What are the Steps to Buying a Pharmacy?

Have you ever dreamed of owning your very own pharmacy? If so, buying a pharmacy is likely the best way to go about this - and our friendly experts are on hand to help. In line with this thought, today, we’re taking a deep dive into the process of buying a pharmacy business to help you decide whether this might be the right option for your needs and aspirations.

What are the Steps to Buying a Pharmacy?

Buying a pharmacy isn’t a two-minute process, understandably. However, there is a lot you will need to keep in mind to make this decision carefully, and the following steps might help you determine whether this could be a suitable approach for your needs.

Step 1: Why Do You Want to Buy a Pharmacy?

Before you go any further in buying a pharmacy, it’s important to make sure that this is the right decision for you. In line with this thought, carefully asking yourself why you want to buy a pharmacy could help greatly.

Now, there are countless different motivations for buying a pharmacy, and identifying yours could help you choose the right business. Some of the most common motives include the following:

•         Making a profit. At the end of the day, the vast majority of people buying a pharmacy are aiming to turn a profit. If this is one of your core motivations, it’s important to look for a pharmacy business that has a proven track record for having plenty of footfall and, ideally, profitable accounts. This could help reduce the risk associated with your new venture.

• Supporting the community. Another common motivation for people to buy a pharmacy is to support a local community. If this is something that you are interested in, looking for a pharmacy in an underserved community could be rewarding. For example, if a village already has a pharmacy, the need for a second may be less than in other areas. However, don’t necessarily disregard pharmacies in communities that already have one; it could be the demand is so high that a second is still highly needed.

•         To save a local store. Along a similar line of thought to the previous point, if your local pharmacy is potentially being sold or closed, you may want to consider buying it personally. This can help retain ownership of a local community pharmacy within your community, thereby giving residents greater confidence in turn.

Of course, these are just a few reasons that people might want to buy a community pharmacy. However, the exact motivations will vary for each person; as a result, ensuring you have considered your motives carefully can help a great deal.

Step 2: Search for Available Pharmacies

Once you know your motives for buying a community pharmacy, you can next begin the process of searching for one. Of course, pharmacies aren’t quite as easy to purchase as other businesses, given the strict health requirements involved and the like. However, some platforms allow you to purchase pharmacy businesses, providing a good place to start for many people.

When searching for available pharmacies, keep in mind that the number of available listings will likely be limited at times. After all, with pharmacies being such niche businesses, there may not always be one in your immediate area to purchase. Nevertheless, it’s generally good advice to keep checking back regularly to see if any new businesses have become available. This can help you find a business that works for your needs.

Of course, it is also - albeit rarely - possible to purchase a pharmacy business privately, which is generally referred to as an “off-market sale.” Off-market sales can come with several benefits, but they may - of course - be harder to arrange. So, unless you happen to know of a pharmacy business that’s likely to be sold, finding these opportunities may be harder and often relies on word of mouth.

Step 3: Consider Financing Opportunities

At this point, you’ll likely want to look at the different options for financing your new business - and this is an important decision. Indeed, most people are unlikely to have the funds for a pharmacy business just sat on the side. This will leave you needing to look at financing opportunities - and there are a couple of common routes entrepreneurs will take when investing in pharmacy businesses.

Now, the most obvious route of funding is to take out a loan with a bank. This is generally one of the simplest ways to obtain funding, for many people; indeed, bank loans allow you to quickly obtain a large amount of funding in a short amount of time. Often, these will be available for up to around 80% of the total value of the business, making it a good way to top up your deposit to ensure you don’t miss out on buying your dream pharmacy.

However, a bank loan is far from the only option. Of course, if you can get a group of investors together, you could chip in individually, with each investor owning a portion of the business; alternatively, a popular option for many new pharmacy owners is to purchase through a Pharmacy Finance Scheme (or PFS).

So, what is a Pharmacy Finance Scheme, you might be wondering? Well, a PFS is a scheme that is designed to help new entrants into the pharmaceutical field purchase their own business. These schemes are widely used by roughly nine out of every ten first-time pharmacy buyers and provide a shorter-term loan, generally over the span of ten years.

