0: Welcome to the AJP podcast,
a podcast for pharmacists by pharmacists where we discuss current
events, relevant topics, and emerging issues. I'm your host, Carlene McMaugh,
and together with the AJP,
I'm bringing you the opinions and expertise of different pharmacists to discuss
their views and insights on topics relevant to pharmacists.
Please like and rate each episode and subscribe to the podcast so you don't miss
an episode.
Are you happy to introduce yourself please?
1: Yeah, sure.
So I'm Blake Hedley and currently I work at a new firm
that we just started this year called Hedley Partners with myself and the
father, Paul Hedley. Between us,
we've probably got a combined roughly nearly 60 years of
working in the advisory space and helping
pharmacists in particular and all types of pharmacists from pharmacy students
all the way through to hospital pharmacists, manager pharmacists,
working pharmacists all the way through to owners of pharmacies
with everything from accounting, finance, financial planning,
legal matters, and obviously buying and selling their pharmacies.
So we've got a fairly good overview of the market and what's happening
and have a fairly good finger on the pulse and what's happening on the business
side of pharmacy,
especially ownership in particular and some of the driving forces behind it.
0: Thank you.
What have you seen are some of the challenges for pharmacists who just qualify
and I guess the reality of the job in the industry?
1: Yeah, I mean we've always had a pretty intimate sort of
experience with a lot of the student pharmacists at our previous
company that myself and Paul worked at.
We were sponsors of the different student societies at two of
the different universities in Victoria and they've got to know
them fairly well and see them on their journey as they go through and enter
working life. And we've probably seen,
especially in Victoria where we are predominantly based,
there's been a large influx of the amount of pharmacy
students graduating.
There's more courses being offered by different universities,
so there's definitely some pressure in terms of wage pressure for
pharmacists to get jobs.
And also there's definitely limitations in around ownership
opportunities and what's available for people if they want to go down that path
because obviously the pharmacy licenses are capped and it's a fixed number.
So there is definitely a lot more pharmacists going into the market
and probably the biggest thing we're seeing at the moment,
biggest frustration with a lot of younger pharmacists is the downward
pressure on their wages and the fact they do a very long
and very complicated course, roughly five years,
and they come out with a fairly large HECS debt,
which at the moment and the way the HECS rules work with indexing is
a challenge for anyone that goes to university for such a long period of
time, one,
to pay off and to get established financially. It is challenging and we're
seeing that probably be the biggest road force that is
frustrating a lot of the younger pharmacists is the fact that finding a good
job, finding good mentors is becoming very hard. It's very,
very competitive and the amounts that they're being paid
are very low compared to comparable medical based
industries like dentistry and medicine, even physio,
podiatry, some of these other occupations with similar course length,
it is very challenging for them.
2: So what has been motivating pharmacists to buy pharmacies lately?
1: I think it's a matter of trying to become financially independent and
financially wealthy. Like I said, with a lot of the manager pharmacists,
pharmacies are very interesting profession. Basically,
once you qualify it,
you are basically at career max in terms of a working,
employed or manager pharmacist.
You can pretty much within the first year or so
run a shop and be a manager and you hit career max pretty quickly.
So for a lot of pharmacists there's the want to
progress professionally and challenge themselves. That's always been around,
but now I think more than ever,
a lot of the pharmacists are looking at the industry and looking at the wealth
that can be made through owning a business,
whether it's the income side of things or whether it's the value of the
pharmacies themselves,
and they're seeing that really in the pharmacy space.
Being an owner is the only way you can really progress to financial
independence. Being a pharmacist, if you're a salaried pharmacist,
and this is a community pharmacy, see hospitals a little bit different,
but being a community pharmacist, they play a vital role in the community.
They're very, very integral.
I know myself probably when I started dealing in the space and dealing with a
lot of pharmacists,
I probably didn't appreciate the work they do as a single young guy as much.
I didn't go to the pharmacy myself, but having kids and having a family,
you very quickly realize how important having a pharmacist is and having one
that you can talk to and trust and that you can consult with.
But likewise, I think a lot of the young pharmacists,
they also want to be remunerated fairly for the work that they do because it's a
really,
really important part of the community and it's a really important part of the
medical wheel that they play and that the government
want them to participate in. But at the moment,
the way that they're paid as employee pharmacists
in community pharmacy, it is very challenging.
So we're seeing a big driver of younger pharmacists in
particular wanting to go down that entrepreneurial T and
to look at ownership.
That's a thing that we probably get more calls about than anything else.
