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Common Pitfalls to Avoid When Selling a Pharmacy

When selling a pharmacy, there are several pitfalls that pharmacy owners encounter. These pitfalls can vary from taking FOREVER to sell, getting a lower price, to losing your business entirely. After being involved in HUNDREDS of pharmacy sale transactions, we have experienced almost every challenge imaginable.  We know there will always be “something new,” but we are prepared to manage these issues as they surface by utilizing our knowledge from prior selling experiences.  Rarely can you predict what issues will arise through each selling process, but having someone experienced to navigate these barriers is essential to optimizing your selling terms.

 

Most Independent Pharmacy owners do not have extensive experience selling a business.  I compiled some common pitfalls that owners should consider prior to entering into the selling process.  Because there are no Do-overs or Re-Dos when you sell a pharmacy. I highly encourage you to align yourself with an expert to optimize the terms and selling price.  The last thing you will want you want to do is make mistakes through the selling process and have regrets for things that you did not consider AFTER THE SALE IS COMPLETE.

 

  • Not Planning Ahead

  • Setting an Asking Price

  • Dealing with the landlord

  • CONFIDENTIALITY!................


Common Pitfalls of Selling Your Pharmacy

  1. Not Planning Ahead. Potential buyers want to see at least two years of previous financials and tax returns. When planning to sell, be proactive in getting your books in order and evaluating expenses related to industry standards. Include only business essential expenses on the Profit and Loss Statements/Tax Returns.  Remove items such as personal vehicles or family payroll. 

  2. Not Knowing What Your Pharmacy Is Worth. A valuation by a third party is an important first step in determining what the market will pay. Of course, dozens of factors determine the price; a valuation will be a great first step in setting expectations. Read more about your pharmacy's worth here.

  3. Being Proactive and Not Reactive.  We see many owners finding themselves with an urgency to sell when they start the process.  Owners should have a general idea of the value of their business and determine if there are things that they can do to increase the selling price; these things usually take some time.  Selling with urgency can significantly affect the price you receive from selling your pharmacy.  Don’t put yourself in a position where you don’t have any other options than to accept a below-market offer.

  4. CONFIDENTIALITY. The most significant difference between selling a house and a business is that you DON’T want everyone to know that you are selling your business. You may lose employees, patients, and physician referrals if they discover your interest in selling. Selectively identify prospective buyers who are qualified but have NDAs completed before approaching them.  This is hard to do without an intermediary.

  5. Failing to Consider a Third Party to Represent You. You’ve been a successful business owner who has built a great pharmacy ... Unfortunately, “Do-It-Yourself “methods rarely result in optimal results when it comes to selling.  Consult with an expert who has been through significant selling transactions that can guide you through the process and steer you away from the “Pitfalls” of selling.

  6. Setting an Asking Price. I caution you about “Setting” a selling price.  If asked “what you want” for your pharmacy, respond with “fair market value” or “the best price.”  If you set a selling price for your pharmacy, you may undersell yourself from a prospective buyer who may pay more, or you may have overpriced your pharmacy and not have any offers.

  7. One-More-Year Syndrome: To be an independent pharmacy owner, you must be an eternal optimist. This can work against you, however, when deciding to sell.  Many owners become complaisant over time and may miss the window of opportunity to capture the value of their pharmacy.  With the industry quickly changing due to regulations, PBMs, chains, and other factors, pharmacy selling prices have decreased.  Consider your options before the value disappears.

  8. Carrying Notes for the Buyer. If a buyer does not have the financing to pay for most of the pharmacy purchase price, move on.  There are so many uncertainties you don’t control that can devastate a business, and then you have nothing left.  We recommend you not carry more than 10 to 20% of the total purchase price and collect the rest at closing. 

  9. Entertaining “Tire Kicking” Buyers. Not all buyers are prequalified or have serious intent to purchase. An owner can waste precious time with a buyer who may not have financing in place, may not be serious about purchasing, or is just plain snooping.  Find out details about a buyer and what financial resources they have available to purchase a pharmacy.

  10. Landlord Cooperation. There are usually unexpected challenges, whether the buyer is trying to reassign the lease, negotiate a new lease, or you need the landlord to agree to a lease restriction. Landlords can be challenging, unreasonable, and opportunistic and rarely empathize with your financial concerns or situation. I have been involved in multiple transactions where a closing did not proceed because the landlord was not flexible.  Never assume that the landlord will cooperate because you are friends or have been a loyal tenant for many years; landlords will maximize business opportunities.


Don’t be one of those - “You don’t know what you don’t know until it is too late!”. Align yourself with the pharmacy experts at Integrity Pharmacy Consultants, where we can take you through the entire selling process.





Integrity Pharmacy Consultants is the most trusted and respected Pharmacy Consultant/Broker in North America. Through strong moral principles and ethical business practices, we prove you can count on us every single time.


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