Selling a pharmacy? Think about who your ideal buyer is.
July 30, 2024
The Importance of Preparing Before Selling
Before (ideally, long before) putting up their pharmacy for sale, a pharmacist-owner needs to prepare. The task list can be long and complex. It typically includes business-related items like improving operational efficiency, making sure the accounting is in order, enhancing facility decorum and right-staffing the store, as well as more personal matters like developing a long-term strategic wealth plan and getting in the right mindset to move on. Yet one task that pharmacist-owners often overlook is equally vital, if a bit fuzzier: they need to ask themselves about the kind of buyer they really want to sell their store to.
Beyond the Highest Bidder
There’s an obvious answer: the highest bidder. But for many pharmacist-owners, that is not always the right answer. And even if it is, thinking about the kind of buyer you are targeting when you put up your pharmacy for sale can pay huge benefits.
That is in part owing to the realities of today’s marketplace, where buyers can be scarce and those that do exist will expect to have the upper hand in negotiations. Especially in rural locations, selling a pharmacy is not as simple as hanging a For Sale sign on the door and waiting for someone to show up. (That will often be a very long wait!) But if you have a clear idea of who might be interested, what they are looking for and what their needs are, then you can begin to enhance your business to attract the right buyer and direct your marketing efforts at them when you go to market.
Living with Your Decision
Another reason to think long and hard about your ideal buyer is that when you sell, you might have to live with your decision for a very long time. In many, many places across Canada, pharmacies are family businesses that occupy a special place in the history and the socioeconomic lives of their communities, along with playing a vital role in local healthcare. That makes pharmacist-owners important and well-known figures. Now think about what happens if you sell to an individual or a corporation that does not share your values, your commitment to and compassion for community members, or who puts profits too far before people, or who doesn’t operate the pharmacy with the same care that you do. Who are your customers, your friends and your neighbours going to blame for that? At least in part, it’s going to be you.
When a pharmacist-owner sells and is unhappy with the result, it is often not because they didn’t get enough money for the store, but because they have to live with negative consequences of a bad second owner and regret selling to them in the first place.
So, here are a few things to think about when you start to think about who your ideal buyer might be:
Considerations for Your Ideal Buyer
1. What’s in a name?
Or, more precisely, your name? Many independent pharmacies proudly bear the family name of their original owners, and name identification and brand affiliation are important parts of goodwill—the intangible things that contribute to a pharmacy’s value beyond profits and so on. Because of that, a buyer will often want to continue to use that name (or some element of it) when they take over the business. So, effectively, the new owner will then be running the business—any way they want—and putting your name on top of it.
If they run it the way you would like them to, then no harm done. But what if they don’t? Or even if they do, what happens if the new owner then turns around and sells the pharmacy to someone else—a buyer you have no control over? We have seen it happen.
The reality is that when you sell a pharmacy, the store’s name is often included as part of the deal—it can be that important to the business’s value. But that’s all the more reason to think long and hard about the kind of operator you are selling to, because you (and even your family members) might have to live with the consequences for years.
2. In rural areas, know the realities.
Owning and operating a pharmacy in a rural location comes with plenty of benefits, but there are also risks, and they can play a big role in the success or failure of the sale of the business. One reality is that the pool of potential buyers is often dramatically smaller than for urban pharmacies, and the balance of power in sale negotiations is typically tilted in the purchaser’s favour. Another reality is that pharmacy talent tends to be scarce in rural areas, which does have an impact on a store’s attractiveness in the marketplace.
For instance, corporate buyers will generally not even consider buying a rural pharmacy unless they are assured that a competent and qualified pharmacist will stay on after the sale. So, if your goal is to sell your rural pharmacy to a chain, it makes sense to try to hire a staff pharmacy who is willing to work with the new buyer. Of course, hiring a staff pharmacist presents its own set of challenges.
On the other hand, rural locations can be attractive to internationally trained pharmacists who want to set up their own businesses in Canada. However, we have found that for many of these new owners, the rural lifestyle turns out not to be a good long-term fit and they exit after just a few years. So, if continuity and stability are important to you as a seller, bear that in mind.
3. Sales Complications and Benefits in Rural Areas
The upshot is that selling in rural locations tends to take longer and be a bit more complicated than in urban areas. But we would also emphasize the benefits to prospective buyers. Many rural pharmacies are highly profitable and can provide a pharmacist-owner and their family with a lifestyle they simply could not afford in a big city. Homes are generally cheaper, and so are commercial rents. Pharmacist-owners have the opportunity to play a much more central role in the life of the community than is usually possible in cities, and in the post-COVID economy, there is significant potential for population growth in at least some rural areas. As a rural seller, think about how to articulate the benefits of your pharmacy’s location and work to find potential buyers who would find them attractive.
4. Customize your marketing materials.
In some ways, selling a business is just like selling anything else in that good marketing helps attract buyers. If you have a firm idea of the kind of buyer you want to sell to, then putting together a marketing package will be simpler and more effective. Good sellers will usually prepare a documents that outline pertinent information about the pharmacy for potential buyers. To the extent that you can, it makes sense to emphasize in those materials the points that will most appeal to your ideal buyer.
For instance, let’s say you want to attract a new owner to whom community is important. So, emphasize messaging about the central place of the pharmacy in your town or city and how involved you and the store have been in civic life. Or maybe you are in a rural location and want to attract a young, urban pharmacist-owner looking for a lifestyle change for them and their family. Then talk about real estate affordability, quality of education, community safety, proximity to natural beauty, and so on. Or let’s say you want to attract a corporate buyer—staffing, profits and potential for growth often matter most to them. Know your audience, and your marketing will be more effective.
Conclusion
It should be obvious from the above discussion that when you put up your pharmacy for sale, there is a lot more to think about than “What can I get for it?” If you don’t know where to get started, a qualified pharmacy transaction advisor like EVCOR, which can provide objective market data and has decades of experience pairing pharmacist-owners with buyers, can help.
In the end, deciding who your ideal buyer is and then taking steps to get them interested in your pharmacy can do more than make the eventual sale of your pharmacy more rewarding for you financially. It can also make it a more emotionally satisfying experience—and one that helps you avoid having to live with the consequences of a bad buyer for years after you sell.
