Buying a pharmacy: what numbers matter

A pharmacy is not a normal retail business, and a pharmacy purchase is not a normal business purchase. The dispensary and the front store earn money differently, inventory is large relative to profit, and much of the revenue is HST exempt while some is not. Here is what we look at when a client is buying or selling a store, and what the same numbers tell you about a store you already own.

Normalised earnings

The seller's statements show what the store earned under the seller's circumstances. Normalised earnings adjust for what will change under yours: owner compensation, related-party costs, one-off items. This is the number the price is really based on, and it is the first thing we rebuild in an accounting-side acquisition analysis, a quality of earnings review.

Script count value and margin by stream

You cannot tell dispensary profit from front-store profit on a single P&L line. We separate revenue streams and cost of goods so you can see script margin, front-store margin and true store contribution, monthly rather than at year-end. On an acquisition, that separation is what lets you value the script count on its own merits and judge whether the front store is carrying its space.

Inventory that ties to the wholesaler

Inventory is a black box in most pharmacy books. On a purchase, inventory and working capital adjustments move real money at closing, so the count has to be right and the cost basis defensible. Afterwards, we build an inventory and COGS process that ties to your wholesaler statements, so shrink and pricing problems show up while you can still fix them. Gross margin analysis by category then tells you where the money is actually made.

Working capital

Supplier and wholesaler accounts, prescription revenue reconciliation and receivables from third-party payers all sit in working capital. The adjustment at closing depends on getting each of them to a clean number as at the closing date. We review those balances as part of the deal, and set up the processes to keep them clean afterwards.

HST on taxable versus exempt sales

Prescription sales and front-store sales are treated differently for HST. On an acquisition you inherit the previous owner's point-of-sale mapping, which may or may not be right. We configure your point-of-sale mapping so filings are correct and defensible from the first period you own the store.

The financing package

Lenders ask for projections and a financing package built from the normalised numbers. We provide lender-ready projections as part of the acquisition work, and financing and lender reporting continue afterwards as part of the monthly plan. Pharmacy acquisitions and vendor take-backs are a regular part of what we cover, so the package arrives in the form a lender expects.

Structure and owner compensation

Most pharmacy owners operate through a professional corporation. Owner compensation planning, corporate tax and instalments follow the purchase, and for owners with more than one location, we handle per-store reporting plus a consolidated view, intercompany balances and owner-level tax planning across the group.

What ongoing pharmacy accounting covers

After closing, the acquisition numbers become the monthly numbers. The engagement covers:

• Inventory and cost of goods
• Prescription revenue reconciliation
• Front-store revenue and margins
• Supplier and wholesaler accounts
• Payroll for pharmacists and technicians
• Pharmacy acquisitions and vendor take-backs
• Multi-location consolidated reporting
• Professional corporation accounting
• Financing and lender reporting
• Gross margin analysis by category
• HST on taxable versus exempt sales
• Corporate tax and instalments
• Owner compensation planning
• Purchase and sale of pharmacies

The point of the list is the first three items arriving monthly rather than at year-end. A buyer who can see script margin, front-store margin and true store contribution in month two knows whether the deal is performing while there is still time to act on it.

Timing

The review belongs before the offer is firm, not after. Normalised earnings and the inventory position change the price; working capital and HST mapping change the closing adjustments. Once the deal closes, the bookkeeping, point-of-sale mapping and wholesaler reconciliation are set up in the first month so the first monthly report reflects the store under your ownership.

Where our work stops

We provide accounting-side acquisition analysis: quality of earnings review, inventory and working capital adjustments, and lender-ready projections. Legal and valuation opinions stay with your lawyer and valuator. The Accounting Doc does not provide audit or assurance engagements.

Selling a store

The same numbers work in reverse. A seller with clean monthly books, separated margin streams and inventory that ties to wholesaler statements sells from a position of strength, because the buyer's accountant will be looking for exactly the items above. Business sale preparation is part of our advisory work.

What it costs

Ongoing pharmacy accounting starts from CAD 299 per month and is priced on transaction volume, payroll, entities and complexity; multi-location owners typically sit in the Growth or Finance Team plans. Acquisition analysis is quoted as a project once we have seen the deal. Every price is confirmed in writing before any work starts.