Whether you call it a pharmacy or a chemist, health has often been seen as a good business venture. Keeping people healthy, be it locally as a pharmacy or through selling medicine and associated products online, remains popular because demand is usually mostly predictable. Obviously, in chillier weather, more cold and other remedies are sold. But there are also ongoing sales from vitamins and a host of other health-related products throughout the year too. Also, expenses on other areas such as business certificates and registration and pharmaceutical in-licensing should be considered. So, does buying a pharmacy make for a good investment? Let’s consider it now.
How Broad Will Your Product Range Be?
Even if the pharmacy for sale doesn’t currently have a large range, you may have access to a warehouse facility. If so, it’ll be possible to stock a substantially broader list of products across different medical categories to sell online. Not only that, but the depth of the products within each category can expand too.
A good example of a broad supplier is medical-supermarket.com. They offer medical supplies, but also other business products, including stationery. This allows for plenty of upselling to increase the order size if selling to business buyers, for instance. The strategy can work equally well with consumers too.
What’s the Profitability Like Now?
What are the profits presently? Do they represent a reasonable profit margin?Does the pharmacy have a retail location, or do they offer distance selling online through an online website?Are the sales mostly to local people through the retail pharmacy or is it mostly online? With the pharmacy changing hands, will it severely affect local sales if the same staff aren’t continually employed there? If the online sales are significant, what’s driving new customers to the site?
What is the customer churn rate like and how high are the customer acquisition costs? Are the total number of customers increasingly or steadily declining? As such, how sustainable do the sales appear with the customer mix? Are they strong and growing, or are you catching a falling knife in a healthcare services business?
Are They Registered Through Pharmacy Regulation?
While someone can launch a site and claim improperly to be a pharmacy or chemist in the UK, customers will want to check that they’re registered correctly. An example from the registration of one site is here. Because they’re registered as an approved pharmacy, they get to display the linked badge, including their official registration number. This can provide confidence to buyers that a pharmacy they’ve not heard of before is legitimate enough to place an online order.
What’s the ROI and How Does It Compare?
When thinking about the profitability, consider the ROI vs. the investment to purchase a pharmacy.
What rate of return are you expecting from a private business investment? Does the return adequately compensate you for the perceived risk level and illiquid nature of it?Look at different pharmacy deals – past and present – to compare them. Also, when considering the ROI and the time to see a full return of capital, compare both the expected return and risk levels to other industries too. When going into a pharmacy acquisition with your eyes open, it’s possible to make a savvy purchase. Buying an existing business removes considerable start-up risk. However, it also pays to ask why the seller is choosing to do so now, and if you know enough to make a knowledge acquisition. Seek out business advice if you feel the need for it too.
