Trusted advice for selling your business
It’s never too soon to plan for selling your pharmacy. As a pharmacy owner, the eventual sale of your pharmacy is one of the most important transitions you will experience — for yourself, your employees and your customers. However, the process of selling an independent pharmacy is extremely complex. Our unmatched expert ownership advisors are here to help.
RxOwnership® provides you with the tools and resources you need to plan for the successful sale and transfer of your pharmacy. With our tools, resources, and especially our Step-by-Step Guide, you’ll know exactly what it takes to sell successfully.
Why you need to plan, not just sell your pharmacy
There are long-term implications for not planning your sale that can affect not only you but also your heirs. Strategic preparation will help you realize the full value for your lifetime’s work. You can also ensure the continuation of the pharmacy to reflect your commitment to both customers and employees.
Consider the reasons why you may want to approach selling your pharmacy as a two-part process — succession planning and ownership transfer:
- Maximize the value of the business that you have built, helping to create funds for your retirement and estate
- Continue the legacy that you have built and continue to be proud of the business in your community
- Define how and if you will be involved in the pharmacy during and after your transfer of ownership
- Find the right new owner who will be able to continue the business and your legacy
- Structure the ownership transfer so that the new owner succeeds
- Help maintain an independent pharmacy presence in your community and provide your patients with ongoing personalized care
It’s likely that you will sell only one or two pharmacies during your career. By preparing and using the best possible counsel and advice, you can transfer the ownership of your pharmacy at the best price and with a bright future for its success.
We can help
According to NCPA, 10,000 independent pharmacies will change hands in the next 10 years. That is nearly half of all independents, so it is never too early to start planning for the sale of your pharmacy.
Our ownership advisors can help you:
- Map out a plan for succession
- Be prepared for an emergency or change in the local economy
- Protect your employees
- Help find potential buyers
- Avoid a quick sell-off to a chain
- Suggest finance options for the potential buyer
- Assist with the transition to new owners
- Keep your independent pharmacy in your community
Get started with these important considerations
Taxes: Understand the tax consequences of the sale of the business. Work with an accountant who handles the sale of businesses on a regular basis. Identify this professional help before the sale contract is structured, not afterward. A key issue to discuss with your accountant is reserving liquid funds from the sale of the business to cover any tax liability and other expenses.
Health insurance: Consider how you and your family receive health insurance after the sale of the pharmacy. Continuing to work part-time may be a good option for keeping health benefits.
Building ownership: If you own the building in which the pharmacy is located, plan for the lease or sale of the building within the pharmacy sale documents, if appropriate.
Penalties: If you are financing a portion of the sale, consult your accountant and attorney about any ongoing contingencies of the sale agreement. You may address concerns such as providing annual financial statements and the consequences of these contingencies not being met.
Additional stores: If you are financing the new owner, discuss with your attorney the feasibility of requiring that you have veto power over the purchase of any additional pharmacy until you are fully paid off.
Employment contract: If you are going to be working in the pharmacy, secure an employment contract. It doesn’t have to be binding, but it should clarify the hours worked, paid time off, time off without pay, hourly wage/retainer, vacation time, insurance, and so on.
The new owner: Typically, it is advantageous to know your buyer and encourage them to work in your store prior to the sale, if possible.
Confidential advice and services for selling your pharmacy
Take advantage of the no-fee services form an ownership advisor when selling your pharmacy. Trusted support from a team of experts ensures that your financial and legal interests are protected. Advice from our team, with unmatched experience in pharmacy transition, is invaluable.
Our ownership advisors can:
- Address your questions and concerns from initial planning through your transfer of ownership.
- Maintain confidentiality so you can start planning well in advance of your eventual sale.
- Provide you with resources and options that can help save you time and money.
- Help find prospective buyers who meet your specific requirements.
- Assist with identifying the type of buyers who will carry on the work you’ve accomplished in your independent pharmacy.
- Recommend financing options for your prospective buyer.
When you’re ready to sell your pharmacy
Many pharmacy owners, sellers, brokers and sales managers attempt to start the ownership transfer process with financing. It’s proven best to start your financial planning once your succession plan has been completed.
There are many different types of financing available today. Rarely is just one type of financing used in the sale/purchase of a pharmacy. For this reason, it is important to understand the breadth of financing options available.
Most common are:
- Traditional lenders such as banks and organizations such as the Small Business Administration
- Suppliers and wholesalers providing dating of product as a form of financing
- Current owner carrying a note for a buyer
- Buyer secures personal loans from family or other sources
Traditional types of financing for sellers
Short-term financing is defined as financing with a term of less than one year in duration. Typically, short-term financing takes the form of dating (extended payment terms) and short-term notes.
Short-term financing may be needed for:
- Opening orders
- Expansion of inventory within an existing store
These types of financing may require a credit review, depending on the customer’s total credit exposure. In most cases, short-term financing requires security and a personal guaranty.
Long-term financing is defined as financing that will be in effect for more than a year. It is typically only appropriate for sellers looking to rapidly grow/expand their pharmacies prior to selling.
Long-term financing for independent pharmacists usually takes the form of a promissory note with equal amortization of the principal amount.
Accessing the sources of financing for your sale
There are many sources of financing for pharmacies. Some are institutions such as the Small Business Administration and banks, while others are individuals such as family or existing owners.
Traditional lenders — banks and financial institutions — underwrite each loan to assess the creditworthiness of the borrower. These institutions require specific data and information about the pharmacy in order to perform an analysis of the potential loan to ensure that they are lending to a borrower who will be able to repay the loan.
Regardless of the source chosen to finance an independent pharmacy during ownership transfer, the same rigorous data gathering and analysis is typically conducted. While the financing source may have some of the financial and credit data in-house based on a past relationship with the owner, current information is almost always required.