Should I buy a Going Buisness?
Is it better to buy an established pharmacy or to start your own? The answer to this question depends on yourself and the resources and opportunities available to you:
- Will you be doing this alone, or with one or more partners? How much financing can you get together (collectively)?
- What experience do you (and/or your partners) have in running a pharmacy? Which type of community would you like to serve (and live in)?
- Are you a pharmacist or will you need to hire a pharmacist or additional pharmacist to comply with legal requirements?
- What does your ideal store look like? How big, where, opening hours, what services to offer other than dispensing medicine, etc.
- How will you deal with sick leave and holidays, advertising and marketing, growth opportunities, pricing policy, staff / pensioners / student discounts and all the other details of running a pharmacy?
Some of these questions have already been addressed in an existing pharmacy. Is that a better choice for you?
That depends on these factors, some of which are particular to the pharmaceutical industry:
- Location, location, location. What makes a good location depends on whether your ideal pharmacy is urban, suburban or rural: foot traffic and/or parking possibilities, other businesses in the area to draw traffic (like a supermarket), line- of-sight to a doctor's office or other origin for prescriptions, etc. Are there any long term (zoning or construction) plans which might affect the suitability of the location?
- The goodwill of an established pharmacy is influenced by how long it has been open; how long it has been under the current ownership; what type of relationship the owner had with his clients and community; what services they offer apart from dispensing medicine, etc.
- A new owner usually enjoys the same current prescription activity, sales and profit, unless something drastic happens.
- It's often easier to transfer contracts, permits and registrations than to apply for new ones, if local laws allow this.
- Partnering with a retiring pharmacist can help you build your business experience, if this is not your strongest point.
The alternative is to open a new pharmacy, which has its own list of pros and cons:
- Again, location. Same points as above. Does the zoning laws allow for a retail pharmacy at the proposed location? Renting space from a diagnostic and treatment center might be good for leapfrog traffic, but beware of Federal and State self-referral and anti-kickback statutes. How much renovation or interior changes are necessary to comply with State space and layout requirements?
- A retail pharmacy usually has eight areas, including a counseling area (usually mandatory).
- The lease can make or break any new business. Reasonable rent is essential to keep overheads as low as possible while building a reputation and client base for a starting pharmacy. The optimal length of the lease is a fine line which influences your eventual exit strategy.
- Make sure your initial loan or financial package includes enough working capital to cover expenses like salaries and wholesale purchases until the money starts coming in. Modesty here can cost you dearly in the long run.
- Consult a lawyer or accountant on the company form which gives you the best tax advantages. They can also help to ensure compliance of your pharmacy registration papers, and assist in obtaining NPI, DEA, Medicaid and Medicare numbers. Check how long in advance of the sale this should be submitted (2 months is not unusual).