As an owner, you either have to be all in our all out.
Rather than sell their pharmacy, one option pharmacy owners consider is to hire someone to run their business, such as a trusted staff member, while they go to the beach. They figure they will make more money in the long-term having somebody run the business for a few years and then sell it.
This plan almost always leads to disappointment or disaster.
First, the business owner underestimates how much time they will need to spend working as an absentee owner. Even if they give the manger full discretion to run the business, there are enough decisions that only the owner can make, enough documents that only the owner can sign, and enough people that will only speak with the owner that more time is spent in the business than on the beach. Their cell phone is ringing constantly. Then, the manager and staff grow frustrated because no matter how accessible the owner tries to be, it is not accessible enough. This causes a decline in performance and morale.
The bigger problem is that the manager is more likely than not to run the business into the ground. There are a few reasons for this:
- They resent that they are doing the work when the owner is on the beach.
- While you may give the manager a bonus, they don’t share in the downside risk, so they make decisions that can harm the business.
- They behave differently without the owners supervision than with it.
- They are not capable of doing their job and the work you did as owner, and burn out.
- They fail to build the infrastructure to support and monitor the manager.
One situation we saw had a pharmacy owner leave the store to his trusted manager who had worked for him for 10 years. He let the manager run the store while he went hunting. Even though this manager made a huge salary and bonus, he became resentful of the owner’s constant hunting trips and increasing demands from the owner. When the owner went to sell the business to the manager two years later, the manager wanted a massive price discount for running the store when the owner was away. No discount was good enough and things broke down between them. The owner could not fire the manager because the manager had built up a relationship with all the patients and doctors and was, in a sense, more powerful than the owner. The situation grew toxic and the store became virtually unsaleable. The situation only got worse when the junior pharmacist left for a competitor and took patients with him.
The mistake that this business owner failed to make is that if a business owner is not 100% engaged in their business, they need to move on. It is all in or all out – there is no in between. If the owner does not want to retire, at ColonyRX, they are welcome to keep working in the store, without the risks, commitment and hassles of ownership.
The best time to sell is when the economy and the industry are in good shape, and when the owner does not have to sell. The owner in the above situation would have made far more money and peace of mind if he sold at the time he decided not to commit 100% of his attention to the business.