How to Prepare Financial Statements When Selling a Pharmacy Business
April 16, 2025
A well-prepared financial record can make a significant difference when it’s time to sell your pharmacy. Whether selling an independent pharmacy or part of a larger group, clear and accurate financial statements play a key role in instilling buyer confidence and supporting a fair valuation. Sellers who plan early and take a methodical approach to financial documentation help facilitate smoother transactions.
1. Organize Your Financial Documentation
When preparing to sell your pharmacy, start by organizing all financial documents from the last three to five years. Include tax returns, profit and loss statements, balance sheets, and cash flow statements. If selling a pharmacy business with multiple revenue streams, break down earnings by category, such as prescription sales, over-the-counter (OTC) products, and ancillary services.
2. Ensure Accurate and Updated Balance Sheets
A current and accurate balance sheet provides a snapshot of assets, liabilities, and owner equity. Buyers will want clarity on inventory, accounts receivable, payables, equipment, and real estate (if owned). Sellers must confirm that asset values reflect market conditions and that any liabilities, such as loans or leases, are appropriately documented.
3. Prepare Detailed Income Statements (Profit & Loss Statements)
Income statements are essential when selling an independent pharmacy. They show revenue and expenses over a defined period, helping buyers understand profitability. Ensure statements include gross profit, cost of goods sold (COGS), operating expenses, and net income. Highlight consistent revenue streams and note any unusual variances.
4. Present Clear Cash Flow Statements
A cash flow statement demonstrates how money moves through the business. Buyers analyze this document to assess liquidity, working capital management, and the ability to generate cash. When planning to sell your pharmacy, ensure this statement separates operational, investing, and financing activities for transparency.
5. Highlight Adjustments and Add-Backs
Adjustments and add-backs help normalize earnings and provide a clearer picture of operational income. These include owner salaries, non-recurring expenses, and discretionary spending not essential to business operations. Clearly label these entries to help buyers assess true cash flow and earnings potential.
6. Provide Supporting Documentation and Notes
Accompany financial statements with notes and relevant documentation. This might include loan agreements, lease contracts, supplier terms, or insurance policies. Supporting notes explain financial anomalies and demonstrate a proactive, transparent approach to selling a pharmacy business.
7. Professional Review and Audit
Having a professional accountant or third-party firm review or audit your financials can improve credibility. Buyers are more likely to confidently move forward if an impartial party has verified the information. For owners selling an independent pharmacy, professional input can also help identify overlooked liabilities or missed value.
Build Buyer Confidence with Clean Financials
Accurate and organized financial records are crucial to a successful sale. Whether planning to sell your pharmacy now or in the future, strong financials support better negotiations and faster closings.
EVCOR offers comprehensive guidance for owners selling a pharmacy business, from financial preparation to valuation and closing. Connect with EVCOR for tailored support that ensures the best outcome when selling an independent pharmacy.
