Christian addresses five frequently asked questions for pharmacy owners who are considering selling their pharmacy. To help independent pharmacies both navigate and direct the sales process, H. D. Smith created VentureRx.
VentureRx fully supports the sale, purchase, start-up and transition strategies of pharmacies. Click here for a free, no-obligations needs assessment from VentureRx.
Read on for Christian’s insights.
FIVE QUESTIONS TO ASK WHEN SELLING YOUR PHARMACY
By Christian Herrington, Corporate Vice President Pharmacy Strategies, H. D. Smith
To help independent pharmacies remain independent and successful throughout a transition, H. D. Smith in 2016 launched VentureRx.
VentureRx fully supports the sale, purchase, start-up and transition strategies of pharmacies. Because many factors are at play during any business change, VentureRx is dedicated to the people and processes involved in starting, buying and selling. It empowers pharmacy owners to shape the future of their businesses.
Here are five key questions that every pharmacy owner should consider.
1) When should I start planning for the sale of my pharmacy?
Planning ahead is key for a smooth transition. The average sale process can take anywhere from 6 to 12 months.
The typical milestones and average timeline for a successful pharmacy sale are:
Several factors can impact this timeline, including the length of time to collect and review financial data, finding the right buyer, the negotiation period, and the buyer’s ability to obtain financing.
The typical milestones and average timeline for a successful pharmacy sale are:
- 1 month: Financial review, valuation and analysis of current business
- 2 to 4 months: Consideration of potential buyers, introductory meetings and transition discussions
- 1 to 2 months: Negotiations and agreement on a final price
- 2 to 4 months: Buyer financing and ownership transition
Several factors can impact this timeline, including the length of time to collect and review financial data, finding the right buyer, the negotiation period, and the buyer’s ability to obtain financing.
2) What do pharmacy buyers want? How can I make my pharmacy most attractive to a buyer?
The most critical step in preparing your pharmacy for sale is gathering and organizing your financial statements. Serious pharmacy buyers are looking for current, accurate financials that provide a clear understanding of your pharmacy’s business and justify its value.
Current financial data are crucial. Without them, you won’t receive an accurate and fair price estimation.
Be honest with potential buyers about all aspects of your pharmacy business. Before negotiations, share the good and potentially not-so-good information with the buyer. Buyers need to know all the pertinent details of a purchase, such as lease agreements, existing debt, past performance and future trends. Sharing this information with your buyer at the onset will alleviate surprises later in the process that could potentially harm the deal.
Curb appeal could make a big difference to some buyers. Consider a fresh coat of paint, fixing broken fixtures, and making all necessary repairs to ensure your pharmacy is aesthetically pleasing.
Current financial data are crucial. Without them, you won’t receive an accurate and fair price estimation.
Be honest with potential buyers about all aspects of your pharmacy business. Before negotiations, share the good and potentially not-so-good information with the buyer. Buyers need to know all the pertinent details of a purchase, such as lease agreements, existing debt, past performance and future trends. Sharing this information with your buyer at the onset will alleviate surprises later in the process that could potentially harm the deal.
Curb appeal could make a big difference to some buyers. Consider a fresh coat of paint, fixing broken fixtures, and making all necessary repairs to ensure your pharmacy is aesthetically pleasing.
3) Which elements will influence the value of my business?
It’s crucial to understand that pharmacy valuations vary dramatically depending on the type of pharmacy business. Differences among such factors as margin, cost of goods, inventory levels, and operating expense structures require that each pharmacy use a different valuation model. Make sure your pharmacy’s valuation is conducted by a professional using multiple, industry-standard formulations.
4) How do I find a pharmacy buyer who is a good fit for my business?
It is crucial to work with a transition partner who has access to a broad network of potential buyers. You likely won’t have access to such a broad network.
Your partner should review all potential candidates with you to jointly determine if they are capable and qualified to buy your store. This means that your transition partner must also be familiar enough with your business so that they can scrutinize potential buyers on your behalf. This will ensure that you see only qualified candidates that meet your requirements.
When meeting qualified buyers, ask about their current pharmacy business to determine if they’re a good match for the future of your pharmacy. Key topics should include how they run their store, staff size, patients, script volume, and any niche service offerings. Find out what they value in pharmacy practice and inquire about their long-term business goals.
Your partner should review all potential candidates with you to jointly determine if they are capable and qualified to buy your store. This means that your transition partner must also be familiar enough with your business so that they can scrutinize potential buyers on your behalf. This will ensure that you see only qualified candidates that meet your requirements.
When meeting qualified buyers, ask about their current pharmacy business to determine if they’re a good match for the future of your pharmacy. Key topics should include how they run their store, staff size, patients, script volume, and any niche service offerings. Find out what they value in pharmacy practice and inquire about their long-term business goals.
5) What should I look for in a professional transition partner?
Selling a pharmacy is a complex process that can quickly become overwhelming. Finding the right transition partner will save you time and headaches. It will also prevent such costly mistakes as undervaluing your store and wasting your time with non-serious buyers.
A good transition partner will:
To learn how VentureRx can support the successful sale of your pharmacy, visit hdsmith.com or call 603-773-5116 for a free, no-obligations needs assessment.A good transition partner will:
- Use multiple formulas to value your store. Be wary of valuations produced using only one formula or a partner who isn't willing to share the process with you.
- Take the time to get to know your unique pharmacy business and to understand the qualifications and values you are seeking in a buyer. A partner can’t make personalized recommendations without first learning your business inside and out.
- Treat the process with confidentiality and professionalism. Before you begin any financial discussions, be sure your partner requires potential buyers to sign a non-disclosure agreement that protects your information.
- Go beyond the buy-sell transaction. A strong partner will help ensure that the new owner of your pharmacy is successful and that the legacy of your business performs long after the sale. Look for a partner that provides value-added services, such as business plan development, marketing strategies and program recommendations. It's your legacy, and it’s important to protect it.
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