Estate Planning for Pharmacy Owners in Nevada

By Brad MacLiver
Authorship and profile at Google


With the current market conditions many NV pharmacy owners are experiencing lower profit margins and have considered selling. A pharmacy industry roll-up in Nevada 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, in all industries, shy away from. 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 to consider a proper succession plan for the pharmacy business.

Developing a plan to transfer the business will be time consuming, but done correctly will allow the business to be successfully transferred in an acceptable manner. An estate plan for a Nevada pharmacy owner does not need to be changeless process. Fine-tuning, updating, and amendments are recommended as government regulations, economic conditions, and personal expectations change.

Estate planning enables a pharmacy owner to anticipate and plan for the transfer of the drug store. The plan will be formatted in a way that attempts to eliminate uncertainties, assist the transfer by trimming expenses, and reduce taxes.

Trusts, Wills, Living Wills, Power of Attorney, Medical Power of Attorney, Business Valuations, Life Insurance, Charitable Remainder Trusts, Buy-Sell Agreements, and other legal documents may become involved during the process.  The variety of aspects to estate planning are there to provide the pharmacy owners in Nevada with coordinated directives.

It is essential that when non-family members exist as partners in a drug store business, the estate planning incorporate a Buy-Sell Agreement.  The buy-sell agreement governs the transfer of the pharmacy business between its partners. The agreement may also called a business will or a partner buyout agreement.  In order to protect the owner's family in the event of a partner’s death, the buy-sell agreement is often funded with a life insurance policy.

Setting up a buy-sell agreement, planning an estate, and transferring of the Nevada pharmacy should involve a pharmacy business valuation completed by a third party that has expertise in the pharmacy industry, handles a large number of pharmacy business valuations every year, and has recent, up-to-date industry data as a basis for the conclusions. Utilizing simple accounting formulas or multipliers with valuators inexperienced in NV pharmacy does not provide an accurate business valuation.

Most pharmacy owners 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 Nevada 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 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 NV pharmacy owner especially if there are some family that work in the business and others that don’t.

Financing Nevada Pharmacy Franchises

By Brad MacLiver
Authorship and profile at Google


A NV 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 Nevada 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 Pharmacy Franchisor.

When financing a pharmacy franchise or business, there quite a few options available. All pharmacy franchise funding sources, for drug stores, prefer lending to a pharmacy franchisee who will be working with a nationally recognized name and long track records. Newer pharmacy franchise models in Nevada won’t possess these two traits and will be considered more 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 pharmacy loan. Community drug stores traditionally have very little in the way of traditional assets to offer as security. Lenders for  Nevada pharmacies will, however, use traditional methods for analyzing the cash flow available to service debt, so they will also need to understand that more nontraditional collateral 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.

NV Pharmacy Franchise Funding Tips:

1. Because there are quite a few pharmacy franchise financing options to choose from, pharmacy owners in Nevada should perform proper due diligence then obtain the pharmacy funding that best suits their situation.

2. Have an accountant or attorney that is acquainted with pharmacy franchise financing to review the pharmacy business loan documents.

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

4. New pharmacy owners need to make sure their funding request is enough to get the Nevada 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 pharmacy owners have questions and need information regarding pharmacy franchise business loans, or any types of funding for community drug stores and pharmacies, they should contact a NV pharmacy industry specialist who can provide quality answers and sound advice.

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