Inventory Management: Milestones in Practice Development

 In Practice Building

Having invested thousands of dollars in a naturopathic education, the thought of further investment in your “natural pharmacy” can stir a lot of fear and emotion for practitioners. After all, you didn’t go to school for an MBA, so what do you know about inventory control? Chances are, very little. So in this month’s column we take a brief walk through inventory management to help every ND out there run a more streamlined, profitable practice.

The first thing is to get clarity over the purpose of carrying a natural pharmacy. First and foremost, you are in the service industry, so providing the highest quality service is critical for the long term success of your practice. That includes making it easy for your patients to access the finest products, and carrying the products you recommend in your office is the highest level of service you can provide. Patient compliance is another salient reason why carrying a full inventory in-house is an optimal business model (assuming you see people primarily in person).

There are also potential financial benefits of carrying stock, especially considering most professional lines recommend a 100% markup, and do not sell direct to patients. Most products have shelf lives in years, so this is a no brainer. In fact, I challenge you to think of another (legal) industry with that type of opportunity.

However, most practitioners that I meet are not making money from their pharmacy. Here are the top reasons why.

  1. Underinvestment in Inventory: Given the factors mentioned above, your inventory should be the engine of your practice. At its best it is an income producing asset unlike anything else in your business. Compared to other infrastructure investments, when you do the numbers, it provides excellent return.
  2. Selling products that are available to the general public. This includes MLM products, patient brands, health food store referrals and supposedly professional lines that allow their products to be discounted all over the internet.
  3. Ordering for Patients Individually. This is the cheapest for you, but is a poor level of service. When looked at from the patient’s perspective, if I have invested my hard earned money in your assessment, I want the solutions now. Not in 3-7 days and another trip to your office!
  4. Running out of Engine Room Products. Most practitioners use a core group of products for most of their patients and then individualize from there. Keeping a solid inventory of your engine room products is critical and your best investment.
  5. Too Many Product Lines. I have seen practitioners working with over a dozen product lines, and this is unsustainable. It adds to your costs well over wholesale as you or your team have many times to the work to do in accounting, ordering and shipping costs alone.
  6. Mental – Emotional Issues around Money. How much do you spend on your own health? How do you feel about money? We have worked with a number of practitioners who, having done some emotional releasing about this area, have been much more effective.
  7. Sympathy. Being empathetic (as opposed to sympathetic) with patients and their financial concerns might be the most important skill in effective naturopathic care. It takes training, personal development as well as a good dose of confidence. Holding the line and people accountable to their goals is your greatest gift to your patients, no matter how they squeal in the moment!

So, how do you navigate through this maze?  The first thing is to appreciate that there is a process of developing one’s pharmacy. So here are the milestones we would recommend each practitioner pass. If you have the financial flexibility to be able to stock a full inventory from the start, that is ideal, but for most practitioners, some sort of prioritizing and streamlining will be necessary.

Step 1: Engine Room Products

Which products you use most of will depend on the unique nature of your practice positioning and modalities. Most NDs I work with will recommend proportionally more Probiotics, Vitamin D, Enzymes than single herbal or homeopathic formulas. What’s in your engine room?

Step 2: Dealing with the Outliers

For those products not in your engine room, you may want to initially consider one of the professional brands direct shipping services. This still makes it easy for your patient to get products, keeps you in control of what they are taking, plus you can probably find something from your engine room to complement the recommendation for them to get started with today.

Step 3: Manage by Statistics and Follow Trends

Looking at your sales data for products can be extremely enlightening. Look for changes in core products, seasonal trends (allergy, cold / flu, etc) and key statistics. One key indicator is Product Turnover , which is the number of times an average retail inventory is sold within a specific period of time, normally a year. A good turnover rate is between 3 and 4.

Formula for Calculating Turnover: Annual Retail Sales divided by Average Inventory at the beginning of each month of the previous year = Turnover.

Step 4: Grow your Inventory in line with your Practice Growth

Building towards a full inventory as your practice grows take organization and long term thinking, but the goal is worth the journey. In our free ‘8 Steps to Total Practice Success’ call on Tuesday, March 8th we will be covering the most effective way to manage inventory, a system we call ‘par levels’. There will also be tips on marketing, hiring, systems and productivity. If you missed the call, you can get a replay on our website.

Holistic Practice Development helps practitioners to grow healthy, sustainable practices, regardless of demographic or economic environment.  Dr. Andrew Colyer and James Maskell have a combined 30 years of experience in the health care industry, and would love to help you grow your practice.  For your free practice strategy session, please visit:


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