The pharmacy sale cycle: strategic wealth planning for pharmacist-owners

Selling a pharmacy business is usually the biggest liquidity event of a pharmacist-owner’s life. Yet, in our experience advising pharmacist-owners, how they will integrate the proceeds of a business sale into their long-term financial planning is often something of a grey area. Many pharmacists become so preoccupied with running their business and then trying to sell it that they neglect to fully plan for how they are going to manage their newly realized wealth. So, as pharmacy business advisors, we routinely encourage our clients to start early on figuring that out – with a comprehensive, long-term strategic wealth plan.

Strategic wealth planning develops a guidebook for you and your family to reach your financial goals before, during and after the sale of your business, and as such it should be tightly integrated into your exit planning process. Because it is goal-oriented and comprehensive, a strategic wealth plan generally goes beyond a typical financial plan, in several ways. For one, it takes into account all the assets held by your family, not just the ones that are easily evaluated, such as stocks, bonds and real estate. For another, it takes a comprehensive view of risks, including potential tax and legal implications of a business exit, as well as a long-term approach to projected income and expenses.

A strategic wealth plan, in short, is a “whole life” project, helping you and your family navigate risk and guiding you through significant life events – such as selling a business. As such, a good strategic wealth plan is continually evolving and adapting to your changing situation, goals and needs.

The first question we often hear from pharmacist-owners is, “When should I sell my business?” But before anyone can answer that, a lot of other questions need to be addressed – and a strategic wealth plan can help you do that.

Among the questions it considers:

• “How can I most effectively manage my expenses now?”
• “When do I want to retire, and what do I want to do in retirement?”
• “How much money will I need to maintain my desired lifestyle in retirement?”
• “How will I manage, grow, protect and draw down on my nest egg in retirement?”
• “How will I involve my family in my business structure and how will my exit impact them financially?”
• “How much do I want to leave to my family or to philanthropic causes after I die?”

Having answers to those questions can make exiting your business much more lucrative and much less stressful. A solid strategic wealth plan helps you recognize that you don’t know what you don’t know. It identifies areas of risk and unknowns and outlines strategies for mitigating them when and if they arise.  On top of that, it helps you prepare for life events you can foresee – things like marriage, children, university, business expansion and, of course, business exit and retirement.  

So, a strategic wealth plan can help you get ready for the future. But it can also be a very useful tool in your day-to-day life. It can help you distinguish wants from needs and guide your spending and saving. With your business, it can help you set goals for profitability and, ultimately, value, giving you a yardstick by which you can measure success or failure. And it can scope out the important issues of when, how and for how much you will one day sell your pharmacy.

If you are just beginning the strategic wealth planning journey, there are a few important considerations. First, choose your wealth advisor carefully. They should be fully qualified and capable, and they must have the time and experience to develop a comprehensive plan specifically for you and your family. Because strategic wealth planning is holistic, it often requires input from several areas of expertise – tax advisors, lawyers, estate planners and accountants, for instance. Ideally, your wealth advisor will have a broad network of experts upon which to draw when developing your plan, and they can act as a quarterback for ensuring everyone is working towards the same goal: long-term financial health for you and your family.

Also, a strategic wealth plan should never be presented by an advisor to sell you something or scare you into buying something – for example, a life insurance policy that might not be required at your stage of life.

Another important consideration is that strategic wealth planning is a process, and not simply a matter of “set it and forget it.” As your circumstances evolve, so must your strategic wealth plan. It needs to be revisited and revised as needed on a regular basis, which means that you and your wealth advisor must commit to developing a long-term relationship, including meeting at least annually and then whenever your financial situation changes.

Our last point is this: time works against good planning. The risk of adverse events like death, disability, divorce and shareholder disagreement – the “Four D’s” of business ownership risk – tend to build as the years go by. If you have not planned for those possibilities and developed strategies for addressing them, then you might one day find that your dreams of a financially secure future have gone up in smoke.

So, if you already have a financial plan in place and are considering selling your pharmacy business, our advice is to take a close look to ensure it really is built for the long term and gives a full accounting of risk. And if you haven’t yet begun working with a qualified advisor to develop a strategic wealth plan, then the time to get started is right now.