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Attain Glossary:
Key Terms Used in Pharmacy Brokerage

The following are key terms used in buying/selling a pharmacy. If you are new to the process, take some time to familiarise yourself with these terms.


Asking Price The Asking Price is normally the list price of the pharmacy for sale. This is the price that the Vendor is seeking to sell the business for, however it may not be the ultimate sale price.


Business Broker A business broker is a person or firm who/which acts as an intermediary between sellers and buyers of small businesses.


Cash Flow Cash Flow is the measure of the movement of cash into (as revenues) and/or out of (as expenses) a business as a result of investment or operating decisions. The total during any given specified time period may be expressed as positive cash flow or negative cash flow.Cash Flow in turn affects the Liquidity of the business.
Confidentiality Agreement An agreement between two parties that oulines that future dealings and material exchanged between two parties will be done so privately. And that any information disclosed between the two parties will remain between the two parties.


Depreciation Depreciation refers to the allocation of the cost of fixed assets over the period for which they are used - it has both an expense component and a reduction in the asset value.


EBIT This is an acronym for Earnings Before Interest and Tax. The EBIT is essentially the Net Profit of the business without Interest or Tax revenue/expenses included in the calculation.
Equity In pharmacy ownership, the term Equity refers to the unencumbered ownership that you have invested in a business. Or the value of the business, less any debt against that business.It represents that value you hold of the pharmacy less any debts against the business.As a pharmacy buyer, you should look to contribute at least 30% of the equity of the pharmacy when purchasing the business.


Goodwill Goodwill is an accounting concept meaning the value of an entity over and above the value of its assets. Goodwill can be defined as Intangible Assets - assets that you cannot see or touch, but have value associated with them. The term was originally used in accounting to express the intangible but quantifiable "prudent value" of an ongoing business beyond its assets, resulting perhaps because the reputation the firm enjoyed with its clients.In pharmacy, goodwill relates to the branding of a site, the brand value of the business, signage, customer patronage, etc.


Heads of Agreement The main purpose of the Heads of Agreement is to identify and highlight the requirements of both the seller and the purchaser of the business. There are a number of advantages of using the Heads of Agreement including that both parties are fully informed of what they are subject to, and to reduce or abolish any misunderstandings from either party.It is used to ensure commitment to the sale and define the settlement process while allowing time to enter into a formal Contract of Sale.
HOA An acronym for Heads of Agreement.


Lease A Lease is a contract between lessor (landlord) and lessee (tenant) for exclusive possession of realty for specified period under specific terms after which property reverts to lessor.


Market Price The current price at which an asset or service can be bought or sold. Economic theory contends that the market price converges at a point where the forces of supply and demand meet. Shocks to either the supply side and/or demand side can cause the market price for a good or service to be re-evaluated.


Transaction Costs For a pharmacy buyer, transaction costs will include (but are not limited to):Legal fees for reviewing the Contract of Sale;Accounting fees for the Due Diligence of the financial information;Fees associated with the bank loans; andValuation/Finance fees.For a vendor/seller, transaction costs can include:Brokerage fees;Legal/Accounting fees;Loan payout fees; etc.


Vendor In real estate, the term Vendor refers to the last formal definition:"The seller"In the case of Pharmacy Sales, the Vendor is the Pharmacist who is selling the business.


Working Capital In real terms, Working Capital refers to the cash available to an enterprise for day-to-day operations. It's the money that's available to pay expenses and purchase stock after accounting for debts that are due to be paid in the short-term.If a business does not have enough money in the bank, it is at risk of business failure. Ensuring that the business has good Working Capital will increase the chances of success in the business.

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