| Owning your own pharmacy |
|
|
| Written by Raj Nutan | |
There is no right or wrong time to decide when to take the plunge and buy your own pharmacy. You may have qualified only a year ago, you may be a locum pharmacist with many years of practice behind you or you may be an employee with a history of working in many different pharmacies – the possibilities are endless.
But one thing is for sure: Before you start the process of finding a suitable business, you need to understand fully all the pros and cons of owning your own pharmacy. This article should help you understand the steps in the decision-making process and gives general advice on the procedure. Can you open your own pharmacy without buying an existing one?Clearly, since the control of entry regulations were introduced, the most straightforward way for you to own your own pharmacy was to purchase an existing one. However there is another way – open one from scratch. This, however, depends on you securing an NHS dispensing contract. Bear in mind that about 80 per cent of the average pharmacy turnover comes from NHS income, so it is highly unlikely that a pharmacy will be profitable without a contract. Since 1 April 2005 the ease with which this can be done varies between each of the devolved countries – England, Scotland, Northern Ireland and Wales. In all apart from England, the procedure involves proving there is a genuine need for pharmaceutical provision in a defined area. This is more commonly referred to as applying for inclusion on to the pharmaceutical list under the grounds of “necessary or desirable”. So if you are confident of securing an NHS dispensing contract under “necessary or desirable” this is an avenue you may wish to pursue. In England, a balanced package of measures was brought in on 1 April 2005. These measures brought some reforms to the regulations that allowed a prospective or existing owner to apply for inclusion on to the pharmaceutical list by bypassing the “necessary or desirable” test, i.e. a distance selling pharmacy, an exempt out-of-town retail shopping centre pharmacy, a pharmacy open 100 hours a week and a one-stop primary care health centre pharmacy. At the time of writing (September 2006) the Government is reviewing the control of entry reforms introduced in April 2005 (therefore for more up-to-date information, log onto www.npa.co.uk ). The remainder of this article focuses on buying an existing pharmacy. What factors should you consider before you start looking?Once you are aware of the pros and cons of being your own boss and are certain that this is something you want to do, you need to find a suitable pharmacy. But before you embark on your journey, you should consider: Pharmacy type Clearly one of the key drivers to a profitable pharmacy is the NHS income streams. In many countries we are now seeing payment for services being a more significant portion of NHS reimbursement, although payment for prescription volume is still by far the significant portion of NHS income. You need to have a good idea from where the future income will come. Are you buying a pharmacy to develop the prescription business, the services business, the OTC business or a mixture of all three? Geographical area You need to be clear in which part of the UK you intend to buy. Break this down further into whether you are looking to own a pharmacy in a major city, village setting, high street location, secondary parade etc. Of course this may be largely dictated by the level of finance you have. Finance Finance is probably the most important consideration, but you may not need as much capital as you first thought. A large number of high street banks may consider lending you up to 90 per cent of the purchase price or you could look at using a Small Firms Loan Guarantee Scheme (for further details see www.sbs.gov.uk). Alternatively, some pharmacy wholesalers will provide guarantees on financing provided the pharmacy buys a set level of pharmaceutical supplies from the same wholesaler. Value of a business The key question many people ponder over is the exact value of a pharmacy business. In general business terms, the true value is considered by most to be the value the pharmacy will fetch on an open market. However, the value is often derived from accepted defined formulae by various banks, accountants etc. It is often worth spending money on an independent agent to value a pharmacy business, especially if you are a first-time buyer. Turnover of a business Once you have an idea of the type of business you want to buy, where you want it to be and what your budget is, then you need to look for businesses with a certain level of turnover. Generally speaking it is what you would expect: the larger the turnover the more competition among buyers. Interestingly enough the recent Office of Fair Trading announcements have not dampened the demand for pharmacies. The larger pharmacy operators tend to look at acquiring businesses with a minimum turnover of £900,000 plus. This is not necessarily out of the reach of first-time buyers, especially with the wholesalers’ loan guarantee schemes. There tends to be a low demand for pharmacies with a turnover of less than £350,000 per annum, leaving the band between £350,000–900,000 open to a mixture of first, second and third-time buyers. Where do I start looking?
 Table 1. Specialist pharmacy sales agencies
Other factors to considerAsset purchase or shares purchase? This very much depends on the seller. If the seller is an individual or a partnership the buyer can purchase the premises (asset sale). However if the seller is a company, the buyer can either purchase the physical premises or shares in the company (share sale). There are many advantages and disadvantages to both – we recommend you seek expert help in analysing the options. Due diligence This is an essential part in the process of buying a pharmacy. You must obtain a minimum of two to three years’ worth of accounts, Prescription Pricing Authority statements and VAT returns. An accountant with expertise in pharmacy should be able to help you analyse this financial information. Don’t forget to ascertain any level of debt the pharmacy has and whether the premises are leasehold or freehold. A solicitor should check for all warranties and indemnities. SummaryThere are certainly many benefits to being your own boss, but there are some downsides – ensure you make an informed choice. Once you have decided to take the plunge, there are many factors to consider (e.g. turnover, geographical area etc.). Once you have chosen the pharmacy to buy, due diligence with the help of specialists (accountants and solicitors) is crucial. Further informationThe NPA produces a leaflet on buying a pharmacy that helps with the operational issues (e.g. CD cabinets etc.). Please email: This email address is being protected from spam bots, you need Javascript enabled to view it for your copy. For further advice on buying a pharmacy please email: This email address is being protected from spam bots, you need Javascript enabled to view it |
| < Prev | Next > |
|---|
