Business plan for founding a parapharmacy

Spaniards are increasingly informed, are becoming more aware of prevention and health care and are living longer. The sale of parapharmacy products in Spain is estimated at more than 5,000 million euros (80% in pharmacies and 20% in parapharmacy, a percentage that continues to grow).

The A parapharmacy? Parapharmacy includes the areas of cosmetics, nutrition, dietetics, herbal medicine, orthopaedics, baby and hygiene products. Unlike the pharmacy, the products it sells are not medicinal products and can be purchased without a prescription. You can freely set the prices of the products and give discounts. The identification color of the facility can be blue or green (like the pharmacy).

Setting up a parapharmacy means less investment compared to a pharmacy and most importantly fewer legal restrictions as it is not regulated by health law and membership is not required. Therefore, it often represents a career path for those pharmacists who cannot open a pharmacy. This was the case for Amparo Gonzalvo HuguetGraduated in Pharmacy and Orthopedics, created in 2002 Pharma AmparoParapharmacy in Rocafort (Valencia).

Parapharmacy is an attractive and profitable activity as long as it is planned in detail, managed competently and the product range is adapted to the local market, ultimately creating a modern center for health and well-being. In the beginning, it will be enough to have the most popular range of products, considering that around 80% of customers are women and that shampoos, creams, and children’s and intimate hygiene products are usually the best-selling products.

A competitive industry

The main competitors are pharmacies, herbalists, franchise chains and even large supermarkets with sections dedicated to this type of product. Many pharmacies already have their own parapharmacy department as an additional source of income and also benefit from exclusive sales channels where they can stock up.

Amparo Gonzalvo recommends: “First find a good retailer and if a product is selling more or less well, jump to the lab and buy in batches to get a better bonus. You also need to know how to negotiate with advertisers to get the best possible price and payment terms.” Of particular importance for the success of this activity is the management of purchases, also taking into account the expiration of some products and the associated costs, if they are not sold.

The keys to success

In order to be successful with a parapharmacy, in addition to optimizing purchasing and supplier management, the following must be taken into account:

Local. You have to avoid your competitors as much as possible, but you have to be on a busy shopping street or in a mall since a lot of the purchases are spontaneous. The spaces must be eye-catching to attract customers, convey a sense of hygiene and light, and have an internal circuit that encourages purchase.

Advisory. Before, during and after the purchase – for example enabling a follow-up chat -. And while it is not a requirement to have a licensed pharmacist, it is advisable to hire healthcare professionals with expert knowledge and in-depth knowledge of products and services to ensure the level of professionalism required.

Marketing. Standing out from the start, targeted local advertising – both offline and through SEO for local searches and advertising platforms such as Google My Business), web, social networks, blog with good advice, cooperation with micro-influencers who promote us are a good capital to make yourself known. You must also have a good loyalty strategy: points and discount cards, home delivery services and above all good value for money.

environment possibilities. To top off the business, some drugstores set up vending machines for products that are available 24 hours a day. In other cases, alliances are forged, for example with nutritionists. In the parapharmacy itself, services such as dietetics, phytotherapy, physiotherapy, homeopathy, chiromassage, foot care, etc. can also be offered. provided by specialists.

Make the leap into digital commerce

There are more and more parapharmacies that have their own online shop. Likewise, the number of customers who purchase these types of products in the digital channel is increasing every day. Without a doubt, e-commerce represents an excellent opportunity to grow business and reach more customers. While it also requires specific skills, a proper website to provide a good user experience, and of course, dedication.

Farma, which made the leap into the online channel in 2017, warns: “Online retail generally follows a very aggressive pricing strategy, which is only possible by buying wholesale products from laboratories. Large pharmacies run very aggressive advertising campaigns. Customers are increasingly inclined to buy online at the lowest price.”

Business Profile: Beginning Balance

Our entrepreneur is building a parapharmacy in a 60m2 building (including a small storage area) on a commercial street in Salamanca. To give the premises a lot of light, a striking showcase and to condition them internally, he undertakes a reform. The chosen legal form is a sole proprietorship with limited liability.

