What is my pharmacy worth, and why is a multiple the wrong place to start?

Q: Do a neighbouring independent, a group and a first-time buyer all pay the same?

No. They are pricing different things. A neighbouring independent is buying capacity and cost: they may already have the pharmacist, the delivery round and the buying terms, so a site that looks marginal to everyone else is worth more to them. A group applies its own cost base and its own model: it will move quickly, run a hard due diligence process and negotiate harder, and it will not pay for the parts of your business it intends to replace. A first-time buyer often wants it most and can fund it least: the buyer most likely to agree your number and least likely to be allowed to pay it. That last point is the ceiling on the whole exercise. Having advised on more than 120 pharmacies, 50 of them independents, this is what I have seen rather than a rule anyone has written down: the lender runs its own normalisation, and lends against profit after a full pharmacist wage, a market rent and a realistic locum line, over a term the lease has to cover. If the lender will not fund your price, it is not the price - which is why how to buy a pharmacy in England sends a buyer to a lender at

rajkamalbhatti

Sep 25

6 min read

Updated: Oct 1

Your pharmacy is worth the profit a buyer believes will still be there after you have gone, adjusted for everything in the accounts that is a decision of yours rather than a feature of the business. That figure is then tested against what a lender will actually advance, and the multiple is the output of that work, not the input to it. Anyone who quotes you a multiple before they have read your accounts, your NHS schedules and your lease is guessing, and their guess becomes the number you spend the whole sale arguing with.

The five things a valuation is built from - adjusted profit, the NHS income and its trend, the premises, the team, and the risks a buyer can see - are taken one at a time in Pharmacy valuation: how the number is built.

Why is a multiple the wrong place to start?

Because a multiple is a ratio, and a ratio is only as good as the figure beneath it: multiply a profit figure nobody has normalised by anything you like and you have a confident total that no buyer will pay.

The second problem is the expensive one. A multiple you are given before anyone has opened the books becomes an anchor. The anchor, not the offer, is then what every offer gets measured against: the buyer's first offer looks like an insult, your solicitor sounds pessimistic, and a fair price four months later feels like a defeat.

Is a pharmacy valued on turnover, on profit, or on goodwill?

On profit. Turnover is a sizing tool - it tells a buyer whether the business fits their model - but nobody banks turnover. Goodwill is not a method either: it is the name for what is left once the stock, the fittings and any property are taken out, so it is the answer rather than the route to it.

Two things sit outside the calculation. Stock is counted at completion and paid for on top of the price, though the basis it is counted on is agreed in the contract. The freehold, if you own it, is valued as property on its own evidence, so insist on seeing the two figures apart - a combined number hides which half is moving.

What gets added back, and what gets taken away?

Normalisation means restating the accounts as they will look in a buyer's hands. Five lines do most of the work:

Your own remuneration. Salary, dividends and pension contributions out; a market rate for the job actually done in.
Family on the payroll. In if they do work the buyer would have to pay someone else to do; out if they do not.
The pharmacist cover you do not pay for. A full pharmacist wage in if you are the pharmacist on duty five days a week for nothing.
One-off items. The lease renewal legal fee, the refit, the bad debt, the grant - out, unless the same one appears three years running.
Rent, where the freehold is held personally. A market rent in, whether you charge yourself above market or nothing at all.

Each of these is an argument you have to win three times: with the buyer, with the buyer's lender and with the buyer's accountant. So every one of them needs a payslip, an invoice or a bank line behind it rather than an explanation.

My item numbers are falling - what will that do to the price?

It cuts the profit and the multiple applied to it, because a buyer is pricing next year rather than last year and a falling line forces them to ask why. Your dispensing volume sits on the monthly Schedule of Payments from the NHS Business Services Authority (NHSBSA), and a buyer will lay two or three years of those side by side before they open your accounts.

