11 Questions to Consider When You Are Thinking of Selling Your NJ Pharmacy Business This Year And 8 Tips When You Have Made the Decision to Sell Your Drug Store

By Brad MacLiver
Authorship and profile at Google


1. Government regulations continue to be imposed at increasing depths for all businesses. Will increased regulations affect your independently owned New Jersey pharmacy over the next few years and sour the milk for a future drug store buyer?

2. New taxes, or cuts in deductions, are going to happen. If changes in the tax code will negatively affect the cash flow of your drug store, or the cash flow of your customers, should you sell sooner than later?

3. There are a larger number of uncertainties that are coming with the new healthcare reform. How will the changes affect the profitability of your New Jersey pharmacy business, and should you sell before any negative affects arrive?

4. An optimal employment rate, and insured customers, that would increase demand for independently owned drug store services will not occur for a number of years. Can you really wait for the economy to fully recover and the demand to increase – before deciding to sell your New Jersey pharmacy location?

5. Pharmacy financing is available for financially sound transactions. However, many potential acquisitions, partner buy-outs, and franchise buy-outs are not completed due to a lack of knowing where to find drug store financing for New Jersey drug stores. Are you familiar with the lenders who will consider financing your pharmacy transaction?

6. Tax for capital gains is currently at 15%. When the Bush tax cuts expire the rate will move to 20%. There is discussions the rate could be moved to 30%. This could mean as much as $150,000 in additional taxes for a $1 million transaction. Since a pharmacy buyer will not offer a purchase price for the current business value + your increased tax liabilities, should you sell your NJ drug store before taxes are increased?

7. Thousands of baby boomers are retiring each day and many of these have businesses they will be selling. Will an influx of businesses for sale reduce the chances of selling your New Jersey drug store at top dollar?

8. Included in the new healthcare act is a new property tax. If you are considering selling your drug store business so you can retire, or invest in other opportunities, what is the total effective tax you can pay and still net enough cash out of the business to meet your desires?

9. In a good economy you should expect that selling your independently owned pharmacy business to take 6-12 months. How long will it take to sell your drug store in the current economic conditions?

10. Many pharmacy buyers, who are not properly financed, will request that you carry part of the financing if they offer to purchase your New Jersey drug store. Are you familiar with carrying and selling a pharmacy business note?

11. Is selling now, or waiting to see what happens, the best strategy to maximize the purchase price of your NJ drug store?

8 Hints for Preparing to Sell Your Pharmacy:

1. Be prepared. It is amazing how many drug store owners don’t have their monthly financial statements and other reports up-to-date. Have at least 2 years of tax returns and monthly financial statements, along with 2 years of your monthly prescription reports copied and ready so that a package can be prepared for a qualified pharmacy buyer.

2. Work with a drug store valuation company that is an expert in the pharmacy industry, to determine the current value of your business. Don’t use simple valuation formulas that might not realistically present the current value of your NJ drug store, or the competitive pressures of the geographic area where your drug store is located.

3. You can’t sell your New Jersy pharmacy business if the buyer doesn’t have an avenue to finance the transaction. If you don’t have a previous lender to direct a drug store buyer toward, start working with finance consultants who have funding sources that have experience in providing business loans in the pharmacy industry.

4. A quality pharmacy business broker will also be able to bring in a higher purchase price than you can get by yourself. When you attend to the day to day activities of running the independently owned pharmacy business and maintaining profits, while not diluting your time with attempting to broker the business yourself, you should net more money even after paying the pharmacy broker commissions.

5. Since most New Jersey drug store acquisitions are financed, if you have received any type of drug store financing in the past, reconnect with the lender so that you can direct a pharmacy buyer to a lender that knows your business.

6. You know “curb appeal” works for selling a home. Make sure your business property, equipment, and work areas provide an appearance that will attract the pharmacy buyer.

7. The various taxes you will be required to pay will have a huge impact on how much you are able to deposit from the purchase price of your independently owned pharmacy. Work with a knowledgeable tax advisor to assist in the development of your best tax strategy when considering the impacts and affects in how you structure the transaction.

8. Confidentiality can be a concern when drug store sellers don’t want their employees and customers to be in a position where they will fear the coming change. Use a pharmacy business broker that has both Pharmacy Purchase & Sale Agreement experience and contacts with qualified drug store buyers. A broker with New Jersey pharmacy expertise should be able to bring qualified buyers to the table without running public advertisements.

***********************