• LATEST PHARMACY NEWS AND EDITORIAL

    LATEST PHARMACY NEWS AND EDITORIAL

Our latest thoughts and inspirations on buying a pharmacy, starting a pharmacy, and ongoing pharmacy operations

Do you Know the Financial Health of Your Pharmacy?

We will be doing a three part series from our friends at SS&G. They are a CPA group representing over 200 independent pharmacies. Please see Annette Hoelzer's information at the bottom of this article for more information. Below you will learn about measuring the financial health of a pharmacy. This is great for current operators and those looking to buy a pharmacy.

Measuring Your Pharmacy’s Financial Health

As Peter Drucker, a well-known business scholar, so aptly stated, “If you can’t measure it, you can’t manage it.” Unfortunately, in today’s environment, it isn’t enough just to be a good pharmacist—you must also be a successful businessperson. The most successful independent pharmacies that we see don’t just run a business, they manage that business.

If you focus on two particular areas—profitability and cash flow-- you will likely experience better financial results. There are a number of key financial indicators that can help you monitor these areas, but to keep it simple, we will provide four statistics to monitor—two for each area. If you have not used statistics to monitor your business in the past, you should find that monitoring these four items faithfully each month and making adjustments based on the results should lead to improvements in your financial outcome.
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Buying a Pharmacy? What licenses and contracts are needed and how do I obtain them?

I am buying a pharmacy how do I obtain the correct licenses?

You found a pharmacy to buy, agreed on a price with the owner and now you just have to get to closing. But to close you need licenses, lot of licenses. It can be overwhelming and even complicated but don’t worry everyone feels that way and it is the number one service requested by our customers.

Unfortunately I cannot provide you with a list or a website to do it all in one place. Each state is going to be different but you will want to start with your state’s board of pharmacy as you will need your state license in order to obtain the other licenses and even sometimes your wholesaler agreement. And I can say with confidence you will, at a minimum, need State Board License, DEA, NPI and NCPDP. You may also need others like local business license, etc.
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Selling your pharmacy – How do you transfer your licenses and 3rd party contracts?

Licenses and contracts when selling a pharmacy.

Congratulations you found a buyer, they have financing and have agreed on a price. That part is hard but now you have to begin paperwork. In an asset sale you will need to transfer your licenses and 3rd party contracts so the new owner can take over.

This is easier said than done. First the laws and regulations vary from federal to state and from state to state. In addition it’s probably been years since you actually looked at all the contracts and licenses you have. There is probably a company like Relay Health, Humana, state Medicaid, business licenses, board licenses and on and on.
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Problem Solving the Key to Independent Pharmacy Ownership

Being an independent pharmacy owner.

There is much that can be controlled and predicted when you become an entrepreneur but that is not what I am here to talk about. Those who plan and listen to others will succeed especially in the independent pharmacy industry. The success attribute not often spoken about is the ability to problem solve. It is not possible to create a business without this skill. I wanted to provide you with some insight on the things that can happen so maybe you won’t feel alone when something similar happens to you, because it will!

Problems can be big or small but they all take time and can be very frustrating. I talked to a pharmacy owner one time that promised he would deliver to his patients. He leased a delivery car and hired a part time employee to do the deliveries. On the first day the employee didn’t show up and he got 5 delivery orders. As an entrepreneur, he said to himself, I will deliver the orders after hours, but when he went to do it the new leased car wouldn’t start. It was not a big deal he took his own car but these things happen and how you handle it daily can be the difference between succeeding and not.
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Calculating the Value of a Pharmacy

We see two commonly used philosophies for valuating a pharmacy:

         1. Multiple of EBITDA

         2. Cost per Script

Multiple of EBITDA – Typically this is used when an individual or other independent is evaluating the pharmacy. These buyers will want to see at least three years of financial documents. This will include an income statement that should outline EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) and a cash flow statement. This tells the potential buyer what their return on investment will be and thus what the value of the pharmacy is to them.
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