Here are the ten basic steps in the selling process and the estimated completion time and documents needed for each step.

Step 1: Pharmacy Valuation Process

 Accurately determine the value of the pharmacy. A valuation is just another word for appraisal.

Documents:

  • Two to three years of accurate financial statements, which are then recast, or normalized, to remove the expenses a new owner will not have.
  • Two to three years of tax returns
  • Recent inventory
  • Estimated value of equipment, fixtures and supplies

If you want to try a pharmacy valuation yourself (keep in mind this is NOT recommended) research the various accepted valuation formulas choosing five. Calculate a value using each throwing out the high and low. The remaining three will give the value range for the pharmacy.

Estimated time to complete: 2 weeks

Step 2: Prepare to market Pharmacy

Documents: Careful preparation of the material used to market the pharmacy to potential buyers is essential. This initial material should answer the following:

  • What are the positive highlights about the area and city in which your pharmacy is located? You need this to attract buyers from outside the local area.
  • What makes your community a nice place to live and raise a family?
  • What services are currently provided and what could new owner add to create revenue.
  • Basic financial information since this is for general marketing (i.e. annual sales, average Rx’s per day, asking price, etc.). Do not give full financials or tax returns at this step.

Estimated time to complete: 2-4 weeks

Step 3: Soliciting and qualifying buyers

Documents:

  • Non-Disclosure and Confidentiality Agreement (NDA).

Choose the outlets and method of marketing the pharmacy. There will be many false inquiries from buyers who really are not interested or do not have the necessary capital. Expect to eliminate 70-80% of the inquiries right away. Thus, the first step in the qualifying process is to get a signed NDA. No signed NDA means no further discussion…period. After signing the NDA, you can provide a little more financial information to entice the buyer, such as a normalized financial statement.

Estimated time to complete: 2-8 weeks

Step 4: Schedule store visits for qualified buyers

Documents:

  • More detailed financial information and tax returns.

The next qualifying step is to schedule a visit when the pharmacy is closed so you can meet the prospective buyer face to face and give him or her a tour of the pharmacy. If traveling is not an option you may have to do this virtually, but remember if a buyer is not willing to “visit” the location, can they really be that serious. Eliminate anyone not willing to take the time to make a “visit”. After the “visit”, you can provide more information and answer questions so the buyer can prepare for the next step.

Estimated time to complete: 2-4 weeks

Step 5: Request and review Letters of Intent from interested buyers

Documents:

  • Letter of Intent for buyers to make an offer (LOI) (Note: they may want to use their own).

If after a potential buyer(s) has visited, and provided both of you are interested in moving forward, the next step is to ask for a Letter of Intent (LOI). A Letter of Intent is a non-binding contract signed by both parties that essentially takes the pharmacy off the market for a period of time and allows the buyer to complete the due diligence process to confirm the financials and other information about the pharmacy prior to entering into a purchase agreement. After you have secured Letters of Intent from interested buyers, it is time to evaluate each and determine your interest. Once you select your potential buyer and you both sign the LOI, it is time to enter the due diligence process. This is an important decision since you will be giving the buyer an exclusive period of time to complete this process. Keep in mind your pharmacy will be off the market during this time.

Estimated time to complete: 2-4 weeks

Step 6: Accept a buyer offer, sign the LOI and buyer begins the due diligence process

Most buyers will want 45-60 days to verify your documents and financials; although, if you have good record keeping practices, you can cut that time substantially (see step 2). Asking for 45-60 days is appropriate since there are usually many requests for additional information. For example, a buyer may ask to see your wholesaler purchasing records for a given period to verify sales figures or a sales breakdown of third party plans you accept. They will most likely move forward with finding a lender during this time. There may also be some negotiation on various items such as the method used to value inventory etc. This is also usually the time when the buyer will decide whether they want an asset or stock purchase arrangement, which will greatly influence the next step.

Estimated time to complete: 6-8 weeks

Step 7: Prepare and negotiate the Purchase Agreement

Documents:

  • Purchase agreement

 After the buyer is satisfied with the accuracy of the information provided, it is time to work on the purchase agreement. This is one of the most intensive parts of the sales process. It is critical to find a qualified professional who understands what pharmacy specific items need to be address in the agreement to work with your attorney. There is obviously too much information in the agreement to go into any type of detail but suffice it to say this is the document that governs every aspect of the sale (i.e., inventory count method, third party payments, leases, delivery vehicles, etc.).

Estimated time to complete: 2-4 weeks

Step 8: Sign purchase agreement and buyer begins final stages of acquiring funding

Once the purchase agreement is signed, the buyer can “officially” begin seeking financing. Lending institutions will usually not put too much effort into the acquisition of financing until they can see the entire roadmap of what is going to occur to complete the sale. If the buyer is doing an SBA loan, which is what most loans are, you can expect the process to take longer than a conventional loan.
Estimated time to complete: 4-12 weeks

 

Step 9: Loan approved; schedule and conduct closing

The loan is approved and you are now in the home stretch. The closing is usually scheduled at the end of a month since it makes it easier to deal with third party billing and regular payments that are usually on a monthly basis (i.e., business insurance, equipment leases, maintenance contracts, etc.).

Estimated time to complete: 4-6 weeks

Step 10: Closeout of Seller

Documents:

  • Owner closeout documents (varies by state)

The sale is complete but as the previous owner, there are still a few items to clean up after you celebrate. When selling your pharmacy you are required to properly closeout your licenses, registrations and other items, including a final inventory of Schedule Drugs. Do not skip this step!

Final Thoughts…

Selling a pharmacy can be complicated, stressful and very time consuming. A competent professional pharmacy broker and their staff will spend many hours going through all of the intricate details involved with each of the above steps. You need to ask yourself if you have the time to thoroughly research the selling process and then successfully implement it while still running your pharmacy until the sale is complete. There are many moving parts in this process and you can expect issues to arise at some point that must be addressed correctly and quickly or the sale could be lost. If you decide to go it alone, strap yourself in tightly, it will be quite a ride.  If you decide to enlist the help of a broker, you will want to choose one that specializes in pharmacy brokerage and that has pharmacists and former pharmacy owners structuring the deal. Either way we sincerely wish you the best of luck!


Why Choose PRS to Value and/or Sell Your Pharmacy

Selling your pharmacy is the culmination of a lifetime of hard work and it can take some time to do it right. The pharmacy brokerage and valuation experts at PRS can help you sell your pharmacy quickly while maximizing your value and do it all free of stress and worry!  Connect with the pharmacy ownership consultants at PRS Pharmacy Services for a free consultation.  If you decide to have us value and/or sell your pharmacy, we will assign one of PRS’s licensed Pharmacists with at least 20 years of experience valuing, selling, transferring and opening retail pharmacies to be your Project Manager.  The Pharmacist Project Manager, along with our skilled support staff, will work with you every step of the way to take the stress out of, what can be, a very stressful process.

PRS is a Different Kind of Broker…

PRS is the ONLY pharmacy ownership and brokerage consultant endorsed by NCPA, the Federation of Pharmacy Networks and over twenty Buying Groups representing more than 15,000 independent pharmacies. We have been helping independent pharmacies succeed for over 40 years and our vast experience in a variety of unique situations make us the BRAND NAME in pharmacy consulting, ownership, compliance and brokerage.

Experience Matters…

To date, PRS has sold, transferred, or opened over 500 independent pharmacies and has worked in all 50 states. We are fully insured, licensed and accredited. Give us a call today for a free consultation!