Th in ki ng After more than a year of planning and work, Allstar Medical Supply held its grand opening in May. Go od Diary of a Retail HME Start-Up By mike kuller, rph Lots of selections mean lots of sales to cash customers. Kuller hired sales staff with both HME and retail knowledge. 18 | august 2010 | www.homecaremag.com Mike Kuller assists a customer in his newly opened retail store in Walnut Creek, Calif. A s Medicare reimbursement has declined for the home oxygen and medical equipment industry every year since 2005, I had been looking for a strategy to diversify and keep my company, Allstar Oxygen Services, in the black. For over a year I collected articles on retail HME because it seemed to have some possibilities and I knew very little about it. motorized scooters, lift chairs and electric beds, but also rollators, compression stockings, orthopedic braces, bath safety items, a line of diabetic shoes and the usual retail array of medical products. I considered walk-in tubs but opted for stairlifts instead. And I planned to add home modification services in conjunction with a local contractor down the road. To be competitive, I would have to be able to bill Medicare for the chair lift mechanisms and the rollators, but everything else would be cash. June — After finishing the business plan, I went to the bank I had worked with for the 10 years since starting Allstar Oxygen to look for financing. It turns out after three mergers they were no longer the preferred SBA lender that helped me start the first business, but they referred me to another bank nearby. Without too much difficulty, I was able to get a $300,000 SBA loan for low costs (part of the economic stimulus plan) and a low interest rate, repayable over 10 years. April, 2009 — I came home from Medtrade Spring and after hearing numerous presentations on retail HME, I was more convinced than ever that was the direction I needed to go—and soon. One of the articles I had saved was by industry consultant Jack Evans with “My retail store July — Now I needed to find a good pictures of a store he designed that location. In my mind, the top three now looks like looked very attractive and differfactors in a successful retail ent than any medical equipment business are location, location store I had seen. So I contacted and location. Perhaps added to Who would have him and asked if he would help with that for seniors are easy access and guessed 32 my project. He began by sending me a parking. Fortunately, with the economic percent cuts?” downturn, there were quite a few empty lot of good information. For starters, I decided I didn’t want to storefronts available, and the rents —Mike Kuller combine my new retail business with appeared to be favorable. Allstar Medical Supply my existing HME company’s warehouse After looking at numerous spaces, I and delivery operation (Allstar Oxygen zeroed in on one with a little more than Service in Concord, Calif.). First, there was no space; 2,000 sq. ft. The location had decent parking on a main and second, the location was excellent for a delivery street across from a busy Trader Joe’s grocery and only a business—between two freeways—but not that condu- half-block from a hospital. But after the owner handed cive to retail traffic. And after downsizing my customer me an 82-page lease, she appeared to be difficult. The service staff in late 2008 to deal with the 36-month oxy- last thing I needed in starting a new business was an gen cap and the 9.5 percent Medicare cut, I couldn’t ask uncooperative landlord, so I continued to look. them to stretch any more into a new venture. I finally settled on a 6,000-sq. ft. space (an out-of-busiSo I decided to create a new company and find a ness Blockbuster Video) that had just become available in storefront location in a downtown retail area with 2,000 nearby Walnut Creek—and that the landlord was willing to 3,000 sq. ft. to start fresh. to split in half for me. Access and parking were excellent, and visibility was good along a main street. May — I began writing a business plan. This prompted me to look closely at the local demographics (they December — A few days before I signed the lease, I appeared excellent), take a good look at the competition got a call from the Yellow Pages informing me that the (only a couple of small, older, cluttered stores locally), deadline was approaching for display ads. Realizing this consider all of the products I would carry (numerous items I knew nothing about) and develop a budget with After working as a hospital pharmacy manager and founding three-year pro forma financials. I projected break-even two home infusion companies, Mike Kuller, RPh, became regional at about month 13; Jack said it would be more likely vice president of Apria Healthcare before founding Allstar Oxygen Services in 1999, and Allstar Medical Supply in 2010. around month 11. Kuller has served on the California State Board of Pharmacy I wanted to create an attractive store with an open Home Health Care Committee and is a NIPCO Certified floor plan, well lit, with a lot of product selection and Respiratory Care Pharmacist. You can reach him at [email protected]. great customer service. We would sell big items like a genius move. www.homecaremag.com | august 2010 | 19 would be a major part of my advertising, I needed to get an ad in the phone book now or wait for another year. I hired a graphic designer to create an ad, and we made the deadline. Knowing that I couldn’t turn back, I woke up a few nights in a sweat wondering what I had gotten myself into, but I kept going. I sent the floor plans outlining the new space to Jack, and