Partnership and succession – Tips and traps
Many talented pharmacists are choosing to leave community pharmacy, for varied reasons. It is my view that we need to create a compelling future for young pharmacists with a view to retaining talent and sustaining independent community pharmacy.
One way, which has historically worked well in pharmacy, is to transition ownership from the current owners to the next generation. There is no one or best way to plan a partnership or succession. It requires careful planning and needs to be tailored to each individual. Here are common succession (exit) planning tips, and traps for you to avoid.
1. Exit when the time is right for you — be ready
Exiting from your pharmacy early may seem like a status symbol, signalling your financial success. But that doesn’t mean it’s the right thing to do. Make sure you have considered all of the business, personal, financial, estate and tax issues. I recommend that you allow at least five years to enable all the required processes to be completed properly, including preparing your pharmacy for sale.
Preparing yourself to let go can include:
- building a future pathway for you
- building a satisfying and rewarding life beyond ownership
- considering a financial plan
- considering ‘counselling’ to let go.
There are many mentors and other pharmacy owners you could discuss this with, but be careful of the bravado that you may hear on the golf course!
2. Consider a staged succession plan
For all of us, retirement is inevitable. A good solution for many pharmacy owners is to use partnership as a staged succession plan. This provides you with a method to ease yourself into the next phase (or retirement) while creating opportunity for ownership for young pharmacists. It also provides a valuable transition of knowledge and management skills from you to the next generation. Succession to a junior partner can also enable independent community pharmacy to survive and grow.
3. Understand your pharmacy’s value
You’ve built up a nest egg, but for many, a significant percentage of their wealth is the value of their pharmacy. Make sure you understand the value of your pharmacy before you plan your financial future. Our data indicates that more than half of the pharmacy owners we deal with overestimate the value of their pharmacy. Do you know what your pharmacy is worth? Have your pharmacy valued by an experienced pharmacy valuer.
4. Be open and flexible
Planning what you want to accomplish in retirement can be exciting, but it can also be overwhelming. While you should have some sort of a ‘retirement-life plan’, it shouldn’t be carved in stone. Consider breaking up your retirement plans into small periods. Be open and flexible, and seize the opportunities as they arise.
5. Communicate with your family and support network
Spending decades of your working life with a spouse or significant other(s) doesn’t necessarily mean you’ve shared all your thoughts and dreams about retirement.
Consider sitting down with your spouse to write down a list of retirement goals — separately.
Also, communicate with your broader support network or friends and family. They will know you well and may provide some sound advice on your plans.
6. Research, test and review
Retirement dreams and reality often clash. What you enjoy during a 10-day vacation isn’t necessarily what you’ll want from 20 years of retirement. Whether you plan to start another business or move to a new country, it’s a good idea to test-drive your plans before you begin.
Also, consider contribution to the profession. Many pharmacists use the early part of their retirement from ownership to mentor others, contribute to the various professional associations, support their local community, and provide contribution to the pharmacy profession and the community. Don’t let your experience be lost — it’s often very valuable.
In the next ITK edition, I will discuss ‘Non-Equity Partnerships’ which is an appealing approach for owners who are not quite ready to fully let go, and also for pharmacists who are not willing to commit to investing capital to buy into a partnership, but have a significant contribution to make to pharmacy performance.
Frank Sirianni, Management Consultant, Medici Capital