How to Gauge the Value of Your Pharmacy

 

When doing business valuation in Vancouver, you need to understand a couple of concepts when determining the true worth of your pharmacy. There is fair market value, how much the pharmacy would sell under certain hypothetical conditions. Then, there is the strategic value which considers a buyer’s motivations, such as making the pharmacy acquisition to remove competition or to realize operational synergies. Fair market value is easier to determine, given that a “strategic value” must consider something of the unknown – the buyer’s intentions.

There are multiple ways owners have used in the past to “guess” the value of their pharmacy using rules of thumb. Hiring an expert for business valuation services is really only the sure way to determine it, however. Whether you’re in Vancouver or dealing with business valuation services in Edmonton, you should consider these factors before taking your store to market.

Using the Income Method

Before getting knee-deep into business valuation services, think of your pharmacy as an investment. With that investment, buyers will look to see if the potential value might increase over time, look at its capacity as a revenue generator and its liquidity. Most cash-flowing pharmacies will satisfy those conditions.

Calculating the value of any investment, you take the annual net profit (or cash flow it produces) and divide this amount by an appropriate risk rate. This is an income-based method of valuing a business. By using the income method, you “capitalize the earnings,” and the value derived from this method is a total value – which includes both goodwill and the tangible assets.

Source: https://www.evcor.com/blog/how-to-gauge-the-value-of-your-pharmacy/