Selling a pharmacy can be a minefield but help is at hand in a new book from pharmacy sales expert Anne Hutchings. In the third of 12 monthly extracts, Anne explains how you can improve the sale value of your pharmacy

It sounds obvious, but to achieve the best price for your business you must make sure it is prepared for sale. If you are planning to sell now the best thing you can do is ensure that your financial accounts are up-to-date. If buyers have to wait for such information any offers you receive will be low, based on the lack of knowledge. One of the first things a buyer will look at is gross profit.

Have you any idea how your business compares with other pharmacies? If the pharmacy is underperforming by industry standards this will inevitably affect the price you get when you sell. Are you carrying too much stock?

Buyers will sometimes put a cap on how much stock they are prepared to take. An experienced buyer will know what the stock levels should be for your type and size of pharmacy. Do you?

Documentation

Review your documentation to ensure there are no potential ‘problem areas’ when you come to sell. For example, make sure all your staff have contracts of employment which meet legal requirements. Any equipment leases should be examined to make sure they can be transferred to a new owner.

If the pharmacy premises are leasehold make sure that the lease meets the criteria buyers will expect. Go through your pharmacy costs carefully and see if there are areas where you could reduce your expenditure. As a rough guide staff wages (including a pharmacist salary) should be no more than 12 per cent of turnover in a pharmacy with standard opening hours.

If you are overstaffed do you want to do anything about it? You could leave things unchanged, but this will be reflected in your goodwill value. If you could, for example, realistically reduce your staff costs by £20,000 you could add at least £100,000 to the value of your pharmacy.

The higher your ‘owner’s expenses’, the lower your profit will be. This reduces your tax bill, which works well while you own the business. However, when you come to sell, a lower profit means a lower price from the buyer.

If you have expenses which will not continue, such as salaries for family members or personal motor expenses, either take them out of your accounts or list them clearly for any prospective buyer.

Highlight potential

Buyers are looking for a business that has potential. Take the time to list all the things a new owner could do to develop the business. If your business is growing and you are expecting turnover to increase it is worth preparing a projection of turnover and profits for the next 12 months. Selling a business can be distracting, so don’t take your eye off the ball. Make sure you continue to focus on running the business.

A sale can take months to complete and during that time you need to at least maintain if not improve the business performance. Buyers will quickly pick up on falling revenue, giving them a reason to re-negotiate on the price. If you are thinking about selling in the next few years it is never too soon to start planning for that sale.

Consider the different elements of what you are selling, such as goodwill, company shares and freehold property. If you own a company which holds assets other than the pharmacy you may want to clean the company up prior to sale. If you take investments and properties out of the company prior to sale there are tax considerations and you could end up with a large tax bill without proper tax advice.

Make an objective assessment of the business. Draw up a strategic plan for the period of time up until you intend to sell the business, with the aim of increasing profits.

Turnover

Have a look at your past few years’ accounts. Has your turnover been increasing, decreasing or staying much the same? Buyers are looking for a solid business which they can develop further. If you have a couple of years or so before you sell, work on a marketing plan to increase your turnover.

Unfortunately there is no simple way to massively increase profits. It takes a systematic approach involving good business management, financial monitoring, successful marketing and a strategy for your business.

 

Anne Hutchings has been dealing with community pharmacists for over 20 years and has built up her company, Hutchings Consultants, to be the UK’s largest independent pharmacy sales agency. ‘Selling your pharmacy for all it’s worth’ (£12) can be ordered from Amazon (ISBN 9781 7846 22411) or from Hutchings Consultants. For a free copy (while stocks last) complete the form online at hutchings-pharmacysales. com or send a cheque for £12 (payable to Hutchings Consultants) to Hutchings Consultants Ltd, Maple House, 53-55 Woodside Road, Amersham, Bucks HP6 6AA