Diary of a Retail HME Start-Up after more than a year of planning

After more than a year of planning
and work, Allstar Medical Supply
held its grand opening in May.
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.
august 2010
Mike Kuller assists a customer
in his newly opened retail
store in Walnut Creek, Calif.
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.
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.
august 2010
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?
august 2010