The most common entry point for pharmacists into the world of business ownership is via a partnership interest. It is an exciting time, but a very nervous time. One where you often have little knowledge about what you need to do, what’s involved, and what advice you need. Having the right team around at this point is vital.
Helping young pharmacists through this process is an important part of Peak Strategies. Our team love to help young pharmacists with their entry into the business world and holding their hand through their journey over the years. We get a lot of joy from this. We have produced a lot of content over the years, and there is plenty more to come as this is an area we are devoting significant time and resources to.
If you are a pharmacist and considering whether you want to get into pharmacy ownership, we will help you out here by listing below the main issues you need to consider. We will dive more into these topics in forth coming blogs and podcasts.
So, if you are not sure if pharmacy business ownership is for you, here are some points to help you…
So, if you are not sure if pharmacy business ownership is for you, here are some points to help you:
Not everyone is meant to be a business owner. Use your time now to consider if this is something you really want to do. Conferences are a great way to speak to other pharmacy owners and industry experts about pharmacy ownership, and what being a business owner really means.
Consider where you are in your journey. Ask any owner and most will tell you, that in hindsight they weren’t ready to be business owners. But you also need to be realistic with yourself. Are you ready for this? Having the right experience and experiencing a variety of pharmacist manager positions is very worthwhile.
Having a business owner as a mentor at this stage will help immensely in these first two points. Something I certainly encourage any keen pharmacist take up. This will help immensely in your journey and give you a good understanding about what it takes to own a pharmacy business in today’s environment.
If you are ready, then it is important to understand what your funding capacity is. Speaking to a pharmacy specialist bank manager or finance broker is important. What you need to understand here is what financial backing you need. The banks do vary but typically you will need cash, or equity that the bank can use as security amounting to 25% of the market value of your investment. The bank will secure the remaining 75% on your share of the pharmacy.
Get your A team together, and make sure they are pharmacy experts. At this stage you will need your own accountant and lawyer. A finance broker here will also help.
Consider your options. It is common for pharmacy owners to want a junior partner. If there are no opportunities where you are currently working, then register with us here and we will help you find partnership opportunities.
When an opportunity does present itself, this is the time where you need your team around you, and listen to their advice. But there are some critical questions that you need to be asking at this stage.
7.1 What is the succession plan? You need to discuss the current owners plans to go forward. Are there opportunities to buy further interests? If so, what is the timing and how will this be determined? You don’t necessarily want to stay on the same percentage interest, particularly if this is a minor percentage like 10%, 20%. This succession plan is critical and needs to be documented.
7.2 Why are they wanting a partner and what is their expectations of the role?
7.3 What percentage of the business is being offered for sale, and for what price?
7.4 What is the market value of the business and how does that compare to the amount the current owners are asking? Important to note here, the first opportunity you get isn’t necessary the best opportunity. Be patient, and be prepared to say no. Other opportunities will come up.
7.5 Do your SWOT Analysis. What are the strengths, weaknesses, opportunities, and threats? Seek advice from your A team here as well. At the end of the day, only you can decide. But remain objective, don’t get too emotional. Others have made the mistake of being too excited and not giving enough weight to the risks, only to regret it later.
If you decide at this point that you want to go ahead, this is when the fun begins! We will hold your hand through the process to ensure your purchase of the interest in the pharmacy is smooth. I have listed below for you the main steps you will need to go through.
1. Set up your legal entities that will own your business interests
2. Sale agreement
3. Partnership agreement
4. Succession agreement
5. Business valuation
6. Get finance approval
7. Undertake the due diligence.
8. Lease assignment
9. Pharmacy Board/Medicare approval
10. Settlement
11. Your pharmacy business ownership career begins!
AP Group and Peak Strategies have combined our talents and resources to form the Pharmacy Partnership and Succession Program. We have put this program together to achieve a number of goals;
Help pharmacy owners find and attract the most talented pharmacists to recruit as future partners.
Assist pharmacists who are keen on pharmacy ownership to find the right partnership opportunity.
Put together a structured business succession program that works for the existing owner and the junior partner. Including documenting the key future buy-in/sell-out timing points, succession issues and partnership arrangements.
Manage all aspects of the sale including, but not limited to the sale agreement, partnership agreement, succession agreement, valuations and appraisals, finance and legal/tax structuring and various registrations and approvals.
To find out more about the program click here.
