So you want to buy a pharmacy?
I speak to many young pharmacists that are keen to buy a pharmacy for the first time. I help them with their structuring, valuations, due diligence, advice, mentoring and getting them in touch with the right lawyers and bank managers. It is a stressful and anxious time, as it should be. They are about to borrow ALOT of money.
In spite of all the changes that have happened over the last 10 years in pharmacy and the levels of uncertainty at present, one thing has remained constant. The demand to buy a pharmacy from young bucks still remains very strong.
When I am talking to potential buyers I like to challenge their thinking and assumptions. This is not to be difficult but to make sure they have thought things through properly. This is because at this stage it is very common for there to be a lot of emotive thinking and not enough objective thinking.
So here are some of the issues I like to raise;
What are you going to do to grow the pharmacy? After all you aren’t borrowing a couple of million dollars for the business to stay the same are you? The business isn’t going to grow itself. You need to have solid plans and a strategy to grow the business. A lot of the young buyers have not thought this through thoroughly enough. In fact some haven’t thought it through at all. There is an assumption that the business will inherently grow on its own. Sorry people but it doesn’t work like that. There is no rule that defines a pharmacy will grow over time. It takes a solid strategy. And “I will service the customers better” is not good enough.
You don’t have to buy THAT pharmacy. It is an unfortunate reality of today’s world in pharmacy land, that the young pharmacists just aren’t given enough opportunities to acquire their first business. In fact I know of some pharmacists that have been waiting for 5 years for an opportunity. The politics of that is a discussion for another day, but what I find is these young buyers feel as though they need to pay what ever the current owner is asking, even if it is way over the top. This is because they feel as though they will never get another chance. It is completely wrong and quite unfortunate really. There are some greedy owners out there who are getting premiums because of this. It is very important for new buyers to be objective and not too eager to acquire the first opportunity. Don’t pay too much, unless there is a really good opportunity in front of you. Be objective not emotional.
Do not underestimate how hard it is to run a business. I have always said, running a business will test every single ounce of physical and mental strength you have. And there will be more than enough times you will be awake at 3am worrying about something. It is hard, and very unforgiving. Do not think it won’t be.
You have to acknowledge that at some stage you will be competing against either Chemist Warehouse or Ramsay or maybe both. You have to figure out how you can be competitive and run a successful pharmacy in today's competitive pharmacy landscape.
There are plenty more issues that need to be discussed. The over riding issue is however, young buyers need to remain objective. Do not be emotional about this. Get some good advice from independent accountants, lawyers and bank managers who are there to support you. Take on the negative comments even if you don’t believe them or don’t want to believe them. Be realistic.
If you are thinking about buying your first pharmacy, make sure you give me a call. I’d love to have a chat and guide you through this process.