Top Five Issues Pharmacy Valuers Face

Over the last few months the volume of valuations we have been doing has been very high. The common question we receive is why? Well for all sorts of reasons. Mainly for bank compliance reasons. However there are still partnership equity changes going on all the time as well as buys and sells.

This week I thought I would let you know the top five issues a valuer must face.

Moral and Ethical issues

Being a valuer, your independence is paramount. It is your expert opinion that is being sort after and relied upon by various parties. Our position and opinions are required to be independent.

I strongly disagree with a valuation being prepared to achieve a certain outcome. Your independent thoughts are last early on when that starts to happen. I find the banks and the various interests within the banks largely respectful of this position and we rarely are put in uncomfortable positions from their perspective. However, it is common for pharmacy owners to want to influence the outcome to suit their own self interests. I suppose that is human nature. We are often filtered information that suits a specific outcome. As valuers sift through the information to uncover facts and determine a realistic earning’s position and risk profile of the business.

Being true to our morals and ethical positions to maintain the highest standards is vital to us. It is important to uphold the integrity of the valuations we produce.

Competing Self Interests

Having undertaken a lot of valuations over many years, we quickly learn the interests of the various parties involved in the process. Therefore we learn how the individual perspectives can influence their own opinions. A pharmacy owner or seller will generally think the pharmacy is worth a lot more than the buyer. When a valuation comes up short the immediate reaction is we are crap at our job, unrealistic, don’t understand the market and we have made a mistake.

On the other hand, the buyer thinks it is worth a lot less than the seller but still wants a valuation high enough to get finance, and allow as much of the debt as possible to be secured on the business itself.

In family court scenarios, the various viewpoints become more pronounced. One side thinks the valuer is a hero and the best person ever whilst the other thinks the valuer is an incompetent fool and you have no idea what you are doing.

Most parties in the process are very respectful of the process and the viewpoints we come up with. I guess they agree with the umpires’ decision.

Once again maintaining our independence and moral/ethical standards is vital. It is quite okay if someone disagrees with our views. It is normal and quite natural. We make sure we listen to them, respect their views, sometimes we learn about certain aspects of the pharmacy, or certain information comes to light that we were not previously advised which causes an adjustment to the valuation. Sometimes we agree to disagree. And that is quite okay.

Cost and Time Pressures

When a consumer agrees to buy a product or service from you, the decision-making process in their eyes relates to value and price. In retail pharmacy, price is becoming the dominant factor despite the years of training and expertise pharmacists undertake. Customers want the product as cheaply as possible and as quickly as possible. Therefore I am sure many of you think the customer doesn’t value the advice and training that goes into dispensing that medication.

Well the same applies to valuations. Despite of years and years of training, process improvements, the decision making as to whether we get the valuation job only comes down to two points. Cost and turn-around time. That sometimes compromises the valuation process. Mistakes are made when things are rushed, pharmacy owners know that just as much as we do. Yet one of the key KPI’s banks place of us is turnaround time. We are expected to finalise a valuation in a very short time frame. The banks we find in general though are quite understanding and would much rather wait to get a quality valuation report.

Once again, the quality and standards we adhere to are vitally important and we must ensure we stick to our processes to ensure a quality product.

Quality of Information

One of the biggest issues we deal with when undertaking a valuation is the quality of information we’re provided with. Due to the cost and time pressures I noted above we cannot and will not verify the information we’re provided with. We can only assume the information we are given is correct.

The common problems here are;

  • Very poor quality financial information

  • Incomplete financial statements

  • Not being provided with the information we have requested.

These issues have a huge impact on valuations. At times, we cannot complete our assessment and must wait until we get what we are after. It is the most common problem that we deal with.

Lack of Financial Competence of the Owners

The lack of financial and business acumen in some owners does become a problem when the quality of information they provide you is poor (refer point 4). They can’t answer your questions in a competent manner or are critical of the outcome yet don’t have the knowledge to understand the process and reasoning behind the valuation. The key here is to try and help and explain as best we can.

Valuations are inherently subjective.  Ask 5 different people to undertake a valuation of the same business and you will get different opinions. That is the nature of it. A valuer must understand that, respect the different view-points, know when to ignore the self-interests and third-party pressures to ensure the valuation achieves a certain outcome. Most importantly they must ensure their own views are not compromised by the views of others. Valuer's must maintain the highest moral and ethical standards to ensure the valuation report and the opinions within that report are not compromised in any way.

Would you like to learn more about valuations? Please do not hesitate to contact me on As one of the few accounting firms that are allowed to conduct pharmacy valuations, we are the team to produce a quality valuation for your business.