Key factors to consider when purchasing a pharmacy

msi - buying a pharmacyBy Matthew Harris, MSI Taylor, Accountants, Brisbane.

Thinking of buying a pharmacy? Well, there are a number of factors to consider when it comes to buying a pharmacy.  Our MSI Global Alliance team has helped many with the acquisition process and has the skills and expertise to help make an informed decision.

The first decision that needs to be made is on the type of pharmacy you want.

  • Do you want to own the pharmacy yourself or in partnership?
  • Turnover – How big a pharmacy do you want?
  • Trading Hours – Do you want to work nights or weekends?
  • Lifestyle needs
  • Location – Where do you want the pharmacy – at a shopping centre, medical centre or in community?  Do you want to be in the city or country?

Once you have made a decision, is essential to gain as much information possible to ensure you are fully informed about the pharmacy you are buying.  Never get rushed into the acquisition and ALWAYS ensure that the financial commitment being made is fully understood.

Some information to obtain pre-acquisition:

  • Financial statements – These will show what the recorded results were, together with disclosing possible trends in the pharmacy
  • Dispensary reports – It can provide an accurate picture of the operations.
  • Front Shop Sales Reports – For a history of the pharmacy operations.
  • Lease details for premises – It is imperative that the lease and conditions meet the future requirements of the potential buyer.
  • Current staffing – The staff are the backbone of the pharmacy and it is essential their skills are suitable.
  • Demographics – As the lifeblood of a pharmacy, any major changes in the surrounding area i.e. new shopping centres, will have a serious impact on the future of the business.
  • Doctors – Without doctors nearby a pharmacy can find it difficult to operate.  It is therefore vital to fully understand their plans and be certain that they will continue to introduce the same level of business in the years to come.

A potential trap when acquiring a pharmacy can be when the vendor influences the results portrayed in the accounts to overstate the true value of the pharmacy.  Some of the simple changes or modifications we often see in reports are when the vendor tries to apply a higher value for stock, incorrectly treat stock transfers in group owned pharmacies and include management adjustments which do not reflect the true picture.  All of these can contribute to the profit being overstated with the value placed significantly greater than it should be.

Choosing the right pharmacy is a personal decision and needs to be made by the individual.  However, there are many tricks and pitfalls to be aware off and it is advisable to seek professional advice.

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