Pharmacists' Guide to Selling Their Business (eBook)

Chapter 1:
Why Listen To Us?

If you’re considering selling your pharmacy, we think it is imperative that you begin preparation well ahead. We see far too many disappointed owners and resultant transactions that can be best described as missed opportunities, where significant monies are left on the table.

Invariably during this preparation phase, you will receive free advice from a plethora of people, and sometimes you’ll even have asked for it. Namely, other pharmacists you know. Your lawyer. Your banker. Your spouse. Maybe your kids or your parents. Your colleague from your graduating class or the owner of a nearby community pharmacy.

The point is, everybody “knows a guy.”

So you will likely encounter no end of advice, some of it good, some it bad, much of it perhaps as ill-informed as it is well-intentioned. Since you are reading this book, you’re already off to a good start in trying to sort it all out. But why should you trust the advice you will find here?

The reason goes beyond the fact that the authors have collectively spent decades advising independent pharmacy owners on selling their businesses and managing the financial impact. And it’s not just that we have helped hundreds of them do just that – successfully. Track record is important, and we have what we think is a solid one. But even more important is this: we understand what you’re going through because we are both pharmacists ourselves, and we have both had the experience of building up and selling a pharmacy business. In essence, we are our clients.

So before we get to the nitty-gritty, allow us to share a little bit about ourselves and how we ended up in the business of helping independent pharmacy owners like you.

Mike’s story

One of the things I’ve learned in life is that you often end up where you want to be simply by getting out of where you don’t want to be. In my case, that place was the pool hall in Tillsonburg.

Let’s back up a bit. My story really begins in 1956, when my parents were among hundreds of thousands of refugees fleeing the Soviet invasion of Hungary. My father and my mother, who at the time was two months pregnant with me, crossed the border into Austria under the cloak of darkness, crawling under barbed wire, in the pouring rain – the kind of scene you might get a flavour of from old spy movies. Eventually, after months of hardship in refugee camps, they found a sponsor in Canada. They settled in Tillsonburg, in southwestern Ontario, which is perhaps best-known for the Stompin’ Tom Connors song whose famous refrain goes, “My back still aches when I hear that word.”

Man, I know what that means. Like so many other immigrants trying to make new lives for themselves and their families in late-1950s Canada, my parents became farmers, and they basically worked their butts off over the next 50 years. All they did was work, or so it seemed to me. When winter covered the fields, they worked in the tobacco processing plant. I joined them in the fields at age 8, was driving my dad’s ‘67 Mercury pickup at 11 and began to work a double weekend shift in the plant when I could drive myself. On the first day of school, I couldn’t speak a word of English. (Some may argue that circumstance remains the same today!) I struggled in school well into high school as an awkward teen trying to find my place. The experience of being an immigrant and having no money left an indelible impression on my relationship with money. And everyone has some form of relationship with money.

To his everlasting credit, my dad always encouraged me to learn to use my head instead of my hands. That took a while to sink in, though. By the time I was a teenager, I had become a bit of a loner in the sense that I hung around different cliques but was never part of one. But I was able to collect and process information in my own mind and then communicate the synthesized solutions to the outside world.

There were a couple of pool halls in town, and some of my earliest memories were of being in a smoke-filled pool hall accompanying my dad. Later on, that led to spending my time in Anderson’s pool hall when I should have been attending class. More often than not, while other kids were discovering the wonders of eskers, drumlins and border treaties in Jimmy Hart’s Grade 11 geography class, I could be found at Anderson’s.

And that’s how I ended up becoming a pharmacist. You see, whenever the truant officer showed up at that den of iniquity – the pool hall was a veritable rogue’s gallery of AWOL high-school students – I would duck out the side door and sneak into the establishment next door, which just happened to be Armstrong Bros. Drug Store. And I would usually see these two pharmacists behind the counter, plying their trade with quiet affability in their white lab coats, and I thought to myself, “I want to be one of those guys.”

So, one day I went to see my guidance counselor to inquire about pharmacy school. He took one look at my marks and – I’ll never forget it – said to me: “Son, you have set your sights too high. Have you ever considered becoming a plumber?”

To which I had two answers: No, I hadn’t. And no, [insert expletive here].

Instead, I spent the next two years of high school cracking down on the books, and I found out something about myself: I could be a good student, and it was far more fun writing exams when you knew the answers! In two years, I went from the bottom of my class to the top. Subsequently, when I applied to pharmacy school at the University of Toronto, I got in.

A fourth-year elective in pharmacy management provided the catalyst to focus on the business of pharmacy. When I graduated in 1980, it was into a market that was far different than the one young pharmacists experience today. Basically, if you had a pulse and a degree, you had a job. Soon after I graduated, I received a call from the president of a drugstore chain, and he offered me a position. I worked behind the counter for a few years and eventually began to take on more senior roles at the corporate level. My mentors were good to me, and that is one reason why I take so much interest in helping the next generation of owners today. Along the way, I went back to school part-time and studied toward a second formal education in financial accounting.

The credentialling never ends. The universe of thought is constantly expanding, so if you stop expanding your learning, then by definition, you are going backward.

I learned the language of business, which – and this is a theme you’ll hear a lot in this book – is different from the language of pharmacy. But it is important to realize that successful pharmacy business owners need to speak both languages concurrently, always in balance and harmony.

Over the years, my responsibilities grew amongst the ranks, and I became a shareholder. Putting capital at risk is scary and exciting at the same time. I had what looked to me like a clear career trajectory, founded on the belief that the company/group practice would continue to grow, and I would continue to make a contribution to the community pharmacy profession and industry. And then it all got derailed.

Sometimes, you kind of become a victim of your own success. The company had grown to the point that the younger generation of shareholders, including me, wanted to keep going, but the older generation wanted to cash out. There was a big disconnect – this is a universal force in multi-generationally owned organizations. One side saw the sale of the business as a way to reap the reward of years of hard work; the other side saw it as squandering the opportunity all those years had created. And since the senior investors owned the majority of the company, and since the junior shareholders didn’t have the financial means to take over, our ambitious little drugstore chain ended up being sold to an ambitious big drugstore chain. We felt there was unfinished business. The liquidity event was seminal in that we cried all the way to the bank.

I’m not kidding – I did cry. My wife was also a shareholder in the company, and we believed in what we were doing. I can confidently say it was the single most difficult period of my professional life.

That’s one of the big reasons I do what I’m doing today. I vowed back then that I was never going to let something like that happen to me again and that I would do my best to make sure others wouldn’t have to go through it either. Or at least that they would be prepared in case they had to.

So after the sale, I focused on building a financial advisory practice, and I found my niche at a great wealth management firm helping pharmacists who were preparing to or had recently sold their businesses. My own liquidity event – the good parts and the bad – helped me appreciate not only what it takes to manage a seven – or eight-figure portfolio, but also the emotional identity loss and lifestyle impact...