To sell your pharmacy the right way, confront your fears
When the day comes to start thinking about selling their business, a pharmacist-owner usually hopes that the transaction will be their big step towards realizing dreams of financial and personal independence. So, why does selling a pharmacy often turn into a nightmare?
As transaction advisors, we have worked with pharmacist-owners for decades, and we’re happy to say that they usually find the experience of selling their business both satisfying and enriching. But there are exceptions. Indeed, we have seen a few – yet still far too many – pharmacist-owners leave the sale process embittered, disappointed, and not nearly as wealthy as they hoped they would be. In just about every case, the reason for that disappointment boils down to one thing: the pharmacist-owner hasn’t planned their exit thoroughly enough or early enough. And sometimes they haven’t planned at all.
On the surface, it makes no sense. Selling their pharmacy is usually the biggest financial event of their lives, so it would only be wise to plan it out comprehensively, early and well in advance of the targeted sale date. In fact, we recommend that pharmacist-owners begin exit planning years before they plan to sell – in some cases, especially where the business’s corporate structure needs to be changed to maximize tax efficiencies, as much as five years before.
So why do some owners put it off? “I’m too busy.” “I don’t know where to start.” “I just never got around to it.” We’ve heard all the excuses. But we think the reason for procrastination that underlies all of those answers is, simply put, fear.
After all, selling a business can be a frightening proposition, and we understandably tend to avoid things that frighten us. But standing up to fears is a lot less intimidating when we understand what they are and where they come from.
So, in that spirit, here are six big fears that can stand in the way of successful exit planning:
- Loss of identity
When you sell your pharmacy, the entity into which you have poured your heart and soul for years is suddenly not a part of your life anymore. We’ve found that pharmacists come to self-identify with their businesses, in part because it establishes them as pillars of their communities and important members of their patients’ healthcare team. They get a lot of self-worth out of it, and fear losing their identity when they think about leaving it behind. They need to ask themselves: Who are they when they’re not running their pharmacy? What will be your identity when you move on?
- Loss of equity
When you sell, you are converting the value of your pharmacy into capital (hopefully, a lot of capital). But managing a business and managing a substantial sum of money require two very different skill sets. Being a good business owner will not make you a good wealth manager, and some pharmacist-owners who realize that are rightfully scared that they could lose everything they have spent years building. The good news: you can get help. An experienced and competent wealth advisor is an absolute must to help you before, during and after your exit plan comes to fruition.
- Not having enough money in retirement
A good pharmacy can be a cash cow, and some pharmacist-owners maintain the lavish lifestyles to prove it. But relying on a steady revenue from the business is far different from withdrawing from a retirement nest egg, and even a sum with a lot of zeroes in it can turn into just a plain zero really quickly if it’s not managed properly – and if the now-former pharmacist-owner doesn’t keep their spending under control. That means understanding what you really need and want in retirement is vital to effective exit planning, and your financial advisor and/or accountant can help. It’s also important, going in, to have a firm idea of your pharmacy’s market value, so you know what you’re looking at living on when you retire. Turn to an experienced, evidence-based business evaluator for assistance.
- The taxman
Is the pharmacy business properly structured to minimize the tax impact of selling? Often, it is not, and the pharmacist-owner faces the prospect of turning over a good chunk of the sale proceeds over to the taxman. Alleviate this fear by consulting an accountant with specific experience in tax planning for transactions.
- Succession
Some pharmacist-owners worry deeply about what happens to their pharmacy after they sell. Especially in smaller communities, selling to a “bad” new owner can be a source of embarrassment and regret for the former owner. Some don’t even want to think about it, but the solution to develop a firm idea of the parties you want to sell to, what kind of owner they will be – and whether you can live with that.
- Mortality
Selling a pharmacy business is usually a step towards retirement. Retirement is a step towards dying. And who wants to think about dying? That’s why more than half of people don’t get around to writing a will. And it’s one big reason pharmacist-owners put off exit planning: they don’t want to think about a world (and a business) without them in it.
Selling any business involves a lot of unknowns, and fear of the unknown is simply human nature. But as with so many things, knowledge is the great cure-all for fear. Our advice: get the help you need to understand potential challenges and develop a comprehensive plan that will provide a roadmap to a successful sale. With the right advisors on your side, fear does not need to hold you back.