The following investments in fixed assets are planned: redevelopment and refurbishment of the premises (€12,000); Furniture (shelves, showcases, counter) and decoration (€4,300); Equipment (scales, refrigerator, etc.) (1,400 €); IT equipment (POS computer, ticket and invoice printing machine, barcode reader) (€1,800).

Intangible assets include specific management software with a total value of €450. The balance sheet assets also include the deposits for two months rent of the premises (€2,600) and the initial start-up costs (€2,800) for the establishment of the company, the technical project and the building permit and the start of advertising. The initial stock is €15,000 and the initial stock investment is €18,000 (initial safety stock, minimum basic purchase to start). Good stock management is a crucial factor in the success of a parapharmacy: a surplus can lead to financial costs, storage costs and possible deterioration of some products. The assets also reflect the supported VAT (“VAT Treasury debtor” of 8,558 euros). The Treasury owes this amount, which is reimbursed in the quarterly VAT returns or, if desired, its reimbursement can be requested from the Treasury at the start of the activity.

The necessary investment is €66,908. The entrepreneur brings in €30,000 in social capital and has received a €4,000 grant to promote women’s entrepreneurship. The remainder (€32,408) is financed by a long-term bank loan (5 years) at 4.5% nominal annual interest, which is repaid in constant monthly installments of €604 (consisting of interest and principal). The balance sheet distinguishes between that part of the loan that has a maturity of more than one year (reconverted into long-term or long-term debt) and the part that is to be paid within the year (short-term or short-term debt).

The working capital (current assets – short-term liabilities) is 35,645 euros and indicates a short-term solvency of 6 months.

Balance sheet of a parapharmacy

Business Profile: Profit and Loss Account

All income and expenses for the year (excluding VAT) are recorded in the profit and loss account.

The main expenses of a parapharmacy are:

-Product purchases. It is the main expense item. Our entrepreneur has an initial safety stock of 18,000 euros. First you place monthly orders, pay on receipt and with a small bonus for paying immediately. Later you negotiate the terms of payment and the discounts for larger quantities with the various suppliers.

-personal expenses. The entrepreneur registers as a self-employed person subject to social security contributions for the first time and pays the monthly contribution of 60 euros (“flat rate”) for the first twelve months of the activity. Your gross monthly salary is set at €1,000. In order to be able to advise customers professionally, a young pharmacy graduate is hired full-time with a gross annual salary of €17,000.

– Rent of the premises (1,300 €)

– Utilities: water, electricity, gas, telephone, internet connection (130 €)

-Advertising costs, a total of €3,200 per year (local radio, mailing, search engine advertising and social networks)

-Liability insurance (1,500 €)

-Services of independent professionals (management and freelancers for the management of the blog and social networks) (280 €).

-Maintenance and repairs (computer and local) (90 €).

-Financial costs of the loan taken out to finance the investment (€1,337 per year).

– Depreciation of fixed assets (€2,976 per year). Year after year, depreciation includes the depreciation of fixed assets, as well as provisions and depreciation of current assets (depreciation of inventories, any exceptional losses, etc.).

sales. The sale of products represents the main income, to which sporadically the supplementary homeopathic service by a specialist doctor is added. The variable costs represented by purchases account for an average of 55% of sales. The average gross margin in the industry is between 30% and 40%, even reaching 60% for dermo-cosmetic and health products.

With the assumptions made, our parapharmacy would achieve an estimated income of €122,800 and a margin of 45% in the first year. The break-even point (at which we have neither losses nor profits) is 146,611 euros in sales. It is calculated by adding fixed (operating) costs and financial expenses, divided by 0.45 (gross margin on sales). With these figures, the success of parapharmacy depends on the entrepreneur’s ability to adapt to the real needs of the market and to build customer loyalty. On the other hand, to ensure profitability, you need to find the right balance between income and fixed costs.

parapharmacy income statement
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