So a lot of young pharmacists will come in probably within
the first three to four years of graduating and they want to start
to plan ahead,
and that's what we do a lot of work with them around how can they get themselves
in a position to buy a pharmacy, how does the process work, who do they talk to?
Who are the main brokers? How do you buy a pharmacy? What's the legal process?
How's the pharmacy valued?
Because there's a lot of nuances that are very unique to the industry
and given that it is a very, very niche industry,
dealing with a professional that specializes in the industry is really,
really vital. And we are seeing that a lot of em,
pharmacists are turning to firms like ourselves where they want to get that
expert advice and they want to start to prepare themselves,
whether that's investing in other areas,
whether it's buying investment properties, buying their own home,
establishing some equity so that they can then take that next leap to pharmacy
or whether it's going down more traditional routes and partnering with an older
pharmacist and having a mentor that they can progressively buy a
small amount of the pharmacy from over time.
There's a lot of different ways you can get into ownership,
but it definitely is probably a hot button and probably the number one thing
that most young pharmacists in that bracket of probably 28 to
38, it's probably the number one thing they call up about.
2: Can you tell me a little bit about,
I guess you've mentioned a little bit about how people can get in,
but have the bank lending criteria for ownership,
has that changed I guess with CCA dispensing and some of the funding questions
around pharmacy? Has it changed that?
1: Not necessarily the bank per se.
There's a few different elements with the buying of pharmacy.
So there's pharmacy valuers,
that's a key component and they value the pharmacy and the business as what they
call a going concern.
So what the profit's going to be from the pharmacy and
then they apply a multiple to that business.
That multiple is based on a number of different factors.
One of them is interest rates, and that's had a huge impact.
So as rates have gone, the multiples have changed dramatically.
Businesses probably five, six years ago, very,
very good businesses in metropolitan Melbourne,
probably not the city per se.
The CBD is of its own interesting dynamic,
but suburban pharmacies, even rural pharmacies,
the multiple was probably somewhere between 13 or 14% applied
to the EBIT profit all the way out to maybe 17%.
For some very far out rural pharmacies,
and this is mainly Victoria where we deal,
but what we've seen with interest rates going up,
the banks are still very keen to lend and the banks are still very,
very supportive of pharmacy. They see it as a very good long-term steady
business that they want to support and back. Much like medical practices,
they're very keen to support pharmacy,
but it's the valuers that are probably being a little bit more conservative with
the government changes,
with all the new things coming through at the moment,
the job of evaluator is to almost look forward and to take the
profit and see what will be sustainable in the going forward and apply that
multiple.
So based on interest rates and where they're at now and based on the changes,
it has meant that some of the values have probably come down recently on some of
the businesses. That being said,
the overarching thing with pharmacy is there's a lack of supply.
So roughly I think it's,
and again you'd be testing my knowledge here,
I think it's about six and a half thousand pharmacy licenses around Australia.
That's it. That's all there is. So in layman's terms,
it's like saying there's only six and a half thousand houses in the whole of
Australia,
and very quickly the price of them is always going to stay at a
certain level and probably rise because there's a demand and we're seeing
with certain areas and certain locations where pharmacists themselves,
they want to have a business that's close to their home,
close to their kids' school,
that's a big driving factor because there's just a limited supply.
If they live in a certain area,
there might be only three pharmacies in that area.
So they will often want to or be in a little bit of a
bidding more with other pharmacies,
pharmacists that are competing for that business.
Then you have to actually go to the valuer itself and the valuer might value the
business lower than they've paid,
which can happen again in property terms. It's almost like you pay a
small premium for a house because it's got water views and you really want water
views and it doesn't matter that it's not necessarily worth what you paid for
you and your family. It's worth more so you pay a slight premium.
The banks themselves then will only lend on the valuation. So again,
the banks are fairly protected,
they're seeing their lending rates
and the businesses that fall into default is still very, very low for pharmacy.
Generally across the board. From a bank's point of view, they're still very,
very supportive. And there's a couple of banks in particular that have
pharmacy specific areas that deal specifically with pharmacy
businesses.
So they understand them quite intimately and they understand them well,
so they're happy to support them.
But definitely some of the changes have had a knock on effect with
valuations,
which ultimately means that the gap between what you have to pay for a business
and then maybe what it's going to value at to then get the loan,
the gap is a little bit bigger, which means that,
and again,
probably I refer back to property a lot because it's the simplest thing we've
ever understand. It makes it very hard for younger people because they have
limited resources, they've got limited equity,
they've got limited money behind them, potentially if they're lucky,
they might have some family support,
but obviously if you are bidding against a older,
more established pharmacist themselves,
they might already have a business that's got some equity in there so they can
pay that premium over and above and they can fill that gap.
