Want to sell your pharmacy successfully? Don’t run it on autopilot
December 2, 2024
written by Max Beairsto
When you’re considering putting up your pharmacy for sale, it’s easy to think that all you have to do is sit back and wait for a buyer to come to you. That might in fact be the case, but like most things in life, “easy” only comes after “hard.” If you want a successful sale—and by “successful,” I mean to the right buyer, at a time of your choosing, and at a price that will fund you and your family through retirement or whatever the next phase of your life is—then you must put in the work.
By way of illustration, indulge me for a moment as I talk about one of my personal hobby horses: airplanes. I love airplanes. Not riding coach-class in them, necessarily, but looking at them, reading about them, learning about them. I never got my pilot’s license—wish I had—but I grew up around planes and to this day I can’t drive past an aviation museum without going in. Like I said, I love the things.
One of the more esoteric aviation subjects I’ve been delving into recently is autopilot systems. These are amazing technologies, and they have been around for longer than you might think—the first aircraft autopilot system was developed before the First World War. Another bit of trivia: in the Second World War, British pilots called their aircrafts’ autopilot system “George,” which allegedly referred to King George, who of course ultimately owned the planes.
Anyway, today these are super-cool, highly capable computerized technological systems. But here’s the thing: even the most advanced autopilots don’t actually work that well for takeoffs and landings. Almost all of the time, real human beings have to do the work.
This got me thinking about my other hobby horse—how to sell a pharmacy the right way—and about how good entrepreneurs start and end businesses.
When you start up a business, you can’t be on autopilot. It takes commitment, long hours and hard work.
And even though a lot of pharmacist-owners might not think this way, it’s the same thing when you are trying to end your ownership flight: doing it right takes commitment and hard work. In fact, going on autopilot as you prepare to exit your pharmacy business can have disastrous consequences.
Stick the landing
Now that I’ve (finally) got to the point, let’s expand on this notion.
I meet independent pharmacists all the time who have been in the game for a while and want to retire, but they have grown comfortable with their business and their lifestyle and don’t really put a lot of effort into continually improving store operations and profitability. They see their sales declining, but—well, there are always excuses, right? They just don’t have the energy to run the business at optimum levels.
Or maybe they just don’t see the need. After all, they are financially comfortable, so why work harder when you’re doing just fine, thanks?
Well, there’s a very good reason why: The profitability of a business run without an energetic operator who keeps their hands on the wheel will inevitably decline. Its value in the marketplace is simply the present value of future cash flows. If those cash flows go down, then so does the valuation of the business. And if they have been going down for a while, then the value of a business to a buyer goes down even further, because now there is added risk to future cash flows. That is a double-whammy.
In plain language, stagnant or declining pharmacies are not worth as much to a buyer as well-run, growing pharmacies. For pharmacy buyers, when a store is in decline, it’s not worth their time.
So, even if—or especially if—you are in the later years of ownership and have one eye on an exit, then you should absolutely develop a growth strategy for the business. The reason is pretty simple. Since a buyer will evaluate the pharmacy based on the present value of future cash flows, wouldn’t you want your buyer to imagine increasing cash flows from your business? Doesn’t it make sense, then, to have a growth strategy that a buyer can have complete faith in?
Put in the work
It’s also worthwhile to ask, before you prepare to sell, whether you have been running the pharmacy for comfort or for profitability. Take a close look at your pharmacy and yourself, because running your business for comfort can come in different forms.
Perhaps the store could use a makeover—a fresh coat of paint, a minor renovation. Or perhaps comfort comes in the form of failure to embrace technology, like automation, that could create efficiency in the pharmacy. Maybe you have been putting these profitability-enhancing moves off because a) they would cost money, b) they would be a hassle and/or c) nobody has complained, and everybody seems to be getting by.
But the thing is, whether someone has raised a flag about facility decorum or ancient dispensary tech is beside the point. Looking for ways to improve the business is your job. It is your business, after all.
Another common “comfort zone” for pharmacist-owners on autopilot is staffing. I see pharmacies all the time with clearly too many pharmacists or assistants on staff. No doubt, some pharmacists view this as a form of insurance in a tight labour market. Others have, over the years, become friends with their staff and can’t imagine letting any of them go in the name of profitability. (Fair enough, but are you really doing redundant team members any favours in the long run?) More often than not, however, overstaffing comes down to the reality that the pharmacist-owner just doesn’t want to work behind the counter. I’ve heard it many times: “I’d rather have lower profits than face the prospect of having to work in the dispensary again.”
Well, as I’ve said, it’s your store, so you can run it how you want. Just realize that there’s a cost to that when you want to sell. If you have a bloated staff count, it is ipso facto cutting into profitability, and a buyer will want to know why you have let that happen. In this circumstance, the seller usually must try to find ways to assure the buyer that the business’s wage model could be different—despite all current indications to the contrary. Usually, the buyer will want evidence that a proposed wage model will actually work for the business. That takes time (and remember, time is a deal-killer).
And here’s a good question: if a pharmacist-owner can develop a more efficient staffing model when they are selling the business, why can’t they take the time to develop that better model when they are running the business?
The point is, as an entrepreneur, your value lies not in contentment, but in hard work, innovation and a commitment to growing your pharmacy. Especially in the later years of ownership, when you are hoping to exit the business, it’s time to go “balls to the wall.” (That is not me being lewd, by the way, but another aviation reference. “Balls” refers to the handle on the plane’s throttle. “Wall” is the aircraft’s firewall.)
When planning your exit, make part of the plan to go full throttle.
