5 Ways to Get Top Dollar for Your Pharmacy
High levels of M&A activity in the pharmaceuticals industry make it a great time to consider selling.
The pharmaceuticals industry is one of the fastest growing and most profitable sectors in the American economy. Our country alone accounts for more than a third of the global pharmaceuticals market with annual sales topping $340 billion. Due to our aging population, the industry is expected to grow exponentially over the next decade. Over the counter sales are expected to double by 2023 and specialty drugs are expected to grow 16% every year through 2016. As the owner of a pharmacy, these growth trends predict a very bright future for your business and give you some food for thought on planning the next step.
There are around 55,000 pharmacies in America and on average, they see a 2.8% profit margin. A successful pharmacy will bring in around $2.5 million in prescription sales ever year and fills close to 56,000 prescriptions per year. Nearly 28% of clients are between 55-64 and as our Baby Boomers continue to age, that number is only going to increase. With corporations like CVS and Wal-greens cornering around 75% of the market, there’s not much room left for independent pharmacies but this does present a big opportunity – a chance to sell your business. The average age of a pharmacy owner is 62 and coupled with the high M&A activity in this sector, it might be time to start thinking about what your exit strategy looks like. This first step to planning your exit is finding out how much your pharmacy is worth. While only a professional business broker can tell you the true value of your business, these formulas can give you a clue as to what counts during the valuation process.
- 2.5-3.5x cash flow + inventory
- 25-50% of annual sales + inventory
- 5-8x EBITDA + inventory
Now that you understand the important factors in valuing a pharmacy, you can begin implementing changes that will help you get higher multiples when you decide to sell your business. After selling several pharmacies over the years, we have compiled a list of tips to help you prepare yours for sale and get the best price possible.
Website & Marketing
We live in a digital age where most consumers use the internet to source everything from an electrician to sushi, and to stay competitive, your business needs a web presence. First, ensure you have an optimized website that fully explains your services, hours, contact information and insurance instructions. Then you may even want to add a few social pages, such as Facebook or Yelp, to help with your SEO rankings and also create new avenues for clients to find you. Once you have an established web presence, you can further utilize it by allowing clients to refill prescriptions online or even participate in a discount program of some kind. Not only will a marketing campaign drive your sales up, but it will impress buyers and give your pharmacy an advantage over smaller firms.
Inventory
Like most businesses, you should be conducting an annual inventory but due to the nature of your trade, we recommend inventories on a more regular basis. Your inventory is tied directly to the value of your pharmacy and as you can see, it is part of several formulas used to calculate worth. That being said, make sure you regularly check expiration dates and rotate out old inventory, stay educated on contemporary products that may be worth purchasing and remove obsolete medicine from your shelves. Inventory is one of the easiest ways for you to control the turnout of your valuation and having a well-kept inventory could significantly raise the sales price of your business.
Curb Appeal & Availability
Curb appeal is important for a pharmacy; clients don’t generally want to handle health related issues in a dusty, old building. Renovation and upkeep can be costly, but there are ways you can spruce up your pharmacy and appeal more to your client’s eye. New signage, waiting room furniture or a fresh coat of paint can make a huge difference. Not only will it appeal to your clients, but potential buyers who are interested in the real estate will also be willing to pay more. In addition to creating a clean, professional environment, expanding your hours can help increase sales and get more clients in your doors. The bigger chains often boast 24 hour service or drive-thru pick up; expanding your hours or staying open on the weekend could dramatically increase your sales, which are directly correlated to value.
Loyalty Programs
All of the major pharmaceuticals have loyalty programs and while you may not be able to match their scale, you can still create a program that incentivizes your clients to stay loyal. Offering a special reward on birthdays or senior citizens day can incentivize clients to stay with your pharmacy, while a member appreciation event or discount can persuade them to come into the store and buy other items, such as vitamins. Offering a loyalty program that is advertised online can also increase engagement through social media platforms and ultimately lead to web traffic on your website. Loyalty programs can eventually lead to more revenues and an increased client base, which will impress buyers.
Vaccines & Immunizations
Pharmacies are evolving to more than just a corner drug store and many consumers look to pharmacies for a variety of medical needs short of actually going to a doctor’s office. In some states, pharmacists are considered healthcare providers and to assist in a growing demand for preventative care, many pharmacies offer vaccines and immunizations. Chain pharmacies offer preventive vaccines for the flu, HPV, tetanus, Hepatitis and so many more diseases, even allowing clients to make appointments online. Consumers can save time and money by opting to be vaccinated at the local pharmacy rather than going through the hassle of scheduling a doctor’s appointment. This can also increase your sales and get new clients in your doors. Be sure to research the requirements of your state and county and see if offering vaccines is plausible for your facility.
The pharmaceuticals industry is on track for a very high level of growth and development over the next few years and while it may feel counter-intuitive to sell during this time, it could actually be the best timing for your business. Business owners are more likely to secure higher sales prices when the economy is thriving, industry trends predict growth and stability and your business is doing better than ever. Those factors combined with major corporations actively looking to acquire independent pharmacies puts business owners in a very advantageous position. Even if you are not ready to sell right now, our no-cost, no-obligation business valuation can give you a better idea of what your pharmacy is worth and how to increase your sales price. As a business owner, you should always have a plan for your future and the best time to start planning is now.