How to buy a pharmacy
A guide for pharmacy professionals
One of the most common reasons for a pharmacist to want to buy their own independent pharmacy is freedom.
You want to practice pharmacy on your own terms and in your own ways, and you want to give more to the health of your patients, but where you are now, you might not have enough funding to do that.
You’re not alone. Many pharmacists feel the same way. This guide will talk you through the critical steps to owning a pharmacy that will lead you to a successful purchase.
Follow these tips to put yourself in the best possible position to run your pharmacy service your way - this will bring the best outcomes for your patients.
Put together a preliminary checklist
Before you start the pharmacy buying process, you should list what you’ll need before you start looking.
The first thing on your list should be finding out which pharmacies are for sale, which is entirely different from the house buying process. Those selling their pharmacies aren’t advertising signs in their windows or in front of their stores. Instead, it’s quite a secretive process. Usually, the current pharmacy owners won’t want their patients to know their pharmacy is for sale, as they may take their business elsewhere. Likewise, owners may not want their employees to see because they may leave.
If you’re a pharmacist interested in purchasing a pharmacy, follow these steps:
- First, work with a third-party vendor who has a database of the pharmacy properties for sale.
- Second, check the pharmacy sales listings on pharmacy association websites.
- Third, hire a pharmacy broker, such as Rangewell, who specialise in pharmacy sales and finance.
- Fourth, network with your peers in the industry to let them know you’re in the market to buy. Word of mouth works.
The second thing on your checklist should be to assemble a team of trusted financial and legal professionals. Your team should include the following people:
- A consultant experienced in company purchase and selling pharmacy properties.
- A specialist accountant who can help you through your financial history and help do your due diligence.
- A lawyer who can handle all your contracts.
- A financial expert who can help with you to help you identify the best finance options.
- A pharmacy owner who can help provide support and advice when you need it.
The third thing on your list should be financing.
Likely, a lender won’t pre-approve you for a loan because the purchase price may vary depending on the size and value of the pharmacy that you end up buying. However, a lender will want to see how much you have to put as a down payment. They’ll likely want to see a minimum of 10% of the purchase prices, but 20% will be better. The amount you put down will depend on the deal type and financing needs. They're also likely to want to see your management accounts, as well as your annual accounts.
Your financing options can include:
- A conventional loan
- A small business administration loan
- A loan from a pharmaceutical supplier or wholesaler
- A personal loan from a family or friend
With all these 3 things in place - a list of available pharmacies to buy, a team of professional advisors, and a range of financing options - you’ll be ready to start shopping for your pharmacy.
How to identify a pharmacy to buy?
There are several options available to you when looking for a suitable pharmacy business to buy. The options are:
- Look for a business yourself: Use your contacts in the industry to hear about the pharmacies for sale. For example, you could contact the companies in the local area to see if there are any pharmacies for sale. The downside of this is that an in-experienced pharmacist who hasn’t bought a pharmacy before could end up paying over the odds for a pharmacy.
- Speak to a pharmaceutical wholesaler: They know the market, and they may be able to put you in touch with a suitable pharmacy in your area.
- Advertise: This can be costly, and results aren’t guaranteed.
- Respond to press adverts: Sometimes, pharmacies for sale are advertised in the local press.
- Use an agent who can act as brokers: Brokers such as Rangewell specialise in putting buyers and sellers together.
If you’re already working full time, finding the time to search for your pharmacy may be limited. If you’re in this situation, you might find it more effective to use the services of an agent who can do this part of the process for you. Don’t make an offer on the first pharmacy presented to you. Take your time to shop around!
What buyers should know before purchasing a pharmacy?
Below are some key points that those looking to purchase a pharmacy should be familiar with:
Survey and valuation
Surveys and valuations are essential to ensure the price that you’re negotiating is what the pharmacy is worth. Lenders also use this to help determine the amount they’re willing to offer you. Factor these into your negotiation process to ensure a smooth process from the offset.
Head of terms
The head of terms will provide a rough outline of what the buyer and seller have agreed between them. It’s essentially a roadmap for both parties to refer to during the selling process.
You should negotiate an exclusivity period that will reassure you that the pharmacy sellers are not offering the pharmacy’s sale to anyone while you’re carrying out due diligence. Sellers may offer a holding deposit in exchange for exclusivity. Holding deposits should be refundable in case your advisors come across and issues during the process.
If you're buying with the assistance of a bank loan, the pharmacy will be an asset for your lender.
If the pharmacy operates from a leasehold property, the lease should be reviewed to ensure you’re aware of rent, frequency of payments, length of term, and any other conditions to see whether they apply to you (and your lender).
Enquiries will be made into the pharmacy’s materials contracts such as any NHS contracts (i.e. the pharmacy’s presence on the Pharmaceutical List)
The importance of doing due diligence is crucial. Thorough due diligence will ensure that you won’t be placed at risk after the exchange and completion by being aware of potential issues from the outset.
Share purchase agreement and structure
A vital feature of the purchase agreement will be the inclusion of warranties. Where warranties cannot be provided, you can negotiate a reduction in the purchase price.
Pharmacies are highly regulated; you’ll need to understand these and keep informed of any changes to regulations.
The registration process will have specific time requirements that you’ll need to meet and complete accordingly.
Fitness to practice
You’ll need to present fitness to practice certificate before you’re able to provide NHS services as a new owner.
Rangewell are pharmacy specialist service providers who offer sound advice, we are on hand to answer any questions you may have.
So after buying a pharmacy – how to grow your business?
There are a few ways in which you can make your pharmacy business prosper. You should follow these steps to run a successful independent community pharmacy business.
- Have a business plan: Have a vision and get your people on board, become an ambitious pharmacist! Then develop a business strategy, and execute it. Speak to Rangewell if you're looking for advice around profit forecasts and profit generation. In addition, we can offer specialist guidance on your business strategy, and guidance on income you generate.
- Hiring pharmacy employees is a successful part of your business. Patients may visit your pharmacy for a variety of reasons, including customer service. Building the right pharmacy team can help your business to thrive. A pharmacy manager is an essential role to hire for to keep your business running as it should.
- Make an excellent first impression. When patients walk into your practice, you’ll want them to feel welcome. They should be able to navigate your front of house with ease. By ensuring your business stands out will ensure you stand out in the community pharmacy sector.
- Incorporate the latest technology. Use mobile technology to improve your pharmacy’s digital marketing efforts. Update your website and promote your business on social newsletter, all of these can be consumed via their smartphones. People are looking for access to health records and their patient record 24/7, so investing in an online presence will keep your customers happy.
- Provide value. The money you’ll make results from the value you provide - not just the pricing you offer. People will pay to have their needs met, whether through excellent customer service in your health centre, the products you offer, or the unique services you provide.
Rangewell can offer professional advice around tax requirements and other tax advice, to get you up and running with your new business.
It’s essential to surround yourself with a panel of pharmacy specialist and their advice from the outset. They will be there to help and support you through the asset sale buying process, and even after the purchase is complete.
You must work with people with experience in the pharmacy sector.
Before you begin, ask them for an indication of their budgets so you can account for these in your cash flow projections.
Rangewell has a wealth of experience in the pharmaceutical sector, and we can help guide you through every aspect of the buying process for you target pharmacy and asset purchase.
Get in touch today to speak to our pharmacy specialist lenders.