Buying a pharmacy: getting the right support every step of the way

Making a successful pharmacy purchase: a major business decision

Clarify your plans before buying

What are your professional goals? What are your preferences in terms of a practice? Do you want to practice alone or with partners? Do you want to practice in the city, in the suburbs, or in a rural area? Do you want to be affiliated with a chain or a banner? These questions call for careful consideration. This exercise is crucial, as the answers will determine how you will proceed.

Define your career vision

As a sole proprietor or affiliate, you will have to:

• Find a partner or a replacement in case of sick leave, parental leave, or other absence;
• Assess your insurance needs;
• Hire administrative staff, lab technicians, etc.

Anticipate the impact on your personal life

Your professional choices will have an impact on your family life and your personal goals: having children, buying a home, etc. So it’s essential to consider these aspects.

Evaluate and plan the purchase of your pharmacy

Understanding the value and components of a pharmacy

Buying a pharmacy is a major investment ($3 million to $5 million). The cost will depend on a number of factors:

• The prescription volume (number of active client files in the pharmacy)
• The market share
• The operating costs
• The size of the establishment (building or other assets)

Membership, associations, and contracts: decisions that shape the future

Most pharmacies are affiliated with a banner or a chain. The services offered vary accordingly and limitative clauses may apply at the time of resale, depending on whether or not you are the owner of the lease. It is therefore very important that you examine the contract in detail. Lastly, since there are on average two owner pharmacists per pharmacy, a good partnership agreement is a must.

Review the purchase offer with experts

Should you buy the seller’s shares or the assets of the practice? Do the terms of sale suit you? Does the appraisal reflect the actual value of the practice? Is the selling price fair? If you are incorporated, who should buy? The tax consequences vary according to the type of transaction. In addition, since it’s important to distinguish between the retail store activities of the business and the dispensary activities, a thorough analysis is a must. A financial advisor can help you make sense of it all and assess financing options.

Finance your project and secure your financial situation

Buying a pharmacy requires a substantial down payment. To obtain financing, personal financial statements showing your income, your expenses, your savings and your debts are required.

Structuring the financing and tax aspects of the acquisition

A balance sheet and cash flow statement are helpful tools for professionals which can be used to:

• Assess your borrowing capacity
• Establish a repayment plan over 7 to 12 years
• Determine if a lease is the best option
• Establish the operating budget plan for your pharmacy (projections)
• Identify the best tax structure (incorporation, your professional income, etc.)
• Plan your personal budget and savings
• Determine the work pace required to meet your obligations

From an accepted offer to signing the contract: leave nothing to chance

Offer accepted! 

You had in hand all of the seller’s documents, did all the due diligence, obtained your financing, and your offer (or counteroffer) was accepted. If all the conditions are satisfied, you can go ahead with the transaction.

Other steps must be completed before officially becoming the owner of your pharmacy. The transaction must be organized and finalized.

Prepare for closing the transaction and finalize the necessary steps

With the draft contract in hand, you’re almost there! Before signing, you must:

• Obtain your registration numbers: NEQ, GST/QST, etc.
• Apply to the RAMQ
• Have insurance: property & casualty, life, disability
• Become a member of the Association québécoise des pharmaciens propriétaires
• Plan the transition and set up the accounting
• Prepare the legal closing documents

You must also be sure to notify the Ordre des pharmaciens du Québec of the transaction and comply with the regulation: Pharmacy Act.

Why choose fdp Private Wealth Management?

Buying a pharmacy is a decision that will shape your professional and financial future for many years to come. Working with specialists helps ensure that every step of the process goes smoothly, allows you to anticipate financial and tax implications, and enables you to make informed decisions. The advisors at fdp Private Wealth Management support pharmacists throughout their acquisition process, taking into account their overall situation and objectives.

To get an analysis of your situation and receive guidance throughout the process, we invite you to contact one of our Wealth Management advisors.