Healing a pharmacy

A few days later, Brian Hamilton drives up from Sage-works in Raleigh. He is dressed casually and carries a stack of papers - all the financials he has analyzed. In the backroom he meets Edloe's wife, Sereta, 47, working at a computer desk in a partitioned-off area. Sereta pays the bills and keeps the books for all three pharmacies. "Medicare Part D has taken a lot of the joy out of this for us," she says.

Hamilton and Leonard pull up chairs and Hamilton fires off a series of probing financial questions. "I'm looking for soft spots," he explains. "For example, do you have discretion as to where you buy aspirin?"

Not really. Leonard explains he's part of a trade association that negotiates prices. How about labor? Maybe he could cut a little, but Leonard is working so hard that he needs all the help he can get. Delivery? "If I do away with that, I lose a lot of my business," he says.

Hamilton nods in agreement, then picks a bigger target: The other two locations are unprofitable. He discovers that neither contributed last year to Leonard's and Sereta's salaries. Some of their cost of goods goes on the main pharmacy's books, which means the two locations are doing even worse than the numbers indicate. "I'm just going to ask, Leonard, is it good to be in those businesses?"

Edloe answers quickly, "Their volume decreases my cost of goods." But, Hamilton argues, customers don't know that all three stores are owned by Edloe. That limits his marketing potential. "If you're going to keep them, is there a problem with branding them all the same?"

"I've thought about it," Edloe says. But he has a weakness for nice cars, and he worries that customers might bridle at his slapping his name all over a neighborhood he cruises through in his Benz.

Hamilton persists. "It's bugging me that the stores are losing money," he says. "Do you give financial statements on the stores to the people who work there?" Edloe doesn't, but he offers to tell the managers that they need to "do better." Hamilton frowns. "Employees never believe the boss, do they?" he argues. "How about, 'Guys, here's the statement, we have to get that number up.' "Edloe looks unsure, and Hamilton moves on.

After a quick look at Sereta's Quick-Books file, Hamilton discovers that although she has detailed financial reports of actual expenses, there is no budget. "You should set up an annual budget in January," he says. "That way when the numbers change, you know why you're not on plan and can catch problems early." Without a budget, he adds, businesses tend to spend more money.

Sereta rolls her eyes. "It sounds good, but the problem is I have a lot of work out front." Then she adds quickly, "That's not an excuse." Hamilton suggests finding a CPA to help set it up. "For not even a 10 percent increase in your workload, you can get reports that will add a lot of value. You're almost already there," he says to Sereta.

"I just need the time," Sereta sighs.