So I think that's probably again,
the changes that the government's brought in.
And probably again with the amount of pharmacists,
young pharmacists coming into the industry,
it's made it very challenging for people at the beginning of their career.
It's definitely a lot easier for the older pharmacists,
and we hear this time and time again that the older pharmacists had it very,
very well. And the young guys, it's a challenge,
but once they get in and once they get started in ownership,
we do see that it is a bit like a step ladder. Many
pharmacists that we deal with will buy and sell multiple businesses
over their career.
So it's probably less common to buy one business and stay in it for 30,
40 years maybe like it was a few decades ago.
They'll often buy a small pharmacy,
they might buy a small rural pharmacy and go just to get an opportunity and
drive a few hours out of town and sort of do what's required
to then sell that business and build it up in a few years and make a good profit
and then they buy one closer to home that is the dream pharmacy that they always
wanted. So it is again, a bit of a challenge,
but there's many different ways to approach it and there's definitely,
there's many different strategies you can apply.
It's just a matter of sometimes being a bit creative and thinking outside the
square.
For younger pharmacists that want to take the challenge and want to get into
ownership as.
2: Exclusively can own pharmacies,
what does that mean for tax and I guess borrowing power?
1: Well,
it makes it a bit limited in terms of with the rules around
pharmacy ownership.
You can't have any complex structures really because all the profits of the
pharmacy have to flow to a pharmacist.
So unless you have a small group or potentially a large group of
pharmacists that all get together and buy a shop,
unlike other businesses where you can have some tax planning arrangements and
split income to either a spouse or to a company,
you can't necessarily do that with pharmacy per se.
It really means that most of the income is really going to go to the
pharmacist themselves and they're going to pay the majority of the tax.
So from a tax point of view, it's what we say,
it's relatively unsexy tax planning, it's fairly straightforward.
Most of the businesses are bought in their own names.
Very rarely they'll buy in a company or a trust structure with a group of
pharmacists. Usually it's in their own name, which means then again,
a profits flow straight to them. So from a tax point of view, it is
fairly limited. Again,
it means that they have to look at having investments outside of pharmacy
to help minimize their tax,
whether that's investment properties or other share investments and other things
to help lower the amount of tax that they're paying.
2: Can you tell me a bit about buying groups?
1: Yeah, I mean buying groups, there's definitely from
when you get into ownership and you go down that path,
the suppliers and who's going to provide you the stock for your pharmacy is
a really, really important factor.
And there's several large players in the space
and some offer different incentives and other benefits
over others.
And it's a matter of usually pharmacists tend to go with who they're
familiar with and the reps that they do know.
So if they have worked as a manager at several other pharmacies,
they'll have built up relationships and they'll usually look to continue those.
Previously and many years ago there was different arrangement with trade terms
and different things that they could do.
Most of those have been reduced or taken out of the industry
unless it relates to some very,
very large groups that have significant buying power.
Individual pharmacists that own a small community pharmacy.
Really what deals you can do and what you can arrange
is nowadays pretty restricted,
but it is a really important factor.
So having those relationships and making sure that you obviously got the right
amount of stock because it is a retail enterprise.
You are selling obviously pharmaceuticals,
but you've got over the counter products as well.
So having the right mix for your demographics really, really important.
And as many pharmacists do know, it is a competitive landscape.
There's often another pharmacy around the corner or over the road,
so making sure that you've got the right amount of supplies and the
right pharmaceuticals in your shop for your regular customers is really,
really important.
So making sure that you build those relationships and you foster those
is more important than ever.
2: Roughly how many pharmacy transactions might happen in a year?
Is it a big market?
1: It probably depends on the year and it
depends on the activity.
What we did see probably around covid was there was a real
tightening of the market.
So there was a lot of older owners that probably were looking to
retire and maybe come out of the market.
They decided to hang on and stay in the business.
And as most pharmacists are aware,
COVID was pretty good for most pharmacies and they obviously were open.
They did an amazing job under really trying circumstances,
especially in Victoria where we operate, it was very,
very challenging for a lot of the pharmacy clients we were dealing with,
but all their financials got a pretty significant what we called a covid bump.
So they had a lot of traffic,
they had a lot of people coming into the shop because they were one of the only
shops that was open and they saw profits really,
really increase. So a lot of the older owners that we would
naturally see probably retire and exit the space stayed
and decided to keep operating because the profits were very good.