The answers are not equal: a surgery that has relocated is a permanent loss, a competitor that opened last year may already have taken what it is going to take, and a care home contract lost in March is a hole you can point at and size. What matters is therefore not how far the line has moved but whether it has stopped, and whether you can show why. An explained decline is a discount; an unexplained one is a discount plus a margin for everything the buyer now suspects they have not been told.

What do my services and the new funding settlement do to the number?

Service income counts, but it is priced on how repeatable it is without you: income that runs off a rota, a trained team and a booking system carries across; income that exists because you personally know every GP in the village does not.

In the Community Pharmacy Contractual Framework (CPCF) for 2026/27 in England, the Pharmacy First budget was merged into the core CPCF envelope, so that income now reads as part of the contract instead of a bolt-on. But the settlement covers a single financial year, with a joint reform programme between Community Pharmacy England and the government still being worked through. A buyer modelling three years forward is modelling one year of certainty and two of judgement, and cautious judgement shows up as a lower price.

What do the lease and the team do to the number?

They set the ceiling more often than the profit does. A short lease is priced, not noted: a lease that expires before the buyer's loan does pushes the deal into a renewal negotiation nobody controls.

Check the lease early. Part II of the Landlord and Tenant Act 1954 gives a business tenant in England and Wales security of tenure and the right to apply for a new tenancy - unless the lease was contracted out under section 38A, which is only valid if the prescribed warning notice was served and the tenant's declaration made in the right form. A buyer's solicitor will read the declaration, not just the recital in the lease; so should you, in week one rather than week six.

The team transfers with a business sale under the Transfer of Undertakings (Protection of Employment) Regulations 2006, contracts and continuity of service intact, so a pharmacy that runs in the owner's absence is worth more than one that stops when they take a fortnight off.

The NHS contract follows its own route: the buyer applies under regulation 26 of the National Health Service (Pharmaceutical and Local Pharmaceutical Services) Regulations 2013, which is not tested against the pharmaceutical needs assessment, so nobody can refuse it on the ground that the area no longer needs a pharmacy. What happens to the NHS contract when a pharmacy changes hands? sets out the sequence.

Do a neighbouring independent, a group and a first-time buyer all pay the same?

No. They are pricing different things.

A neighbouring independent is buying capacity and cost: they may already have the pharmacist, the delivery round and the buying terms, so a site that looks marginal to everyone else is worth more to them.
A group applies its own cost base and its own model: it will move quickly, run a hard due diligence process and negotiate harder, and it will not pay for the parts of your business it intends to replace.
A first-time buyer often wants it most and can fund it least: the buyer most likely to agree your number and least likely to be allowed to pay it.

That last point is the ceiling on the whole exercise. Having advised on more than 120 pharmacies, 50 of them independents, this is what I have seen rather than a rule anyone has written down: the lender runs its own normalisation, and lends against profit after a full pharmacist wage, a market rent and a realistic locum line, over a term the lease has to cover. If the lender will not fund your price, it is not the price - which is why how to buy a pharmacy in England sends a buyer to a lender at step two, before the shortlist at step three.

What should I do with a valuation somebody has given me for free?

Date it, keep it, and ask what it was built from - a number given before anyone has seen the books is a conversation opener, not a valuation. Three questions get you to the bottom of it: which profit figure did you use, and from which year? Which add-backs did you assume, and what evidence did you assume behind each one? And what would the buyer have to be, and be funded by, to pay this?

A valuation you can act on is defensible document by document - every add-back on a payslip or a bank line, every item number on a Schedule of Payments - so that when the buyer's accountant challenges it in month four the answer is already on the page and the price does not move. Whoever you eventually instruct, ask them for their fee basis in writing before you sign anything.

Still weighing it up? How to sell a pharmacy and how long it takes are the two that usually come next.

This is general information about how pharmacy valuations are built, not legal, tax or financial advice; your solicitor and your accountant are the people to confirm the legal and tax points on your own sale. If you would rather have a number you can defend than one you have been handed, 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.