Welcome back! Today I’m so excited to interview Diana Hermann, L.Ac., owner of Zi Zai Dermatology, based in Fort Collins, Colorado. Zi Zai Dermatology is an impressive two-fold business: it’s both a clinic that provides acupuncture and herbal medicine to local patients in Portland, as well as an incredible line of packaged dermatology herbal medicine products sold online.

Diana is an expert in running a complex and very busy herbal dispensary that creates both custom patient formulas as well as packaged products for sale internationally.

Today Diana’s going to share her expertise with us and offer some guidance on how to start and manage a Chinese herbal medicine dispensary.

In addition, Diana has literally trained all over the world (China, England, and the US). So keep your eyes peeled in a few weeks for another interview with Diana discussing all the amazing places she’s studied advanced herbal medicine, and why she chose those locations. (With tons of pictures, of course!)

Without further ado, let’s learn about Diana, what inspired her develop her packaged herbal product line, and her tops tips for running your own dispensary!

Where did you go to school for acupuncture and herbal medicine, and how long have you been in practice?

I graduated in 1999 from the Oregon College of Oriental Medicine (OCOM) in Portland, Oregon, USA with the degree of Master of Acupuncture & Oriental Medicine.  I have been in private practice since then.

You have some pretty extensive training in herbal medicine. Where exactly have you studied? How long was each program?

The herbal education I received in graduate school at OCOM was superb.  So that gave me an excellent starting point.  In September of 1999, I completed a month-long internship at the Nanjing University of Traditional Chinese Medicine (NUTCM).  I studied with the Director of the Dermatology Department in the NUTCM teaching hospital.  The use of Chinese Medicine in the treatment of dermatological conditions is largely focused on herbal prescriptions (internal and external), so I learned more skin-specific uses of herbs I was already familiar with, as well as being introduced to less-common Chinese herbs that are often employed in dermatology.

Recently I began studying with Mazin Al-Khafaji, a world-renown practitioner of Chinese Medicine who specializes in dermatology (learn more about him at http://www.Avicenna.co.uk).  This year I am attending his TCM Dermatology Diploma Course in London, UK.  I will travel to London a total of 5 times (!) this year to complete this elite training.  We are learning to recognize and understand various skin diseases from both the western biomedical viewpoint as well as the TCM perspective.  Treatment is based solely on the use of Chinese Herbal Medicine (no acupuncture).  At each module, I am continually amazed at the depth of herbal knowledge we are learning.  I am loving it!  It is remarkable how exceedingly complex and brilliant Chinese Herbal Medicine is.

What was your first exposure to acupuncture and/or herbs?

My first exposure was to external herbal medicine was during my training in kung fu back when I was a civil engineering student in my early 20’s (early 1990’s). We had to apply a liniment (Dit Da Jow) before conditioning (where we would basically beat on each other to toughen our tissues in preparation for actual combat – why did I ever do this??). Those students who did not apply the Dit Da Jow before conditioning would end up so bruised, swollen and tender that it hurt just to look at their limbs.  Those of us who applied the herbs had few contusions, and the bruises that did develop healed in record time.  I was so impressed!

What made you decide that you wanted to pursue acupuncture and herbal medicine as a career?

I had overheard whisperings about acupuncture from the black belt students in my kung fu class who were getting treatments to help heal injuries.  I wanted to know more about this “ancient Chinese secret” so I set up an appointment with a local acupuncturist.  She helped treat the effects of my stress, which had increased significantly since I began working as a civil engineer.   One day I just looked at her smiling face and thought, “Screw engineering…I want to do what she is doing.”

How did you initially start your business after acupuncture school? Were you ever an associate, or did you go right into private practice?

I went right into private practice. I have problems with authority and I am not wired to work for someone else.  Plus, back in 1999 there were not as many jobs for acupuncturists or many opportunities to partner with other health care providers (at least, not as many as there are today).

There was no social media and few practitioners had websites at that time.  Frankly, there were few people in my community that even knew what acupuncture was, let alone what it could treat.  How was I going to get word out that I had something useful to offer and I was ready and waiting for clients?  I needed to get to people who gossip so they could help spread the word about me.  So I sent out letters (in the actual mail) to all the hair salons and spas in town.  I got ONE spa owner who came in for treatment.  But it was the right person because she told people about me and eventually I had a couple of regular clients and then my practice grew from there.

Tell us about your specialty and what made you choose that path.

