Buying a pharmacy is a big deal. Whether you’re expanding your existing business or taking your first steps into pharmacy ownership, getting the due diligence right is crucial. Rushing in without checking the details could leave you with unexpected debts, compliance headaches, or a business that simply doesn’t perform as expected.
What is due diligence?
In simple terms, due diligence is the process of investigating a pharmacy before you buy it. Think of it as lifting the bonnet on a car before making a purchase. You’re checking everything works as it should and there are no hidden surprises. This includes reviewing financials, legal matters, operational processes, and regulatory compliance.
Key areas to focus on
Here are some of the main things to check during the due diligence process:
1. Financial health
You’ll need to go through the pharmacy’s accounts with a fine-tooth comb. Look at revenue, profit margins, and outstanding debts. Are there any financial red flags? Have prescriptions been declining? Are there payment disputes with suppliers? Getting an accountant who understands pharmacies involved at this stage is a smart move.
2. Regulatory compliance
Pharmacies are heavily regulated, so make sure everything is up to scratch. Check General Pharmaceutical Council (GPhC) registration, NHS contracts, and whether there have been any recent compliance issues or warnings. If the pharmacy isn’t meeting regulations, you could inherit a major headache.
3. Property and lease agreements
Is the pharmacy freehold or leasehold? If it’s leasehold, how long is left on the lease? You don’t want to buy a business only to find out the lease is about to expire, leaving you with nowhere to operate. Also, check rent increases and service charges so you’re not caught out with unexpected costs.
4. Staffing and employment contracts
A pharmacy is only as good as the team behind it. Look at staff contracts, salaries, and any ongoing HR issues. Are there key team members planning to leave? Are there unresolved disputes? Understanding the employment side of things will help avoid staffing headaches down the line.
5. Supplier agreements and stock
Pharmacies rely on strong supplier relationships. Check the terms of supply contracts, any exclusivity agreements, and whether there are any outstanding debts to suppliers. Also, take a close look at stock levels – are they realistic, or is there a lot of unsellable stock sitting on shelves?
A thorough due diligence process can save you from making a costly mistake. Surround yourself with the right professionals such as accountants, solicitors, and pharmacy sector specialists. After all, buying a pharmacy should be an exciting next step, not a stressful one!
