The Entrepreneurial Pharmacy Podcast: Are You Ready to sell Your Pharmacy?

Are you planning on selling your pharmacy? Do you think you’re ready to sell your pharmacy? 

Many pharmacy owners underestimate the amount of time and planning it takes to optimize the value of your pharmacy so you can make the most money from your transition.  

On this first episode of The Entrepreneurial Pharmacy Podcast, Ollin Sykes, CPA CMA, CITP and Scotty Sykes, CPA, CFP share insights into how to make the most money from your pharmacy sale, proper timing and planning when selling your pharmacy, what you need to consider, and more! 

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If you prefer to read this content, the video transcript is below:

Scotty Sykes: All right, welcome everybody to The Entrepreneurial Pharmacy Podcast. And this is going to be your guide to buying, selling, or starting a pharmacy today. We’re talking about selling your pharmacy and are you ready to sell? Maybe you are, maybe you’re not. So, let’s just dive into that topic and kind of think about the things you need to be thinking about before selling your pharmacy. Dad, how far in advance should you be looking before we look to sell a pharmacy? 

Ollin Sykes: Oh, I think, Scotty, you got to be looking multiple years in advance. And actually, the longer the better. Three or four years out is not too far in advance to start getting your books and records and tax documents in order, because clearly whomever is going to be taking a look at the pharmacy, once you have an identified potential buyer in place and a non-disclosure agreement has been checked off, the due diligence process will begin. And if your books and records are not in order this can cost you a lot of money in terms of potentially what you might otherwise receive for the sale of your pharmacy. 

Scotty Sykes: And we talk about books and records dive into that. What do you mean by that? 

Ollin Sykes: Yeah, we’re talking specifically having your…assuming you use QuickBooks, having your QuickBooks files your balance sheet, your P&L information, into the actual numbers at the end of the month and or the years, for example, having your cash reconciled your 3rd party receivables balanced and verified each and every week to month to make sure that you’ve got those under control because the offset to that affects your revenue. Hopefully you’ve got a perpetual inventory system for your script files and adjusting your inventory monthly, you should have a depreciation schedule and be able to record your depreciation and or amortization each month on your, again, your QuickBooks files. Keeping your payables, your notes and your equity section and your balance sheet in order. In other words, your balance sheet needs to be in pristine shape in order for a potential buyer to take a look at that pharmacy. Of course, the result of all these entries from this, these balance sheet adjustments we’re speaking about affects directly your profit and loss. Of course, naturally, you want your year-end profit and loss to agree with your tax return to reconcile there and many sets of records we look at tax returns in the books from records just don’t agree. So. Yeah as fundamental as that is, if you don’t have that information in place, it’s going to be, you’ll be at a distinct disadvantage and trying to optimize the vaccine pharmacy. 

Scotty Sykes: Right. Because if somebody looking to buy a pharmacy comes to us and brings us, for example, numbers and financials and tax returns that are all over the map, that’s not going to hurt, that’s going to hurt the seller, not the buyer. 

Ollin Sykes: Absolutely it’s going to hurt the seller. In some cases, the buyer may say “well your books and records are in such bad shape, I don’t want anything to do with it”, or where you might be intending to sell the common stock of the entity. They may say “well, I don’t want to do that because I can’t trust your numbers. And therefore, the only thing I might consider would be an asset sale and or purchase”, where they’re purchasing essentially your script files, maybe certain assets, whether it be inventory receivables, certain equipment and technology that you may have. Leaving you the remainder of the assets and liabilities to deal with on your entity. That’s what could occur. 

Scotty Sykes: Yep, because we’ve definitely seen where we’ve told buyers that these numbers are in such bad shape.  Better off not even getting near this thing. 

Ollin Sykes: No question about it. I see that quite frequently as a matter of fact.   

Scotty Sykes: So, what about, what about why would you want to sell? Why are you ready to sell? Perhaps? Let’s talk about that. Are you in the position to sell? Is it a life situation you’re in? Is it a fire sale? What kind of? 

Ollin Sykes: Well, there are different reasons that folks want to sell. Some may be health reasons, some may be family reasons, may be a divorce may be multiple owners in a pharmacy if whatever reason, can I get along? There’s just a whole host of reasons why someone may want to sell that pharmacy. Clearly, you don’t want to be in a position where you have to sell. You have, you want to clearly be in a position where you have the options to let multiple parties take a look at your pharmacy. I’m involved in several right now and we’ve actually gone through a pretty comprehensive analysis about one set of buyers, and they were looking for a fire sale. And this particular pharmacy that I’m working with is not a fire sale pharmacy. In fact they fill over 200, 000 scripts a year. It’s not a small pharmacy. It’s a very profitable pharmacy. It has some nuances to it that have to be understood by a potential buyer. There are options here for buying both the common stock and or the assets, depending on the potential buyer, as the case may be. But again, there’s multiple reasons why folks do want to sell. 

Scotty Sykes: So, I guess the takeaway here is that timeline, planning out for an advance, preparing yourself, preparing the books, preparing why you want to sell and putting the plan in place, making sure you’re ready to sell. So, that timeline is a key first step here and selling. 

Ollin Sykes: Timeline is critical to start. Again, three or four years out in advance, get your accounting files in order, get your tax returns in order, get everything in order that you might want to look at if you were the potential buyer of your own pharmacy. And the cleaner that balance sheet and P&L is, the less questions that could come up by a potential buyer on the other side, the better off you’re going to be as that seller. 

Scotty Sykes: All right. I think that covers it for today and we appreciate everybody listening in. If you got questions or comments, just leave us a message and we’ll respond to you as best we can. 

Ollin Sykes: Absolutely. Thank you very much.