DID YOU PAY TOO MUCH WHEN YOU BOUGHT YOUR PHARMACY?
DID YOU PAY TOO MUCH WHEN YOU BOUGHT YOUR PHARMACY?
- July 12, 2026
- 10:28 am
Did you pay too much, when you bought your pharmacy?
The market for pharmacy acquisitions has changed significantly over the last few years. Whilst many sectors in the economy have suffered, community pharmacy has strengthened because:In today’s fast-moving environment, having a clear financial plan can help you navigate uncertainty, take advantage of opportunities and build long-term security.
- There are a finite number of PBS approved pharmacies in Australia.
- Only a small number are for sale, at any given time.
- The demand by pharmacists to purchase a business, has become even stronger over time. In part because the role of community pharmacy has become more evident to the general public, which makes current and future owners more confident about the existing ownership and location rules.
- Banks have become generally more conservative in lending, but still see pharmacy as a “safe” sector.
- Interest rates have been relatively low in recent years.
Say 5 years ago, a prospective pharmacy purchaser might have been happy to generate a return on investment (ROI) on their pharmacy business of between 15%-20% (depending upon location, demographics etc). This ROI is expressed as a percentage, BEFORE interest and income tax. But these days, some purchasers are happy to buy the same pharmacy, which currently only returns 12% -15% on their investment. So, in some of the examples I’ve seen, this has resulted in a relative increase in market selling price of up to 25% on the same pharmacy, compared to the market only a few years ago.
What does that mean for a new owner?
If a pharmacist bought a business generating a profit of say 12% return on investment (before interest and tax) but pays interest on their loan of around (say) 5%, then the net return on their investment implied is 7% before tax. By the time you allow for tax and repayments of principal on your business mortgage, that doesn’t leave much “buffer” of cashflow. So, if the economy suffered a “blip” or there was an interruption to normal trading, it doesn’t leave much room for error. In this hypothetical scenario, one may argue that the purchaser may have paid too much for their business.
Accordingly, before you make an offer to purchase (or become a partner) ensure that you:
- Consider current interest rates as well as future rate increases.
- Identify opportunities, to grow your business returns in future.
- Prepare a Cashflow budget, taking into account profit, tax, loan repayments and personal living expenses.
Be diligent and seek professional advice before making any offer to purchase a pharmacy or become a partner. A poor decision can prove costly over the long term; a wise decision could be enjoyed over many years to come.
About The Author
Neil Featherstone
Senior Consultant
Pharmacy Advisory
Specialist
Neil works with pharmacy owners and businesses to improve performance, build value and achieve long-term success.
Need expert advice?
Our team is here to help you make confident financial decisions for your business.
WHY OWN A PHARMACY? AM I BETTER OFF BEING AN EMPLOYEE?
WHY OWN A PHARMACY? AM I BETTER OFF BEING AN EMPLOYEE?
- July 12, 2026
- 10:28 am
Why own a pharmacy? Am I better-off being an employee?
The UTS Community Pharmacy Barometer is an annual report collating research tracking the confidence, perceptions and opinions of pharmacy owners and employees in relation to impact of perceived future changes. The report published late last year provided many interesting observations and interpretations, including:
- Increased provision of professional services by pharmacies.
- Improved collaboration with doctors, aged care facilities and other health professionals.
- Signs of increased optimism by some owners, about the future of community pharmacy generally.
- However, employed pharmacists were often less optimistic, due to perceived increase in workload going forward.
- rend towards increase in hourly wage rates for employee pharmacists.
Over the last couple of years there has been an increased demand for pharmacy services such as vaccinations and also a need for deliveries to customers, putting a greater load on staff’s time. Some team members have also reported being uncomfortable dealing with frustrated customers in situations where certain stock have been in short supply and customers were frequently disappointed.
On the back of the challenges to community pharmacy (and businesses generally) due to Covid, many pharmacies have experienced ongoing difficulty in attracting, recruiting and retaining staff. Especially those pharmacies located regionally. Pharmacy owners have needed to manage staff rosters carefully (eg splitting into teams in case staff became unavailable due to illness) requiring extra staff numbers to cover the need. But with access to additional experienced staff limited, then existing owners and staff have had to work longer and harder to meet customer needs.
It also appears anecdotally that an increasing proportion of pharmacy students are choosing to work in hospitals as their career pathway, rather than explore community pharmacy. The perception of many students is that community pharmacy may be a more difficult or less satisfying choice, compared to working in a clinical environment. So if fewer students join community pharmacy, then the shortage of professional staff will not be resolved in the immediate future.
