Selling a pharmacy can be a daunting process and there are many time-related considerations to address. If you are a pharmacy owner who is thinking about selling your business, you will have to decide whether to sell it on your own or find a professional, like a CPA, Attorney, or Broker to assist you.
Keep in mind that the professional you choose to help sell your pharmacy, or choosing to do it on your own, will impact the time it takes to close the sale. Either way, you will need to be prepared for the many hours required for the sales process, as well as, the unavoidable down time and weeks of waiting on paperwork and other developments.
Is It Better to Work with a Pharmacy Broker?
If you’re uncertain about whether to sell your pharmacy on your own or to work with a professional, start by deciding how much time you want to invest in the process. Start with the question "What do I want to happen to my patients?" Will you keep it independent or are you willing to sell your pharmacy to a chain? Next, determine what all you are selling, as well as, how much it is worth; patient files, inventory, real estate, additional businesses included in your pharmacy such as DME services. Don't forget to consider additional scenarios, such as a buyer who only wants to buy a segment of your business such as the patient files. How will you liquidate everything else?
Oftentimes, making these decisions can be overwhelming but having a knowledgeable professional to walk you through the entire process can make things go more smoothly. It can be much easier to have someone hold your hand and walk you through the entire process. In many ways, it is similar to planning a wedding. Think of your own wedding, or the wedding of someone you know. Did they use a wedding planner or did they plan everything on their own? Did they make their own cake, sew their own dress, arrange their own flowers, or did they work with specialists?
Selling a business is difficult. When you have seen independent pharmacies for sale in the past, were they for sale by owner or were the owners working with a professional? Some people are up to the challenge, but most people prefer to have someone help navigate the waters. If you do decide to sell your pharmacy on your own, make sure you take the time to get some help from outside sources, like your attorney, CPA, or a friend who has sold their pharmacy in the past. This will ensure you aren’t leaving the door open for mistakes or other negligence as you put your independent pharmacy up for sale.
The Difference Between Selling a Pharmacy and Another Small Business
How long does it take to sell a small business and is it any different than selling a pharmacy? The nuts and bolts of selling a pharmacy are no different than selling any other small business, whether it is a hardware store, a machine shop, or a grocery store. You will have to look at how the corporate structure is set up, what is actually being sold, whether it is a stock sale or an asset sale, and the dissolution of the business while transitioning from owner A to owner B.
Regardless of the small business, owners will have to deal with the same types of things the whole way through the process. Selling a pharmacy differs from selling another small business when it comes to all of the regulatory components and licenses that must be addressed. Healthcare is, by far, one of the most heavily regulated industries. In addition to being regulated on a state level by the state board of pharmacy, pharmacies must also deal with the alphabet soup of federal agencies like the DEA, FDA, HHS, OIG, and others.
Though it all depends on how you decide to sell your pharmacy, it is very common to run into issues when selling a pharmacy without a broker. Sellers will typically work with their local attorney or CPA that may have never dealt with a pharmacy sale before. They will have no issues drawing up an agreement of sale, but this agreement likely will not include the transition of the actual specifications of your pharmacy, such as the pharmacy license, pharmacy contracts, DEA number, Medicare number, and more.
This is where it pays to work with a broker who has experience selling pharmacies. For example, due to the nature of the sale, they may recognize the importance of having a power of attorney in place while getting all the pharmacy numbers readjusted. Stock sales are simple because the pharmacy will close one day, open the next, and the only change is the owner’s name. Yet there are still notifications that must be sent out to agencies to ensure everything is updated.
In the event of an asset sale, the business closes one day and is essentially a brand-new business when it opens the next day. Plenty of prep work has to go hand-in-hand with the brokerage component to ensure the proper pharmacy numbers are in place. These regulatory issues are common when selling pharmacies, which is why it is beneficial to work with a broker that specializes in the industry and can take care of these extra obligations.
Factors that Impact the Timing of a Pharmacy Sale
Several factors impact the time it takes to sell a pharmacy, but it is a good idea to begin by having an exit date in mind. Wanting to sell in 10 days is a little too ambitious, but everyone’s timeline is different. If you want to have your pharmacy sold in 12 months, that gives you a reasonable goal that you can begin working toward achieving.
One of the best ways to ensure you stay on track with your timeline is to sign, or complete, documents, like an NDA and engagement contract, immediately and return them. This is a simple task in theory, but in reality, sellers take extended periods of time to submit initial paperwork delay advertising, which delays and advertising and prospecting, which delays negotiating, and in the end delays selling the business. If prospective buyers have a window they want to buy in, delaying paperwork, could result in a possible missed buyer interaction. This step in the process should only take a few minutes. The client needs to read the NDA and engagement contract, ask questions if necessary, sign the documents, and send them back.
When working with a broker, they will send requests for information and should note which information is needed immediately and which information can be sent in the following weeks. This collection of data is extremely important because it allows the broker to build out a profile for their business called a Confidential Business Review (CBR). It typically takes a few weeks to compile this document, but it is important to give to potential buyers who have been vetted by the broker.
Securing financial information is very important to creating the CBR. Hopefully, your CPA has you utilizing an online accounting platform. These platforms make it extremely easy to run reports so you can export all the information you need for the selling process. However, if you’re still using a pen and ink ledger system, it will take a much longer time to secure these reports.
The next step of the process is the negotiation period after a buyer has been found. Negotiations typically consists of a back and forth over the phone and through email. When there is an offer or several offers on the table, the seller must decide whether to accept it or to wait for additional offers.
Once an offer is accepted, a new timeline begins. This part of the process is dependent on whether or not the buyer has already secured financing and if they need assistance with this step. The timetable for financing varies greatly depending on the buyer.
The next component of the process is preparing all the paperwork for accepting the offer and preparing for the transition of ownership at closing. Purchase Agreements, Promissory Notes, Guarantee Agreements, Power of Attorney, CHOW, and Medicare Apps are just a few of the documents that may need prepared. This preparation segment is usually done in tandem with the financing component and generally takes several months.
While many would believe the final stage is the day of closing, there are actually many steps that need completed after the paperwork is signed and the funds are transferred. So don’t plan your vacation post sale too quickly as you may have some loose ends to tie up after the closing day. Our blog "You Sold Your Independent Pharmacy, Now What?" can help shed some light on those items.
Selecting the Ideal Partner to Speed Up the Selling Process
If you decide to work with a professional throughout the selling process, you’ll typically choose a lawyer, CPA, or business broker.
If you choose to go with your CPA, they will already be very familiar with your finances and can help with all the mathematics and tax advantages of certain sales scenarios. However, a CPA will not know about licensure requirements, 3rd party contracts, and notifications.
An attorney is a great partner for selling a pharmacy because they will comb through documents and agreements and find sections or words that need to be changed. This extra level of assurance when reviewing and signing documents is essential for having peace of mind. However, they may not know about DEA, State Board of Pharmacy, 3rd party contracts, normal notifications, and NCPDP requirements.
If you are looking for someone to guide you through the selling process with as few bumps and bruises as possible, a broker is a great choice. The staff at R.J. Hedges & Associates is both licensed and accredited as business brokers.
R.J. Hedges also provides complete turnkey healthcare compliance programs, making them the ideal partner for anyone looking to sell an independent pharmacy. The R.J. Hedges team handles valuation, brokerage, and eliminates the headaches commonly associated with transferring or securing new licensing.
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