In 2016, we achieved pharmacy goodwill values of between 5.9 and 17.3 times EBITDA (earnings before interest, tax, depreciation and amortisation). With such large variations in pharmacy prices it illustrates how important it is to market the pharmacy properly to achieve the maximum price.
An interesting thing is that by selling your pharmacy you can realise a substantial lump sum which would take you many years to earn as a pharmacist.
Take the example of a pharmacy we sold recently in the South East. This pharmacy had a turnover of £1.1m and EBITDA of £259,000. We obtained a goodwill value of £1.8m which was 7 times EBITDA. In terms of pence in the £1 this was £1.63.
The owner was entitled to entrepreneurs’ relief and therefore will only pay tax at 10% on the sale leaving them with £1,620,000 in their pocket.
If that pharmacy owner had continued trading instead of selling assuming that they were able to maintain the profit level at £259,000 per annum their net position after tax (using current tax rates) would be:
Annual profit £259,000
Corporation tax (51,800)
Tax on dividends (62,200)
Net income after tax £145,000
To earn £1,620,000 it would take them just over 11 years (£145,000 x 11.17).
We sold one pharmacy last year where the vendor would have had to work for another 20 years to make the same amount as he did from the proceeds of his pharmacy sale!
If you are thinking now may be the time to move on or release a lump sum for retirement, contact Anne or Scott for an informal discussion and a free valuation.