For those students who are choosing to become community pharmacists, or those pharmacists currently employed in community pharmacies, they also should consider the option of ownership. If the remuneration prospects of remaining as an employee appear promising in future due to scarce supply, is there sufficient enough incentive to become an owner (or partner)? For those pharmacists who love the engagement of working closely with customers in their local community and being part of a small team, what could be compelling motivators to take the next step? There are numerous other motivators for becoming an owner, but some of the most common include:
- Flexibility to organise both your business as well as personal life. This might be important when you have a young family to care for, or at the other end of your career when you would like to travel or take a sabbatical.
- Control to make all of the important decisions and have more influence your own destiny. It can be most satisfying to really be part of the community, grow a business and develop vision for the team.
- Contribution to the health of customers, providing meaningful employment to staff as well as earning an income from the business can be rewarding, on multiple levels.
- However, employed pharmacists were often less optimistic, due to perceived increase in workload going forward.
- Building an asset by improving the business turnover, profitability and overall performance can become a significant component of a pharmacists’ long term retirement planning.
Once a pharmacist has embraced community pharmacy ownership as their long-term career, I would also challenge them to also reflect carefully upon the business side. This should occur both before purchasing the business, and also as an ongoing exercise whilst being an owner. Every successful business requires astute planning to ensure confidence about the future. Thus, owners should regularly ask themselves these five questions:
- Methodology of business – Whilst you are working within ethical requirements of the profession, are you also deriving optimal profit?
- Perception of risk –How much financially is “on the line” in you personally supporting the business, and are you comfortable with this?
- Return for effort – Are you truly generating enough profit over and above a reasonable wage, to justify the risk? Or would you be better-off remaining as an employee?
- Opportunities – Could you take on a bit MORE risk, but generate rewards that could deliver attractive results? (eg borrowing to buy another pharmacy, purchase the premises)?
- How much is enough? – What is my target accumulated assets value by the time I retire, which should generate sufficient income for your lifestyle?
For the right person, community pharmacy can provide an extremely satisfying career. The combination of professional interactions, relationship building and remuneration can still be a compelling option. It also provides an additional entrepreneurial opportunities, should the pharmacist be attracted into ownership.
About The Author
Neil Featherstone
Senior Consultant
Pharmacy Advisory
Specialist
Neil works with pharmacy owners and businesses to improve performance, build value and achieve long-term success.
Need expert advice?
Our team is here to help you make confident financial decisions for your business.
PARTNERSHIP DISPUTE? HOW DO YOU ACCOUNT FOR IT?
PARTNERSHIP DISPUTE? HOW DO YOU ACCOUNT FOR IT?
- July 12, 2026
- 10:28 am
Partnership dispute? How do you account for it?
Everyday business decisions of business owners and managers include directing staff, advising customers, replenishing stock and planning cashflow. When your team is experienced and harmonious, decisions tend to flow smoothly. We learn to adapt and compromise as necessary based upon the circumstances at the time. Small issues can generally be resolved as they arise. The glass feels “half-full”. But sometimes, a business may experience serious conflict. Either from external sources (eg landlord, suppliers, customers) or internally from employees or fellow owners.
Some examples of typical partnership (or director/shareholder) disputes include:
- Staff hiring or firing, remuneration, reprimands, rostering, training
- Stock purchases (type of stock, quantities, pricing)
- Inventory layout and presentation
- Marketing, promotion, branding
- Partners’ conditions and performance (eg job specification, responsibilities, roster, remuneration, leave)
- Cashflow management (including when to make profit distributions to partners and how much)
- Major capital acquisitions (eg refit, rebranding, relocation)
- Suspected misappropriation of money or inventory (eg using business funds to make unauthorised personal transactions)
- Professional misconduct or criminal charges
When a problem arises
When a problem arises the first step should be communication. Identify the perceived issue, substantiate why this is a problem, then suggest potential solutions. Keep communications simple, clear and respectful. Hopefully sensible dialogue will pay-off. If the matter is more objective in nature (rather than subjective) possibly the parties may be able to resolve the dispute themselves, by referring to the partnership (or shareholder) agreement that should have been put in place at the commencement of the business. These agreements are invaluable.