And also there was a bit of uncertainty what was going to happen,
how long were things going to go for, how challenging the times would be,
and it really tightened the market around how many
transactions were going on. I mean,
all around Australia it would be hard to talk about.
I mean in the market we operate, there's probably
maybe 20 odd transactions a year around Victoria.
It's not a huge number. Again,
it's hard to get a lot of transparency until after they settle and often a
different name goes up on the shop or you see a different banner group go up
because there is no realestate.com or anything like that for pharmacy.
So often people one have businesses for
sale. It's done very discreetly and very quietly because the pharmacists
themselves, they want to keep operating their operation.
They don't want necessarily all their staff to know that they're selling.
They don't want to upset their regular customers to know that they might be
leaving. So it is done very, very quietly. So in our experience,
probably 20 to 30, but definitely it has tightened up in the last year or two.
So it's got a little bit more challenging,
but with interest rates still remaining high now,
COVID sort of becoming a thing of the past people slowly going back to
work and going back to normality,
we're seeing things start to become a bit more normalized. I mean,
there was a lot of different things in the pharmacy space that we saw,
which probably were anomalies,
but were very good for some businesses,
not so good for others. So obviously the CBD pharmacies really suffered a
little bit during covid because there was just a lack of foot traffic where some
of the suburban pharmacies had huge amounts of customers more than they
normally get because there was just so many people working from home and so many
people in the suburbs.
So it really changed the dynamics of the business and I think a lot of
people wanting to sell,
obviously they want to maximize the price they're going to be able to get for
their business.
They've been waiting till now to have a year or two of business financials where
things are normalized.
So because often that is the thing when you're buying a pharmacy,
you're looking at a set of figures,
so you're looking at the business financials and you're looking at the
performance.
And with the covid changes and the different
rules and things with customer numbers,
with the government changes that come in,
it has changed and probably artificially inflated
some business performance. So there's always an argument then
around what the true value is of the business.
Will someone pay what you want to pay?
And having that year or two of more normalized figures probably helps settle
everything down so that buyers and sellers can transact and they can find a
middle ground where they're happy to pay a fair price and the owners happy to
sell and they know that they're getting a good amount as well.
So I definitely think it's probably going to open up a little bit later in this
year. Again,
potentially if there's some rate drops and things later in this year or next
year from the RBA, that'll have a big impact as well. But yeah,
it's probably a little bit more normalized is the best way to put it.
2: Can I find out about any,
you've mentioned a couple of impacts of 60 day dispensing,
but have there been any other impacts of 60 day dispensing in the pharmacy?
1: I think probably the main thing is just general nervousness about what the
impact's going to be and until you can sort of see it flow through to the
business and to the figures when it was first announced,
we did get a lot of calls from clients that were concerned and worried about
what the real impact would be,
but we generally find pharmacy is a pretty resilient industry.
And I know Paul,
obviously he's a little bit older than my dad and he's been dealing with it for
a long time. He always uses the analogy that
whether it was probably 40, 30, 40 years ago,
pharmacists used to spend millions of dollars putting photo dispensing
in their shops,
and that's where you'd go and you'd print the photos out and that's what you
did. And digital cameras came in and that all went away.
And there's always things changing. There's always different offerings.
I think on the positive,
it could be things coming through to pharmacy that could have an uptick,
whether it's more flu shots and more
medical based in pharmacy services that they can offer.
I think services are going to be the big push going forward,
and I think government's trying to support that. There's also, again,
it's probably been a little bit delayed,
but probably the impact and the changes around what's going to happen with vapes
and now that they've become illegal and then they have to go through a pharmacy,
I think that could have a big increase to pharmacy. But yeah,
the 60 day expense in changes,
it created a lot of nervousness and like anything, when there's nervousness,
it means people wanting to spend millions of dollars in
some cases to buy and sell pharmacies and to transact,
they get a little gun shy,
they're a bit nervous. So it creates a little bit of hesitation.
So I think pharmacy will, as it always has,
will come out the other end.
Pharmacists are very clever people and they'll always come up with different
ways and different exciting offerings. And
I can even remember it was 10, 15 years ago,
it was all weight loss shakes and other things.
There's always something around the corner for pharmacy.
And I think that the entrepreneurial,
clever pharmacy owners,
it's just a matter about looking at their offering and looking at where they're
positioning themselves.
I think obviously we've got the thousand pound gorilla in the room with the
discounters,
and I think that they play an important space in the
industry, but it's only one particular space.
There's only one particular segment.
There's a lot of other consumers out there and customers that aren't
just looking for the cheapest, they are looking for things like services.
