Exit strategies in any business are a critical requirement. Every business owner needs to think through and document exactly what their plan is regarding selling their business when it reaches a certain level or it’s perhaps time for them to finally retire. Perhaps this is even more critical to do if you own an independent retail pharmacy than in most other businesses. Recently we discussed how the opening of new retail community pharmacies and specialty pharmacies was dramatically on the rise across the nation. Yet a review of recent pharmacy related news stories over the past several weeks also reveals that numerous small independent pharmacies were closing, shut down or suddenly went out of business at an increasing and alarming rate.
Pharmacies Suddenly Closed or Shut Down
A recent article from Fox News discussing the issues that many independent pharmacy owners are facing today may help educate the public as to why their local pharmacy suddenly closed its door and the business was unexpectedly shut down. The current situation that the independent pharmacy owner now faces includes having to compete with the large national chains, plus also having to try to make a profit while adhering to policies that were put in place by the insurance companies and hospitals. Some of these policies put the independent pharmacies at a severe disadvantage to be able to do business profitably, plus still perform the critically vital role of serving their customers by filling their prescriptions and provide counseling. Eventually, the beloved corner drugstore may be a memory from the past, just like the typewriter and rotary telephones have sadly become.
Let’s take a closer look at some recent examples of pharmacies suddenly going out of business, closing down or being sold in just the past two weeks!
- In Addison, Michigan, the Addison Pharmacy and Gifts in downtown Addison suddenly announced that they were closing their doors and then closed permanently just this past week (August 2nd of 2019). This leaves the City of Addison without an independent pharmacy for the first time since the pioneer era. After eighteen (18) years of owning the pharmacy, Doug and Karol Heidbreder sent a letter to their customers letting them know that the pharmacy was intending to shutdown and close its doors. It’s important to note that the Heidbreder’s did have an exit strategy in place and were able to sell the business to a competitor located in nearby Hudson, Michigan (a drive of approximately fifteen miles from Addison, or thirty miles for the “round-trip”).
- The NY Post announced that the Metropolitan Pharmacy, located in Queens, New York and the Metro Pharmacy II, located in Forest Hills, both closed their doors after serving local residents for well over forty years. Owner Ira Lisogorsky who, according to the pharmacies’ customers “had selflessly served the neighborhood” for the past 40 years, stated that “problems with drug companies, as well as regulatory and city policies” led to his decision to shut the two businesses down for good. Lisogorsky also noted that the ever increasing popularity of online ordering combined with “the drug companies screwing us so I make almost nothing on prescriptions” ultimately made the decision easy. So far, according to the article, no buyers for the pharmacies have been identified.
- In Richmond, Virginia, the Grove Avenue Pharmacy announced that they were shutting their doors and closing down at the end of August this year according to NBC News. After 73 years at their current location, the family-owned pharmacy announced that they had been purchased by CVS and that all of the prescriptions and patient files would be transferred to the CVS Broad Street location. The owners stated that the “shrinking” prescription volume had caused “financial pressures” and that they simply could not continue to stay open and operate the pharmacy profitably any longer.
Exit Strategies For Pharmacy Owners
Having an exit strategy is a must for all pharmacy owners. The very best of business plans that must be written when a company or corporation is initially being started all include a detailed strategy regarding the “exiting” of the owner of the business at some point in the future. The specifics of challenges, issues and situations that the pharmacy faces obviously may change, however the exit strategy can change right along with them. Every pharmacy business owner should be asking themselves the following questions (or similar ones):
– Will I be able to sell my my business when I’m ready to finally retire?
– Will it be a hard or an easy thing to do?
– How can I project what my business will be worth?
– Should I periodically have an outside third-party perform a valuation of my business?
– Will my wife and/or children be able to run my business if something should happen to me? Are they really prepared for such an occurrence?
– Should I hire a 3rd party to take an objective review of my pharmacy operation and efficiency to give me an unbiased opinion and perhaps get some constructive feedback?
– Do I want to expand my business and if yes, what are the best ways to accomplish that?
– Do I want to consider employee ownership for my valued and key staff members?
– What do I need to change or upgrade in order to make my business more attractive to a potential third-party buyer?
Most pharmacy owners love what they do and work hard everyday to best service their customers and patients and make their business a success. Yet, as an owner of a business ourselves, we strongly urge you to plan ahead and consider developing an exit strategy for your pharmacy business or enterprise.
How Should a Pharmacy Owner Proceed?
A successful exit strategy takes a considerable amount of time, thought and planning. The fact is that the sooner you plan and document your possible exit strategies, the more prepared you will be and the more you will be able to focus on the actual running of your business. A good way to think of an exit strategy is to look at it like you would a map. You know where you want to travel to and eventually end up, but how will you get there? What’s the fastest way to get there, taking into consideration that all of the roads need to be reliable A person would never drive a long distance without consulting a map for the best route (plus their navigation system to see the current conditions on their proposed route), so why would a business owner not “map out” their “business journey”. As noted above, the best plans and strategies are always flexible and allow you to be able to respond to changes. As most can agree, the practice of pharmacy is perhaps one of the fastest changing environments there is when compared to most other businesses.
HCC Has the Experience to Help You!
If you are considering selling your pharmacy business in the future,or simply want to prepare and explore your options, we strongly urge you to get in touch with us today for a free consultation. We offer you the support of an experienced staff who have been through the process many times and know the business inside and out! With 29+ years of pharmacy consulting experience, HCC has helped hundreds of business owners (pharmacists and non-pharmacists alike) get prepared by evaluating their business and exploring their possible exit strategy options. Contact us on line or call us today at 800-642-1652 for a Free Consultation to find out how we can help you too.