Legend has it, that the directors of the Australian global software company Atlassianuse “Rock, Paper, Scissors” as a tiebreaker! However, for most other businesses, if the matter is not so simple or there is friction between the parties (especially if there are more than just two partners) then you may need professional help. Your lawyers are obviously the appropriate people to consult in these situations. They should understand all relevant legislation or case law, and hopefully able to advise the best solution.
But in extreme cases, a dispute cannot be resolved. Which might result in one of the partners deciding to exit the business or be “removed” from working in or owning the business. Here the lawyers representing party become even more important, because the longer the business continues to operate with dysfunctionality, the more potential damage to goodwill (internally with your staff and externally with customers etc).
The lawyers will rely upon all relevant documentation (eg partnership agreement) as well as their interpretation of the facts. The outcome may involve some process of mediation to determine middle ground. Or possibly just an objective interpretation of the agreements implemented originally. A sound partnership agreement should include documented mechanisms that apply in cases of disputes, or ultimately exit of a partner.
From an accounting perspective, we provide initially support to all partners by:
• Processing data regularly and prepare monthly management reports (P&L and balance sheet) on a timely basis
• Lodging BAS on time
• Ensuring annual financial statements and tax returns are up to date
• Maintaining consistent accounting policies and procedures each year
If the partners encounter a significant falling-out, an objective valuation of the business will be required to identify the fair market value of the business upon exit. The partnership agreement normally suggests who they already accept to be the appropriate valuer in these circumstances. Often it is either the partnership’s external accountant, or one of the industry accepted valuers.
The general technique normally is to calculate the future maintainable earnings of the business (FME) or more accurately described as EBITDA (earnings before interest, taxation, depreciation and amortisation) based upon recent trading history.
A valuer considers recent trends within the business (eg sales, gross profit margins, script numbers, costs of rent, wages and other overheads). They also analyse the impact of external non-recurring transactions or events (eg impact of Covid on foot traffic, income subsidies including Jobkeeper or rent relief, sale of RATs, high cost drugs etc).
Once the valuer is comfortable with the estimated EBITDA dollar value, they allow for a market salary for the owner’s hours working as pharmacist in charge or managing partner. Accordingly, the residual profit is a true representation of their monetary reward for their investment in this particular business.
The final piece of the puzzle is to identify the required the market “return on investment” or ROI (also referred to as capitalisation rate or rate of return). The higher the perceived risk of the pharmacy (investment) then the higher the ROI needs to be, to attract the pharmacist to be the owner. The risk assessment requires the valuer to consider the specific ingredients of the business such as customer demographics, competition, nearby prescribers, location (city/suburbs/regional) style of store (shopping centre/strip/medical centre) etc.
The range of ROI can differ significantly, so the valuer looks for recent comparative sales as relevant indicators. This can be an involved process and the owners are best advised to consult a valuer who specialises in the pharmacy profession. We are happy to assist pharmacists in identifying resolutions to a dispute.
About The Author
Neil Featherstone
Senior Consultant
Pharmacy Advisory
Specialist
Neil works with pharmacy owners and businesses to improve performance, build value and achieve long-term success.
Need expert advice?
Our team is here to help you make confident financial decisions for your business.
Healthy, Simple Financial Advice
Healthy, Simple Financial Advice
- July 12, 2026
- 10:27 am
Health professionals require assistance from time to time.
The saying “play to your strengths” is applicable in your work, play or family life. Building a team of confidantes is a prerequisite to a balanced and “successful” life. Your team helps you avoid potential problems, plan for the future and simply be a sounding board. They allow you to focus on what you are best at, and what you love spending your time upon.
When I first went into my own practice, we developed a list of simple suggestions for our clients so we could fine tune their relationship with us! A brief summary:
Communicate your individual needs.
Do you need monthly profit/cashflow reports or can you estimate your tax position from your own observations? Are you totally confident in your point-of-sale system, or do you need independent information to compare it with? Can you prepare your own BAS or would you prefer to focus upon on more profitable/enjoyable activities etc?
Discuss your short, medium and long term goals together.
The more background your accountant has the, the better quality advice you will receive. Share your current activities, goals and future plans. As your plans change, recognise this may have a significant effect on the financial strategy employed (so keep sharing)!
The cost of accounting fees should not be the biggest issue.
Some advice may be invaluable. You may save thousands of tax dollars when negotiating a business purchase or selecting the right business structure. Similarly, capital gains implications on selling a business, shares or investment property. Strategic use of CGT “roll-over” concessions or SMSF can be life changing.
Never say “I only want you to do my tax”.
