How to Maximize your Pharmacy’s Value for a Sale
Selling a pharmacy is a process that requires planning and strategy to maximize the value. In this video, Scotty Sykes of Sykes & Company, P.A. discusses some of the things you should do now to maximize the value of your pharmacy for a sale.
Working with pharmacy accountants and industry advisors can help you to not only maximize the value of your pharmacy but also optimize cash flow and help you with options to save for retirement.
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If you prefer to read this content, the video transcript is below.
Pharmacies looking to maximize the value of their sales should, at a minimum, start about five years prior to sale. And what you should be first and foremost doing is getting your books and records cleaned up. You need to have good, solid, fundamental information for your books and records. Accurate tax returns. Making sure your tax returns tie into your books and records. And in that process of getting that cleaned up, you’re also going to notice any inefficiencies, any issues in the books or in the financial metrics of the pharmacy that can impact the cash flow. So you’re going to, ultimately, be able to maximize the cash flow profitability by doing that as well, which, of course, is going to maximize, hopefully, the value of the pharmacy.
So that’s going to be very important, starting about five years prior to. Maybe even longer in some cases, I would even suggest. But when a buyer comes in, they’re going to want to make sure that those books and records are clean. They’re going to want to see that it ties into the tax returns. They’re going to want to see the actual accounting file itself. So being transparent in that process is going to make the buyer feel better about the situation which, hopefully, again, maximizes the value of the pharmacy, because there’s going to be no hesitations from the buyer’s side of “why is this balance sheet completely out of whack?” “Why is it making no sense as we’re looking at the tax returns?” When you’re bringing up all these questions with buyers, it’s impacting the value of the pharmacy. So getting those books and records clean is important.
A buyer is going to want to see the audit logs from the pharmacy’s script system. What you’re filling? The margins on those fills. How does that tie back into your financial statements? Your financial data that you’re filing with tax returns. How does that all match up? And if there’s discrepancies, why? So being transparent in that, making sure your accounting is where it should be is going to answer those questions as well.
And, also, when you’re looking to maximize the value of the pharmacy, it’s not just about maximizing the value of the pharmacy. It’s how are you selling your pharmacy that’s going to ultimately maximize the after-tax cash flow to you, the seller. So a lot of times that is left off. You see a lot of folks say, “Yeah. We can help you maximize the value of your pharmacy,” and then that’s it. Working with the experienced professionals to not only do that part, but also maximize the tax side as well, is going to put more money in your pocket when you do sign the deal and you’re out of it. And I can even, even go on further to say, you know, what retirement plan options are you looking at? That can potentially limit the tax impact while you are still operating your pharmacy and help you save for retirement. And when you go to sell the pharmacy, you might show low cash flow or low dead income, but the buyer is going to add back that retirement plan, potentially, if you’ve got one in place as an add-back when they’re determining the value of the pharmacy. So not only will you be maximizing the value of the pharmacy, and the cash flow, you’re going to be saving for retirement, because there’s a lot of programs out there you can do to really maximize that and hundreds of thousands of dollars. And then you’re going to also maximize the value of the pharmacy. So there’s just a lot of different things you can do prior to selling that can get you the best bang for your buck.
