Pharmacy Valuation

In today's pharmacy market, many owners will leave significant sums of money on the negotiating table when they are selling their pharmacy. The major reason is that they do not know the true value of their pharmacy business. The valuation process is an extremely valuable asset to the pharmacy owner. A properly prepared pharmacy valuation will help you:

Identify what drives value. Also identify the main strengths of your business and, more importantly, weaknesses, which allows the pharmacy owner to solve visible and hidden problems before beginning the selling process.
Set a reasonable price. Many pharmacy brokers and consultants tell you they have proprietary valuation techniques, but they are unreliable. Values obtained by dollars per prescription, percent of revenue, multiple of earnings, etc. may be too high or too low. Without a legitimate valuation, you will not know. If you are expecting too high of a price, you will extend the selling process and too steep of a price adjustment will occur. If you price your pharmacy too low, you will leave money on the table.
Know your value to give you an advantage in the negotiating process. In today's pharmacy market, buyers are sophisticated. They will rigorously analyze your business even if you have not. Buyers will look at factors and value drivers that the pharmacy owner should consider when placing a value on the pharmacy. Buyers will try to use that information against you in the negotiating process. A true comprehensive valuation will safeguard you and give you a documented defense against claims made by buyers in an attempt to devalue your pharmacy.

Reasons For a Pharmacy Valuation

Determine fair market value
Progess report to check on the financial health of your pharmacy
Compare your pharmacy to others nationally
Financing for buyers and sellers
Part of a business plan to know today's value and set goals to increase value
Value pharmacy stock
Planning for retirement
Buying or selling
Dispute an IRS audit
Estate planning
Junior partnership planning
Buying out a partner
Divorce
Bankruptcy

Types of Valuations

Limited Formal Valuation This is approximately a 100 page report and is considered a "restricted use" appraisal and is intended for an asset sale of a pharmacy having annual sales of up to $8,000,000. This report has a thorough financial analysis of the pharmacy and supports the final value with a detailed review of all aspects that were used in determining that value.
IRS Revenue Ruling 59-60 Valuation This valuation is approximately a 200 page report and is intended for purposes other than a "restricted use" business transaction (i.e. other than a business asset sale with a financial buyer). This valuation can be used if there is a stock valuation question. This report must be used when litigation is required.