Long-time independent pharmacist Bob Graul has made some big changes and taken a new direction recently. In this interview with ComputerTalk senior editor Will Lockwood, Graul talks about the process of selling his pharmacies and how this motivated him to get involved in his current project: www.RxOwnership.com, a Web site designed to facilitate independent pharmacy ownership transition.

Graul: I sold the last store of two stores this past September. About the time I turned 60, realized that at some point I had to get serious about succession planning. I had no one in the family and no business partners interested in taking over. So shortly after I turned 60, I'd bought out all my partners in Rancho Santa Fe Health Mart Pharmacy and I started doing some research. I'd bought stores in the past, but never sold one. It was a new process. NCPA [the National Community Pharmacists Association] had some information online that was great, but I still had some unanswered questions. By the time I'd turned 61, I decided it is really time to do this and I reached out to my local McKesson sales team and asked if they knew anyone interested in purchasing the business. I also talked to a few friends in pharmacy. I had about six people look at the store. One bought.

CT: What are some of the decisions you have to make?

Graul: To begin with, you have to decide when you want to sell, how you want to advertise that you are selling, and how you value the store. And then you have to figure out the actual process of selling a store. Much like selling a home, there's a lot of paper work, a lot of forms that need to be filled out.  But the fact that you are selling a pharmacy complicates the process even more because there's licensing involved. You have to decide how you are going to structure the transaction. Will it be an asset sale or a stock sale? How will you handle receivables and payables? There are a lot of questions and addressing them is one of the goals of the Web site, www.RxOwnership.com, though it also serves as a link to me and to other sources of information and assistance.

CT: What did you learn from this experience about the challenges facing pharmacy owners who want to sell stores?


Graul: The primary challenge in most owners' minds is determining the value of the pharmacy. How much should you ask and what's a reasonable price for an offer? That's why on the Web site we have a valuation tool that uses, I think, 11 of the most common industry accepted formulas for the valuation of a pharmacy. Valuation is not an exact science by any means. These tools will give you a ballpark number. You can also check around to see if there are other sales in the area for pricing guidance. But having these formulas available is important. Then there's a benefit to having someone to talk to, to say "How come there's a wide spread in the numbers from the different formulas?"  That's where I can come in. The formulas are based on different theories about how pharmacies are valued and, depending on the type and quality of the numbers entered, you can get a pretty wide spread on the formulas. So being able to interpret them is important also.

CT: So valuation is one big challenge.  What else?

Graul: Confidentiality is another big challenge. When they first consider selling, most owners don't want their employees knowing right away, because it may create some uncertainty among the employees, not knowing who the new buyer is going to be and what will happen to them. You may lose some valuable employees. You don't necessarily want your customers to find out. They may take this as a time to decide to shop somewhere else. And you certainly don't want your competitors to know. I can give the clients I work with as much confidentiality as they choose. Actually, on the Web site in the confidential advisor contact form that they use to reach me, there are four different levels of confidentiality they can choose from. And this is one of the first discussions I have with a pharmacist looking at transition. I want to know if I can talk to local sales people, move up a level and talk to vice presidents of sales, or if I can speak to senior management. I get their comfort level about who I can speak with. If they want to be completely confidential, that's OK too because one of the things we're looking to do with the program is to develop some matching between buyers and sellers. It is not impossible to locate a buyer even if you want to be completely confidential.

CT: Who is the Web site for?

Graul: The site is open to anyone. It is designed without passwords or the requirement to divulge any information. I'll work with anyone who puts in a lead on the Web site. It is designed to be a tool for community pharmacists to level the playing field. The way the ownership transfer process has generally worked is that a chain comes in and makes an offer on a store and the owner may not have any other information or tools to work with to evaluate the offer or decide if there's another way to do it. So, the Web site offers important information to help owners decide whether or not they should maybe look around and see if they can't find an independent who will keep their store open, continue the legacy they started, and keep their valued employees.

CT: What about challenges for potential buyers? What are they and how do you address them?

Graul: The issues a buyer faces really depend on the circumstances. She could be a younger pharmacist only a few years out of school. It may be the first time she's considered owning a store. There are going to be a lot of business issues, such as developing a business plan. Then there's the task of finding a pharmacy for sale in a suitable location. Financing is always an issue, of course. A lot of the background information that explains the process, the ways to develop a good business plan, is on RxOwnership.com. This is primarily what the buyers are interested in. Then there's also a lot of specific information about how to make an offer, for example. Quite honestly, not being an attorney or an accountant, I always recommend that a buyer or a seller have a good lawyer and accountant. When it comes to a purchase offer or a buy-sell agreement, you really need experts and your own people to do that for you. So I don't get into that level of detail, but I do give them an awful lot of information in general about it. And then a lot of times buyers aren't sure if they should buy or not. So they're asking a lot of questions about what ownership is all about. How much work is involved? What's the time commitment? What's the risk? Again, the Web site offers guidance.

CT: Is there information for students?

Graul: The Web site has a lot of information and statistics from the NCPA Digest on the trends in pharmacy. It talks about the benefits of pharmacy ownership and offers a lot of links for further information. From my experience at trade shows, I'd say at least a third of the people who come up to the RxOwnership booth looking for more information are students. What resonates most with students is the freedom pharmacy ownership gives them to control their own practice setting. Obviously whether you can make more money as an owner is something people are always going to want to know about, but control over the practice setting is really more on people's minds. For example, if they want to do a diabetes clinic and they work for a large corporation, it is more difficult. They have corporate structure they need to go through to get approval. If you own your own business it is much simpler to sit down and decide if you can do it. And for years that's what we did at the stores I owned. Anytime a new idea came up, we'd sit down and look at it and determine whether we could restructure a little to afford it. We'd ask ourselves: What's our break-even point? Do we think we can make money on it long term? But the primary motivation for everything we did was: Is it going to help our customers? Because I feel that if you stay customer focused and develop your programs based on this, you are going to be successful. And when you own your own business, you are the one making these decisions. You can start a diabetes clinic, you can do medication therapy management, you can do the immunizations that are legal in your state. So I think the flexibility of being able to control your practice setting is very very appealing to the younger pharmacists. The swing over the past 10 years has really been toward looking to the kinds of services a young pharmacist can provide that will really use all of the training she receives.

CT: Thanks for you time, Bob.  Any final thoughts?

Graul: I would really like to say a word of thanks to McKesson, who is powering the Web site, for entering this area. Ownership transfer and succession planning have been topics on the agenda of every meeting I've been to for years. NCPA has done a really nice job working in this area, but has been a lone ranger. McKesson has a legacy in independent pharmacy and they are very committed to it. They've stepped up to develop the Web site, bring me on as a consultant, and then I have regional people who work with me on the program. I think it is a huge commitment that McKesson is making to the independent segment and they deserve credit for it.