out there originally. I mean, this is gonna go down as one of the better podcasts we’ve done.
Bonnie Bond, CPA: We went from, you started with the kale drink, and we ended with the bacon milkshake and everything in between.
Greco De Valencia, VP of Pharmacy: Hey, I bet you if you did a poll out there, you’re gonne see a lot of kale eaters, a lot of people that like that.
Scotty Sykes, CPA, CFP®: Anybody listening in, put in your favorite fast food restaurant down.
Greco De Valencia, VP of Pharmacy: Yeah, there you go, yeah, there we go.
Bonnie Bond, CPA: Hahaha
Bonnie Bond, CPA: And everybody harass Greco for not knowing what Buc-ees is.
Greco De Valencia, VP of Pharmacy: Sorry, I will know. I’m going to Google it and next time I’m in that region, I’m going to hit the Buc-ees.
Bonnie Bond, CPA: Just go to YouTube and watch, there’s gonna be 8 million videos and then it’s gonna start popping up on your phone and all your social media so you’ll be completely educated in it. Okay?
Scotty Sykes, CPA, CFP®: Well Greco, always a pleasure. Thanks for hopping on and we’ll have to do it again.