Maximizing Your Pharmacy’s Value: Four Key Aspects

June 15, 2021

There are many facets of value to keep in mind when there is a drugstore for sale anywhere in Canada. We have compartmentalized these into four phases, and those clients who have been mindful of them have maximized their “take-home” in their sale process.

Phase 1: Understand the Value

Any owner of a pharmacy for sale in Ontario or anywhere, for that matter, should have their business valued at some point. The valuation report will give the owner insight as to what is driving value. These things include the tangible aspects, but for pharmacies, it is primarily intangible.

Phase 2: Build the Value

Once you know where you stand and understand value drivers, developing a plan to grow the value is vital. There are two aspects to keep in mind when putting this plan together. The first is profitability; the second is “risk.”

Keeping the profitability high is as important as keeping it growing. This all relates to your operational plan. This plan needs to include not only features of profitability retention but a plan to keep it rising.

The most forgotten or ignored part of the value formula is “risk.” The more risk a buyer has of maintaining your profitability, the less they will be willing to pay. An owner needs to think about how the business can be easily transitioned to a new owner.

The business will build wealth, as will the owner through this building phase. They will be challenged with determining what to do with the cash in the business and their own. They must develop a strategic wealth plan to build value effectively.

Phase 3: Realize the Value

Realizing the value of the business is the point where there is a liquidity event. Ahead of the “Realizing” phase, you want to have a transaction plan to retain the value of the business more effectively. In our other blog this month, Tax and Legal Issues, we specifically deal with strategies to more effectively convert the value of the business to cash.

When companies do not have the strategic plans, it becomes much more likely to lose value in the sale. There are jurisdictional nuances as well, so if you are putting up your pharmacy for sale in Toronto, for example, it is critical to have experts who understand those markets. Keep in mind as well that the “Realizing” phase may take 2-5 years to execute, so plan ahead!

Phase 4: Preserve the Value

Once you have converted the embedded value of your pharmacy business into “cash,” care must be taken to preserve your wealth. We advise that you have first prepared a strategic wealth plan well in advance of your liquidity event. This will not only help plan “when” to sell but “what” retirement will look like.

At EVCOR, we understand these aspects of value and provide competent support and guidance through selling a pharmacy business. We have your best interests in mind, and we have the answers you need. Contact one of our experienced associates either by phone or email today.