The value of a pharmacy is influenced by many factors including government regulations, cuts in reimbursements, competition, economic conditions, location, etc.

Understanding how the factors will influence a purchase price comes from years of experience. When you want straight forward answers about the value of a pharmacy contact us and learn the facts about a pharmacy business valuations.

Whether a local drug store or a regional pharmacy chain, when you are planning on making decisions about expansion, building new stores, or selling an existing pharmacy, you can start the decision process with a free pharmacy business valuation from http://pharmacyvaluations.com/pharmacy-valuation/. This pharmacy valuation is only a ballpark value, due to the limited amount of information you need to provide. However, with the years of experience and large number of deals processed the ballpark is based on current market conditions and will provide you valuable information about how much your pharmacy or drug store is worth in today’s market.

Understanding Pharmacy Business Valuations

By: Pharmacy Consultant Brad MacLiver

People who have purchased a residence are familiar with real estate appraisals. With a pharmacy business there are times when both the real estate and the business itself will need to be appraised. The pharmacy “business” appraisal does not include the real estate and is more commonly called a Pharmacy Business Valuation.

Pharmacy Business Valuations are conducted when there is a possible acquisition, financing is being pursued, or legal matters require a Certified Valuation. A Business Valuation places a reasonable market value on the drug store after consideration has been given to factors such as, but not limited to: assets, financial statements, tax returns, script reports, goodwill, licensing, competitive studies, deliveries, mail order, regulatory concerns, management’s team, inventories, and industry comparisons.

There are a number of companies that provide business valuations. However, unless they specialize in the pharmacy industry the valuation company will not have current pharmacy data on which to base their conclusions. The pharmacy industry is changing. Pharmacy values are on the decline due to current market conditions, fewer pharmacists are willing to move to an ownership position, cuts in reimbursements and dispensing fees, many of the regional pharmacy chains who were buyers – have sold to the larger chains, etc.

In order to calculate a realistic value for a specific pharmacy it will require current industry data along with knowledge of the potential buyers for that specific location. When all of the factors that are affecting the pharmacy industry are not considered – the conclusions will result in a more ambiguous valuation and could lead the pharmacy owner to make a decision not based on the best information. When a valuation company (such as www.PharmacyValuations.com) specializes in a specific industry, that company will be able to offer a more precise and credible valuation.

Many generic valuation companies will calculate a value for a pharmacy based on simple accounting formulas because they do not have the industry data that should be used. “Multipliers” are one simple method that is often used. The multiplier method is when someone takes the net profit, gross sales, or some other figure from the financial statements and then multiplies that number by 3, 5, 8 times (whatever the case may be). However, when using simple methods you need to understand a few points:

1. Financial statements are typically prepared to justify the lowest possible taxes. Therefore, the data going into those financial statements must be analyzed.

2. Stated profits are not usually the actual cash flow of the company.

3. Due to tax reasons and depreciation, company assets probably have a different value than what is stated on the Balance Sheet.

4. Multiples and other simple valuation methods can provide the same value for businesses that are in different competitive markets, population density, etc. Example, by using multiples a pharmacy in Manhattan with the same sales as pharmacy in a one horse town could be valued equally. However, there may not be anybody willing to buy the store in the one horse town, but there could be a bidding war for the Manhattan location. Although their sales are the same, obviously they have different values.

Understanding the above points, you can understand that a pharmacy valuation based on multiples, or other simple methods, may not reflect the true market value of the drug store.

The value of anything is only how much somebody else will pay for it. Any industry with declining net profits and fewer buyers will see values declining. This is what is happening in the pharmacy industry. Lower net profits means it is harder for the business to service debt. This means it is harder to obtain a business loan. Lower profits also mean it is more difficult for an investor to achieve their required ROI – taking one more acquisition avenue away.

We often receive a valuation requests from a pharmacy owner who had a friend that sold a pharmacy a number of years ago and thinks current store values should reflect equally to past deals. This is just not the case. When you work with www.PharmacyValuations.com in calculating a current market value for your pharmacy you may be displeased with the conclusions, because your friend’s historical value is not relevant in today’s market.

Some drug store owners ask about paying for a valuation, which would be a certified value based on an in-depth analysis of the pharmacy’s financial position, customer base, local demographics, and other aspects that affect the value of the business. Before pursuing a paid Certified Valuation, understand pharmacies values are declining and there is continued downward pressure on this industry.

PharmacyValuations.com is a national pharmacy consulting firm that specializes in pharmacy business valuations, manages pharmacy mergers and acquisitions, and works with lenders who understand the dynamics of financing a pharmacy. This pharmacy consulting firm can provide you a free ballpark valuation that provides you enough information to make a decision and the decision may save you $10,000 – $20,000 for a paid valuation.

Experience plays a major role in understanding the current market conditions of the pharmacy industry, valuing pharmacies realistically, and having the ability to provide expert guidance throughout an acquisition, or financing process. Many years of successful experience and the $Billions of pharmacy valuations completed each year places PharmacyValuations.com at the top of all companies who handle pharmacy acquisitions, valuations, and finance.

When you want someone to talk with about the how much your drug store is worth, or simply want to brainstorm ideas and concepts, don’t hesitate to contact us.