Professional Services for MA Pharmacy Owners

by Brad MacLiver
Authorship and profile at Google

Pharmacy Acquisitions
There are a number of factors to be concerned about when selling a pharmacy. There are sink holes to avoid and actions that can be taken, which allow the seller to deposit more in the bank. www.PharmacyValuations.com provides expert guidance and manages the acquisition process.

Pharmacy Buyers
www.PharmacyValuations.com provide free services that assist pharmacy buyers with the leg work that goes into acquisition searches. This reduces the buyer’s cost of acquisitions and allows more money to be available for acquisitions.

Pharmacy Financing
Sellers need to make sure they are dealing with qualified buyers and not tire kickers. Financing is available to make sure that the deal gets done. www.PharmacyValuations.com packages and presents funding requests to a number of lenders who understand the dynamics of the pharmacy industry and who generally offer better terms than local banks. Whether buying a single location or a small chain, or when there are needs to refinance other pharmacy business debt - funding is available from $200,000 to $100 Million.

Free Pharmacy Business Valuations
PharmacyValuations.com provides free pharmacy valuations for pharmacy owners who are considering selling their drug store. When making a decision, pharmacy owners want expert answers to base their decision on.

Independent drug store owners and regional pharmacy chains located in: 
Massachusetts (MA)… when you are considering selling, financing, buying, valuing, or expanding your community pharmacy or regional drug store chain you will find value tips, resources and information at the following:

1. For Tips and Resources about buying, selling, financing, or expanding a pharmacy or drug store business: www.BuyingAndSellingPharmacies.com.

2. By connecting with us at   Facebook   Twitter   LinkedIn  you can discover the latest news and trends affecting the pharmacy industry and whether the equity in your business is increasing or decreasing due to the current market conditions

3. View pharmacy business videos at YouTube 

4. Click now a FREE  Pharmacy Business Valuation

5. We will be posting new pharmacy related articles for Pharmacy Owners on this Blog.

Pharmacy Acquisitions and EBITDA in Massachusetts

By Brad MacLiver
Authorship and profile at Google


EBITDA stands for earnings before interest, taxes, depreciation and amortization and is often used to measure the value of some businesses. It can also be used in the comparison of similar companies.

Generally, EBITDA makes it easier to evaluate various companies and to compare them against industry averages by removing the non-core and irregular operating costs, such as interest, which can vary depending on the management’s choice of financing, taxes which can fluctuate depending on acquisitions or losses from prior years, and arbitrary factors of depreciation and amortization.

The EBITDA formula can be used as a guideline when valuing larger companies, or when comparing the profitability of large similar companies in the same industry.

For the effective use of EBITDA, these larger companies should possess significant assets, have heavy amortization schedules, or bear substantial amounts of debt. Considering independent Massachusetts pharmacies don’t meet that criteria, this formula is not a useful measure as the sole means for valuing MA pharmacies for acquisition purposes.

To Calculate EBITDA, Use These Steps: 1 -- Calculate net income by obtaining total income and subtract total expenses.
2 -- Determine the total amount of taxes paid to federal, state, and local governments.
3 -- Compute interest fees paid to companies or individuals for the use of credit, or capital.
4 -- Establish the cost of depreciation (the expense recorded to allocate a tangible asset's cost over its useful life).
5 -- Determine the cost of amortization (the expense for consumption of the value of intangible assets, such as goodwill, patents, and copyrights, over a specific period of time, or the asset's expected life.
6 -- Add #1 through #5.

EBITDA calculation example:
(Net Income)            2,100
(Taxes paid)            + 620
(Interest Expenses)     + 390
(Depreciation)          + 205
(Amortization)           + 90
(EBITDA)              = 3,405

Seven Things to Watch For When Using EBITDA: 1 -- Can be misleading number when it is confused with cash flow.
2 -- Can make even completely unprofitable firms appear to be financially healthy.
3 -- Numbers are easy to manipulate.
4 -- Can overlook cash requirements for growth in accounts receivable.
5 -- Can miss cash requirements for growth in inventories.
6 -- Not factual when valuing small companies.
7 -- Not effective for companies with few assets, small amounts of debt, or low depreciation or amortization schedules.

EBITDA has been used as an estimator for cash flow in leveraged buyouts to calculate whether companies could service their debt. Factoring out interest, taxes, depreciation, and amortization can allow an unprofitable business to appear financially healthy. This method of valuation was used extensively during the dotcom era to value unprofitable businesses, with few assets, little earnings, and the results from that method caused many to go bust. This was a blaring example of misapplying EBITDA.

Knowledgeable pharmacy specialists performing Massachusetts pharmacy business valuations will use EBITDA in pharmacy valuations, but only as part of a larger formula when computing values for specialty MA pharmacies especially those who have a niche in HIV, disease management, long term care, etc. However, EBITDA should not be used as part of the usual formula for standard retail pharmacy acquisitions.

The EBITDA number for a specific existing Massachusetts pharmacy is important, for the most part, when the existing ownership is establishing their store value for the purpose of a line of credit, borrowing, creating a Trust, stock values, etc., but EBITDA does not have the same importance when selling a MA pharmacy. This is due to the fact the buyer will not have the same expenses as the seller.

Buyers may not have the same tax base, interest expense, or the same depreciation schedule, thus it is important that the buyer calculate an estimated EBITDA that is specific to their operating model, business systems, buying power, cost of operations, etc., not the sellers. It should also be noted that EBITDA assumes that the buyer will acquire all of the assets, working capital, accounts receivable, and liabilities. Those assumptions do not hold true regarding an acquisition of a Massachusetts pharmacy. Instead of the EBITDA number, pharmacy buyers should be focusing on sales, gross profit, cash flow, and customer mix.

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