For many pharmacy owners, the business represents far more than day-to-day income. It is often central to long-term investment goals and, ultimately, retirement planning. With the right preparation and professional guidance, a pharmacy sale can deliver a strong return and provide certainty for the future. Without it, value can be left behind. The key is forethought.
Think like a buyer.
A successful sale requires an understanding of both the seller’s and the buyer’s perspectives. If a pharmacy is not an attractive proposition to a purchaser, it simply will not sell – or it will sell at a discount.
Selling a pharmacy is not unlike retailing itself. Customers do not buy faulty or poorly presented products. Similarly, buyers will not pay a premium for a business that is inefficient, opaque, or overly dependent on its owner. The critical question every seller should ask is:
- How can my pharmacy be best packaged for sale?
- How pharmacies are valued.
Most pharmacy transactions are valued using an earnings-based approach, typically applying a multiple to maintainable EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortisation). EBITDA is effectively a measure of the business’s pre-tax cash-generating ability before financing costs.
It is important to note that historical or current EBITDA may not reflect the true value of the business. Buyers are purchasing future income, not past performance. As a result, normalising profits and identifying sustainable earnings is critical.
In the current market, EBITDA multiples in the range of 4 to 6 times are common. The multiple achieved will depend largely on factors such as:
- Scale of the business.
- Geographic location.
- Quality and sustainability of earnings.
- Strength of systems and processes.
- The final valuation step involves adjusting for assets and liabilities, including stock, debt, and working capital.
Understanding how your pharmacy is valued allows you to actively influence that outcome.
The three key drivers of value.
While pharmacy businesses are complex, valuation ultimately comes back to three core drivers:
- Turnover.
- Gross profit margin.
- Overhead control.
Improving performance in each area strengthens EBITDA and, in turn, the valuation.
- Driving turnover
Increasing turnover is often the most challenging lever, particularly when the majority of the business’ income stream is set by the State and there is continual pressure on discretionary consumer spending. However, opportunities still exist.
Consider the following:
- Maximise claim accuracy: Most pharmacies already have the systems in place. Reviewing rejected prescription claims and tightening processes can recover income that is already earned but not collected.
- Monitor competition: Customer loyalty should never be taken for granted. Today’s consumer is well-informed and value-driven.
- Optimise front-of-shop performance: Every square inch must earn its keep. Replace stagnant product lines, trial new offerings, and make swift decisions where performance disappoints.
In many cases, protecting turnover can be just as valuable as growing it.
- Improving gross profit margin
- Gross margin is often the most impactful and controllable driver of profitability.
- Review purchasing arrangements regularly and negotiate assertively with suppliers.
- Consider joining or leveraging buying groups to improve terms.
- Some pharmacies benefit from assigning responsibility or even a dedicated role to sourcing discounts and monitoring supplier pricing.
- Small improvements in margin can translate into disproportionately large increases in EBITDA.
- Controlling overheads
- Overhead management is critical, particularly in two key areas: wages and rent.
- Benchmark labour costs against sector norms and review dispensing processes. Variations in the cost of dispensing between pharmacies can be significant.
- Ensure staffing levels and skill mix align with workflow efficiency.
- Review occupancy costs regularly and understand how they compare to industry standards.
- Consistent discipline in overhead control strengthens profitability and reduces buyer risk.
Tax planning: act early or pay the price.
After years of effort spent building and improving a pharmacy business, it is remarkable how often tax planning is left until the final stages of a sale. In our experience, this is where significant value can be unintentionally lost.
A pharmacy may be trading well and operationally ready for sale, yet still be structurally unprepared for a tax-efficient transaction. Issues frequently only come to light late in the process or when a deal is already being negotiated, leaving little or no scope to correct them.
Examples we commonly encounter include substantial cash balances or investment portfolios that have accumulated within the company, uncertainty around share ownership and who is ultimately entitled to the sale proceeds, or complications arising from property ownership, whether the premises are owned personally, held within the company, or owned by a third party. Each of these can materially affect both deal structure and post-tax outcomes if not addressed early.
Effective tax planning requires meaningful lead time to avail of the various reliefs and exemptions available, including entrepreneur and retirement reliefs, participation exemption, and tax-efficient strategies for interim cash extraction. Just as importantly, it allows the overall exit to be designed in a way that aligns the business structure with the owner’s personal objectives.
At Fitzgerald Power, this work is carried out collaboratively. Our Taxation Partner, Brian Kelly, works closely with pharmacy owners and with the corporate finance team to ensure that both the business and the shareholder are properly positioned well in advance of a transaction. As we often say: if you are already at the altar, it is probably too late. Addressing these matters early can materially change not just the tax bill, but the overall success of the sale itself.
Maximising the value of your pharmacy is not about a single change or a last-minute push. It is about consistent improvement, clear planning, and early professional advice. If you would like to explore any of the issues raised in this article, contact Noel Winters, Corporate Finance Partner at Fitzgerald Power, on 051 870152 or visit www.fitzgeraldpower.ie.
