Secrets When Selling a Pharmacy
Every profession has “secrets” that have been hard-learned by experts over the years. Buying and selling pharmacies is no different. Below are some of Colony’s secrets and best advice we give to our clients.
Competitor Calling (including chains)
If your most fierce competitor wants to buy your store, it may be a blessing or may be a curse. It really depends on your past relationship with that person. Don’t necessarily run away. Consult with the experts at COLONY RX to chart your path forward with this potential opportunity (or potential landmine).
Legacy vs. Cash
Selling to a third party compared to a family member almost always results in a higher price and better terms, but if you decide to sell to your family, I both respect and applaud you. Remember to set clear expectations about the family relationship if the business goes south, and be sure to bring in an experienced pharmacy advisor like COLONY RX to get the deal closed.
Owners vs. Employees
Former employees may be a good candidate to buy your pharmacy, but set a strict timeline. We have heard of negotiations with employees dragging on for over 5 years or more. Employee deals can take longer, but if a deal with an employee doesn’t close within 6-12 months, it is unlikely ever to close. In these cases, call COLONY RX to help get the deal closed, even if you have an ideal buyer ready.
Customer concentration is a problem. If you have one LTC home that is 40% of your pharmacy, you are going to have a problem selling it. Same if you have one doctor or clinic that is 80% of your scripts. At COLONY RX, we know how to mitigate against these factors.
Asking vs. Selling
If you heard what your friend was asking for his pharmacy and it sold, remember that his asking price was unlikely his final selling price. So don’t set false pricing expectations for your pharmacy based on someone else’s false expectations that never materialized. Additionally, every pharmacy is different, and the same buyer will pay different prices based on their needs and expectations of value. To protect yourself, trust the experts at COLONY RX to make sure you are getting top dollar.
Family on the Payroll
Non-working family members on the payroll can be counted as cash on the bottom line. Just be sure that you can prove to your potential buyer that they truly don’t work in the business or add any value to the business whatsoever. At COLONY RX, we will present your business in the best possible light to buyers, giving you the benefit of tax maximization strategies during the sale process.
Your debts or your retirement income needs are not a buyer’s concern and should not be a significant factor when determining your pricing strategy. COLONT RX will help present your profitability in the best possible light to get you top dollar.
Growth is Good
Declining revenue or RX scripts can be a problem for buyers. Buyers like growth. COLONY RX can help mitigate against these issues.
Landlords can seriously complicate pharmacy sales. COLONY RX knows how to deal with landlords to make sure everyone gets what they need.
COLONY RX has great expertise in pricing “growth potential” into our deals. In other words, we can get buyers to pay for not only what the business has done in the past, but what it is likely to do in the future.
First Offer, Best Offer?
Your first offer is sometimes your best offer. You are crazy to leave a great offer on the table because of what may happen in the future. Trust the experts at COLONY RX to know if you should take the offer on the table or keep shopping.
The best offers must be win-win for both parties. If both parties are not happy, something is eventually going to blow up. COLONY RX has considerable expertise in structuring deals so all parties walk away happy.
Due diligence is not a time for surprises. Every business has a skeleton or two, so share any problems with your broker early. If you reveal your concerns early in the process, you will hopefully have time to resolve the issues. However, if you wait until due diligence, that small little skeleton may suddenly become frightening enough to scare your buyer away. Trust COLONY RX to present any issues you have in the best possible light and use mitigation strategies to minimize the impact.