When is the right time to sell your pharmacy?

Is selling your pharmacy the best thing you can do?

For some pharmacy owners, life circumstances necessitate a sale such as health reasons. For others, retirement age will be approaching. For still others, it’s for a change in direction or to pursue other interests.

Whatever your reason for thinking about selling, this page will talk you through everything you need to know to make an informed decision so you can truly understand the right time to sell YOUR pharmacy – including…

How you can be sure you sell your pharmacy at the right time, how your pharmacy valuation will work, and the different multiples that pharmacies sell at.

Pharmacy shelves with 'when?' written over the image

If you’ve landed here because you’re thinking about selling your pharmacy and you’re wondering when the best time would be to do it, here’s the simple answer: the best time to sell your pharmacy is when there is demand, and it’s our job to help you create that demand.

As you can imagine, there are lots of different factors that will determine when that time is, not just the turnover your pharmacy is currently making. Understanding current market conditions can help you pinpoint when it is best to sell your pharmacy and how best to market your business.

“The pharmacy sales market is ever fluctuating. The most important thing to understand is how these things affect you, and how best to position your pharmacy in the current climate.”

Understanding current pharmacy market conditions

The pharmacy sales market is ever fluctuating.

Over recent years things such as the Government’s drive on Primary Care Networks (PCNs), with 3,500 pharmacists currently placed within GP surgeries, the delay in new pharmacists coming through due to Covid, and the upsurge of pharmacists returning home abroad post-Brexit, have all been felt throughout the sector. For many, this has led to significant increases in staff costs and reduced net profitability.

Whether it’s increasing staff rates or some new government policy, the most important thing to understand is to what degree these things effect you, and how best to position your pharmacy in the current climate to maximise its desirability, in turn increasing its demand.

You can listen to our tips on how to increase the value of the pharmacy ahead of a sale here.

Do interest rates and capital gains affect a pharmacy’s value?

Factors such as interest rates, the availability of credit and the tax regime are outside your control. That being said, interest rates and availability of credit are two key factors for pharmacy buyers.

The recent rises in the Bank of England interest rate are nothing compared to the astronomical highs we have seen in the past, and while they might serve to put off some first-time pharmacy buyers, so far the market has weathered these fluctuations well. Most importantly, while banks might be taking longer to process borrowing, they do continue to do so.

The tax rates on a business sale are also favourable at the moment. For most pharmacy sellers the situation is straightforward: providing you qualify for BADR (Business Asset Disposal Relief) – and most pharmacy owners do – you should only pay 10% capital gains tax on the first £1million from the sale of your business. Although this won’t increase a pharmacy’s gross market value, it can hugely increase your net profit from the sale.

How do you value a pharmacy? Does the pence in the pound method work?

Every day, pharmacy owners approach us asking “how much is my pharmacy worth?”. Often, they’ll quote a pence-in-pound figure or mention the price one of their colleagues has recently achieved.

Every time, we tell them that the pence in the pound method alone isn’t a suitable base for accurate market value and should only ever be used as a guide.

The problem is, every pharmacy and its surrounding situation is unique so can only be valued on a case-by-case basis. For example, a pharmacy in South-West London cannot be directly compared with one in Surrey, despite being just a few miles apart – there are just so many other factors to take into consideration.

If you’re trying to ascertain when is the right time to sell your pharmacy and would like a free valuation, or if you’d like to understand the latest market trends and how these may affect your business, please don’t hesitate to call us on 01494 722 224.

What multiples do pharmacies sell at?

Another valuation method for pharmacies uses the net profit calculation EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) and multiplies this figure by market-determined amount.

On its own, however, the net profit multiplier will not give you a completely accurate picture. In our decades of experience selling hundreds of pharmacies, this multiple can vary greatly from 5 to 20 times your EBITDA, depending on the situation of the pharmacy.

Other things considered in a pharmacy valuation

EBITDA net profit calculation
There will be many other things to consider, such as historic financial data, any outstanding loans repayments, and potential areas of growth; your buyer will be looking for an investment after all.

Your biggest concern with all the above is making sure your potential buyers see everything your pharmacy is now and everything it can be. That’s where we come in. Helping you to showcase your business, highlighting everything it has to offer, and presenting this in the context of the current market.

With all the above considered, the most important thing to remember is your pharmacy business will be worth as much as the highest bidder is prepared to pay for it.

Hutchings Consultants are in regular touch with all the major buyers, multiples and buying groups in the UK, as well as small groups and first-time buyers in the market. That relationship means we know exactly what buyers are looking for and are in the ideal position to achieve the best possible price for your pharmacy business.

So is now a good time to sell your pharmacy?

In summary, the answer to the question “is now a good time to sell?” depends completely on your pharmacy and circumstances.

When to sell your pharmacy business will be one of the biggest decisions you ever make. You should have clear reasons for doing so and clear objectives for what you wish to achieve in the future. Once your pharmacy has been sold there’s no going back!

The best way to understand these factors is to speak to one of our pharmacy specialist consultants today. You can find our phone number at the top of this page, and full contact details on our About Us page here.

Counting pills on pharmacy shelf