How To Buy Your Own Independent Pharmacy
The draw to buying your own independent pharmacy has everything to do with wanting freedom. Owning your own pharmacy allows you to practice on your own terms and go above and beyond for your patients and your community as a whole. But many people feel that they aren’t in the financial position to make this happen, or that they don’t have the time or the opportunity.
Though many feel this way, there are ways to get in the best position to operate your own pharmacy and serve your customers in the best way possible.
This article will explain some tips on how to get a head start on owning your own independent pharmacy.
Create A Preliminary Checklist
Owning an independent pharmacy doesn’t happen overnight. In order to make it happen, you have to put together a checklist of things that you’ll need before you even begin looking for places to make your own.
The very first thing you should include on this checklist is a method of knowing what pharmacies in your area are for sale. This process isn’t like that of buying a house - pharmacies don’t simply put ‘For Sale’ signs in their windows and wait for buyers to come to them. The process of buying a pharmacy is dealt with on a quieter level because owners don’t typically want their patients to know that they’re selling - this way, they won’t take their business somewhere else. Owners would also rather their employees not know either, because then they might leave and work somewhere else.
Here are a few things you can do if you’re interested in purchasing a pharmacy:
● Work with a third-party vendor that has a database of pharmacies for sale
● Check pharmacy associate websites on a statewide and national level in order to see sales listings
● Hire a pharmacy broker that specializes in pharmacy transactions
● Utilize peer networking in order to let people know you’re in the market for buying
Putting together a team of trusted advisors is a huge asset for this process. Trying to go through it alone won’t get you anywhere fast. A good team should include:
● An experienced consultant who knows how to buy and sell independent pharmacies
● An account to go through financial statements and help maintain due diligence
● A lawyer to review and translate contracts/contract language
● A pharmacy owner who can give you advice based on their own experiences
Your checklist should also include financing information. It’s unlikely that a lender will pre-approve you for a loan because the purchase price will vary depending on the size and value of the pharmacy you’re looking to obtain. A lender will want to see how much money you’ve got to place on a down payment, though - most likely a minimum of 10% of the purchase price.
The options and considerations regarding your finances include:
● A conventional loan
● A Small Business Administration loan
● A loan from a pharmaceutical supplier/wholesaler
● A personal loan given by family or friends
With those three things present in your checklist, you’ll be ready to get your feet on the ground and start moving forward in the process.
Identify the Right Pharmacy
Choosing the right pharmacy for you is a process that’s based in both art and science. The science side of things relates to the business side of your pharmacy, and the act of researching your pharmacy’s financial statements.
Before you make an offer on a pharmacy, here are some things you should be aware of:
● How profitable business is
● If revenue is trending upwards or downwards
● Potential business growth
● What type of expenses the owner incurs that you might not incur
● Cost savings opportunities
● The mix and volume of prescriptions
● The payer mix of patients
● If there are any long-term contracts in place, whether they need to be extended/renewed
● All the financial statements
The act of buying a pharmacy is also extremely personal, as this business is centered around you and your patients. Here are some questions you should ask yourself as you get ready to buy:
● Will you live in the town that your pharmacy is located in?
● Is a commute possible from your current residence?
● Is this town where you want to raise your family/your future family?
● Does the pharmacy have community support?
● Will other businesses in town support your pharmacy?
● Is this town where you want to spend the majority of your time?
And the three most important questions you can ask yourself before jumping in are:
● Will this pharmacy give me the opportunity for change that I want?
● Can I practice pharmacy in the way that I want to here, so I can help my patients lead their best lives?
If you can answer yes to these questions, then this is a decision that you’ll be able to feel in your gut and know it’s the right pharmacy for you.
Execute the Purchase
So you’ve finally found the right independent pharmacy - the one that’s perfect for your growing business. In order to close the deal, here are five steps that you should take:
a. Ask yourself how much the pharmacy itself is worth, as there are several factors that can affect this answer. These factors include prescription volume, market share, cash flow, debt, annual profit and loss, property value, inventory, and store aesthetics. It’s important for you and your team to identify these things as they can greatly impact your pharmacy’s value not only now, but in the future as well.
a. You might not see eye-to-eye with a seller when it comes to price, and that’s normal. What helps is explaining to the seller how you came up with the number that you’re offering and asking the seller how they got their number. Maybe the two of you missed something regarding valuation or price, and this will help to facilitate a conversation to get you both on the same page.
a. After you agree on a closing price,signing a letter of intent with a closing date comes next. If it changes hands, some pharmacy benefit managers require a pharmacy to re-enroll with them before paying out, and re-enrolling has the potential to harm your cash flow. Your sales agreement should state that you can operate under the previous owner’s license until you’re able to follow through with re-enrollments.
a. Don’t box yourself in before closing a deal - it’s important to remember all of your options. Work alongside your team to pick the one that works the best for you not only professionally, but personally and financially as well.
a. This involves the last step, ownership transfer. In order to close, you need to transfer the previous owner’s reimbursement contracts, supplier agreements, and licenses to your name. This includes notifying your state’s pharmacy board and the U.S. Drug Enforcement Administration of these changes, along with smaller things like changing utility bills and lease agreements.
The act of buying your own independent pharmacy doesn’t have to be intimidating or complicated. By following these steps, you’ll be on a clear path to buying your own pharmacy and running it the way you want to with improved patient outcomes and a tighter-knit community.