They're looking for advice and they're willing to pay a little bit more. I mean,
there's room for everyone.
And I think that those sort of ancillary services, those
things that are coming down in the next few years that may transition into
pharmacy, whether they can potentially over time,
potentially issue their own scripts or do things like that,
even doing refills or things like that are going to come through.
And I think that that's a really good opportunity.
There's always a solution. There's always something coming.
It's a very dynamic industry, as I said.
2: Thank you.
So I guess I'd ask a slightly downward question.
So pharmacy owners that fail and those that succeed,
what have you seen through your experiences?
1: Yes. Well, yeah, probably. I mean, look,
we're probably lucky in a way that we've been able to guide and help
more succeed than they'd go the other way.
And again,
whether a young pharmacist who's going to ownership comes see us or
one of our other colleagues,
there's probably five or six in Melbourne that specialize in the industry,
they tend to do very well because dealing with an industry specific accountant
and advisor, so we can look at their figures,
we can update them regularly,
we can talk to them about the performance of their business,
and we can often have those discussions with them before something
becomes too bad.
We can see the trends of the business and have a chat with them about that.
The people that do tend to get into trouble with running a business
are probably people that just don't get the right advice upfront. And I think
that's the main thing that when you're starting out on the journey,
it's best to start building those relationships and start having a trusted
advisor who specializes the space.
And that includes a pharmacy-based accountant, pharmacy-based lawyer,
knowing the different pharmacy bankers and the bankers that have medical and
pharmacy expertise because it is so niche,
just going and seeing your dad's accountant who he used to see for 30
years
isn't going to set you up for success because they might deal one day with a
fireman the next day with a tradie the next day with a neurosurgeon and
all those businesses totally different.
Pharmacy has got its own unique properties. I mean,
it is a medical and a service based industry like we're talking about,
but on the other hand,
it's a retail operation and you've really got to look at things like the rents
that they're paying, how strong the lease is. That's really,
really vital for the value of the business and for the longevity of the
business.
Your staffing and your overhead staffing is a huge cost to pharmacy opening
hours and what staff you've got on those hours, whether you do extended trade,
whether you open on a Sunday, all these little dynamic things are really,
really important.
And that's what we work with a lot of the owners on closely and regularly
monitor those trends to make sure they're going in the right direction.
Probably the other big thing is that while it's definitely more
financially beneficial to become an owner,
you've actually got to want to be an owner. And I often say that to everyone.
You don't have to be a pharmacy owner just because everyone else is doing it.
There's still other ways and lots of other ways that you can build wealth
outside of pharmacy if you want to and invest in other things and shares and
property and managed funds and all sorts of things. And again,
a lot of the hospital pharmacists do this because they obviously can't go into
ownership, but you've got to want to be a pharmacist,
you've got to have that entrepreneurial flare.
And I think that the risk you run is if you go
into it without that passion and really a deep desire to be an
owner,
and whether you feel slightly pushed from parental pressure or
you're just sort of going along with your peers and what all your friends are
doing, everyone's buying a pharmacy, I should be buying one too.
That can run into a little bit of problems down the track because
it is a tough business.
You open pretty long hours and you're dealing with the community and you're
dealing with a lot of moving parts. You're dealing with banks,
you're dealing with landlords, you're dealing with staff,
you're dealing with customers,
you're dealing with suppliers. There's a lot of moving parts to it. I mean,
it can be really,
really enjoyable and a lot of pharmacists absolutely love it and they're born to
be owners. But I think on the other hand,
people that probably, if it's not something that you are passionate about,
it's not something you have to do and you don't have to go into it.
And it's also, there's no race. You don't have to do it at 25,
you might do it at 40, you might do it at 50. I mean,
we've had clients where they bought their first business and they were in their
late forties and they've been a manager for a long, long time,
and then they took over and bought the business off their mentor.
So yeah, there's not one size fits all.
So that would be my advice.
I'd probably say the most successful pharmacists are the ones that probably look
within themselves and know what path they want to take in the
industry.
2: Can you tell me more about, I guess you mentioned trading of pharmacies as well,
so people that buy and then can you tell me a little bit about that?
1: Yeah, I mean we probably come across this because obviously we've got a pharmacy
broken license as well.
So transact pharmacies and have clients that want to sell and clients that want
to buy. So we advise on different elements of the transaction,
and it's something that I think with pharmacy,
there's usually different tiers of pharmacy that we see.
So especially again,
to talk mainly in Victoria where we predominantly deal the
small suburban pharmacy,
very small or potentially even a small rural pharmacy,
you're probably looking at an entry point of around a million dollars and then
it moves up to slightly bigger suburban pharmacy,
you're probably looking at two to $3 million.
