5 Questions to Ask Before Selling a Pharmacy

When you are looking into selling your pharmacy, it is important to make sure that you are adequately prepared to navigate the process. According to the National Community Pharmacists Organization, there are over 22,000 independent pharmacies in the United States. These pharmacies dispense nearly half of the nation’s prescription medications. RxOwnership estimated that over 10,000 pharmacies would change hands in the next ten years, so pharmacy owners should be prepared to position their pharmacy in the best way possible.

From understanding the preparations you need to make before listing to planning the closing meeting, there are a lot of questions that should be asked and answered to ensure the sale goes smoothly. The experts at Sunbelt Business Brokers have developed the five questions you should ask before selling your pharmacy. By addressing and answering these issues, you can make both your selling experience and the buyer’s experience positive.

1. What Are the Insurance Regulations?

As a pharmacy owner, your relationship with the insurance companies has terms and regulations that need to be completed before your pharmacy is sold. These laws differ from insurance company to insurance company and can sometimes even vary state to state.

After you have decided to sell your pharmacy, you should reach out to the insurance companies you work with and ask that they provide you with detailed guidelines about what regulations need to be addressed.

2. What Documentation Do You Need to Gather Before Selling a Pharmacy?

To successfully sell your pharmacy, you need to collect all your business documents from at least the last five years. These documents include tax forms, profit and loss statements, insurance forms, insurance company contracts, employee contracts, the building lease, purchase receipts, pharmacy licenses, and more. For this step, we highly recommend getting a Sunbelt business broker involved in the process.

Your broker can not only assist in gathering the necessary forms, but a broker will also be able to synthesize down all of the information into a relevant and organized document for the buyer. The more organized the information is, and the more transparent the operation and financials are to the buyer, the more likely they are to purchase your pharmacy.

3. What is Your Pharmacy Worth?

Receiving a business valuation is one of the most critical steps to preparing a pharmacy business for sale. With the assistance of your business broker, you can determine the value of your pharmacy by taking into consideration:

• Last year’s net profit,
• Expected growth for this year,
• Average Seller’s discretionary expenditure over the next 4 to 5 years,
• The total value of current assets and liabilities,
• Depreciation expense,
• Capital, and more.

Your business broker will be able to ensure that this valuation is accurate and fair. With their assistance and technical skillset, you will be able to decide on an asking price for your pharmacy that is mutually beneficial to both you and the potential buyer.

4. Do You Want to Continue Working in the Pharmacy?

Pharmacy ownership is slightly different from other businesses in that the owners are frequently pharmacists. It can sometimes be the case that you may no longer want to own the business outright but want to continue working in the pharmacy as an employee.

If that is the case, you will need to include that as a term of the sale and ensure that you receive a signed employment contract from the new owner in conjunction with the sale. Adding your employment as a term of the sale will not only ensure that you can continue your work uninterrupted but will also make your desired intentions clear to the new owner and save time spent negotiating extra details.

5. How Will You Transfer Patient Files?

Patient files are “protected health information” and are protected under the Health Insurance Portability and Accountability Act of 1996, commonly referred to as HIPAA. HIPAA requires that pharmacies follow strict guidelines to ensure that patients’ health information is protected and secure.

If both parties are “covered entities” under HIPAA, the patient files can be transferred without any special accommodations. If the party the files are being moved to is not a “covered entity,” then the permission of each patient must be obtained before transfer. When you and your business broker are looking for potential buyers, make sure that you are looking for buyers who are “covered entities,” this can make the process smoother and shorter.

If you want to sell your pharmacy, you should have the answers to all of these questions before you move into the process of finding a buyer. Partnering with a Sunbelt business broker can help make the process more manageable for you and ensure that you’re adequately prepared for the sale of your pharmacy.

Ready to sell your pharmacy? Contact Sunbelt Business Brokers today!

Article updated on November 4, 2019.