Here is a quick rule of thumb to determine what your pharmacy may be worth. While your company is like a diamond in that it has many facets, size counts! Let us start by taking your top line revenues from your Profit & Loss statement. Then, subtract your cost of goods, which can be anywhere from 70% to 80%. The number you are left with is your Gross Profit. Now, subtract your General and Administrative expenses and you will have your Net Profit, which can run from 5% to 8% after we adjust for non-recurring expenses, including personal expenses, excess owner compensation, depreciation, and interest. Finally, take the adjusted Net Profit and multiply it by 4 - 8 times, and that number is the Market Value of your company! Retail drug stores are selling for 4 times their adjusted Net Profit, unless there are several locations with high volume. Specialty and Long-Term Care pharmacies sell from 6 to 8 times their adjusted Net Profit, plus their inventory.
Sample Retail Pharmacy Valuation
This comes from a culmination of over a thousand closed transactions by American Healthcare Capital over the past 31 years. If you are considering the sale of your pharmacy, please contact Jack Eskenazi at (310) 625-7889. Mention this article for a 10% discount on our fee schedule.
This post is related to:Buying/Selling of a Pharmacy & Franchising