And then you probably go right up to your very big, large,
big box pharmacy that's got a lot of staff,
really long trading hours and they can be anywhere from five to 10 million.
They can be sort of sky's the limit.
I would always advise people, it's always best to call before you walk. And
the challenges of a pharmacy business are all pretty much the same.
It's just the scale and the moving parts are very,
very different at those different size businesses.
The bigger businesses have more staff, more overheads,
potentially more that can go wrong.
So it's not a great place to learn if you are starting out.
Sometimes it is best to start small, small, but often as well.
In terms of the trading,
it's a matter of affordability and anything. And again,
property is probably this example. People,
you might start with a one bedroom apartment or a two bedroom apartment.
You're probably not going to stay there for your whole life and raise your kids.
You buy and sell and move.
And some of our biggest success stories, and I know Paul,
he's had a number of clients over 20,
25 years where they went and drove out and went
to rural pharmacies five,
six hours away and lived there for two or three years and did all the hard
work and they bought a small shop and it's all they could afford at the time,
but they knew it,
at least get them into the business and they could learn. And again,
with those businesses, they can be really, really good one.
The competition is usually very small. So again,
there's less that can go wrong in terms of being up against a very
successful or highly knowledgeable
competitor,
but also it's a good training ground and you can make mistakes and everything's
at a lower scale.
You're not necessarily going to lose all your money if you make a slight blue or
you open too long and you've got your opening hours for an extra two or three
hours a day, you can make those tweaks and make those changes.
It's not going to cost you too much.
And some of those really successful people then sold those businesses and bought
something closer to home because they wanted something that was,
they started a family, they wanted to be near their kids' school,
take their kids to school.
And it's a matter of building up the business. Like
anybody that goes into self-employment, it's an asset.
It's something that you can actually control.
So if you are a good owner and you understand the fundamentals and you can
understand the key components of a pharmacy,
if you can run it really efficiently and make improvements and provide a really,
really good customer service experience,
you are going to have more customers come into your shop.
You are going to then as a byproduct, make more profit. By making more profit,
you've increased the value of pharmacy.
And often pharmacists get to that point where for family reasons they
choose to sell,
they might buy something else or they might decide that they've done everything
they possibly can.
They've made the business as efficient as they possibly can and now it's
starting to move on to the next challenge.
And that moving with a challenge usually does come with then
moving up those price scales,
whether it's then going into partnership with some friends from uni or other
pharmacists buying a bigger shop, or if you've built up enough equity,
you might do it yourself for a lot of reasons,
one for the challenge and just you've honed your skills at a small level and you
want to take on that next challenge. And two, for the financial benefits,
if you can make the business as efficient at the smaller level
as you go up that scale with a bigger shop,
the profits that flow down to the pharmacists themselves are going to be more so
it's going to be more financially beneficial to you. So
some owners will go through this process
4, 5, 6 times in their career as I said,
and I've probably got a couple of clients that have done that,
and it's just a matter of what suits their personal situation and also their
ambition and that that's probably the thing with pharmacy,
that it's a career where really have an entrepreneurial flare
and probably of all the medical science-based
degrees and occupations that you can go down.
It's got these elements that if you are really,
really good at your job and you understand the business and you understand your
customers, you can do extremely well and you can really,
really help get yourself and your family well established and financially
secure.
2: So my last question,
fat please think of anything else that you'd like to share that I haven't asked
is I guess if someone's looking to start
at the process of buying a pharmacy, what advice might you have for them?
1: My advice would be I would start creating contacts and
reaching out to the network of advisors and people that specialize in
pharmacy straight away. Even if you're in the last few years of university,
whether you are working as a manager,
start making those networks and start talking to
accountants and advisors that specialize in your industry.
You still have to get your tax done every year anyway.
You might as well be talking to somebody that actually knows the industry.
It has a few benefits. One again,
the pharmacy industry and opportunities that come up aren't
always publicly advertised.
So being connected and involved in that network of advisors,
you are more likely to be introduced to opportunities and become
aware of what's available,
whether it's being introduced to potential business partners that your
accountant might introduce you to another client they've got,
you might become aware of a business that's going to become for sale because
the advisor's got a client that's going to retire or is thinking about something
else. If you are in that network and you're talking to those people,
you probably have more of an opportunity to sort of be tapped into what's
going on in the industry itself.
The other reason I'd say to get involved quite early is you can start making a
plan.