I specialize in dermatology, autoimmune diseases and respiratory ailments.  Of these, dermatology is my top favorite.  I have always had sensitive skin, I get rashes easily, and I absolutely abhor being itchy. My heart aches for those people with chronic itchy skin conditions.  There are so few conventional treatment options for inflammatory skin conditions and I thought I could put my efforts in that direction.  Plus, skin conditions can be very challenging to treat successfully.  I like challenges.  I treat such conditions as psoriasis, eczema, acne, rosacea, perioral dermatitis, cheilitis, lichen planus, warts, herpes, and more.

The inflammatory nature of autoimmune diseases is very similar to that of inflammatory skin diseases.  From a TCM perspective, the pathogenesis, diagnosis and treatment approaches of these two categories of disease are so similar that I couldn’t help but get interested in treating autoimmune diseases as well.  Chinese medicine is really an effective way to naturally manage these challenging conditions.  I’ve also become quite good at treating respiratory ailments because over the years I have successfully treated innumerable cases of upper respiratory infections.  I love treating infectious illnesses!  In addition, asthma and eczema can be concurrent in atopic patients and it is important to be skilled in treating both.

Can you explain the current set up of your businesses – acupuncture/herbal clinic plus herbal product line? Do you provide personalized formulas (decoctions and granules, etc.) for your patients, or are most of your herbal prescriptions topical?

[I’ll do better than that – I will explain the evolution of my practice because I think it would be interesting to newbies.]  Early in my practice I hadn’t had enough dermatology training and experience to feel adequate saying that I specialized in it.  Plus, no one in the community had any idea TCM could treat skin ailments.  So for a long time I mostly treated cases of pain and injury, as well as acute respiratory infections. At that time, I would estimate that my practice was 85% acupuncture and 15% herbal treatment (maybe it was closer to 90%/10%).  I obtained fast, long-lasting results and I had no shortage of patients.  But I started getting bored.

I was an excellent acupuncturist, but there were other practitioners in my town who also did a fine job treating pain.  So I decided I was ready to move toward specializing.  I contacted all my colleagues in town and told them I was going to specialize in dermatology and that they should send all their derm patients to me (golly, so bold of me!).  In return, I asked what types of cases they each wanted to see more of and I promised to refer those types of cases to them (win-win!).

Now, dermatology, autoimmune and respiratory conditions truly are the bulk of my practice.  Currently the acupuncture/herbal split is close to 30% acupuncture and 70% herbal.  Soon it will probably end up being 10% acupuncture and 90% herbs.

There are several patients of mine who receive their herbs and nutritional supplements in pill/tablet form.  The reasoning for this is based on condition, lifestyle and compliance.  The conditions I treat that respond well to patent preparations are common cold and flu, mild coughs, and allergies.  But the majority of my patients receive custom internal formulas in the form of concentrated granules or raw herbs to be decocted.  Most of my dermatology and autoimmune patients will get raw herbs because granules are often not potent enough to adequately treat severe inflammation.   Most of my dermatology patients will also get topical herbal preparations to apply to their skin (depending on their condition, of course).  Very few derm patients receive only topical preparations.

So your dispensary has two major functions – one, to provide herbal prescriptions for patients that visit your office, and two, to create herbal products for sale on your website. How do you manage these two separate functions?

You are correct: the Zi Zai Dermatology herbal dispensary supplies both custom patient preparations of internal herbs as well as the herbal ingredients for the topical products we craft.  We personally hand craft all of the external herbal products that we sell.  Nothing is outsourced.  We have currently outgrown our current clinic location.  When we find a new home for Zi Zai Dermatology, I plan to extend the services offered in our dispensary.  I want to be able to fill custom formulas for other practitioners in town who cannot afford or don’t have the space to stock their own pharmacies.  I also want to offer custom herbal facial masks and other custom-made topical products for customers who visit the shop as well as for my patients.

Can you explain how these two separate functions work at your office? Do you have employees who assist you?

We are still working this out to make operations more efficient.  It used to be just me doing EVERYTHING.  So I batched things based on the day.  I saw patients certain days of the week and then dedicated other days to making products.  Now Zi Zai has 2 additional employees: one who handles all the office stuff plus order fulfillment (we also sell our products online) and one who helps me craft the topical products.  Each will help me fill custom herb formulas when needed.

It has been a tad challenging to keep all these operations running smoothly, especially during the time I was training both of them while still seeing patients (I felt crazy some days).  Ideally… and we are not there yet… I will have a full-time pharmacy employee who just fills the raw and granule formulas.

How do you stay organized?

This is a constant challenge.  Lots of written lists!  A big whiteboard and more sticky notes than my office manager cares to keep track of (she rolls her eyeballs at me every time I plaster a new one on the desk).  But the more customers and patients I get, the more work there is to be done and the more there is to keep track of.  I really ought to carry an old fashioned notebook because the calendar on my cell phone doesn’t have enough space for all my notes!

