By Colony RX
When selling your pharmacy, it pays to learn from others who have completed transactions. As pharmacy buyers, we have earned scars from broken deals, learned many humbling and expensive lessons, and spent hours doing our best to structure the perfect win-win arrangement with sellers. Even now, I learn something new or experience something unpredictable in each transaction.
Here is the best of what I have learned about buying pharmacies that will be of benefit to those selling them.
Put Time on Your Side
Most business endeavors are easier and better when time is your friend. The opposite may also be true – it is difficult to optimize the results of a pharmacy sale if you compress the time available to work all of the components. This applies to both the time available each week and the time from the start to the finish of the overall process. As the saying goes, the best time to sell a business is when you don’t have to. Because of this, start the process early. And consider accepting a fair offer for your business even if it is a few years earlier than you envisioned selling your pharmacy. A fair offer may not be around when you need one.
Responsiveness is Godliness
Sellers may find it surprising how important responsiveness is to the buyer. If a seller is not responsive, and it takes weeks to respond to requests for information, the buyer will often assume the seller is not interested and just move on to other opportunities.
Real Estate Issues
It can be unbelievably frustrating when a landlord is holding up the sale of your pharmacy. Most stopgaps occur because the landlord is not being responsive or doesn’t know what they want to do with the premises.
Know When to Stop Negotiating
It is important for sellers to understand that pharmacy buyers can get distracted or dissuaded at different points in a transaction. One of the easiest ways to turn off a buyer is to try and re-negotiate fundamental elements of the deal after an LOI is signed. The message the seller is sending to the buyer is that they (the seller) are untrustworthy, and it makes the buyer question the entire transaction.
No Material Changes
To ensure a successful close, pharmacy owners should keep the underlying business performing (frankly, it is really good if the business results improve during the sale process). If there are any changes, the buyer should disclose them immediately, because if the seller finds out about a problem rather than learning about it from the buyer, it creates a second problem. That problem is that the buyer will now question what else the seller has not disclosed. As an example, there has only been one time when we have not closed a deal after an LOI was signed. This happened because we found out that the seller didn’t disclose that he had a $300,000 clawback from a PBM.
Selling a Business is All About Fit and Timing
Along with everything else, selling a pharmacy is a numbers game. You need to find a way to maximize your chances that you will find a buyer for whom your pharmacy is a great fit and the timing is perfect. For many buyers who may be great for your pharmacy, it may be bad timing as they are focused on other things. There are so many things behind the scenes that affect how buyers behave that you will never know what is truly happening in their minds. As such, it is very risky to decline a fair pharmacy deal because you are hopeful a better one will come tomorrow. It is more likely that the buyer will have found some reason not to buy your pharmacy when you come back to them in the future.
Everyone Freaks Out Sometime During the Process
In nearly every pharmacy purchase and sale, there has been a moment when the pharmacy seller and buyer both feel stress. This is quite normal because the sale process can become totally consuming. We feel the fundamental issue is that many sellers underestimate the time involved in completing the transaction, which is time spent in addition to their other usual personal and work activities. Some days they can question the transaction itself– although we have never had anyone walk away because of “deal fatigue”. It is no one person’s fault that the process is frustrating and time-consuming. Most everyone is trying their very best to do the right thing, and virtually all deals that get to the LOI stage will get to the finish line.
Control the Lawyers
While it is important to rely on lawyers (and accountants), sometimes lawyers can impede a transaction. In order for a transaction to be fair, there is going to be risk for the buyer and seller after the transaction. There sometimes comes a moment where everyone must tell his or her attorneys to pick the most important issues, ignore the rest, and get the deal done.