Estate Planning for Nebraska Pharmacy Owners

By Brad MacLiver
Authorship and profile at Google


With the current market conditions many NE pharmacy owners are experiencing lower profit margins and have considered selling. A pharmacy industry roll-up 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 Nebraska 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 Nebraska 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.

Setting up a plan to transfer the business will be time consuming, but when done correctly it will allow the business to successfully be transferred in an acceptable manner.  A pharmacy owner's estate plan does not need to be process without change.  It is recommended to fine-tune, amend, and update the plan as government regulations, economic conditions, and personal expectations change.

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

Planning an estate may involve Wills, Living Wills, Trusts, Power of Attorney, Medical Power of Attorney, Business Valuations, Life Insurance, Charitable Remainder Trusts, Buy-Sell Agreements, and more legal documents. The various aspects of planning an estate are designed to provide the pharmacy owners coordinated directives.

When non-family members are partners in the pharmacy business, it is crucial that a Buy-Sell Agreement is incorporated in estate planning.  Buy-Sell agreements are documents that govern transfer businesses between Nebraska pharmacy partners. The document may also be known as a partner buyout agreement or business will. To help protect the family in the event of a partner’s death, the buy-sell agreement may be funded with a life insurance policy.

Estate planning, buy-sell agreements, and the transfer of the pharmacy should incorporate a pharmacy business valuation completed by a third party that has expertise in the pharmacy industry, performs a large number of pharmacy business valuations each year, and has current industry data as a basis for the conclusions. Using simple accounting formulas, multipliers, and valuators inexperienced in Nebraska pharmacy will 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 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 in Nebraska die and their family is left with an asset with very little value.

Tips for Drug Store Owners considering Estate Planning:        
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 Nebraska pharmacy owner especially if there are some family that work in the business and others that don’t.

Nebraska Pharmacy Franchise Financing

By Brad MacLiver
Authorship and profile at Google


A NE 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 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 in Nebraska.

There are a number of options for financing a pharmacy franchise business. 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 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 Nebraska pharmacy loan. Community drug stores typically have very little traditional assets to offer as security. Lenders for pharmacy will use traditional methods for analyzing the cash flow available to service to the debt, and they will also need to understand the nontraditional collateral that 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 verification of the down payment's source and the amount of actual cash on hand will be a critical factor when qualifying for a Nebraska pharmacy business loan.

NE Pharmacy Franchise Funding Tips:

1. Several pharmacy franchise financing options exist, so pharmacy owners should take the time to perform proper due diligence and obtain the pharmacy funding that best suits their situation.

2. It is advised to have either an accountant or attorney familiar with pharmacy franchise financing to look over any and all pharmacy business loan documents.

3. Pharmacy consulting services and franchise associations exist in Nebraska who can help guide prospective pharmacy franchisees or borrowers for a drug store loan.

4. New pharmacy owners should make sure that their funding request is for enough cash to get the pharmacy running and profitable. Funding that doesn't meet the requirements for the initial stages puts 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 NE 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 Nebraska pharmacy industry specialist who can provide quality answers and sound advice.

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