How to buy a pharmacy

Written by amber keefer
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While the advantages of owning your own retail pharmacy are many, buying a pharmacy involves more than a commercial investment. Although the potential for greater profitability is there, you must deal with a number of government guidelines and financial constraints involved in managing the operation of a pharmacy. Before you make a final commitment, it can be helpful to know what to expect. Careful planning throughout each step of the process can result in a more successful outcome.

Skill level:
Easy

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Instructions

  1. 1

    Assess your financial position, especially the amount of capital that you have to invest. Most banks and other financial lending institutions will require that you have a minimum down payment of 20 per cent to 30 per cent of the amount you are financing. Lenders will usually only lend up to 80 per cent of either the purchase price or the value, whichever is lower. Keep in mind that there will be legal fees and other start-up costs as well.

  2. 2

    Know your financial position before you apply for a loan, including how much cash and equity you have. You may be required to post collateral in addition to the assets of the business you wish to purchase. Often a lien is placed on a buyer's home.

  3. 3

    Make certain that you have sufficient assets and collateral to secure the debt. Whether you can handle repayment of the debt, the potential profits the pharmacy could generate, and what kind of salary you will be able to draw are all critical factors.

  4. 4

    Choose the type of pharmacy that you are interested in purchasing, and then find the right pharmacy to buy. Determine whether you want to own an independent pharmacy, go into partnership with someone else or buy into a pharmacy chain franchise.

  5. 5

    Consider partnering with an established pharmacist who owns a pharmacy and is preparing for retirement within the next five years. Finding an equity partner may be a viable option, especially if you find that you do not have adequate financial resources to afford the financing on your own.

  6. 6

    Consider buying in as a junior partner. This allows you to purchase an interest in a pharmacy more easily than purchasing a business on your own. In most cases, a 25 per cent interest is required to start, but you could eventually own the pharmacy. The first step is to find out how much capital you will need to fund your percentage of interest in the business. This kind of partnership to start also gives you the opportunity to learn management techniques from an experienced pharmacist and business owner.

  7. 7

    Think about relocating. Pharmacies in rural areas often sell for a lower price and have fewer local business competitors.

  8. 8

    Obtain the services of a pharmacy broker (see Resources) to help locate the right match. Once you find a pharmacy that you want to buy, consider the size of the business and the asking price. Evaluate the value of the business in addition to the market price. The process incorporates a number of different factors including current market conditions. Ask whether the list price is negotiable.

  9. 9

    Conduct a thorough financial analysis of the business before making any final decisions. Ask to see the financial reports for the previous five years. Examine all documentation showing the pharmacy's operating costs and business growth over the last several years.

  10. 10

    Hire an accountant familiar with the pharmaceutical industry and the government regulations for operating a pharmacy. The person whom you choose should be qualified to assist in long-term planning.

  11. 11

    Identify potential growth opportunities. For example, speciality pharmaceutical products could be a niche worth pursuing. According to a report issued by the National Association of Chain Drug Stores (NACDS), sales involving specialised pharmaceuticals is expected to grow at an annual rate of more than 12 per cent through 2014, while the overall market share of brand name and generic drugs is expected to decline.

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