Pharmacy valuation

[MFarmer]

Hello
I have recently opened a 100 hour pharmacy and am trying to find out a (rough) value for the business at this early stage.
We are presently doing 2500 items a month and sales are around 200 per day. I anticipate these to grow fairly rapidly- hopefully doubling within 6-9 months.
There is a large doctors practice with a small (branded!!!) pharmacy inside 200 yards away but we are situated on a busy high st location.
I appreciate these details are pretty vague but i hope to get a "ballpark" figure. Thanks in advance for your contributions

[Tony Schofield]

As anyone can currently open against you with another 100 hour pharmacy how about zero?

Script numbers of 2500 with a NIC of, say £10 is £25000ish a month or £300k per year. £200 per day is £73k. So say a total of £400k per year with a GP of say 30% is approximately £120k gross per year. You need to pay a pharmacist, even if it's you, £25 per hour = £2500 per week = £130k per year.

So just paying a pharmacist would cost you a net £10k. You have nothing left for support staff, rent, rates, heat light etc etc. Who would pay anything for this?

Goodwill is based on the super profits of a business ie the profit made over and above what it would cost to run, factoring an owner/managers hours at the going rate. No-one pays for potential as any increase in performance is due to the new incumbent . A brilliant location with a valuable lease may achieve a premium for potential but you don't seem to be in that fortunate position.

To value this you would have to look at whether a purchasor can raise finance against the asking price. What would an enterprise losing money on the scale you are, be able to fund in bank repayments ? That's right zero!

On the face of it you should be offering someone money to take this disaster off your hands, and you won't be killed in the rush. However, what would be really wise would be to trade for a couple of years and see if your projections are realised. By then the 100 hour exemption may no longer exist which will increase the value. However, ONLY if you can demonstrate a profit will you be able to ask a price.

Good luck.

[johnep]

Good sense Upstart. I have met many pharmacists who think they can open a business and sell on at a profit. This was possible some years back when kindly proprietors sold to a young pharmacist who promptly sold on to a multiple.
johnep

[shan]

Hello
I have recently opened a 100 hour pharmacy and am trying to find out a (rough) value for the business at this early stage.
We are presently doing 2500 items a month and sales are around 200 per day. I anticipate these to grow fairly rapidly- hopefully doubling within 6-9 months.
There is a large doctors practice with a small (branded!!!) pharmacy inside 200 yards away but we are situated on a busy high st location.
I appreciate these details are pretty vague but i hope to get a "ballpark" figure. Thanks in advance for your contributions

Why would you like to sell it off, if you have recently opened it ??? This itself is detterrent for any prospective buyer (if he is a decently smart and business minded enough) The fact that there is a pharmacy inside the surgery (however small) itself is an hinderence for future increase in business, unless you have a good relations with the GPs and have convinced more patients for a collection and delivery system. And also if the small pharmacy inside is providing good service why will some one walk even 2 steps extra to get their Rxs filled somewhere else ??

[Tony Schofield]

Shan, he is probably looking for a valuation to give some idea of the equity he has in the business. Possibly for the bank or to see if he can go into another venture. I wouldn't be so cynical as to believe he thinks it is a scheme to make a quick buck

[johnep]

When you are as old as me, you tend to have a high cynic rating.
johnep

[shan]

To be frank, I aspire to buy a pharmacy one day too (sooner the better) but definitely not a 100hr pharmacy. The calculation I have is that, I earn roughly 60K an year with 4 weeks break as a Locum. My wife (who is a technician) earns roughly 15K working part time in the same pharmacy I work. so it is roughly 75k without tax. I would therefore, not look to buy/ open a pharmacy that will not give me at least 100K gross profit to start with, after all expenses including staff salaries. As it makes no sense to take more responsibilities/ headaches and risk of running such a business, if you end earning same or less money which you would have earned at other's expense (as a locum).

Shan

[Tony Schofield]

When you are as old as me, you tend to have a high cynic rating.
johnep

Likewise! I am however being charitable and extending the benefit of the doubt.

[Tony Schofield]

To be frank, I aspire to buy a pharmacy one day too (sooner the better) but definitely not a 100hr pharmacy. The calculation I have is that, I earn roughly 60K an year with 4 weeks break as a Locum. My wife (who is a technician) earns roughly 15K working part time in the same pharmacy I work. so it is roughly 75k without tax. I would therefore, not look to buy/ open a pharmacy that will not give me at least 100K gross profit to start with, after all expenses including staff salaries. As it makes no sense to take more responsibilities/ headaches and risk of running such a business, if you end earning same or less money which you would have earned at other's expense (as a locum).

Shan

You will be lucky, unless paying cash, to clear that initially as bank repayments will mean your take home income will probably be less than you currently earn. Remember that re bank repayments, interest is chargeable against tax but capital repayments aren't. Therefore say a £500k loan over 10 years will have on average £50k per year capital repayment. That will be attributed to you as income and you will pay tax at your highest rate on it (it is of course income as it is being invested in the business). There are ways to mitigate part of this depending on how you buy the business but you will need an accountant to advise you. If a limited company, the company can't borrow money to buy it's own shares (it's illegal) so the tax isn't on profit of the company (corporation tax) which is much less than income tax. If you as a director buy the shares, repayments will be be at 40% tax (or perhaps higher if you stray over £150k including income and capital repayment. £500k won't buy a brilliant business unless it has significant potential.)

[hibernia]

I would therefore, not look to buy/ open a pharmacy that will not give me at least 100K gross profit to start with, after all expenses including staff salaries. As it makes no sense to take more responsibilities/ headaches and risk of running such a business, if you end earning same or less money which you would have earned at other's expense (as a locum).

I get your point but you have to take a longer term view in business. A business that can can deliver 100K gross profit after 3-5 years would be a decent option for you. You can't expect any business to be a cash cow from day one.

I wouldn't advise anyone to go into ANY type of business, including pharmacy, unless they are prepared to live modestly on savings or a partner's income for the first couple of years as they invest every penny made back into the business. That is the way to build up an asset and be sucessful in the LONG term.