Selling a pharmacy business is a complicated process, and any wrinkle or mistake can severely impact the pharmacy’s price – or terminate a sale entirely. Sellers should be aware of the most common issues associated with the sale process. EVCOR can help pharmacy owners answer the question, “What is the most effective, efficient, and profitable way to sell my pharmacy?”
Unrealistic Asking Price
The asking price for the pharmacy should be calculated using only relevant factors such as its historical performance and its multiplier. The seller should resist being influenced by non-related factors – such as their needs in retirement. In some cases, the pharmacy’s estimated future growth influences the pharmacy’s asking price, but the growth needs to be quantified and supported.
Being Unprepared to Sell
Selling a pharmacy business is an exhaustive and complicated process. Sellers should not tell anyone about their intentions to sell until they have prepared and are committed to selling the pharmacy.
Sharing Confidential Information Without Protection
Buyers have a right to access to relevant financial information about the pharmacy. However, sellers should insist on buyers signing a legally binding confidentiality agreement prepared by a lawyer before disclosing confidential information about the pharmacy.
Decline in Sales
If the pharmacy being sold loses business during the selling process, not only will the basis upon which the buyer does their assessment decrease, but the multiplier can drop as well. All of which can lead to a lower selling price. The seller should ensure that the pharmacy either maintains or increases its business during the selling process. Don’t take your foot off the pedal!
Postponing or Withholding Disclosures
Adherence to confidentiality is no excuse for sellers not giving buyers an honest review of the pharmacy and its issues. Concealing or avoiding disclosure can jeopardize the sale or expose the seller to legal matters.
Delays in Responding
When a seller does not reply to brokers and buyers in a timely manner, it can delay or stall the pharmacy’s sale. The broker should provide the seller and buyer with reasonable timetables for responses, and all should adhere to them to ensure a successful transaction.
Incomplete Letters of Intent
Sellers should verify that Letters of Intent (“LOI”) are detailed enough to outline the transaction's essential elements. It is preferable to err on the side of too many terms instead of not enough. Although the LOI is a non-binding document, it will create the outline upon which the definitive agreements are drafted. A lawyer should review the LOI to ensure all the components necessary are included.
Unresolved Issues in the Letter of Intent
No seller should sell their pharmacy when they have concerns about the Letter of Intent (“LOI”) contents. All matters, issues, and questions should be resolved before the seller signs the Letter of Intent. It is not uncommon for an LOI to go back and forth between the parties before it is ratified.
Failure to Define or Honor Deadlines
Sellers, buyers, and other relevant parties should be provided with clear deadlines by their advisors. To the best of their abilities, sellers should adhere to timelines, providing adequate notice when unforeseen events prevent them from meeting the deadlines.
Rejecting a Solid, Fair Offer
Selling a pharmacy is unlike selling personal property; often, if the first offer reflects that the buyer understands the pharmacy's value, and it is at or above fair market value, then this is an offer worth considering. They say a bird in the hand is worth two in the bush, and often a good offer is lost by holding out for something better.
EVCOR can help owners of Canadian pharmacies in every aspect of the sale process. We can help sellers establish a sales strategy, provide a realistic valuation of the pharmacy, and prepare them to achieve the best price for their pharmacy.
