Another year is almost behind us and it has been a year of significant change for the pharmacy industry with the effects of price disclosure starting to be felt by all pharmacy owners.
This year has had many owners considering their future in the pharmacy industry with many colleagues, in a similar age bracket to myself, deciding if it is time for them to exit the industry they have been part of for so many years. As the leading pharmacy brokers in the country, we are very busy speaking to owners about selling their businesses and preparing free market assessments on what price we believe we can achieve in the current marketplace.
Our job is often made more difficult by brokers who over promise and under deliver. Quoting an owner an unrealistic price may secure a listing but the business will languish on the market because it is priced too high. We often get the challenging job of picking up other brokers’ failed attempts and then having to re-position the business in the marketplace. The result is the sale process often becomes protracted and very difficult for the anxious owner wanting to sell and move on.
All pharmacy owners should understand that the market for selling pharmacies has changed considerably from the situation which existed just 12 months ago. Brokers who say otherwise and tell the market cap rates have not changed are just not being honest. Everyone knows there is a general lack of confidence in the economy. Banks are much more cautious and buyers are not prepared to take the risks they may have taken previously.
Pharmacies, as an asset class, are no different from other asset classes, which have all fallen in value from where they were two years ago. Everybody knows their house or boat is not worth what it was at the peak in the market and yet the pharmacy industry has been slow to realise that pharmacy values have fallen too. Pharmacy owners are no different from anyone else selling an asset. Everybody wants to achieve the best possible price but successful sellers in the current market are those that set realistic prices whether it is for their house or their business. Brokers who are misleading sellers by saying they can achieve prices of two years ago are doing the industry a disservice.
The fact that prices have eased to some extent is probably a good thing for the pharmacy marketplace as prices had become overheated. Banks were keen to lend and considered the pharmacy industry as the one area of the retail market they could lend to with confidence. Money was showered on individuals and extended credit from suppliers exacerbated the situation and set the market for a correction. The result is well known and we have seen more pharmacy failures in the past 12 months that we have seen in the last decade.
As a result all banks have changed their lending criteria and this is the reason that prices have softened.
We are still achieving excellent prices for pharmacies; however, successful sellers have had to adjust their expectations. Pharmacy Solutions Australia provides an honest appraisal of the price we know we can achieve and then we set out in a professional way to achieve a great result for the owner.
All pharmacists should be looking at their margins and their expenses in these changing times. Where possible, margins should be increased by maximising
substitution, taking advantage of government incentives and fine tuning prices and at the same time examining every expense to ensure they are running their business as profitably as possible. The two biggest expenses are rent and wages. Rosters need to be closely looked at to ensure that wages are kept as low as possible.
If you are thinking about selling, consider Pharmacy Solutions Australia. You can be confident we will handle the sale of your business in a professional manner and our appraisal will reflect what the market will pay for your business. We have all heard and read about real estate salespersons promising buyers huge prices only to get the listing and then begin the process of conditioning the buyer to a much lower price. Don’t make the mistake of listening to brokers who tell you they can get you the world. Selling is stressful enough without dealing with people who will say anything to get a listing.
Pharmacy Solutions Australia wishes you and your family a very Merry Christmas and a safe and Happy New Year. We look forward to working with you in 2013.
John Neilson
Director
Pharmacy Solutions Australia
john@pharmacysolutions.com.au
07 3252 0343