We have been part of over 100 pharmacy transactions which means we have reviewed thousands of pharmacy businesses. As such we have seen pharmacies valued using over 30 different methods. Technically none of these are necessarily wrong. However to us there are really only 3 key ways to value a pharmacy:
- Multiple of EBITDA plus inventory
- Dollar per script filled annually
- Discounted cash flow
The reason these 3 matter most is that they are the methods most used by the largest buyers in the market which are individual investors, chain drug stores and private equity investors.
Below are definitions of each but give us a call if you would like to us to value your pharmacy or are looking to buy or sell a pharmacy and need help.
Multiple of EBITDA plus inventory – EBITDA stands for Earnings before Interest, Taxes, Depreciation and Amortization. The normal multiples for a pharmacy right now are around 2.5-3 times.
Dollar per script filled annually – chains will assign a dollar value per script plus pay for inventory. This will range from $5 to over $20 depending on market and script mixture.
Discounted Cashflow – is a valuation method used to estimate the value of an investment based on its expected future cash flows. This method is usually used by sophisticated private equity investors.