How to build a resilient and successful business, according to the great Charlie Munger.
Many people influence us as individuals and as business owners. One such figure who has profoundly influenced my approach to business is Charlie Munger. Charlie Munger was chairman of Berkshire Hathaway and was one of the most successful businessmen along with his partner Warren Buffet. Although he recently passed away at the age of 99, his wisdom and principles continue to guide many business owners, including myself. Munger’s insights into business strategy, decision-making, and personal development are invaluable. Here are some of the most impactful lessons I’ve learned from him and how you can apply them to enhance your pharmacy business.
1. Embrace Inverted Thinking
One of Munger’s most powerful tools was inverted thinking. This approach involves tackling a problem by considering the opposite. For example, instead of asking, “How can I grow my pharmacy business?” you might ask, “How could I destroy my pharmacy business in the fewest moves possible?” For some strange reason, our brains are better at identifying threats than figuring out solutions. You will find it far easier to list a bunch of pitfalls rather than a bunch of solutions. Create your list of negatives first, then invert those into positive actions; you can develop robust strategies for growth and stability.
*PBU members can watch me deep dive into this in our strategy training inside the membership.
Application:
- Customer Awareness: If one way to destroy your business is to not tell people about your services, then a strategy for growth is to maximize awareness. So, promote your pharmacy by utilizing local advertising, social media, and community events.
- Profitability: One way to ruin your profits is to pay too much for the products. So, to maximize your profitability, you will want to pay as little as possible for the products you sell.
2. Keep It Simple
Munger had a strong aversion to complexity. He often dismissed deals and ideas that seemed overly complicated, preferring straightforward, understandable opportunities. This principle can be incredibly beneficial in managing an independent pharmacy.
Application:
- Streamlined Operations: Simplify your processes wherever possible. Whether it’s your inventory management system, customer service protocols, or employee training programs, strive for simplicity to enhance efficiency and reduce errors.
- Clear Value Proposition: Make sure your customers clearly understand what sets your pharmacy apart. Whether it’s personalized service, faster turnaround times, or unique product offerings, communicate your value simply and effectively. Clear is better than cute!
*Simple scales, fancy fails!
3. Focus on Fundamentals
Munger emphasized the importance of mastering the basics. This involves not getting sidetracked by trendy business strategies until you’ve thoroughly mastered the foundational elements of running a business.
Application:
- Financial Health: Ensure your pharmacy’s three critical KPIs are in order. Nothing else matters until you have mastered these basics.
- Customer Relationships: Building and maintaining strong relationships with your customers is fundamental. Offer loyalty programs and personalized service, and ensure every interaction leaves a positive impression.
*Profit is in the boring work. It is doing the basics better and more consistent than anyone else.
4. Leverage Unique, Expensive, Sticky Products
Charlie Munger often spoke about the ideal business being one that is unique, can charge premium prices, and has sticky (repeat) customers. For a pharmacy, this translates into offering exclusive or high-demand products and services that ensure customers keep coming back.
Application:
- Exclusive Offerings: Consider offering unique products that aren’t available at big-box stores. This could be specialized health supplements, locally sourced products, or exclusive health services.
- Premium Services: Introduce premium services such as personalized health consultations, home delivery of medications, or wellness programs. These services can command higher prices and increase customer loyalty.
- Recurring Revenue: Implement programs that encourage repeat business, such as medication synchronization or subscription-based health services.
5. Hire and Train Like an Owner
Charlie Munger believed in hiring people who act like owners. This means having a team that is deeply invested in the business’s success and makes decisions that benefit the pharmacy’s long-term health.
Application:
- Employee Ownership: Consider offering profit-sharing or other performance incentives that align employees’ interests with the long-term success of the pharmacy.
- Continuous Training: Invest in ongoing training for your staff. This could include technical training, customer service skills, and staying up-to-date with the latest in pharmaceutical care.
6. Understand the Value of Brand
Munger and his partner, Warren Buffett, often invested in companies with strong brands. They understood that a well-regarded brand can create a loyal customer base and allow for premium pricing.
Application:
- Brand Building: Invest in building a strong brand for your pharmacy. This includes everything from a recognizable logo and consistent marketing messages to ensuring exceptional customer experiences that build trust and loyalty.
- Community Involvement: Enhance your brand’s visibility and reputation by being active in your community. Sponsor local events, participate in health fairs, and collaborate with other local businesses.
7. Know When Enough is Enough
Munger knew when to say enough and avoid the endless pursuit of more. He focused on maintaining independence and not overstretching resources.
Application:
- Balanced Growth: Aim for sustainable growth rather than rapid expansion that could overextend your resources. Focus on maintaining high-quality service and operational efficiency.
- Financial Prudence: Avoid unnecessary risks and ensure your business decisions are financially prudent. It’s better to grow slowly and sustainably than to risk the stability of your pharmacy.
8. Learn from Others’ Mistakes
Munger often emphasized the importance of learning from the mistakes of others to avoid unnecessary pitfalls.
Application:
- Continuous Learning: Stay informed about industry trends and challenges. Learn from the experiences of other pharmacy owners through networking, industry conferences, and professional associations.
- Mentorship: Seek out mentorship opportunities with more experienced pharmacy owners who can offer guidance and insights based on their experiences.
I wished I had a mentor early in my pharmacy owner and entrepreneurship career. This is exactly why I created Pharmacy Badass University for pharmacy owners. You could learn directly from me, both my wins and losses and from your peers as well.
9. Charlie Munger Prioritize Long-Term Decisions
Munger and Buffett’s investment philosophy was based on making decisions with a long-term perspective.
Application:
- Long-Term Planning: Develop long-term strategies for your pharmacy, whether it’s expanding your services, improving your technology, or enhancing your customer loyalty programs. Make decisions that will benefit your business for years to come.
- Patient Care: Focus on providing exceptional patient care that builds long-term relationships. Happy, healthy patients are more likely to remain loyal customers.
While independent pharmacy is a unique industry, it is also a business. Successful businesspeople can teach us a lot that we can apply to our pharmacies. I think it is very important to collect mentors outside of pharmacy, just as it is critical to have some within the industry as well.
