How to sell a pharmacy: what a buyer is actually paying for

rajkamalbhatti

Sep 10

4 min read

Updated: Oct 1

A pharmacy is sold twice. Once in the buyer's head, in the first ten minutes with the numbers; once on paper, months later, when the lawyers have finished. The price is set in the first sale and defended in the second. Sellers who understand what the buyer is paying for get the first sale right - and the second one becomes a formality.

What the buyer is paying for

Not the shop. Not the stock - that is counted separately at completion. The buyer is paying for four things, in roughly this order:

The NHS contract, and the income it produces: items, and the services on top of them. The trend matters more than the level. A pharmacy whose items have risen for three years is a different asset from one whose items have fallen, even at the same number today.
The profit that is really there - adjusted for what a new owner would actually pay themselves, for family members on the payroll, for the locum cover that the accounts hide. Buyers and their lenders normalise the accounts; you should do it first, so the number you quote is the number that survives.
The premises: a long lease at a sensible rent, assignable without drama, or the freehold. A short lease with a difficult landlord takes money off the price every time.
The team. The pharmacist and technicians who make the place run transfer with the business. A settled team is worth money; a team about to leave is a discount the buyer will apply whether you mention it or not.

Everything else - the fixtures, the goodwill of the neighbourhood, the loyalty card - is nice, and is not what the cheque is for.

Prepare twelve months out, not twelve days

The best sales start a year before the pharmacy goes to market. In that year:

Clean the accounts. Take out anything a buyer will have to ask about. Get the year-end done on time.
Renew or extend the lease if it is short. It is cheaper to do this as the sitting tenant than to have the buyer negotiate it under time pressure.
Fix the inspection points. If the last GPhC inspection left standards not met, meet them, and keep the evidence.
Look at the services. Services that were set up and never claimed are money on the floor, and a buyer will spot the gap between what could be claimed and what is.
Decide asset or share with your accountant, because the tax outcome for you can be very different, and the NHS route for the buyer is different too.

A buyer list before you go to market

The single biggest difference between a good sale and an ordinary one is who hears about it and in what order. A pharmacy offered to everyone at once through a listing gets the price the market feels like paying that month. A pharmacy offered first to the three buyers who actually want that town, that size, that kind of contract, gets a price built on competition between people who mean it.

That list exists before the pharmacy goes to market or it does not exist at all. It is built from who has bought, who has asked, who has funding in place and who has told you what they want. Then the pharmacy is shown in confidence, one buyer at a time, with the same information pack for each - and the offers are compared on the same basis.

Running the sale so it completes

Once heads of terms are agreed, the sale has three clocks running: the buyer's funding, the NHS change-of-ownership consent, and the legal work on the lease and the sale agreement. They should run in parallel. When they run in sequence - funding first, then the application, then the lawyers - a four-month sale becomes a nine-month one, and nine-month sales fall over.

Your job in that period is to keep supplying documents quickly and completely, to keep trading the pharmacy as if it were not for sale, and to keep the team steady. The buyer's job is to get the application in early and complete. A good adviser's job is to notice when a clock has stopped and start it again.

The things that kill a sale

In no particular order: a lease that turns out not to be assignable; a landlord who wants a premium for consent; accounts that do not reconcile to the NHS statements; a pharmacist who resigns when the sale becomes known; a buyer whose funding was never really in place; a services claim that turns out to have been overstated; and a change-of-ownership application that went in late and incomplete. Every one of these is visible twelve months out and fixable then. None of them is fixable in the last fortnight.

Know what the price is a price for

One more thing, because it is the question every seller asks quietly. Before you instruct anyone, get two things in writing: what their fee is calculated on, and whether it comes out of the headline price or sits on top of it. If someone quotes you a price with a fee hidden inside it, ask for the two numbers separately.

This is general information from running pharmacy sales, not legal, tax or financial advice; your solicitor and accountant confirm the legal and tax points for your own sale. If you are thinking about selling in the next two years, the useful conversation is the one this year - tell us where you are.

Rajkamal Singh Bhatti MPharm is a practising pharmacist (GPhC registration 2230365) and a former Superintendent Pharmacist of a national group of 120 branches, which he took through insolvency and sale. He founded RSB Consulting.