Concentration Risk

Broader patient and customer bases will increase the value of your pharmacy business. Wider prescriber bases reduce dependency on a specific prescriber, in the event that the prescriber leaves.
Concentrated patient and prescriber bases are associated with greater risk and lower earnings multiples. We are growing increasingly leery of the evolution of concentrated prescriber clinic-based pharmacy businesses. Pharmacies who enjoy a broad community base of customers and patients and who are not dependant on one or two prescribers, garner higher earnings multiples.
Furthermore, contract-based revenue practices also garner lower earnings multiples attributed to the potential aperiodic nature of the earnings streams associated with long-term care and infusion clinic practices. We are not suggesting that they are zero merit practices; however, such practices result in riskier and lower visibility regarding the predictability related to their resultant cash flows.