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Different circumstances require different business valuations. In pharmacy, re-financing, new partner acquisition and purchases require different methods of valuation to account for changes in style of the operation of the business. Medici Capital is the industry leader in pharmacy valuations and takes these factors into account when valuing a pharmacy.
There are three methodologies for pharmacy valuation:
|Discounted Cash Flow (DCF)||The pharmacy value is the present value of the future cash flows from that business.||Pharmacies with a finite life or varying annual cash flow.|
|Capitalisation of Future Maintainable Profits||Maintainable profits are estimated and capitalised using long-term market or industry discount rates.||Pharmacy with a presumed "infinite life".|
|Assets plus Goodwill||The going concern value of assets plus goodwill for expected future income.||Relatively new pharmacies or where future cash flows are uncertain.|
The choice of methods depends on the ability to forecast revenue and expenses and the purpose of the valuation.
To see the current capitalisation rates for pharmacy, please contact Medici Capital.
The capitalisation rate appropriate for a pharmacy reflects its desireability and:
- Gross profit margin;
- Rent terms and costs;
- Pharmacy characteristics;
(Inc. Location, Product Mix, Presentation, SWOT)
- Prevailing interest rates (overdraft) plus allowance for risk.
Capitalisation rates vary over time. Currently rates range between 17 per cent for metropolitan pharmacies with good growth and 20 per cent for rural pharmacies. Exceptional pharmacies with unusually high growth outlooks may attract a lower capitalisation.
It is important to note that the asking price is not related to turnover. Rather, it's a function of the expected maintainable income to the buyer. Value assumes a willing buyer exists and there is sufficient time to market the pharmacy properly.
Medici Capital provides 5 different versions of our valuation:
(The following list is ordered by the complexity of the valuations)
- Indicative Valuation
- Market Assessment
- Full Valuation
- Brownfield Valuation
- Greenfield Valuation
Medici Capital provides Indicative Valuations on-line through Medici Express.Through this system, you can process a valuation within 24 hours (or faster if urgent) to provide you with an indication of what value the pharmacy will be.
A market assessment is essentially an accountant's/broker's valuation. It is primarly provided from the analysis of a trading statement/profit & loss statement and provides a slightly more detailed perspective of the value of the pharmacy.
Medici Capital's Full Valuation provides full comprehensive analysis of a pharmacy and produces a financially and economically robust value for the pharmacy based on statistical and analytical evidence. The capitalisation rates are generated based on a risk assessment model ensuring that market verifiable rates are applied for valuation purposes.
An extension on the full valuation, Brownfield Valuations are based on significant changes to the operational environment of the pharmacy that would cause a significant shift in the income of the business - ie location change or significant resizing of business. These valuations take into account the effects of the changes to the operations and resultant financials of the business. Medici Capital with it's analytical background is in a unique position to be able to calculate these valuations.
The next step from a Brownfield Valuation is a Greenfield Valuation: the case in which a business is newly established from scratch. Medici Capital can accurately forecast the operating capacity of the pharmacy and past clients have contacted us to claim that forecasts of our Greenfield Valuations have accurately matched the actual operating performance of the business as time elapsed.
It is important to note that Medici Capital are not an accountant. We are analysts and researchers with specific focus on valuations, finance and management consulting in the health sector. Our products and services are based on statistical research and each report/assurance we provide is based on financial, verifiable evidence.
As an expert witness, our analysis are accepted by courts throughout Australia because of the mathematical nature of our work - we do not estimate, guess or compare figures. We logically, methodically and mathematically determine the true values of pharmacy.
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