When I was a younger homeowner I was of a mind that I could virtually tackle any home improvement project with a bit of common sense, a book and maybe a YouTube video for support. We call this learning the hard way. And although I’m still a proponent of do-it-yourself repairs and projects, I have become much more selective these days with respect to the type of projects I’m willing to take on. Some things are best left to experts.
And if this is true with respect to our home investment, it is even more true with respect to certain aspects of our business investment. When I talk to pharmacists and owners of independent pharmacies, I find that the challenges of safely and profitably managing the financial aspect of their business is one of the chief concerns. Some discover this too late, and make significant mistakes in how they manage their capital and in how they approach the sale or purchase of a pharmacy. Thankfully there are those who have made protecting your financial interests from unnecessary tax liabilities and other pitfalls the focus of their careers. I reached out to Lawrence Barrett of Independent Pharmacy Consulting Group to talk with my readers here at The Honest Apothecary about some of the important issues to consider when buying or selling a pharmacy.
1) Larry thanks for taking the time to talk with us here at The Honest Apothecary. Could you tell us first of all about your own career, and what led you to take a special interest in pharmacy ownership issues?
I have been in the financial services industry since 1971 after graduation from Ohio Northern University with a BSBA. Several of my fraternity brothers graduated in pharmacy and purchased their own Medicine Shoppe store(s). I began working with them and Medicine Shoppes in the mid 1970’s. I found it to be a very interesting and unique niche market. Like most pharmacy owners, they worked long hours in their stores and found little time to focus on their financial, estate and succession planning. Ten years ago I looked at the demographics and ages of the pharmacy owners, and it appears that more than 50% were over 50 years old without an exit strategy. They had no plan that would compensate them for their capstone asset. I began working with the key management of Cardinal Health’s Pharmacy Transition Team. I have a deep passion to keep Independent Pharmacies “Independent.” Besides myself, I have two partners in the practice with me.
Tom Craft is a CPA* and Personal Financial Specialist with over 33 years of experience in working with business owners and executives. He is focused on designing strategies to handle complex issues in business succession and estate planning. Tom’s career includes working for Deloitte and management positions in industry.
Kevin Plank is a Certified Financial Planner™ and does Comprehensive Wealth Planning with 32 years of financial services experience. He focuses on employer sponsored retirement plans to reduce both direct and administrative costs and provide investment strategies.
2) Your website mentions your partnership with Cardinal Health. Could you explain that relationship also?
I have been working with the Cardinal Health Pharmacy Transition Team and Cardinal Health Sales Reps in all markets. I have been a Key Note Speaker for Continuing Education for the past 10 years at the annual Retail Business Conference (RBC).
3) So could you explain the services that Independent Pharmacy Consulting Group offers to pharmacy owners and/or pharmacists?
Building a successful pharmacy business takes a great deal of resources. With the pharmacist’s time and energy focused on the daily demands of running the business, we offer comprehensive financial planning services to help the business owner transition business wealth to personal wealth, structure assets to ensure the family and business are protected from any unexpected contingencies, and assist putting the business in the best possible position for future succession whether to family, employees or an outside third party. We believe that running a business without a good financial and succession plan is like treating your business as a hobby, rather than a business.
4) Why is having professional advice when considering the sale of a pharmacy so important?
There are many issues to consider when negotiating the sale of a business including potential buyers, method of transfer, types of financing, cash flow issues, tax implications, regulatory issues, and reasons for selling. Who should you sell to – family, employees, co-owner, third party or large chain? With over 20 methods for transferring a business, choosing the method right for your situation is critical. Is the purchase price derived from a lump sum payment, installment note, or from the future profits of the pharmacy, or a combination thereof? Each scenario may impact your risk and taxes. Buyers and sellers view the structure of the deal from two distinct points of view when taxes enter the picture. The buyer most often prefers an asset sale because it allows them to purchase specific assets, fully depreciate them to shelter income taxes, and limit any unknown liabilities that may be hidden when purchasing the stock. The seller most often prefers a stock sale because the net proceeds are treated as capital gains rather than ordinary income on the sale of assets, and no liabilities are retained. In addition, the seller of a C corporation may face double taxation, once at the corporate level and once at the personal level. As you can see, having professional advice from an experienced team can save you a significant amount of money.
5) Many pharmacists think they would like to own their own pharmacy, but feel it is impossible for financial reasons or simply believe they aren’t prepared to comprehend all that ownership involves. What would you say to someone like this? Can Independent Pharmacy Consulting help?
We can provide strategies in structuring a sale and/or purchase. There are so many ways that a store purchase may be structured to benefit the seller and buyer alike. Often, a sale can be done without a substantial amount of upfront money from the buyer. While we do not provide funding, we have access to 3rd party strategic relationships that can help.
6) How do you help independent pharmacy owners to improve their financial position?
We can recommend strategies to help reduce their taxes and grow their assets. The theme here is that every pharmacy has its own DNA and specific solutions are not one size fits all. That is why going through the specific financial planning process is critical. We have many in-house resources (attorneys* and CPA’s*) along with unaffiliated 3rd party strategic relationships (attorneys, CPA’s, Lenders etc.)
7) Finally, the big question is about cost. Would you share with our readers how you calculate the fees associated with your services?
Our fees are based on the complexity of the financial plan and the many components that are involved with each client. There is no charge for our initial consultation. We collect all the financial data plus carefully work to fully explore, understand and develop our client’s ideal vision, their values, and their goals. We then present an Engagement Proposal which outlines the areas of financial planning we will be addressing along with our quoted fee. Our fee is fixed and covers the full engagement.
8) Thank you kindly for all this information about Independent Pharmacy Consulting Group. How can my readers get in contact with you or your business for more information?
You may reach me by phone at 800-875-0803 x2392 or email Lawrence.firstname.lastname@example.org. Visit the website at www.BarrettWealthAdvisors.com.
Lawrence Barrett, Tom Craft and Kevin Plank are registered representatives of Lincoln Financial Advisors Corp.
Securities offered through Lincoln Financial Advisors Corp., a broker/dealer. Member SIPC. Investment advisory services offered through Sagemark Consulting, a division of Lincoln Financial Advisors, a registered investment advisor. Insurance offered through Lincoln affiliates and other fine companies. 28601 Chagrin Boulevard Suite 300 Cleveland, OH 44122.
Lincoln Financial Advisors Corp. offers Business Succession Planning and can provide access to 3rd party resources to assist business owners in Exit Planning. You may want to consult a legal or tax advisor regarding this information as it relates to your personal circumstances. Neither Lincoln Financial Advisors Corp. nor its representatives offer legal or tax advice. CRN201307-2083148.
Independent Pharmacy Consulting Group is not an affiliate of Lincoln Financial Advisors Corp.
*Licensed, not practicing on behalf of Lincoln Financial Advisors Corp.
©Jason Poquette and The Honest Apothecary. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Jason Poquette and The Honest Apothecary with appropriate and specific direction to the original content.
Independent Pharmacy Consulting Group Lawrence Barrett Pharmacy financial plans Pharmacy Ownership Pharmacy transition
Last modified: September 10, 2014