he came back with a design designating where each product category would go. Now the business was beginning to become a reality. Here was the layout in my hand with all of the products I would carry. I hired an architect to do drawings to submit to the city. Once we had formal plans, I moved forward getting bids and hired a contractor and an interior decorator. January, 2010 — Once we dealt with the city planning department, modifying the plans a couple of times and finally receiving a building permit, construction on the space began. We ran into a few problems creating a third space in a building designed for two, but it was nothing a little additional construction couldn’t solve. When I told people I was starting a new business, some were surprised. They said at my age, most people were thinking about cutting back or retiring. I was hesitant to tell them my new business wasn’t about my unbridled ambition but was more a defensive move to keep my other business afloat. Our Yellow Pages ad came out in the phone book. We were getting two or three calls a day, so I had to get voicemail to let the callers know we were not yet open. When one message said a customer was unsuccessfully trying to find the store, I put a big sign in the window to let everyone know we were coming. 20 | august 2010 | www.homecaremag.com February — I had a list of products to consider in each general category and multiple vendors identified for each group. I contacted numerous manufacturers and set up new accounts to buy products for the store. Others had heard about my venture and contacted me. For some of the bigger accounts, I was able to negotiate 90-day terms. But without a credit history for the new company, many of the smaller vendors required a credit card or were only able to give me 30 days. March — As construction was coming along well, I figured it was time to hire the sales staff, a male to help with delivering big items and a female who might have a softer touch with seniors. I was flooded with resumes and was able to hire an easygoing, personable guy with over 20 years’ experience in the DME industry, most recently as a logistics manager for one of Allstar Oxygen’s competitors. Then I hired a woman with a great personality who had owned her own boutique and had lots of retail experience to complement him. April — Finally, after many delays and finding creative ways to work around some of the city’s stringent building codes, construction was finished. The cost of the improvements was about 30 percent over the initial bid because of things I hadn’t anticipated. But the place looked great, so it was worth it. We had problems getting our phone and computer lines installed, and then the phone company changed the FAX number without telling us. Since I had already had stationery and business cards printed, AT&T agreed to pay for the reprinting and give me a free month of service for the trouble. Since this business was mainly going on their products, teaching us how to to be cash, I asked my accountant to use them and how to sell them. recommend a point-of-sale cash regisOn Monday, May 10, the store had ter system. I purchased a state-of-thea soft opening. We had a Chamber of art system with barcode scanners and Commerce ribbon-cutting one evetouchscreen monitors/computers with ning, and more people showed up than Internet access on top of cash drawers. we planned. The nice thing is we can bookmark On Saturday, May 22, Allstar Mediour manufacturers’ catalogs on the cal Supply had our grand opening. It Internet and turn the screens around was publicized in a couple of the local to show the items to customers. newspapers, and I took flyers to many Then I realized that every single Opened in May, Allstar Medical Supply is on its way to of the senior retirement homes in the item we were going to stock had to be breaking even by November. area. One of the sales reps came and entered into the back-end accounting helped us demonstrate her products. system with all of the order numbers, pricing info and barcode We served food, had raffles for the prizes our vendors had SKUs. I figured it would be about 40 hours of work and began donated and it was a big success. to panic. My wife suggested hiring a college student to do the I’m working every Saturday now since the store is open for data entry. Why hadn’t I thought of that? The student I hired four hours, and I want to give my staff a break. In spite of that, got data entered for about 600 items in a couple of days. Then it’s satisfying to see the business take off after all of the planon his own, he went into the storeroom and put together all of ning and work. In my plan, I had projected $5,000 in sales for the shelving and arranged the overstock. Who says the younger the first month. In our first four weeks, we nearly quadrupled generation doesn’t have a good work ethic? that. Now Jack says we may hit break-even by month six. May — As we received inventory and began unpacking boxes to stock the store, there was a fairly good flow of customers who had seen our sign and were interested in purchasing items. It was tough to turn them away and ask them to come back in a couple of weeks. Some of the sales reps came in and helped us unpack and stock their items. They also gave us in-services July — The stress of managing this project and running my other business almost did me in, and I’m sure my wife was ready to strangle me by Friday nights when I would come home and collapse. But looking at Medicare competitive bidding, my retail store now looks like a genius move. Who would have guessed 32 percent cuts? www.homecaremag.com | august 2010 | 21