You've spent years working hard to build a local business that patients in your community have come to know, trust and rely on.
It's never too early to start planning your exit strategy. Preparation is the key to a successful transition. Ask and answer the tough questions - early - and then revisit and answer them again - often. For example:
Most pharmacy owners have two options: to sell to a chain or to an individual who wants to continue their legacy of independent pharmacy ownership. Retail chains are not the only option. Pharmacy ownership is an excellent career option for pharmacists who have already been working in a retail setting for a number of years and are ready for ownership. It's also quite common for other independent pharmacy owners to purchase multiple pharmacies, often in a neighboring town.
It's your pharmacy. Remember to consider all of your selling options. Only you can decide who continues your legacy and what's best for your family, your employees and the community.
It's important to understand that the value of your pharmacy is a direct multiple of your net operating Income. Buyers and bankers want to be assured that the pharmacy can generate sufficient cash flow to service the debt. This is where you will need to be as transparent as possible. Protect yourself with a confidentially agreement, but be prepared to share at least three years of the pharmacy's most recent tax returns, year-to-date financial statements, prescription summary audit logs, top drugs dispensed, third party plan mix, labor schedules and any "discretionary" operating expenses.
Independent pharmacy values are generally based on the profitability of the business. The most profitable and efficiently run pharmacies generate the highest prices. It's important to stay focused on implementing efficiencies, processes or technology that can improve your bottom line and attract the best possible price from potential buyers.
Don't let your exit strategy become an emergency exit strategy due to an unplanned life event. Retirement doesn't have to happen overnight. Develop a transition plan that helps you adjust to retirement - one that gives you more flexibility, time with family, time to pursue other interests while also allowing you to remain connected to your pharmacy in a way that ensures a smooth transition for the new owner, your employees and your patients.
A successful transition includes upfront and honest communication with your staff. They know that one day you'll retire. It's best to let them know your plan. It can be hard to give up the reins, but consider a role with the new owner as you transition her into ownership. It's important that your staff and the community recognize that this was your choice, and how that choice can benefit not just you, but also your team, your patients and the community.
Assemble your team of trusted advisors to develop the best possible exit strategy for your needs. Engage your accountant and craft a plan to maximize your profitability. Ask your pharmaceutical distributor and other key partners what tools and solutions you can use to drive margins and revenues. Take a closer look at the appearance of your store. Consider removing clutter or upgrading fixtures, lighting, flooring and the exterior. Engage a tax attorney to determine taxation consequences and potential mitigating measures.
Regardless of how long you've been a pharmacy owner - take these steps now, and re-evaluate your exit strategy frequently. Afterall, it's never too early to start planning your future.
Our family will have owned an independent pharmacy for 100 years next April. My grandfather, father, uncle, and brother were pharmacists and owned Clinkscales Drugs in Belton, South Carolina. I worked in the store growing up, but decided after graduating college to move away and begin a business career.We have been a proud customer of Cardinal Health for over 20 years, so it was only natural that we called on Cardinal Health's acquisition team to lead us through the purchase and transition.
I speak for my entire family and the staff of our company when I say that this could never have gone so well without this team's help. They are very intuitive to the situation and very educated on the necessary steps to be taken to accomplish the acquisition. We are doing very well and I am so thankful for their help.
Clinkscales Drugs, Inc. Belton, South Carolina