Compliance work is only one of your needs, but there are areas where your professional team can have greater impact (eg forecasts, feasibility studies, investment advice etc). You would never ask your doctor to treat only one of your ailments at the exclusion of all others. Your finances are no different!
Be organised and pay attention to detail.
This reduces unnecessary time attending to routine tasks (such as reconstructing lost records) and allow accurate reporting on a timely basis. It should also help avoid unexpected tax issues.
If you are not satisfied, say so.
You are allowed to be critical, but don’t expect someone to be able to read your mind. When a customer walks into your business, you need to rely upon their input to provide the correct solution.
So, tell your financial advisor:
- Keep it simple and just tell it like it is
- No nasty surprises
- Don’t be a stranger
- Help me pay less tax, and grow my assets
- Show me how to add value to my business
What do you want from your professional & private life?
Your accountant must be intimate with your business and your specific needs. This helps generate new ideas and facilitate regular feedback.
You must be aware of what you really want from your professional and personal life. If you aren’t sure, confide in your team and develop an overall concept. Your accountant should be in the best position to advise you on all aspects of your financial strategy.
BAS, GST and STP require data to be processed and reported upon on a regular basis. Technology has empowered even the smallest business to have access to relatively inexpensive and reliable bookkeeping software, but this requires direction. Just because you bought an aeroplane, it doesn’t make you a pilot!
So, take some care in building your team and it should pay dividends for over your entire professional career.
Whether you’re a business owner, professional or investor, the right plan today can make a significant difference to your future.
Our team can help you create a tailored plan that gives you confidence and peace of mind.
About The Author
Michael Pinn
Senior Consultant
Pharmacy Advisory
Specialist
Neil works with pharmacy owners and businesses to improve performance, build value and achieve long-term success.
Need expert advice?
Our team is here to help you make confident financial decisions for your business.
A GUIDE TO BETTER FINANCIAL PLANNING
A GUIDE TO BETTER FINANCIAL PLANNING
- July 12, 2026
- 10:15 am
Good financial planning is about more than just numbers - it's about giving you clarity, control and confidence in your business and personal future.
In today’s fast-moving environment, having a clear financial plan can help you navigate uncertainty, take advantage of opportunities and build long-term security.
Why Planning Matters
Financial planning provides a roadmap for your business and your personal goals. It helps you make informed decisions, manage risks and stay focused on what matters most. Without a plan, it’s easy to get caught up in day-to-day demands and lose sight of the bigger picture.
Key Areas to Focus On
A strong financial plan covers more than budgeting. It should include:
- Cash flow management - understand your position and plan ahead.
- Growth strategies - align financial decisions with your business goals.
- Risk management - protect your business and personal assets.
- Tac planning - take advantage of opportunities and stay compliant.
Taking the Next Step
Whether you’re a business owner, professional or investor, the right plan today can make a significant difference to your future.
Our team can help you create a tailored plan that gives you confidence and peace of mind.
About The Author
Michael Pinn
Director
Pharmacy Advisory
Specialist
Michael works with pharmacy owners and businesses to improve performance, build value and achieve long-term success.
Need expert advice?
Our team is here to help you make confident financial decisions for your business.
A GUIDE TO BETTER FINANCIAL PLANNING
A GUIDE TO BETTER FINANCIAL PLANNING
- July 12, 2026
- 9:43 am
Good financial planning is about more than just numbers - it's about giving you clarity, control and confidence in your business and personal future.
In today’s fast-moving environment, having a clear financial plan can help you navigate uncertainty, take advantage of opportunities and build long-term security.
Why Planning Matters
Financial planning provides a roadmap for your business and your personal goals. It helps you make informed decisions, manage risks and stay focused on what matters most. Without a plan, it’s easy to get caught up in day-to-day demands and lose sight of the bigger picture.
Key Areas to Focus On
A strong financial plan covers more than budgeting. It should include:
- Cash flow management - understand your position and plan ahead.
- Growth strategies - align financial decisions with your business goals.
- Risk management - protect your business and personal assets.
- Tac planning - take advantage of opportunities and stay compliant.
Taking the Next Step
Whether you’re a business owner, professional or investor, the right plan today can make a significant difference to your future.
Our team can help you create a tailored plan that gives you confidence and peace of mind.
About The Author
Michael Pinn
Director
Pharmacy Advisory
Specialist
Michael works with pharmacy owners and businesses to improve performance, build value and achieve long-term success.
Need expert advice?
Our team is here to help you make confident financial decisions for your business.