One of the most common questions we get is “how much is my pharmacy worth?” This is a great question, but not always as straight forward as one might think. There are many variables that go into deciding the desirability of business, specifically a pharmacy. Where is the pharmacy located? What type of pharmacy do you have? Who is your competition? These are just a few
While there are many variables in valuing a pharmacy, there are some basic methodologies used when trying to find the worth of an organization. The main three models are broken down into earnings multiplier, price-per-prescription, and revenue multiple. While the exact numbers are continually changing for each model, the basic rules are applied.Earnings multiple
Also known as the EBITDA multiple, is primarily used when a private buyer is valuing a pharmacy. This model uses earnings multiplied by a numerical range to generate value. The equation is shown below.
EBITDA x Multiple = Value
This model is primarily used when a pharmacy is selling its book of business, but not selling operations. This model takes the given number of prescriptions filled over a certain amount of time (week, year, etc.), multiplied by a dollar value. The equation is shown below.
Prescription Volume x Price-per-prescription = Value
The revenue multiple is the least used of all the pharmacy valuations methods. This method is primarily used when the are not positive earnings(i.e. the pharmacy does not net any profit or has a negative annual profit) and is not eligible for the price-per-prescription model. The equation is shown below.
Revenue x Multiple = Value