Buying a Pharmacy: Key Considerations

Buying a pharmacy is a major decision, much like purchasing a house. It's not just about finding the right opportunity; knowing how much to pay and making sure it fits your long-term goals are crucial to success.

Defining what you are looking for

Once you’ve decided to invest in a pharmacy, the next step is determining the type of ownership interest you are looking to take on.

Consider the following options:

• Purchasing a share in an existing pharmacy – This approach carries a lower risk, offers support from an experienced owner, and typically provides stable profit levels. However, this often means a smaller ownership interest and less control.
• Partnering with others to acquire an interest in an existing pharmacy – Collaborating with one or more of your peers allows you to share responsibilities and control and lowers your cost of entry.
• Acquiring complete ownership of an existing pharmacy – While this provides complete control, it comes with higher risk and higher cost of entry.

Carefully evaluating these options based on your financial standing, experience, and risk tolerance is essential. Engaging experienced advisors can help you navigate this decision-making process effectively.

Understanding what you can afford

Understanding your financial position is a critical step in the acquisition process. It is essential to evaluate:

• Your borrowing capacity; and
• The amount of equity you currently have or need to buy a pharmacy.

Having a clear understanding of your borrowing capacity and what you can afford enables you to focus on pharmacies that align with your budget. This step will save time and streamline your search by ensuring that you are only pursuing viable opportunities.

Location and type of pharmacy

Once you are clear on your borrowing capacity and financial position, your next step is identifying the ideal location and type of pharmacy. Consider whether the pharmacy’s geographic location fits within your current lifestyle and overall strategic objectives. This may include an inner-city location, a suburban location or possibly a rural remote location.

Another important consideration is the type and position of the pharmacy within your selected location you are interested in, this may include:

• A shopping strip pharmacy
• A pharmacy within a large or small shopping centre
• A suburban street pharmacy
• A pharmacy located within a medical centre

Each location and type of pharmacy presents unique challenges and opportunities, so it is vital to select one that complements your strategic objectives and that you thoroughly understand your location, cost structure, and customer demographics associated with that location.

Seek guidance and support

The final step is ensuring you have the appropriate team around you. Engaging an accountant, lawyer, and finance broker who know and understand your industry is highly recommended.

The right team will assist in negotiations, assess financial data from a due diligence perspective, and guide you in making informed decisions throughout the acquisition process.

Buying a pharmacy is a big decision, contact our pharmacy experts at PKF if you would like to discuss further, or have any questions.