And I think having a plan and getting established even at a really early age
when you're working around budgeting, saving,
working out what you are going to put away and save what you are going to invest
and work towards is really, really important.
Most of our clients and most of the clients I've dealt with over my career at a
previous firm and obviously at a new firm,
they often will start investing in other things.
So they'll often buy a property or they'll start share portfolio,
start saving, but it's getting started I think.
And again,
it's probably the same for every industry. If you spend all your money that you
make and you're going out every weekend and having a good time,
it's going to be very hard to get started later on in life without having a bit
of a nest egg and having something behind you. So talking to the right network,
being involved with these people and then having that plan and having that sort
of investment plan that where you're going is really,
really critical and important.
And knowing that if you are going to go down a certain path and whether
it's property investing for example, that what would that mean?
And would this be a good asset to have later on if I want to buy a pharmacy?
Because the way often the banks will work with lending for the business,
having property and having security like property, the banks look at it very,
very favorable. So they like it. It's a real fixed asset.
So getting started and getting starting to invest can
set you up much longer down the track.
And it also gives you personally,
you added benefit that you've got somewhere to live.
So you're not paying rent and you are building up a little bit of wealth.
You might start with a little apartment, you might move on to a house,
rent out your apartment, now you've got two properties.
By the time you then go to buy a business,
the bank can see that you can pay loans, you're responsible,
you got credit,
and you've also now got a bit of equity in your investments behind you that can
help get into the pharmacy business itself.
So all those elements really work together.
And the other thing that the banks do look favorably on again,
is that if you are dealing with a pharmacy based advisor,
they know that they've got someone holding your hand and helping you along the
journey,
who is going to make sure that you don't run into those crosswinds and that can
help guide you and as steam the problems that you can fall into. And that gives
the banks a lot more security and a lot more comfort when they go to lend
you the significant amount of money that you need to buy business.
So that's what I would advise all young people in that
pharmacy space is that it's never too young to start engaging and
start looking ahead. As I said,
it might be the case that you never buy a pharmacy and never go down that track,
but at least if you've started on those steps,
you'll have some other assets behind you and you will be really tapped into that
pharmacy network and know what's going on.
So I think getting involved in that network of advisors that specializes
is really critical.
Besides the most obvious question of how do I get started and I want to buy a
pharmacy is where do I actually go to find pharmacies that are for sale?
And as I said,
unfortunately it is still a little bit of
a niche industry and it's not very,
very well publicized for a lot of different reasons.
It is a rather quiet transaction buying and
selling a business because there are it's ongoing concern and there's a lot of
moving elements and real factors at play.
So if anyone's looking to buy a pharmacy,
the people that are actually licensed and that sell 'em are called pharmacy
brokers. There's probably around Australia,
there's probably 20 or 30 pretty
reputable, pretty consistent pharmacy brokers in Victoria.
There's probably five or six main brokers.
And simply even if you just Google pharmacy brokers or talk to your pharmacy
best accountant,
most of the pharmacy brokers are going to come up and they're all good people to
speak to and get to know you want to get on their mailing list. You want them
to know who you are,
you want to discuss potential opportunities with them,
and you want them to know you're serious because ultimately for a pharmacy
broker,
he can only sell the business once and he wants to know that if he sells the
business that you're a serious buyer, that you know the process,
what's involved,
you understand how you're going to finance the business.
You can actually the business because he's representing,
obviously from a broker's point of view, they're representing the seller.
They don't necessarily want to have a situation where there's a hiccup or a
problem at the final step because you didn't quite
understand the calculation or the amount of money you'll need or this or that
because it becomes very difficult at that point and can be very stressful for
everyone involved. So getting to know the brokers,
one will give you the opportunity and know what they've got potentially for sale
most these days will put it on their website. But there are also ones that
for different reasons,
certain sellers don't want advertised completely publicly.
So they will often tell people over the phone or on a private email
so that again, it can have a little bit of
discretion around the fail. So getting to know who the brokers are is really,
really important and creating relationships with them.
So I would recommend all the young pharmacists,
if this is a space that you are interested in,
create those relationships and watch what happens and watch of a
period of time, look at the profiles.
If you are thinking about buying a business,
the broker will often send you what's called a broker pack or a pharmacy tech,
which will have all the details of the business.
It'll have a lot of business financials,
it might have a few pictures of the shop, it might have a roster,
it might have the opening hours is
you've got to learn how to read those and understand the information. And again,
often it can be a bit daunting the first time you go through it.
So having an accounted that you can go and talk to that can explain the figures
to you and go through it is vitally important.
