There are over 67,000 pharmacies in the United States. Almost half of them, or 33,000, are located in supermarkets, grocery stores, department stores, medical clinics, surgical clinics, universities, nursing houses and even prisons. The top 25 American pharmacy chains employ about 46,000 employees.
Research conducted in 2013 showed that there is a new business trend regarding pharmacies: the creation of small businesses in order to replace large chain drugstores. According to that research, consumers would be giving preference to a more personalized treatment that only small pharmacies are able to offer.
That happens because consumers’ preferences lie on smaller establishments with individualized services and good attendance by the staff. One good example is small neighborhood pharmacies.
With that being said, if you own a pharmacy and intend to sell it, you may learn how to value your business and close the best deal you can.
In the next topics, you’ll find some information regarding pharmacy business in the United States and how did other pharmacy owners have already sold their stores.
What is your Pharmacy business worth?
One of the most important steps in the sales process is to determine the real value of your pharmacy.
In order to do that, you’ll probably need to be aware of your EBITDA rate. But what is it?
EBITDA is an acronym for “Earnings Before Interest, Taxes, Depreciation and Amortization”, and it’s the name for a financial indicator that represents how a company generates resources through its operational activities, excluding taxes and other financial effects.
EBITDA is important for business owners and managers of companies as it allows them to analyze not only the final result of the organization, but the process as a whole. This indicator is widely used in the stock market.
You may also gather more finance data, as potential buyers will probably ask you about your business financial situation. Take a look:
- What are the sales?
- What is the profit?
- What are the growth trends?
- What is driving new sales and is that sustainable?
- What channels do new customers come from and what is the breakdown of each channel?
- What is your market position?
- Is your Location favorable?
- How reliant is the business on the owner?
- What systems and processes are in place to run the business?
What makes a Pharmacy business worth more?
Show your potential buyers all the strengths you’ve raised over the years, such as
- Investment in technology
- Variety of products
- Clientele Loyalty
- Whether you have a online store or not
- Telephone Sales
- Delivery (local or to other states as well)
- Product diversification (generic included) and from all laboratories
- Growth potential
- Creation of a score system in order to buy cosmetics and exchange point for gifts
- Creation of your own cosmetics brand, personal care products and functional foods
- Staff trained to treat customers as if they were family.
- Advantages to squeeze profit margins, offering medicines with prices below average in order to win new customers and get higher profit on sales volume.
- Have only a few stores is more interesting, as you won’t need to spend money on rent and neither with so many pharmacists or infrastructure.
What does the average Pharmacy business sell for?
There have been very few pharmacy sales in the past 10 years, only 57. But, as we can see in the chart, sales were good.
Average sales price, for example, is huge, almost $900k, and average multiple is almost 3, which means the usual asking price tend to be three times higher than total gross income.
What is the most frequent deal size?
Despite that, the most frequent deal size is $150k, which explains why in 2018 there have been much more deals under $250k.
In 2017, however, most of pharmacies were sold for more than $500k and less than $1 million, the exact same thing that happened in 2015, for example.
Is the Pharmacy market getting bigger?
2018 was finished with a total transaction value of $12 million, the exact quantity accumulated in 2006, for example.
Last year was the best in this past decade, and 2017 and 2016 were good years as well, but it’s too soon to say that the pharmacy market is getting bigger. We still need to wait for 2019 numbers.
Are bigger businesses worth more?
Yes! Pharmacies sold for less than $250k in 2018 had a multiple of 2.12x, as it tends to grow as the deal size gets higher.
If you look at the chart, you’ll see that businesses sold for more than $2 million and less than $10 million had a profit over two times bigger than the first category. The same happened in the last few years as well.
What states have the most Pharmacy business deals?
California and Florida are the best states to sell a pharmacy by far
But Maryland and New York are not that bad, and you can also try to make a good deal in the state of Washington too.
Why would you sell in the first place?
The reason to sell always varies from each person. Maybe you are looking for new challenges, businesses and opportunities, or you just want to enjoy your family and retire. Although it can seem tempting to get your hard worked cash, make sure that you are clear on the motives so you don’t regret afterwards.
How long will it take to sell your Pharmacy business?
If you have read all the necessary steps to understand your valuation, and think you have focused on all the topics that make your company worth more, it is maybe time to start the process. Selling your business is a long-term process, and doesn’t happen overnight. Usually companies sell in 12 months, but you can also see deals getting closed in 6 to 9 months depending on the opportunity.
What is the process of selling your Pharmacy business?
This step by step process will help you get less confused when you make sure you are ready and confident to let go of your business, and perform a nice and positive sell. Many entrepreneurs forget about a step, or just don’t have the right guidance to know all the stages necessary and get lost through the process. Don’t forget to go through all of these, and if you have any questions, comment at the end of the article or contact us for more help.
Who will buy your business?
If you are wondering about the buyers that can be interested in your pharmacy, don’t worry, there are many options and possibilities. From First Time entrepreneurs, to businessmen interested in new opportunities, the chances are that in the pharmacy industry it may likely be a person who already had a store in the field.
How should I sell my Pharmacy business?
Marketplaces – (under $500k yearly profit)
Smaller business and micro-businesses are usually best sold privately by the owner through forums or classified websites.
To sell your Pharmacy business, check out:
Broker/M&A Advisor – ($500k – $10m yearly profit)
Medium sized businesses in the $100k-$20m are best sold through brokers who help with finding buyers, negotiating and structuring the deal. To sell your Pharmacy business, check out:
Investment Banks – (Over $10m yearly profit)
Larger businesses are best sold through investment banks or merger and acquisition companies. To sell your Pharmacy business, check out:
How much will it cost to sell my Pharmacy business?
Generally a business broker will charge 8-12% of the sales price of an Pharmacy business including inventory depending on the deal size. Larger deals attract a smaller fee. Below is a range of fees at each deal value level.
- Under $1m – 12%
- $1m -$4m – 10%
- $4m -$10m – 8%
- $10m -$25m – 6%
- $25m + – 4%
Conclusion
There have been very few pharmacies sold in the past ten years, but they are usually very expensive, with an average sale price almost three times higher than total gross income.
However, it’s too soon to say that pharmacy market is getting bigger, so it’s better wait to 2016 numbers to make and exact prediction.
If you want to start accelerating your buyout process, fill out our free valuation form and get your business valued today! Leave your comments on any doubts or feedback, we are glad to hear your thoughts!