| If buying a pharmacy features on your New Year’s Resolutions, then take a look at our Pharmacy Ownership Readiness Checklist – we’ve put together the key factors to improve your readiness to own a pharmacy.
Pharmacy Ownership Readiness Checklist
Think through the differences between being a pharmacist and a pharmacy owner. Owning a pharmacy brings a whole lot more responsibility, financial commitment, compliance obligations and time management. Does pharmacy ownership align with your career and lifestyle goals?
As specialist pharmacy accounting and business advisors, we have an ear to the ground. Along with our network, we often know about pharmacies for sale and owners considering selling. Talk to us about your ambition. We’ll talk through the implications of different ownership models (including partnerships), along with the pros and cons of different pharmacy locations eg. Shopping strip, shopping centre, medical centre, regional etc.
Evaluate your borrowing capacity and think about how you will fund the purchase. Banks generally will lend 75% of either the purchase price or the business valuation, whichever is lower. The difference will need to be funded from personal assets like cash or equity from property. If you are acquiring a partnership interest, the existing Partners may allow you to use their equity in the business to fund your purchase. We’ll be able to share our experiences here too. An entry-level pharmacy may cost $1 – $2 million, with larger pharmacies $5 million plus, so there’s plenty of scope to consider.
When it comes to assessing the pharmacy’s suitability for you, a thorough due diligence is essential as the numbers don’t always tell the whole story. Consideration of the financial health of the business, turnover, margins, labour costs and risks eg. Lease and trading banner. There’s also the goodwill to consider (based on the location, team, culture) and other factors such as value alignment, partnership agreements (if purchasing a partnership interest), definition of clear roles and responsibilities etc. It is important to invest a considerable amount of time and resources at this stage of the process, as generally the outcome provides information of whether or not you proceed with the transaction.
Understanding and thinking through the implications of the legalities involved in buying a pharmacy is vital. Commercial terms, lease and sale agreements, partnership considerations, franchise agreements, exit and non-compete clauses – these all must be considered carefully. It’s worthwhile familiarising yourself with these kinds of things before you start the purchase process, which we are happy to help with and can introduce you to solicitors that have extensive expertise in pharmacy transactions. Equally important is to consider the legal responsibilities that accompany becoming a director of a company that owns and operates a pharmacy business. These are covered under the Corporations Act 2001, including directors must fulfill a duty of care, act in good faith and, amongst other things, obtain a Director ID. As part of your due diligence, it’s also important that you consider whether the pharmacy you are acquiring has implemented strong corporate governance practices, conflicts of interest are disclosed and ensure that they are complying with laws to mitigate any risks, including holding appropriate and valid registrations.
Having a supportive network is a great way to progress your ambition. People like pharmacy advisors, valuers, accountants, financiers or bankers, solicitors are, of course, essential. But equally important is being able to talk to other pharmacy owners and managers about owning and running their pharmacy business, their journey and experiences along the way. Talk to us and we can introduce you to pharmacy owners who can share their experiences. There will be many challenges ahead, and being able to turn to the right people for advice will provide you a level of comfort and peace of mind! Buying a pharmacy can be a long, complex process. Being prepared, knowing the right questions to ask, familiarising yourself with the process and involving the right people are the key takeaways to facilitate the process. Buying and selling a pharmacy Pharmacy management
About the author: Serry Leombruno is an Assistant Manager at Holman Hodge. He works with a stable of pharmacy clients, supporting tax and compliance, management accounting and advisory around matters such as restructures, cashflow and transactions. Coming from commerce, with a pharmacy retail background, he has an understanding of system and process, providing insight into business improvement. |