Pharmacist Ian McNeil, who since 2010 has purchased three pharmacies, is in the process of developing a succession plan for his business.
By Randy Ray
As he adds more stores, the Ottawa pharmacist plans to hire a director of pharmacy operations/clinical services who would be in line to purchase the stores. If the person is not interested McNeil plans to approach managers at each location to purchase a store or set up a partnership. If he chooses not to give the option to buy to a known individual, he will hire a representative to act as a liaison between the purchaser and him to create some distance and remove any bias.
Tips to plan your succession:
- Start NOW. As soon as you buy a business, you should start planning your exit strategy.
- Work with an expert to get an accurate valuation.
- Ask the right questions: Are the vendor’s books accurate? Is the location solid? Do they have a workable business plan? Can they arrange financing? Can they grow the business?
In the next three to four years he will create a trust as part of the succession plan and speak to a financial advisor to ensure he is not missing anything when he decides to sell. And two years before the sale of his pharmacies, he will ensure his income statements are clean and will remove any personal expenses and personal pension plans.
Not every beginning pharmacist is as organized as Ian McNeil. Many would-be owners completely overlook the need for a succession plan.
Pharmacists contemplating the purchase of an existing drugstore must address many key challenges.
While succession planning may seem premature during the employee-to-owner transition, experts and pharmacists who’ve taken the leap say it’s crucial to plan early for the day they dispose of their business. In more than one instance, putting it on the back burner has snookered an older owner’s retirement plans.
The most common problem buyers and sellers face is gaining unbiased advice on issues ranging from business valuation, ways to negotiate a purchase, the development of a business or retirement plan, tax and investment planning, and transitioning from entrepreneur to retiree. Young buyers know little about finding a store that is a worthwhile investment, performing the necessary due diligence, lining up financing – even managing the business once the sale goes through, while sellers often get caught up in the emotion of valuing and selling their business and may have no plan for the large chunk of cash they are about to reap.
A key part of the succession strategy is pinning a value on the pharmacy that makes it saleable and provides sufficient resources to fund a retirement.
And structure is what it’s all about in devising the best succession strategy…earlier rather than later.