Should You Sell Your Pharmacy?

By Colony RX

Should You Sell Your Pharmacy

Is now a good time to sell your pharmacy? Ultimately, each person is different and only you can answer this question for yourself.  Here are a few points to consider:

Market conditions

Factors such as interest rates, the availability of credit and the tax regime are outside your control. However, these are key factors that will impact the valuation of your pharmacy. With interest rates at historically low levels, pharmacy sellers will realize more value for their pharmacies. This is because asset prices are inversely proportional to interest rates. Just as the stock market and real estate market inflate during low interest rate periods, so have pharmacy valuations. However, what low rates push up, high rates will push down. What is here today will be gone tomorrow.

Tax rates

Donald Trump will likely lower your tax rate. If he does, this will effectively raise the net proceeds you will receive on the purchase. This will not last forever. A change in Congress in two years and/or a change in the White House in four years can quickly eliminate this advantage for you.

Cuts to reimbursements

The squeeze on reimbursements impacts pharmacy valuations. Pharmacy goodwill values are based on the future cash flows of the pharmacy. If these come under fire, so too will the goodwill value you may receive for your store.

Similarly, in times of instability in a particular market segment, banks have traditionally been hesitant to lend into that segment for acquisitions until things stabilize. The problem is that nobody knows when any of this will happen. What is known is that over the past few decades, reimbursements have declined, and this trend is likely to continue.

Is now a good time to sell?

If your pharmacy is doing well, it is the ideal time to consider a graceful exit. The alternative is a forced exit. Deciding to sell after a problem arises will adversely affect the value of your pharmacy.

Whatever your feelings on the above issues, you need to be sure that you are making the right decision for you. This is based on your personal circumstances, your tolerance for future risk, and how you want to spend your time going forward.

Image: wavebreakmediamicro / 123RF Stock Photo

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