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Begin with the end in mind: Authors of new exit planning guide say many pharmacists wait until it’s too late
Published by the Canadian Healthcare Network, April 26, 2022 – by Marjo Johne
Mike Jaczko and Max Beairsto’s new book, The Pharmacists’ Guide to Selling Their Business: An Essential Exit Planning Resource for Canadian Independent Pharmacy Owners, is a comprehensive how-to on exit strategy development for pharmacists.
Mike Jaczko remembers a time about eight years ago when he got a phone call from a pharmacist who wanted him to come over right away to meet her employer.
It was urgent, she said.
“So I drove to the pharmacy in downtown Toronto and when I got there, the pharmacist led me to the stockroom in a dingy basement with a low ceiling,” recalled Jaczko, an investment management executive and succession planning advisor with years of experience helping pharmacy owners. “There, with a little light shining over him, was a hunched-over elderly gentleman—the pharmacy owner. As I got closer to him, I realized he was connected to an intravenous device and apparently didn’t have long to live.”
The pharmacy owner also didn’t have a business transition and estate plan in place. Jaczko quickly pulled together a team of accountants and lawyers who, among other things, worked out a valuation for the business and prepared a last will and testament.
“The following week we all attended the owner’s funeral,” he said.
Jaczko has seen different versions of the same story over the years—pharmacy owners who failed to get their business and personal affairs in order and, often finding themselves in tough positions when the time came for them to exit their business.
To that end, Jaczko and Max Beairsto—president of Evcor, an Edmonton-based business valuations firm where Jaczko is an advisor—wrote a book on the subject: The Pharmacists’ Guide to Selling Their Business: An Essential Exit Planning Resource for Canadian Independent Pharmacy Owners.
Available for purchase—with all proceeds going to the Canadian Foundation for Pharmacy—the book is a comprehensive how-to on exit strategy development for pharmacists, covering everything from how to pick competent advisors to how pharmacists can estimate and enhance the value of their business.
“As part of our work shepherding independent pharmacies, we focus on three key areas: properly managing the business, properly structuring your business affairs, and contemplating life after pharmacy,” Beairsto told Pharmacy Practice + Business. “Most independent pharmacy owners don’t have a coordinated strategy to bring together these areas of importance, which require different skill sets. The book is intended to help them create that coordinated strategy.”
While the title refers to selling the business and exit planning, “the book isn’t really about selling your pharmacy. It’s about preparing the pharmacy and corporation for sale someday,” said Jaczko.
That preparation should start as early as possible, even before the pharmacy business is launched.
“Getting the corporate structure right, right from the start is important,” said Beairsto. “Pharmacies are provincially regulated and there are guidelines and rules related to structure and ownership that often collide with tax regulations at the federal level. When the owner tries to sell the business later they realize that all these years they’ve been offside for federal or provincial regulatory reasons, and now they have a problem.”
Pharmacists who fail to plan and structure the business appropriately can miss out on opportunities for tax efficiencies and better estate planning, said Beairsto.
They can also become lax in critical areas such as bookkeeping. Pharmacists who don’t keep good books, said Jaczko, will be in for an unpleasant surprise when the time comes to sell their business.
“It will be very hard to figure out what the practice might be worth,” he said. “And it could set off red flags for a potential buyer.”
Yet for all the benefits of advanced exit planning, it’s easy to see why many pharmacists put it off, said Jaczko. Running a pharmacy practice and business is time-consuming, and in general most people don’t want to think about aging and retirement.
“People don’t want to contemplate the day when they’re no longer part of the pharmacy they’ve built for decades,” said Jaczko. “But they have to face this reality and plan for it, and the sooner they start the less daunting it will be in the long run.”
All proceeds from the book will be donated to the Canadian Foundation for Pharmacy.