Estate Planning in Florida for Pharmacy Owners

By Brad MacLiver
Authorship and profile at Google


With the current market conditions many FL pharmacy owners are experiencing lower profit margins and have considered selling their drug stores after a professional business valuation has been completed. A Florida pharmacy industry roll-up has been occurring for a number of years, consolidating the pharmacy seller’s customer traffic into fewer pharmacy locations. However, there are a number of pharmacies that are not in a geographic location with other nearby pharmacies, so consolidation can’t take place. Some pharmacy and drug store owners, despite where they are located or what is happening in the industry, have taken a stance and won’t consider selling. However, just like paying taxes, an exit of the business, is eventually inevitable.

Estate Planning is a topic many people avoid. For the pharmacy owner who works 6 days a week, takes very few vacations, fills scripts all day, then mops the floor and does the books at night, there usually isn’t much time to consider additional things such as estate planning. However, knowing that there will eventually be a transfer of the business, it is important for the pharmacy owner in Florida to consider a proper succession plan for the pharmacy business.

Developing a plan to transfer the business will require a lot of time, but it will allow the business to be successfully transferred in an acceptable manner if done correctly. An estate plan for a Florida pharmacy owner does not need to be an inflexible process; adjustments, updates, and amendments are advised as government regulations, economic conditions, and personal expectations change.

Estate planning allows pharmacy owners to arrange for and anticipate the transfer of the drug store.  The plan will be formatted in a way which attempts to eliminate uncertainties, help the transfer by trimming expenses, and reduce taxes.

The full process may involve Wills, Trusts, Living Wills, Power of Attorney, Medical Power of Attorney, Business Valuations, Life Insurance, Charitable Remainder Trusts, Buy-Sell Agreements, and various other legal documents.  All of these different aspects of estate planning are to provide pharmacy owners in Florida coordinated directives.

When non-family members operate as partners in the drug store business, it is crucial that the estate planning incorporate a Buy-Sell Agreement.  Buy-sell agreements govern the transfer of businesses between pharmacy partners. The agreement may also be referred to as a partner buyout agreement or business will. In the event of a partner's death, the buy-sell agreement may be funded with a life insurance policy to help protect the family.

Estate planning, buy-sell agreements, and the transfer of the Florida pharmacy should incorporate a pharmacy business valuation completed by a third party that has expertise in the pharmacy industry, performs a large number of pharmacy business valuations each year, and has current industry data as a basis for the conclusions. Using simple accounting formulas, multipliers, and valuators inexperienced in pharmacy will not provide an accurate business valuation.

Most pharmacy owners in FL spend a major part of their life building the business. The efforts should not disappear because the pharmacy owner refuses to accept their mortality and plan accordingly. The only pharmacist in some small pharmacies is the owner. If the scripts can’t be filled by a licensed pharmacist then by law the customer files must be transferred to another pharmacy. Due to this, a pharmacy’s business value may drop to a negligible figure in just a few days after the passing of the owner. Contingencies outlined in an estate plan should address this issue. Unfortunately due to not having an effective plan in place, each year a number of Florida pharmacy owners die and their family is left with an asset with very little value.

Tips:        
1. When the family drug store is the sole means of income for several family members it becomes even more crucial to have a succession plan in place.
2. To avoid disputes, estate plans should be developed with clear directives.
3. Minimizing tax liabilities is a major objective for most completing an estate plan, therefore expert tax advice should be sought.
4. Many on-line documents and books are available that provide advice and documents for developing an estate plan. When going the self-help route, it is advisable to have a paid expert review the completed documentation to ensure that it can be legally complied with when the time comes.
5. While developing the estate plan it is essential to talk with children and other family members of the pharmacy owner in Florida especially if there are some family that work in the business and others that don’t.



 

Florida Pharmacy Franchise Financing

By Brad MacLiver
Authorship and profile at Google


A Florida (FL) pharmacy franchise is a contractual relationship between two parties. One, the Pharmacy Franchisor is the party that developed their drug store business model, branded the pharmacy related products, and produced the system the pharmacy franchisees will operate under. The second party, the Pharmacy Franchisee, purchases a franchise license from the Pharmacy Franchisor, and usually pays an ongoing pharmacy franchise fee, or royalty fees, to use the name, products, systems, trade secrets, etc., created by the Florida Pharmacy Franchisor.

Several options are available for the financing of a pharmacy franchise business. All pharmacy franchise funding sources for pharmacies or drug stores prefer to lend to a franchisee who works with a nationally recognized name and with long track records. Newer pharmacy franchise models in Florida don't possess either of these two traits and will be considered risky.

Traditional Bank Financing used in funding a pharmacy franchise is available when a pharmacy franchise has the track record and pharmacy name recognition. Many of the banks will show interest in this type of funding opportunity. Unfortunately once the bank reviews the loan documents, many of these banks decline the funding request because they don’t understand the security provided for the Florida pharmacy loan. Community drug stores typically have very little traditional assets to offer as security. Lenders for pharmacy will use traditional methods for analyzing the cash flow available to service to the debt, and they will also need to understand the nontraditional collateral that will secure the loan.

As a borrower, even when incorporated, the independent drug store owner’s personal credit rating will be a factor, along with personal tax returns, and financial statements. The amount of actual cash on hand and the verification of the source of the down payment will be critical factor in qualifying for a pharmacy business loan.

FL Pharmacy Franchise Funding Tips:

1. Because there are many pharmacy franchise financing options available, Florida pharmacy owners should perform proper due diligence then obtain the pharmacy funding that best suits their situation.

2. It is recommended to have an accountant or attorney that is familiar with Florida pharmacy franchise financing to review the pharmacy business loan documents.

3. There are pharmacy consulting services and franchise associations who can help guide a prospective pharmacy franchisee or borrower or a drug store loan.

4. New independent drug store owners in Florida need to make sure their funding request is enough to get the pharmacy running and profitable. Less than ample funding for the initial stages may put the drug store in a position of needing additional funding. Smaller working capital loans that would be in a subordinated position will be more difficult to obtain at a later date.

When FL pharmacy owners have questions and need information regarding pharmacy franchise business loans, business valuations, or any types of funding for community drug stores and pharmacies, they should contact a pharmacy industry specialist in Florida who can provide quality answers and sound advice.

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