Business class: Buying a pharmacy is no small feat!
There are many factors to consider and hopefully the investment will provide financial and other rewards for many years, says Natalie Sirianni of Attain Business Brokers.
When looking to buy, no doubt you will review and analyse many pharmacy opportunities. Here are five questions to consider when reviewing a pharmacy for sale:
- What are the growth opportunities?
Potential and growth opportunities will play a large role in the ultimate return on investment that you achieve from owning a pharmacy. Any 1% increases, year on year, can have an exponential growth impact on the business return and your wealth creation. As business brokers, we have been lucky enough to see some amazing growth levels achieved at pharmacies throughout Australia. All of these pharmacies have taken advantage of local demographics and developments to achieve growth, as well as using innovation and new techniques to provide a high level of service to patients.
- What are the risks of the pharmacy?
All businesses have risks – that’s why you get the reward! Risks can come in many forms including financial, operational, location and general market risks. It is important to identify and analyse the risks associated with each pharmacy you review. The return you will receive from the pharmacy must be commensurate with the risks of the business. Ultimately, as an investor, you will be looking for asymmetrical risk reward – that is, taking the smallest amount of risk to get the greatest reward.
- How is the business currently performing financially?
When you buy a pharmacy, it is important to closely examine the current financial performance of the pharmacy as it tells the story of the current operations. When doing this, focus on the key income and expense items, to ensure you do not get too bogged down in the minor details. Turnover, gross margin, wages and rent are the main factors to focus on as they make up 90% of the story.
- Why is the vendor selling?
This is also very important to consider. Most of the pharmacies we are selling at the moment are being sold for retirement of the owner, however this is something to check. Usually the better the investment, the longer the pharmacist will hold onto the business, but eventually all owners must sell (unless they have a succession plan in place with family members or junior partners). It is important to consider why the vendor is selling.
- What will be the value in my hands?
As mentioned earlier, it is critical to review the current performance of the business, but it is also imperative that you determine the value of the business ‘in your hands’. Ultimately, the value in your hands should provide a price ceiling for what you would be prepared to pay for the business. The value in your hands will be based on future returns, which is essentially what you are paying for when you buy a business.
When reviewing a pharmacy to buy, there are many factors to consider and hopefully these questions will give you a starting point for your analysis. Buying a pharmacy can be a very rewarding and successful process and we wish you all the best!
If you are looking to buy a pharmacy, please feel free to call one of our brokers on 1300 ATTAIN (288 246) to discuss opportunities that may suit. We look forward to assisting you through the important process of buying a pharmacy!