How do you know how much of each herb to order and when?

We are currently reorganizing our inventory tracking system.  For now, we do it all by hand.  Whenever we get down to one backup bag of an herb, its gets written on the big whiteboard and I order it that week.  Some herbs I use so much of that I order a lot of them every time I place an order (like Sheng Di Huang – I can never have enough Sheng Di Huang in stock).  Other herbs are harder to obtain (mostly now due to pesticides) so when they become available, I order extra to be sure we are less likely to run out of them should they become scarce again.  I would be VERY interested to hear what inventory systems other herbal pharmacies are using because I would like to improve our rudimentary system.

Is the majority of your time spent on preparing formulas or products, or is it evenly divided between your acupuncture clinic and herbal preparation?

Now that I have someone helping me craft the topical herbal products that we sell, I can spend more time treating patients again.  But as far as the business as a whole is concerned, it’s a 50/50 split between seeing patients and crafting products.

When did you start your dermatology herbal product line?

I started formulating products in 2008 and then began the official business and launched the website in 2009.

What inspired you to begin packaging dermatology herbal products for sale?

In the hospital at NUTCM (Nanjing University of TCM), their pharmacy carried all sorts of pre-made topical herbal preparations for skin.  When I returned to America, I realized my patients didn’t have such options.  One day I realized that if I didn’t start making them, maybe no one would!  But I wasn’t sure I could turn it into a viable business.

When you decided to embark on Zi Zai Dermatology, how did you begin? How did you know how to get started?

I had no idea where to begin.  Honestly, I don’t know what I was thinking.  I had no idea how much work all this would take!  I only knew that more people should have access to effective herbal options for their itchy skin conditions and I was determined to make the best products possible.

I understood herbs, but I had no idea how to make skin care products. So I watched a bunch of YouTube videos, purchased every eBook available, and spent a lot of time on the floor at the bookstore reading books and taking notes (I couldn’t afford to buy every book I wanted).  Eventually I saved up enough money to take some classes on making lotions, ointments and soap.  Then I did A LOT of experimenting, much of which was rather messy.  I made a lot of mistakes and I learned more from them than I ever thought I would. And although the learning curve was frustrating, I had a lot of fun, too.

Finance questions: To begin producing herbal products, did you have to take out a business loan? If you saved money for Zi Zai, how long did it take you to save up enough capital to start packaging products? Or did you start out small and work slowly to where you are today?

I did not want to take out a loan or have anyone else have control over how I did things, so I did not seek any investors.  I borrowed $10,000 from family members who believed in me.  That was enough to get a logo designed, a website designed, and the labels for 2 products designed.  That did not include professional photos of the products for the website or the actual printing of labels, nor did it cover any cost of packaging materials or product ingredients.

I found a photographer who also believed in me enough to take the professional photos and let me pay him over the course of a year – I was grateful.  From that point on, I only started new projects as I saved up the money myself to complete them.  I did not want to borrow any more money, so it was a slow and gradual growth.  Every penny of profit I made went right back into the business.

Once again, I had no idea how much work (and cost!) was involved in making professional products.  It cost money to stock the herbs and other ingredients, to stock the containers, to have labels designed, and to have labels printed.  It sucks when you spill a small bottle of a precious oil or screw up a batch of product.  These can be expensive mishaps!

I had no money to put towards marketing and promotion.  And really, time IS money.  I still had to see patients because that is what paid the bills, so I couldn’t afford to see fewer patients.  For years I made the products at night after clinic hours and on weekends.  I was working a stupid amount of hours.

Do you have any financial advice for those of us who are considering curating an herbal dispensary in our office?

Start with a few herbs and build from there. You don’t need to have 150 herbs all at once.  Though, I do have a colleague who bought her entire bulk pharmacy from another practitioner who decided to stop prescribing herbs.  But I built mine slowly over time.

What advice would you give for people who want to start an herbal dispensary for their practice, but don’t know where to begin? How do they know, for example, how much of each product to buy to prevent herbs from expiring before you need them? Do you recommend starting with just a few herbs, or going for it and buying a large collection of herbs that immediate feels like a “dispensary”?

If you are thinking of building an herbal pharmacy, I would suggest first deciding if you want to use granules or raw herbs (or both).  If you are treating skin conditions, you won’t have much choice as raw herbs are really the only way to get results.  But granules can be effective for many ailments, so it is up to you.

Granules don’t take up too much space in a clinic, but raw herbs do.  So consider how much space you have to house your pharmacy.  If you are going to stock raw bulk herbs, consider how you will store them.  I store them in gallon size glass jars. The jars are not expensive but getting them shipped to you is!

