Buying a pharmacy in Victoria: the 12-month runway

The pharmacists who buy good pharmacies are rarely the ones with the most money. They are the ones who were ready when the business came up. Quality pharmacies are often under offer within days, and the buyer who still has to confirm their equity, choose a structure and approach a lender is competing against people who did all of that months ago.

This guide sets out what needs to happen, and roughly when, in the twelve months before you buy your first pharmacy in Victoria. Some of it is regulatory, some is financial, and some is simply about having the right people lined up before you need them.

Start with the ownership rules

In Victoria, pharmacy ownership is governed by the Pharmacy Regulation Act 2010 (Vic) and administered by the Victorian Pharmacy Authority. The rules are strict, and they shape every other decision in this guide.

• Who can own. Under section 5, a pharmacy business may only be owned, or a proprietary interest held in it, by a registered pharmacist, an “eligible company” or a qualifying friendly society. An eligible company is one whose directors are all registered pharmacists and whose shares, and the legal and beneficial interests in them, are all held by registered pharmacists.
• Trusts are caught too. A “proprietary interest” includes being a trustee or beneficiary of a trust, or a director, member or shareholder of a company. A family trust with non-pharmacist beneficiaries is a problem, not a planning tool.
• A limit of five. A pharmacist or eligible company must not own or hold a proprietary interest in more than five separate pharmacy businesses.
• Licence and premises. Under section 21, you cannot carry on a pharmacy business unless the Authority has registered the premises and granted you a licence to carry on the business there. Build the application into your settlement timetable.

The Authority has published guidance on proprietary interests and undue influence, and the penalties for getting it wrong are significant. Every structure we recommend is tested against the Act and that guidance before a lender, a vendor or the Authority sees it.

Months 12 to 9: know exactly what you can bring

Most acquisitions are funded by a combination of business lending and the buyer’s own equity — cash, and very often equity in a home or investment property. The equity side is where most first-time buyers are least prepared.

• Confirm your property equity now, not later. In a softening market, the valuation a lender obtains may be lower than you expect. Find out what your property is worth to a lender before you rely on it.
• Understand your borrowing capacity. Your existing home loan, credit cards and personal commitments all affect what a lender will allow you to borrow against the business.
• Clean up your personal position. Lodge any outstanding returns, deal with ATO debts and reduce unused credit limits. These things are easy to fix twelve months out and awkward to explain during a credit assessment.
• Decide who you are buying with. If you are buying with another pharmacist, agree the commercial terms, the split and what happens if one of you wants out — and have your lawyer document it.

Months 9 to 6: choose a structure and get pre-approved

Structure is a decision you make once and live with for a decade. The right answer depends on your income, your family, how much you are borrowing and, most of all, who you expect to sell to eventually. We compare the common options in our note on pharmacy structures.

With a structure chosen, the next step is an indicative approval. A lender cannot fully approve a purchase without a specific business, but it can confirm how it will treat your equity, your experience and your personal position. That turns “I think I can afford it” into a number you can act on.

This is also the time to line up the people you will need: an accountant and finance broker who understand pharmacy, a lawyer experienced in pharmacy contracts, and someone to review the lease. We do not provide legal services, but we work alongside your lawyer on every acquisition.

Months 6 to 0: finding the pharmacy and testing it properly

When a pharmacy comes up, the vendor’s figures are the beginning of the conversation, not the end of it. Financial due diligence rebuilds the numbers from source and asks the questions a lender will ask.

The offer should be conditional on finance, due diligence, an acceptable lease assignment and the necessary approvals. Your lawyer will draft the conditions; we make sure the commercial and financial ones protect you.

Settlement and the first 90 days

1. Stock take. Stock is usually valued separately at settlement. Agree the method and who conducts the count in advance.
2. Staff. Confirm which employees transfer, their accrued entitlements and how they are adjusted in the price.
3. Systems and accounts. Bank accounts, merchant facilities, payroll, dispensary software and wholesaler accounts set up in the new entity before day one.
4. Tax registrations. ABN, GST, PAYG withholding and payroll registrations for the new entity.
5. The first quarter. Working capital matters most now — stock replenishment, the first BAS and the timing of PBS payments all land early.

How we help

We work with pharmacists through every step in this guide: confirming equity and borrowing capacity, choosing a structure that satisfies the ownership rules, arranging pre-approval and goodwill lending, testing the business in due diligence, reviewing the lease, and setting up the accounting from day one. Use the acquisition funding calculator for an indicative view of the equity you may need, then talk to us about your actual position.