Keeping Pharmacies Independent: Best Practices For Selling, Buying a Business
At AAP 2024, the Cardinal Health Pharmacy Transitions Services team hosted a session outlining how best to go about selling and buying a pharmacy.
For an independent pharmacy owner, selling the business that countless hours of work and investment have went into can be an extremely difficult decision. There are many questions that need to be considered when deciding to sell a pharmacy. How much time is needed to plan the sale? And who should it be sold to? Although some independent pharmacy owners may feel pressured to sell to a big chain, there are better options available.
What are best practices for buying or selling a pharmacy? / Gorodenkoff - stock.adobe.com
At the American Associated Pharmacies (AAP) Annual Conference, held April 4 to 6 in San Diego, California, the Cardinal Health Pharmacy Transitions Services team hosted a session titled “You Don't Have To Sell To a Chain! Keeping Independent Pharmacies Independent.” The session aimed to outline best practices for buying or selling a pharmacy, review the ideal pharmacy transition timeline, and explain pharmacy valuation methodologies.
Kicking off the session, Chad Sanders, director of Pharmacy Acquisition for the retail independent team at Cardinal health, who is responsible for the eastern United States, talked about some of the most important things to consider when first setting out to buy or sell a pharmacy. According to Sanders, one of the most critical aspects of buying or selling a pharmacy is having a plan in place and allowing for plenty of time to come up with it. It is also crucial to have a team in place that can provide different perspectives throughout the entire process.
“One of the things I always like to stress to everyone is that it’s never too early to start planning,” Sanders said. “Even though you may think you’ll be working until the end of time, there’s no time like the present to take a look at that asset and where it is today….One of the things that I’ve gotten calls about over the years in this role is that a spouse passes away unexpectedly. That’s kind of the worst time to start planning for the sale of the business. Because at that point, it’s usually a mad scramble. So, again, it’s always good to have a game plan in place.”
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Daniel Bernstein, director of Pharmacy Acquisition for the retail independent team at Cardinal health, who is responsible for the central US, talked more about pharmacy acquisition from the buyer side. He said the most important thing for buyers is not to buy based on emotions. The only thing to consider is the facts of that specific pharmacy. If there are issues that present themselves during the process, don’t overlook them and think they will be easy to change. What is the trend of the pharmacy? Also, are its profits going up or down? Considering all of these questions rationally is key to a successful transaction.
“It's really about building that team and getting perspective from multiple people—wealth Advisors, CPAs, attorneys, a mentor…[so] you get multiple perspectives to make sure that you're buying the right asset for you,” Bernstein said. “Looking at that pharmacy, what makes sense…How many prescriptions are they filling? If they’re filling 80 versus 1000 a day, there’s a difference there. Just think through those things. From a buyer's perspective, due diligence is so important.”
The final speaker of the session was Dave Johnson, director of Pharmacy Acquisition for the retail independent team at Cardinal health, who is responsible for the western US. Johnson discussed the importance of conducting a proper valuation and modeling of a pharmacy that is being sold. Conducting a proper valuation requires time and moving from step to step so that the transition can occur without any issues. Johnson added that when he has a pharmacy that is trying to sell, he takes into consideration who he thinks might be a good buyer based on his knowledge of the pharmacy that’s for sale and who is currently looking to buy. A fair valuation also includes making sure all financial records and dispensing reports are accurate.
“There are some models out there where you plug in a bunch of numbers from a tax return, plug this line in, put it right here, and then pull the chain…and then here’s your value,” Johnson said. “We're investing a whole lot more time and effort into it than that. From a seller standpoint, you just need to understand that this is going to be a commitment of time for you so that we can truly value your business fairly. On the other side, once we've got a buyer engaged and we've got that information, we can spend time with the buyer and relay what your business is all about, which will save you time in the end.”
Click here to see all of our AAP 2024 coverage.