Some practitioners store their raw (dried) herbs in plastic bins (shoebox sized) which are inexpensive and allow for neat stackable storage and easy access (especially for herbs that are like bird nests – Hai Zao, for instance).  But plastic containers like that allow air and moisture and bugs in, so I don’t think they are particularly suited for long-term storage of herbs. Plus, I love seeing the herbs in their jars on my shelves.

Which herbs should you carry? Start by ordering the top 15 or 20 herbs you might use.  For instance, if you treat many cases of PMS, you’ll want all the herbs necessary to put together Jia Wei Xiao Yao Wan with some modifications for addressing Blood Stasis, for example.  Or if you treat lots of coughs, order the basic herbs necessary to prescribe the formulas Er Chen Tang and Qing Qi Hu Tan Wan.  Then slowly build from there.   If you treat all sorts of conditions, then start by ordering herbs for patterns that respond better to herbs than to acupuncture such as Dampness, Damp Heat, and EPIs.

What is a typical day like for you in your office?

Controlled chaos.  I will start in the lab, instructing our product crafter on what we are making that day.  Then she goes to work crafting products and I start seeing patients. Most days my patient schedule is filled and I am moving nonstop.  I will see both acupuncture and herbal patients in the same day.  But nowadays I only run one treatment room.

While a patient is relaxing with needles in there, I am filling herbal formulas (or writing herbal formulas for my staff to fill), answering emails and phone calls from patients or customers who have specific medical or product questions (I let my office manager deal with everything that does not require medical information/advice), and overseeing our product crafter (she is still learning so I still need to instruct her on some steps and I am a control freak, so I still oversee EVERYTHING that goes on in the lab).

Most days I also have a few patients who come in asking for herbs for the common cold or cough they just developed (which cannot wait to get treated because then it will get worse) so I spend a few moments getting herbs together for them between my scheduled patients.  I don’t always get a lunch break these days.

Can you take us through the process of product development for a new product for your dermatology line? What does it look like from start to finish?

First thing to consider when developing a new product is need.  Is there a need in my clinical practice for a product I cannot find in the market? Are there products already on the market but I think I can make them better?  Have I received enough requests from customers or colleagues to make a product that they can’t find on the market or that they would like to see improved?

Once I decide that yes, there is a need for a new product, then I decide in what form those herbs will be administered onto the skin – ointment, lotion, soap, oil, balm, powder, wash, etc.  Then I begin to formulate the herbs based on common TCM pattern differentiation of the skin imbalance being addressed.  Then I formulate the non-herb ingredients.  Then I decide what type of packaging would best suit the use of the product.

Next, I make a small sample batch and test it out for consistency on myself and my patients and friends or anyone I can trust to give me honest feedback.  Then I test it on several patients for efficacy.  If I don’t think it works as well as planned, I reformulate and make another sample batch to test out.

If all goes well, I will print temporary labels from our computer and add the product to our catalog.  This requires taking and uploading a photo and writing a product description and syncing the new inventory item to our accounting software.  If we get good feedback from customers and if I am satisfied with the formula, I get our graphic designer to start designing official labels.  (If not, I reformulate and make a new batch until I am satisfied with the product.)

Once I do the back and forth with the graphic designer to settle on a label design (and quadruple-check the label copy to be sure everything is listed and spelled correctly), the design gets sent to the printer.  They make sure the UPC bar codes scan and make any adjustments necessary.  Then I sign off on the temporary proofs, they mail me actual proofs which I then also sign off on and THEN I can order the labels, which have to be paid for in advance of production.

The label company then designs the new die (to cut our uniquely-shaped labels) and prints and cuts the labels and mails them to me. Then I make more product, hand apply each label, take a nice new photo and add it to the website. Whew! This entire process can take a few months, or up to a year.  I still update established product formulas when necessary (such as reformulating our soaps to remove palm oil).

Do you sell your herbal products to many other herbalists for them to provide for their patients? Do you offer a “practitioner” discount or rate for them, so they can then mark it up for resale?

Yes and yes.  I feel so honored when my colleagues want to carry our products in their clinic.  I offer a professional discount of 35% off retail prices to licensed acupuncturists, licensed herbalists, naturopaths, medical doctors and licensed estheticians.  Professionals with retail licenses who order $300 or more of our products (after discount) can qualify for our Wholesale discount of 50% off retail prices.

How long did it take before you felt like you’d “made it” with your business/businesses?

Ask me again next year 😉

How do you plan to continue your studies of herbal medicine in the future?