The main difference between PFS loans and traditional bank loans is that these are generally backed by another, larger wholesale pharmaceutical company. In doing so, this typically means that banks are willing to offer more favorable interest rates, making it a valuable option to consider for entrepreneurs needing a solution that can help fund their new endeavor without compromising affordability, stability, ease of access to funds, and the like.

Of course, if you were to leave financing for now, you could consider this later on in the process. However, doing so could lead to delays and may potentially cause tensions to rise between the buyer and seller.

Step 4: Signing the Deposit Agreement

At this stage, you’ll hopefully have a pharmacy in mind to purchase and funding plans in place. The next step is usually to sign the deposit agreement, which should include information such as the terms of the deposit, refund agreements should the buyer pull out of the trade, and so on. Be sure to read the terms of the deposit agreement thoroughly before going any further, of course; this is often a lot of money to place down as a deposit, and it could be a lot to lose if you get this wrong.

Step 5: Complete Due Diligence Checks

With the deposit agreement signed (and likely also a non-disclosure agreement), the next stage in the process will be to complete due diligence checks on your purchase. Most often, this is something you’ll want to employ solicitor support for, given the crucial nature of this process. Usually, your solicitor will prepare a list of enquiries relating to the business to ensure you are fully aware of the firm’s operations before going any further in the buying process.

Step 6: Sale and Purchase Agreements

If you’re happy thus far with the terms of the sale and the details of the business, you may want to consider going a step further with a sale and purchase agreement. This agreement should generally contain a list of warranties regarding the business; these should naturally be true and accurate, and it’s the seller’s responsibility to ensure as much. However, a disclosure letter may be required if certain circumstances might make claims untrue.

Step 7: Signing Any Ancillary Documents

Naturally, buying a pharmacy comes with a lot of paperwork - so, you may want to expect additional ancillary documents at this point. Luckily, this is something your solicitors should be able to handle, but make sure you raise any concerns with them if you have queries over data accessibility and the like (e.g. requesting copies of board minutes, etc).

Step 8: Transferring the NHS Contract

In order to operate as a pharmacy business, you will need an NHS contract. These can be incredibly difficult to obtain, which is why most people tend to buy a pharmacy business as opposed to opening one from scratch. However, this contract will need to be transferred into the buyer’s name when purchasing, which is typically done at the outset of the transaction.

It should be noted that an existing NHS contract alone may not necessarily be enough to complete the purchase of the pharmacy. For example, if you are buying a pharmacy for the first time, you will need to submit a Fitness to Practice application. Your solicitor should be able to guide you through the requirements here to ensure that your purchase goes smoothly and all NHS requirements are met and adhered to.

Step 9: Acquisition of the Unit

With everything hopefully going through smoothly, now’s the time to consider looking at acquisition of the property itself.

The exact nature of property acquisition will vary depending on the type of property you’re dealing with; for example, if the unit itself is leased, the lease will need to either be transferred to you, as the purchaser or otherwise terminated and a new lease drawn up. This may depend on the requirements of the financing party and the preference of the seller and property landlord.

Alternatively, in cases where the building itself is owned, the buyer may need to either agree on a lease of the unit or acquire the freehold of the property. Naturally, acquiring a freehold will come with significantly higher costs, so this is worth factoring into your budget.

Step 9: Completion

With everything in place, the transfer of the business, and all NHS contracts having gone through and been consented to without appeal, you should be about ready to complete your purchase.

Keep in mind here that there may still be several other factors to consider as part of this, such as ensuring an SDLT return and land registry update is completed for property purchases and the like. However, your solicitors should be able to handle this, so ensuring you have partnered with a trusted team is incredibly important.

Step 10: Grand Reopening!

At this point, everything should have been finalized and your dream new pharmacy will hopefully be in your name. All that’s left to do is kit out the place (if it needs new furnishings or renovation) and re-open the business! Make sure to make the event well known in the local community to start on a high with community support, and remember: pharmacies are often held incredibly dear by many communities, making it critical that you set a good first impression and get the support of your local community to encourage long-term success for the brand.

Final Thoughts

Buying a pharmacy is a huge decision; however, if you’ve always dreamed of running your own pharmacy business, it might just be the best way to go about this. However, try to keep in mind here that not every pharmacy business available for purchase is necessarily created equal, and there are many different options available that you could consider. So, be sure to do your research before buying a pharmacy to ensure it is the right one for your needs.