Pharmacies are the most expensive retail business category in Australia. They sell for five, six, or seven times their annual profits. Why? Because they are protected from competition by outsiders. The federal government has for a long time acceded to the Pharmacy Industry’s lobbying to prevent Coles and Woolworths from entering the retail pharmacy sector.
In fact, the federal legislation (in theory) even prevents any single qualified pharmacist from owning more than two retail pharmacies. However, the reality is that many pharmacists have at least a minority interest in several retail pharmacies. They are able to do this by offering a part ownership structure to a younger pharmacist, who in effect becomes the managing partner of the expansion pharmacy, with the senior pharmacist becoming the “silent partner”.
Whether the pharmacy you are interested in is worth four or seven times its profit, or somewhere in between will depend on numerous factors such as size, location, scrip versus product profit mix, and also the length of the lease.
Rent roll valuations are one of the most common valuations done by Business Valuer Network members. We value many real estate practices each year and have a broad database of