Well, Mazin Al-Khafaji’s TCM Dermatology Diploma course was a dream for me and now that I am in the middle of that, I have no idea what comes next.  (What can possibly top this training? This diploma program is so awesome!)  I might have to learn Mandarin in order to get training in China.  But I am not undertaking that anytime soon.  I would really like to learn from Dr. Shen P’ian (author of the Management of Autoimmune Diseases with Chinese Medicine).  He was invited to teach in London in 2013 but I missed it – I kick myself for not attending that seminar.

Do you have any suggestions for determining if starting a dispensary is the right choice for someone? Perhaps number of patients currently taking herbs, interest in herbal medicine, whether patients can afford to buy herbs regularly, etc.? Is there ever a time when you would NOT recommend that someone begin creating their own dispensary for their office?

First and foremost, if you have no or minimal herbal training, then having your own pharmacy is not appropriate.  Herbs are complex and not without side effects.  They require a high level of training to safely dispense if you are prescribing custom formulations.

Next, the choice of whether or not to have a pharmacy will depend what types of conditions you treat.  If you want to treat the same things I focus on (inflammatory skin conditions, autoimmune diseases and respiratory conditions), it is my opinion that you cannot adequately treat or manage these conditions without herbal medicine.  And such conditions rarely are effectively treated with patent medicines.

Other factors to consider before collecting a bunch of herbs for your pharmacy are clinic space, time to prepare formulas, overhead cost of maintaining stock, and desire. Do you have enough room to store all your herbs properly and where you can easily access them and prepare formulas?  Do you have the time to prepare formulas for patients (it takes time to weigh out herbs and put them in packages)?

You have to buy herbs up front before any patient pays you for them.  Can you afford this? Do you even want to bother with herbs?  There are now a few pharmacies across the U.S. who can put together custom formulas and ship them to your patients so that you do not have to undertake this task/expense.

*This applies only to U.S. practitioners who legally are allowed to have their own herbal dispensaries.  The laws are different in other countries.

Do you have a product that is a personal favorite of yours? What is your bestseller?

I have 2 favorite Zi Zai Dermatology products.  The first is our BeeswaxFree Herbal Lip Balm.  I discovered that I had developed an allergy to propolis (a component of honeycombs that often gets stuck in the beeswax).  So I formulated a lip balm that did not use beeswax and I absolutely cannot live without it now. Apparently lots of people feel the same because it is far and away our best selling product!  My next favorite of our products is our line of herbal facial serums.  I am almost 43 years old and Zi Zai’s facial serum has done wonders to keep those fine lines and wrinkles at bay (I use our RosaceaHerbal Facial Serum).

Do you have any advice for those of us who want to make packaged herbal products for sale, either just for our own patients, or for sale online?

If you produce anything – a product or service – make sure it is the best you can do or don’t bother.  The world is full of mediocrity.  Be and do better than what is already out there.

Does it take you a long time to perfect your packaged products?

Yes, because I am a perfectionist.  Though I am not sure if I ever consider anything perfected – with each new bit of knowledge and clinical experience I gather, I find new ways to improve existing products.  Ever an evolution.

In the classes and courses/certifications that you have taken after graduating from acupuncture school, did these classes teach you the practical side of creating herbal products? For example, did you create things in these classes? Or were they more for the theoretical aspects of herbal medicine and prescription writing?

All of continuing education I received was focused on a deeper understanding of the human body, disease and how to use acupuncture and Chinese herbal medicine to achieve the best clinical results in the patients I treat.  No TCM class ever taught me how to make topical skin care products.  I had to go outside the world of Chinese Medicine to learn that.  Perhaps someday I will teach such things 🙂

Anything else you’d like to share? Further advice or words of wisdom?

Be prepared that in any business you start, it will likely take far more work than you ever imagined. More blood, sweat and tears than you might have prepared yourself for.  Entrepreneurship is not for the faint of heart.  But if you have an idea in you that needs to be born, don’t wait to bring it into reality.  If Steve Jobs had waited until the iPhone was perfect before he unleashed it to the public, we still would not have the iPhone.

Thank you for all the amazing tips and insight, Diana!

Don’t forget to check out Zi Zai Dermatology online and ask about their practitioner discount:

35% off retail prices to licensed acupuncturists, licensed herbalists, naturopaths, medical doctors and licensed estheticians.  Professionals with retail licenses who order $300 or more of our products (after discount) can qualify for our Wholesale discount of 50% off retail prices.

Have questions or comments for Diana? Leave them in the comments below, and thanks for reading! Stay tuned for next week’s interview with Eric Schanke of Ashi Acupuncture.