But the more that those that you see and the more you read,
you'll also get a better understanding of what's a really good deal and what's
not a great deal, what's a good business,
what's a business that's performing really well?
And you get a sense of the demand in the industry as well because
even if you're just going through a process and looking at those profiles,
looking at the business performance and you don't happen to make an offer,
you don't happen to bid,
it can just really help with your personal education around what
businesses are valued for. Often, even if the business sells, the broker might,
after it's all settled and obviously the disclosures and everything are done,
they might be able to disclose to you a rough price or the actual price. They
might be able to tell you what it valued at. So again,
you get a sense of when you are doing your own assessment and looking at a
business, you might put a figure on it,
how close was that figure to then what it actually sold?
So how are you in touch with what the actual market's doing?
The other thing I would really,
really recommend is the best opportunities in pharmacy
go extremely quickly.
So the more profiles,
the more immersed you can be in understanding those figures and being able
to read the figures to know this is a really good business,
this is a really good opportunity. These are the fundamentals,
this is why I like it. Whether it's limited competition, whether it's
got some geographical protections,
whatever the fundamentals might be,
if it's a really special and really good pharmacy,
they will sell in one day. There's pharmacists as a
broker,
you can make one phone call and it's sold because there are some pharmacies
that are just that sought after.
And I know that happened a couple of years ago with a pharmacy,
regional pharmacy down the coast, no competition,
seaside town one day and there was a bidding war, but yeah,
two, three hours gone.
So obviously that doesn't always happen.
Some pharmacies will take a couple of weeks to go,
but if you are looking at buying a really, really good business,
which most people do want to do,
the better and faster that you can understand and make your own assessments and
work out what you think a good value or a good price is for that business
and potentially make an offer the better for you and you'll be putting your best
foot forward because the competition is very fierce and there are a lot more
experience than older owners that will move very quickly.
And ultimately you can educate yourself on that side of things.
It will give you a better opportunity because it can be that quick for the real
special ones, and everyone wants the spare,
wants the special pharmacy business if they can.
It's always nice to have very limited competition and very high profits that
it's something everyone searches for. So
those fundamentals and having that skillset become more and more
important as you sort of go through the journey.
2: Brilliant, thank you.
1: As I said before, and again,
I think you'd probably reiterate the number one question we always get from
young pharmacists once they've worked in the career for a number of years
is how do I take the next step? How do I progress my career?
How do I get into ownership?
There's a few different paths you can go,
but I'd strongly recommend reaching out and creating those relationships is the
first step.
And you can definitely contact either myself or Paul and every partners.
We'd be more than happy to talk to any young pharmacist,
old or young about it, how to get started and how everything works.
We do no obligation meetings and we're happy to meet with
anyone and have a bit of a chat.
You don't necessarily have to come on board as a client.
We can go through and have a bit of a chat about how the industry works,
how the process works, what's involved,
and explain the nuances of the different elements and who's involved in the
process from banks, to brokers, to lawyers, valuers,
everyone in the mix of and around this business element of
pharmacy itself. And more than happy to meet and talk to people because from our
point of view,
we'd rather share the education and knowledge that we've built up over a really
long period of time. For us,
we probably take a little bit for granted because we meet with so many young
pharmacists.
We meet with so many business owners who see so many businesses their
financials, their performance day in, day out,
that we sometimes underestimate how much knowledge that
we have and we're more happy to pass it on because it's a really vital and
important part of the industry and it really helped these
younger pharmacists in particular take that next step.
And if they're willing and able and really want to be and
go down that entrepreneurial path,
the best thing for them and the best way they're going to succeed is if they're
armed with knowledge. And that's what we are more than happy to meet and pass
on. And if they decide they want to come on board and use our other services and
become a client all the best, then that'd be great. And if not,
it doesn't hurt to have a cup of coffee and let them know how it all works.
Because like I said, I mean some of our business owners,
we've got some amazing six death stories and people that have just done
exceptionally well, and we met them when they were very,
very young. I mean, one Paul's oldest clients I know he talks about regularly.
He was the president of the pharmacy student society at
university. He came in, did his tax return for free when he was a student,
and he met him way back then. He's known the guy now for probably 30,
30 odd years, and he runs one of the biggest pharmacy groups in Australia.
And it has a huge network all over Australia and multiple pharmacy
owner, a wildly successful guy.
And just to see where he's progressed and him and his family, it's fantastic.
It's great we get to go along with the journey and see all these great young
pharmacy clients get the most out of their career.
So as I said, more than happy to help. And if anyone needs some help,
just reach out to Headley Partners.
2: Thank you.
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