ARTICLES

The phrase “exit strategy” has become an everyday component of business conversation in recent years. This is no doubt the work of highly educated graduate business students, one of whose roles in life, so it seems, is to constantly add to the vocabulary of the world of business, something I call “B-school speak.”

To quote an old adage in the real estate business, the three most important things to review when considering an acquisition are “Location, location and location.”  This adage also applies in the world of retailing, and certainly in the world of pharmacy, though in many cases, what might be a great “traditional” retail location might not always be the best for a pharmacy.  We will discuss this concept a little further on in this article.

From my personal perspective, there is only so much one can learn about the process of negotiating a business deal (or about any other “real world” activity for that matter) from a book.  I think that most pharmacists, highly educated as we are and with a strong foundation in many sciences, would agree with this premise.  You can only learn so much in the classroom, after which you have to apply what you have learned in practice. The same holds true for negotiating.

To do all that it takes to find, evaluate, negotiate for and finance the acquisition of a pharmacy can seem a daunting task.  Accordingly, many young, first time buyers can become dismayed at the lack of progress or their inability to find and acquire a suitable business, given all the many variables involved as well as the risks. But with that said, I can assure you from personal experience that dozens to hundreds of independent pharmacies are changing hands on a regular basis, year after year.

The debate about buying a going business as opposed to starting from scratch has always been an interesting and active one. While there is no doubt that in the world of large, public companies, mergers and acquisitions have played a key role in the growth of many successful businesses, in the world of small business, particularly retailing, that is not always the case.

The process of valuing a business, large or small, can be a complex one. There are numerous approaches to the process, many variables and a wealth of published material from which one can get input on how to perform the process. This material ranges from lengthy, hardcover books to magazine articles, and other source material that discusses, delves into, and deals with the process.

There are many factors which are driving the sale of independent community pharmacies and small, privately-held chains. At certain points in time in the last two decades of the 20th Century, it was mostly an activity that revolved around attrition, a sort of “survival of the fittest,” as the community of 40,000 independents was reduced to 20,000 at the start of the new millennium.