Instructions

ALWAYS CLICK ‘SAVE & CONTINUE’ AS YOU INPUT DATA INTO THE REQUIRED FIELDS – THE TAB IS AT THE BOTTOM OF EACH SECTION

Ensure you have all the data required to complete this exercise – refer to Information Required.

Rest assured, this is not a difficult exercise and you may in fact enjoy the process!

If you have any questions or problems please contact Tod on (mobile) 0419 745 600 or (email) at tod@mypharmacyappraisal.com.au

For example, you may have Service Trusts/Entities or similar involved. If so, we may need to provide more direct assistance…don’t hesitate to call.

Front Page

Simply complete each individual box on this page:

Pharmacy name.
Most recent financial year end.
Choose your pharmacy location (drop down available).
Choose your state (drop down available).
Choose whether you wish to have your pdfs produced in “Anonymous Mode” or not (drop down available) (“Yes” is recommended if you wish to consider becoming a Vendor).

Other Information Entry Page

Ensure you have a) Gross Script Reports for the last 3 financial years (a 12 month report for each financial year) that shows Script Numbers and Script Dollars.

You will also need separate reports for b) Total Nursing Home Scripts (if applicable) and c) High Cost/Low Margin (HCLM) molecules (over $5,000) Scripts over the same corresponding 12 month periods (last 3 financial years).

Deduct any Nursing Home Script Numbers from Gross Script Numbers for each year;
Deduct any HCLM Script Numbers from Gross Script Numbers for each year;
The remaining number represents Total Dispensary (only) Script Number volumes for each 12 month period over the last 3 financial years;
Complete the individual boxes for Script Number data;
Complete the Gross Lettable Area (GLA) for the pharmacy size in square metres (sqm);
Complete store trading hours for the pharmacy (drop down available) for the Monday to Sunday trading period;
Complete the pharmacy’s latest Generic Substitution rate;
Complete all Lease Detail – Lease Commencement Date, Lease Termination Date, Remaining Term (drop down available), provide more detail if you selected “Yes” for Lease options. eg 2 x 5 years, 1 x 3 years etc; and
Enter your latest Latest Shop-fit date, your latest Stock Take date and if Robotics are used in the dispensary? (drop down available).

Roster and Salaries & Wages Page

Trading hours (completed above) will have already flowed to this section.

Completing the Roster and Salaries & Wages is all about “Productivity”. The final outcome in terms of Staff Costs (TEC) should represent the staffing requirements necessary to achieve:

The level of Sales currently being achieved;
The level of Customer Service currently being achieved; and
The level of Professional Services Income (revenues) currently being achieved.

Note well: There may be Staff on Contracts. If so, the capacity to include an Annual Salary is available. Additionally, the process of taking an “average” to staff wages across overtime hours, evening (night) trading, and the weekends is recommended should that methodology be appropriate. The key to remember is to present a realistic and appropriate level of Salaries & Wages in your “Adjustment” column so as to accurately reflect the level of “Staff Investment” necessary to achieve current “Productivity” levels.

Also: if you curtail staff hours you may be challenged by a Buyer and you may need to justify your stance – be prudent and pragmatic;

Complete using either staff identifiers such as initials or, preferably a staff ID number;
Show the role next to each individual pharmacy staff member;
Complete the Roster for a typical “productive” week as per the requirements in points 1 to 3 above.
1. If the Owner actually works hours in the pharmacy, replace all hours worked with a substitute employee – there is a role called “Replace Owner”.
2. We are looking to flatten the impact of the Owner, both positive (+) and negative (-), on the roster.
3. Positive (+) impacts could be the fact that the Owner may contribute a high hourly contribution per week actually working in the pharmacy operations. Negative (-) impacts may include wage payments to family members etc.
4. Thus the Final Financial Analysis will have already allocated zero for the Owner in the Adjustments column;
Complete Employment Status, eg., F/T, Perm P/T, Casual etc; and
Now complete the hourly rates of pay for Monday to Friday and for Saturday and Sunday. The annualised data – the “Annual Pay” and the “Super” Totals – will flow to the financial section automatically and sit in the Adjustments Column.

Financial Data Entry Page

NB: It is NOT an imperative that Sales Revenues be broken down into categories; however, this process has real value as it will greatly assist you, your advisors and a potential Buyer in understanding the ‘drivers’ within your pharmacy.

Undertake the exact same exercise you completed for Script Numbers, but this time do so for the dollar amounts.

Ensure you have a) Gross Script Reports for the last 3 financial years (a 12 month report for each financial year) that shows Script Numbers and Script Dollars.

