Prepare for Transfer

Step-by-Step Guide

Set Goals

Establish a Timeline

Identify Advisors

Organize your Finances

Calculate Pharmacy Value

Prepare For Transfer

Things to remember before signing on the dotted line.

What you want the pharmacy to continue to be (or to become) will impact the type of buyer you are looking for. If you envision a regional chain taking over the pharmacy, you will look for those qualifications and business background. If you want a junior partner, you will be looking for a very different type of buyer.

Regardless of the type of new owner, there are three basic questions you need to ask when considering selling your pharmacy:

1. Who is a qualified buyer for my business?
2. How do I determine if the buyer is qualified?
3. How do I find that qualified buyer?

There are good buyers for your pharmacy and there are not-so-good buyers for your pharmacy. Simply stated, you need to make sure that you find a buyer who can maintain and grow the business. This is absolutely critical if you are financing the new owner. If you don’t select the right new owner and don’t have the deal structured with an eye to what will go right and what can possibly go wrong, you could put your future in jeopardy. It is important to understand that you aren’t looking just for a buyer. You are looking for the right buyer. The new owner can impact your financial future, the legacy of your pharmacy, and the well-being of your long-time employees.

You will be able to tell if a potential buyer has the necessary qualifications and skills to run the pharmacy based on your pharmacy skill set. However, you also may want to rely on the specialized knowledge of your banker or accountant to evaluate the buyer’s business plan and pro forma financial statements. How will you know when you have found the right buyer or junior partner? Many tangible and intangible elements will go into this decision, but there are several key ones:

• Does the buyer/junior partner have a workable business plan?
• Can the pharmacy financially support the new owner/partner’s salary, service the debt, earn an acceptable return on investment, as well as weather the inevitable bumps of ownership transfer?
• Does he or she have the knowledge and experience to properly operate a pharmacy?

It is recommended that you have the potential buyer work in your pharmacy for a period of time, if at all possible. This will give you, the potential buyer, and your employees an evaluation period.

Depending on when in the planning and selling process you tell your employees that changes are in store, you should consider getting feedback from long-time employees on the potential buyer. Your employees will hopefully be working with and for this new buyer for a long time. Your employees may see qualities or deficiencies that you don’t. And above all, trust your intuition, especially when you don’t wholeheartedly believe that the potential new owner is the right person.

Here is an example of a timeline to help prepare your pharmacy for transfer.

10 years before transferring ownership

• With the aid of your attorney and/or accountant, determine the correct corporate structure. Some of the choices include:
  
  • Limited Liability Corporation (LLC)
  • S-Corporation
  • C-Corporation
  • Sole proprietorship
  • Partnerships

5 years before transferring ownership

• Begin considering candidates to succeed you and evaluating ownership transfer models

3 years before transferring ownership

• Settle on the most advantageous ownership transfer model and, if appropriate, begin implementing with your designated successor
• Ensure your pharmacy has curb appeal and is visually competitive to attract customers and a potential buyer

1 year before transferring ownership

• Create a marketing strategy if selling to an outside party
• Maximize the curb appeal of your store