Developing an Effective Exit Strategy When Selling a Pharmacy
What is an exit strategy? This word has been bandied around so often - it seems to be a catchphrase if you want to sound knowledgeable about investments. In terms of an independent pharmacy, it describes the way in which the owner recoups his investment by selling the pharmacy.
For most independent pharmacists, this happens when they are preparing to retire. To get the most out of the long hours spent building the pharmacy, an independent pharmacist wants the best price possible for his pharmacy. This is often an emotional question: what is the value of the countless hours and effort it took to get to this point? The assets and goodwill represents a substantial part (sometimes the only part) of the seller's retirement fund. In the past, the owner usually sold their pharmacy to another pharmacist who will continue at the same location. Sometimes a son (or daughter) would gradually take over the pharmacy, other times another pharmacist might become a junior partner. This requires that the value of the pharmacy is measured and updated regularly, to measure the financial impact of the partnership and adjust payments accordingly.
Nowadays, it is not quite so simple. With most of a community pharmacist's personal net worth tied up in their business, the timing of selling becomes critical because of the impact of external factors like market conditions. This is why planning your eventual exit up to 10 years in advance has become so important. During that time, you want to maximise the value of your pharmacy, so that the invested proceeds from the sale will supplement your Social Security during retirement. Independent and small chain pharmacies are valuable small businesses, despite decreasing margins and growing third party prescriptions. Their value lies in their sales and profits, asset base and market share within their communities. Selling an independent pharmacy is best done by executing a careful plan which matures slowly, like good wine.
The basic steps to get to a practical exit strategy for selling pharmacy are:
Review your business documentation. Discuss the current value and competitive position of your business with Aventine Group pharmacy brokers. Consider different options to add value to your pharmacy in the short and long term. Perhaps some (more) patient care services like diabetes education and (travel) immunizations can increase your footprint in your community and attract new clients. Your Aventine agent can advise on these and other opportunities. Decide on a time-frame to implement these new ideas. Keep track of market trends and how your pharmacy's value changes over time. Include this information in a business plan and keep it current. Perhaps include a scenario of what to do in case the time-line needs to be shortened for whatever reason. Plan ahead and decide how you want to invest the proceeds from the sale of your pharmacy. There are many different options. Your preferred investment option might change the way in which you want to structure the sale.
You want to keep your pharmacy's reputation intact and enjoy a smooth transition to a new owner. But you also deserve to reap the benefits of the time and effort you put into your pharmacy when you want to sell. Both objectives can be achieved with a bit of planning and professional help. At Aventine Group, we look forward to helping you on your way.