You’re a pharmacist and have been working for a few years in a pharmacy, most likely with the title of manager. Now finally! You’ve been given the opportunity to buy a partnership interest in the pharmacy you work at, and you’ve got many emotions bubbling throughout your head so, you’re not quite sure what to do.
Firstly, take a big deep breath and read this article……
From the experience of those who have trodden this path before you, here are some tips to help guide you to make some crucial decisions.
Remember the Basic Investment Principals
Buying into a pharmacy is an investment and no different than any other investment. Therefore, remember the basic investment principals that revolve around the concept of “Return on Investment”.
1. Be comfortable with the risk attached to this investment. Noting there are no guarantees in anything, especially in business. There is always the possibility your investment will decline in value and earnings will fall. That is a reality of pharmacy land. Make sure you objectively assess the investment and the risk attached to those earnings. If the risk to earnings are high, then you should be paying less for it. Don’t pay a premium for a pharmacy whose earnings have a high-risk factor attached to them.
2. Know how to grow the value of your investment. Don’t buy into a pharmacy without a solid strategy around how you will grow the value of your investment. It surprises me, but many first-time pharmacists who are considering buying into a pharmacy have not thought about how they will grow the business. Like I said before, there are no guarantees in business and plenty of people have lost money before. Furthermore, having done many valuations I have seen plenty of pharmacy values go backwards over recent years. Doing nothing and continuing the status quo is not enough. Before you commit have a think about what strategies you can employ that will grow the value of your investment. The best pharmacy owners I know can look at a pharmacy business for sale and know its potential for growth. You need to do the same.
Keep Your Emotions in Check
It is an exciting, nervous and often stressful time with buckets of anxiousness. Make sure though your decision making is based on objective reasoning and not emotional reasoning. Sometimes you will see a young pharmacy owner excited about the first ownership opportunity that comes their way. Being human though they often only see the facts that support their decision to go ahead, and they ignore or disregard the facts that go against that. Of course, that is just being human. But you are about to invest a lot of money so be objective in your decisions and let emotions override. Which leads me to my next point.
You Don’t Have to Do This
Please do not feel like this is the only opportunity you will get. It may feel to you that you should go ahead with this. Remember you don’t have to do this. Don’t feel as though this will be your only opportunity. It isn’t. Be patient, be objective, and be prepared to walk away. Only go ahead if there is a good opportunity ahead of you. You are about to borrow and invest a lot of money, be careful and be prepared to walk away.
Speak to your trusted advisor's: accountants, lawyers etc. It’s extremely important to have your own team of trusted people around, to help guide you through the process.
It is quite important before you commit to buying into the pharmacy that you have a clear strategy about how you are going to improve the performance of the pharmacy. I would be uncomfortable with pay a lot of money for an interest in a business without knowing how to grow it. That is leaving far too much to chance. Like I said before the best pharmacy owners I know can see the potential of a pharmacy for sale and know when to pounce and when to back away. Where is the growth potential?
The reality of pharmacy ownership is that it can be a hard-competitive environment. Owning a business, it not for everyone. Some have often said they didn’t realise how difficult it would be. What happens if you find your customer numbers and script numbers are falling, what are you going to do then? What happens if the businesses profitability is showing declining trends, what are you going to do then? If the business doesn’t have a marketing strategy, what are you going to do about it? The team are not operating as a close, harmonious, effective unit, what are you going to do then? Your financial data doesn’t make sense, what do you do about it? The reality of ownership is there is a lot of stuff that goes on in every day, week, month and you must deal with it all. Pharmacy ownership is also not a 9 to 5 job, where you get to go home and forget about it.
So, think carefully about your decision, and what business ownership really means to you. It is not for everyone. I know what I have written does sound negative and a bit “doomsdayish”. But I would much rather you be prepared and make a good decision that is carefully thought out then one you regret and you end up losing money. Furthermore, it is can be a very exciting process, just take the time to research the opportunity.