Do These Two Things Before Selling a Pharmacy
If you’re looking to sell your pharmacy, there are two steps to consider before listing the pharmacy for sale. In this video, Ollin Sykes, CPA discusses the importance of having your accounting system in order to ensure accurate financial information. The second important aspect before selling is to recast the EBITDA. Ollin describes how and why each of these pieces is important in ensuring a successful sale in the future.
Ollin: If you’re considering selling your pharmacy, the first and foremost thing you need to do is have your accounting system and your numbers in order. What am I speaking about? I’m speaking about, in particular, having the last three to four years of accounting data and information reporting accurately on a full accrual basis so that if I’m representing a buyer, when I ask for your accounting file, I can see that both your balance sheet and your profit and loss, and your cash flow is in order and that it’s reporting accurately. If this information is in shambles, if this information is on a cash basis, if it doesn’t report inventory, receivables, indebtedness correctly, then I, as a buyer, am going to look with a jaundiced eye at this transaction potentially and it clearly will impact the valuation of your pharmacy.
Secondly, if you’re seriously considering selling you want to try to recast your EBITDA. Let me explain. EBITDA stands for earnings before interest, taxes, depreciation and amortization. And if I’m a buyer, I want to look at that cash, that’s generally defined as cash flow available, from that pharmacy. And I want to know as a potential buyer what amount is going to be available to me as a buyer with you and your family out of the picture. So, if you have your cousins, your aunts, your spouse, your daughter, you have vehicles on the depreciation schedule that I may not have either employed or use such assets in my business, then those numbers would need to be recasted to show what the capabilities of the pharmacy is, are a true cash basis again, true EBITDA on a recasted basis. And this will maximize your valuation as I, as a potential buyer, am looking at that pharmacy from the outside in. So clearly, these items are things that need to be considered if you’re considering selling your pharmacy.
