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Three Important Factors That Affect a Pharmacy’s Value

October 13, 2021

Pharmacys Value

The value of any business will likely be determined by how much a prospective buyer is willing to pay based on their perception. However, there are fundamental elements that factor into a valuation for a pharmacy for sale in Ontario. There are strictly business-related factors, such as growth and stability, and low concentration risk. Significant regulatory and funding framework events can have a major influence on how much a pharmacy for sale in BC is worth. However, it all boils down to profitability and the risk associated with maintaining that profitability.

Proper valuation determines whether your asking price is valid or needs to be lowered or raised. There are factors that, when assessed, will help you accurately determine what the value of your pharmacy will be once you put it on the open market.

The following are three more essential factors that influence the profitability and risk as mentioned above and directly impact your pharmacy business for sale’s value.

Operating efficiency

Everything you have worked for boils down to how much cash flow your pharmacy business generates year-over-year on a predictable basis. All forms of investors, including would-be pharmacy buyers, like to see predictability. It reduces risk and uncertainty. A predictable pattern will garner a premium price when selling. It is all about risk. The lower the risk of losing the cash flow in a transfer of ownership, the more a buyer is prepared to pay.

Growth and scalability

Acquirers typically pay more for businesses with a greater growth rate and/or potential to grow. In rare cases, an acquiring company may even buy a business that scores high on growth potential but low on other attributes because the acquirer sees a way to leverage some of its own assets to help the business expand much more quickly than it could under its current owner

Concentration risk

Pharmacies that have a concentrated customer and patient base dependent on a physician or two runs the risk of that base leaving to follow a physician elsewhere. A community dependent on one major employer or industry is vulnerable as a result of changing economic circumstances. We refer to such phenomena as concentration risk – the proverbial case of putting all your eggs in one basket. On the other hand, broader community customer bases not dependent on a handful of prescribers or one employer will increase the value of your pharmacy business for sale because if one customer leaves, another is there to take their place. And with lower risk comes higher value.

Seeking a maintenance boost for your pharmacy business as you look for premium value pre-sale? Contact us for more information on our services.

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