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Buying a pharmacy with limited financial details

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  • Buying a pharmacy with limited financial details


    I am new to the forum so apologies in advance if some questions have been answered in the past although I didn’t seem to find anything similar to my query. I am a community pharmacist looking to buy a pharmacy for the first time.
    There are a couple of pharmacies I am interested in however hesitating in terms of the limited financial info provided by the vendors. They are two separate vendors, one of them provided details of turnover, expenses, NHS sales, rent/lease expenses but no details purchases, stock value or profit/loss.
    The other would only provide turnover, otc sales, staff costs and rent/expenses but no details of sales/purchases or general expenses or profit/loss.
    The former is a company disposal therefore they will not provide any further details so it’s a matter of take or leave it as is. The latter however is a retirement sale and have said they would provide further details but has been months with no progress.
    My question is how do you proceed in such scenarios? How do you deduce if financially viable and without such info will the banks even lend?
    Thank you in advance.

  • #2
    You need to know gross and net profit to value a business, ideally over 2-3 years to judge the trend. Have you spoken to lenders to see what they need to know or to a broker familiar with the area?
    Don’t do anything without legal and accounting advice from professionals experienced in pharmacy sales. It costs but pays for itself in the long run.

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    • #3
      Originally posted by hibernia View Post
      You need to know gross and net profit to value a business, ideally over 2-3 years to judge the trend. Have you spoken to lenders to see what they need to know or to a broker familiar with the area?
      Don’t do anything without legal and accounting advice from professionals experienced in pharmacy sales. It costs but pays for itself in the long run.


      +++


      If you want to sell something you should be prepared to tell people all about it.


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      • #4
        Ask yourself. WHY are they not prepared to divulge this information?

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        • #5
          Hello Sebere. The information you need is FP34's, rent/rates/staff costs. As Hibernia said, ideally over 2-3 years so you can follow trends. Have a think of all the expenses you are likely to incur? Light, PMR, Insurance, phone etc. You can make an educated guess. Generally allow £1000 per month. Staff costs? Look at what they are in accounts and compare to what you would require/pay. Go for the higher figure. Rents/rates are fixed and stated. Those are your costs.
          The vendor may well achieve 34% GP, but do you have the buying/management experience to match their figures? Assume not, the banks won't go with it. Look at the PSNC income calculator. They estimate you will get roughly £2.20 per item. You have your main income stream. You will have OTC figures. From the FP34's you will know how much of this was fees collected. Add this figure. The rest of the OTC, 20% is yours.
          For clarity, pharmacy does 10k items/month, OTC sales are £7760/month, NHS levy collected for 200 items at £8.80. Your gross income? £22k for the Rx's. £1760 for the 200 items. £6000/5 = £1200. Your total gross income is £24960/ month.
          Banks expect you to work on repayment of £735/month/£100000 borrowed.

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          • Rakesh Kukadiya
            Rakesh Kukadiya commented
            Editing a comment
            Thanks Viru,
            I am also having same situation where seller is not providing the net profit or details of purchase of stocks.
            I need your help to work out what could be aprox net profit? They do 10k item, £170k wages, £107k other expenses. As mentioned no detail of purchase of stock.

            Can you help please?

        • #6
          Hello Rakesh. The sales memorandum always states SAV. Stock at valuation. Look at the FP34 for drug bill. You will want to buy a months stock for sure?
          Get the OTC figure and apply the calculation above. If you are unsure, just message me please. All the best.

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          • #7
            Thanks Viru

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