Partnerships

Partnership – may be the only viable option for young pharmacists

With Bank Lending coming to an almost standstill, and pharmacy continuing to achieve good results leading to prices not declining as other asset categories recently have, it seems the only viable option for young pharmacists may be to enter into a Pharmacy Partnership to achieve their dream of ownership. The inevitable conclusion: The days of outright ownership may be over for most young or for that matter most first time owners.

One may argue that this is an obvious statement but lets look at it a little closer. The average pharmacy is approximately worth $2.5 million dollars. With most Banks lending approximately 70-75% (on rare occasions higher), this means a young pharmacist needs to come up with $625,000 - $750,000 to go it alone. This is indeed a very daunting task.

As most of you who have seen me speak will know, I always argue that there is no such thing as an average pharmacy. Even if we scale it back and a young pharmacist buys a $1,000,000 pharmacy $250,000 - $300,000 equity is required. Once again very daunting.

Add this to the fact that most pharmacies below one million purchase price have a tendency to be sold on potential, the prospective buyer will have a hard time convincing the banks to commit as there may be serviceability issues. Furthermore the Banks level of perceived risk increases due to the fact that a young pharmacist might not have that much experience.

Increasingly Junior partners are asking is it all worth it or even possible?