You will also need separate reports for b) Total Nursing Home Scripts and c) High Cost/Low Margin (HCLM) molecules (over $5,000) Scripts over the same corresponding 12 month periods (the last 3 financial years):

Firstly, deduct matching 12 monthly Gross Script Dollar amounts from Annual Revenues/Total Sales as shown in each year’s Profit & Loss (P&L) Statement. The remaining amount will represent Retail Sales;
Now deduct any Nursing Home Script Dollar amounts from Gross Script Dollar amounts for each year;
Then deduct any HCLM Script Dollars amounts from Gross Script Dollar amounts for each year;
The remaining totals are Dispensary Script Dollar Amounts over each of the three years for each 12 month period;
Complete the individual boxes for Sales Revenues, eg. “Sales – Dispensary”, “Sales – Retail”, “Sales – Nursing Home” and “Sales – HCLM” for each of the 3 financial years;
NB: “Total Sales” after the break-down noted above should equal “Total Sales” as per your P&L Statement for each financial year;
Complete “Cost of Goods Sold” across each of the 3 financial years;
Complete “Opening Stock”;
Complete “Purchases“;
Compete “Closing Stock” – NB: always complete this figure as a negative amount;
“Gross Profit” should now be recorded for each of the three (3) financial years (compare with your P&L Statements)
Complete “Expenses” for the oldest P&L data set;
Complete “Expenses” for the second oldest P&L data set;
Complete “Expenses” for the most recent P&L data set
Compare “Total Expenses” with those from your P&L Statements across the three (3) financial years;
Complete any additional “Other Income” across the three (3) financial years; and
Compare “Net Profit/(Loss)” with the P&L Statements for the three (3) financial years – all should agree!

Now GO TO the the final “Amended” Column

Go through each “Expense” line item and amend any line where the “Expense” item is either:

An abnormal or extraordinary item (eg., donations);
A one-off, non-recurring expense (eg., legal fees);
A personal or proprietary expense (eg., interest);
A non-cash item (eg., depreciation);
Consider, you may need to increase an Expense item, for example “Rent” knowing an increase or re-negotiation is scheduled; and
Salaries & Wages and Superannuation will have already been input as per the Roster and Salaries & Wages Page exercise (above).
NB: Any amendments may be challenged by a Buyer and you may need to justify your stance – be prudent and pragmatic.
Similarly, with “Other Income” remove any additional income that is non-recurring or relates to proprietary assets such as dividends or interest received.
You will now have an Adjusted Net Profit.

Final Report Page

Your Final Financial Analysis Report (now available in pdf) will provide you with the following information about your pharmacy:

Amendments you have made in the previous exercise will be identified with a “Yes” and highlighted in red;
Pharmacy revenue splits and thus revenue drivers;
Growth and/or decline percentage factors;
Floor space efficiencies across revenue areas in terms of Sales per square metre (sqm);
Stock intensities per annum;
Rent efficiencies and Rent per sqm;
Salaries & Wages efficiencies;
Other Income;
Adjusted Net Profits;
Capitalisation Rates (Cap Rates) utilised; and
A Pharmacy Appraisal/Valuation range.

Capitalisation Rates

To create your Pharmacy Appraisal/valuation range, go to “Capitalisation Rates” at the bottom of the detailed Financial Analysis. You will have the opportunity to choose/enter the “Lowest Expected Capitalisation Rate”. (There is a drop down range available).

Remember, the Lower the Capitalisation Rate, the Higher the Value. For example, by choosing 16.0% your Valuation range will span from 16.0% to 18.0%, and so range across 5 different percentages, ie., (16.0% | 16.5% | 17.0% | 17.5% | 18.0%). Be prudent and pragmatic in your approach to this exercise.

This is where you will factor in considerations such as:

Past performances and future prospects/trends;
Rent considerations, both length of term available and the annual inflator; and what this expense represents as a percentage of Sales;
Condition of the pharmacy/latest refit;
Competition;
Demographics;
Access and proximity to revenue and foot traffic drivers such as supermarkets and/or doctors;
Visibility, ease of parking, convenience for customers;
Unique qualities/services available in your pharmacy;
Desirability and the depth of Buyers for your type/style of pharmacy; and
There will also be state influences and trends as well as regional/remote influences and trends that will be factors for consideration.

(Use the Geotech Upgrades available on My Pharmacy Appraisal to collate data including suburban and regional demographics | competition | foot traffic drivers | script detail | private health insurance information | and the testing of the Pharmacy Location Rules).

Choose the lowest Capitalisation Rate that best represents the most realistic Value assignable to your pharmacy. Remember, if you go to the market you will need to justify your approach.

Executive Summary

A detailed Executive Summary of your pharmacy is now available for consideration and is downloadable as a pdf.

The Executive Summary will be added to our listings should you choose to transition to a Vendor (there is an Optional Upgrade Cost) and anonymously test the market for your pharmacy for a period of 30 days.

Potential Buyers will have the opportunity to review your “Anonymous Executive Summary” and then register their interest.

We will provide you with a list of Registered Buyers who have expressed an interest. Should you wish to engage with these Buyers you can use a trusted Pharmacy Broker or we can direct you through “next steps” and a sale transaction.

Alternatively, you can take your data set (Executive Summary, Detailed Financial Analysis, Salaries & Wages/Roster) and the list of Registered Buyers to your preferred Pharmacy Business Broker. – we always recommend the use of trusted professionals.

Furthermore, you may wish to speak with one of our “Valued Partners” with expertise in areas such as pharmacy accounting, pharmacy finance, lease negotiations, content creation for digital marketing, SEO & SEM | web development & coding | graphic design, legal services as well as pharmacy legal services, pharmacy recruitment and and Team building. If so, complete the questionnaire at the end of the assessment or contact Tod directly on 0419 745 600 or on tod@mypharmacyappraisal.com.au