Updated on: July 19th, 2024

How to Start a Pharmacy Business? (Step-by-Step Guide)

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Developing a pharmacy from the ground up can be overwhelming, particularly when the marketplace is so competitive. Pharmacists must go to great lengths to make their business stand out and sustain its growth in order to succeed.

Crafting a successful pharmacy requires a well-thought-out business plan and identity. Allow us to guide you through the journey of forming a solid business plan for your very own pharmacy, from creating your blueprint to finally opening its doors! Our comprehensive manual walks you step by step in starting up your dream.

As for any business, you will also need an LLC for your pharmacy business. You can create one yourself easily by following our step-by-step guide on how to start an LLC.

If you want to skip the hassle of starting an LLC for a pharmacy business yourself, consider using professional help for the best price in the market:

Pros and Cons of Starting Your Own Pharmacy Business

Here are some pros and cons that everyone should go through before starting their own Pharmacy Business.

Pros

Starting your own pharmacy business has many advantages.

  • One major benefit is the opportunity to reach a wider customer base than what you could while working at a traditional retail pharmacy.
  • Additionally, depending on your local area, you may also experience lower overhead costs since many of the necessary supplies and medicines are thought to be cheaper in larger quantities. Because of this, new pharmacists typically have higher profit margins than ones who work elsewhere.
  • Furthermore, outright owning a pharmacy allows employees more scheduling freedom and flexibility since they can easily adjust staffing hours within the business without fear of upsetting an employer or manager.
  • And lastly, by having ownership of all inventory, pharmacists can create better customer relations from knowing each patron’s individual needs rather than relying on a limited range of recommendations from corporate staff.

Cons

Starting your own pharmacy business involves a lot of hard work and dedication but it also carries certain risks.

  • First, there is the burden of added legal restrictions and regulations that independent pharmacy owners have to face.
  • And then there are high start-up costs – capital expenses for things like registering ones business, purchasing or leasing equipment, and investing in insurance policies.
  • Finally, there is the challenge of marketing and advertising to generate customers – without these efforts, one’s business will be at risk for low-volume sales and losses.

All these cons should be thoughtfully considered before making a final decision towards launching a new pharmacy venture.

Key Segments of the Pharmacy Industry

The pharmacy and drugstore industry is divided into four distinct segments: Large-Chain Retailers, Independent Pharmacies, Wholesalers, and Others. Each of these categories provides an essential role to the overall pharmaceutical market.

  • Large-Chain Retailers: CVS and Walgreens have become leading giants in the healthcare industry, thanks to their ability to fulfill customers’ desires. They offer a wide range of items from non-prescription drugs like over-the-counter medication, to onsite prescription filling services which no doubt contribute immensely to their financial success. These chains now comprise hundreds of stores all around the world!
  • Small Independent Pharmacies: Generally serving smaller communities, independent pharmacies provide customers with the opportunity to shop in stores that offer a personal touch and experience. Drawing from their locally produced products as well as personalized services, independent pharmacies strive to appeal to customers wanting to show support for local businesses within their community. While they only account for 2% of all retail pharmacy stores, large independents make up around 20% of total retail pharmacy revenue across the United States.
  • Wholesalers: By leveraging large-scale distribution centers, wholesalers are able to provide pharmacies and hospitals with both prescription and non-prescription drugs at a discounted rate. Furthermore, these businesses mark up the cost of their product by an average of 300% – 400%.
  • Other: Companies in this segment offer pharmacies and hospitals services to prepare for examinations, store medical records or manage the prescription drug programs and/or insurance claims of their patients. These organizations are defendant on how many prescriptions are filled at each pharmacy location.

External Factors that Affect the Pharmacy Market

The pharmacy and drugstore industries are highly influenced by a variety of external factors.

  • Health & Dental Insurance: Thanks to the Patient Protection and Affordable Care Act (ACA), health insurance providers are mandated by law to offer free preventative care, such as physical examinations and immunizations. This has caused a sharp rise in the number of vaccinations being administered at pharmacies which is advantageous for both patients, who save money on doctor visits, and healthcare providers alike.
  • Generics: Generic drugs are just as reliable and potent as name-brand medications, but more affordable for consumers. Where you go to purchase your prescription medication may be influenced by this price difference between generics and name brands; while people with the means will opt to visit retail locations that offer pricier prescriptions, those who favor generic options can find them in pharmacies offering lower prices. This results in retailers gaining higher profits from sale of their costlier name brand products.
  • Pharmacies & Hospital Mergers: As these large hospital systems acquire more private practices and smaller hospitals, they are also purchasing their accompanying pharmacies. This gives them control over the prices of medications released through their health care and pharmacy system – which could possibly alter the dynamic between customers searching for prescriptions from pharmacies and these big corporations.
  • Home Care: With the advent of improved healthcare technology and procedures, more individuals are opting for in-home care instead of a nursing home or facility. This means fewer visits to retail locations since nurses/pharmacists come directly to their doorsteps – saving time and money that would otherwise be spent on travel expenses.
  • Online Pharmacies & Telemedicine: By taking advantage of the convenience that online technology provides, pharmaceutical companies are now able to offer patients remote consultations with their physicians. This allows them easy access to prescriptions without ever having to leave home and travel to a pharmacy. As such, this is revolutionizing how consumers obtain medication – they can purchase bulk orders directly from the web without requiring a visit or even presence in a retail setting!
  • Price Transparency: With the abundance of digital resources available – from online drugstore listings to mobile pharmacy apps and websites – consumers today can effortlessly compare prices, set reminders when they need to repurchase a product, making any attempts by brick-and-mortar outlets to raise costs without repercussions almost impossible.
  • Direct-to-consumer (DTC) Advertising: Pharmaceutical businesses invest millions to promote their medications directly to customers, encouraging them to request the same prescription from their physician. This affects the patient’s medication preference; they now desire precisely what was advertised, regardless of cost – an unattainable expense for those not covered by the drug’s producing pharmaceutical company.
  • Competitors: Walgreens’ recent move to open shops in grocery stores, such as Kroger and Safeway, has attracted criticism from independent pharmacy owners. The merger of pharmacies with groceries may result in lower prices for shoppers but puts local pharmacies at risk since they are unable to match the discounted rates that large retail corporations can offer.

Who are the Key Competitors in the Pharmacy Market?

Pharmacies are a crucial part of the healthcare industry, competing with other retailers for customers. Direct competitors include stores with similar product lines such as discount and convenience stores. Additionally, pharmacists are also in competition with hospitals, clinics, and their own office practices for patients’ services. For example, an independent pharmacist may run their practice where they personally consult clients seeking medical advice or treatment solutions.

What are the Key Customer Segments in the Pharmacy Market?

Pharmacies have identified three main customer segments for their services:

  • Seniors who desire discounts on prescriptions and other goods
  • Middle-class consumers looking to access the pharmacy without spending too much time or money
  • Elite/upper-class customers expecting private delivery service.

With so many customer groups that need medication, you have a wide range of opportunities to appeal to their unique needs. By honing in on what each target market desires, you can re-adjust your services accordingly and stand out from the competition. When done effectively, this not only brings more loyal customers in through the door but keeps them coming back too!

Startup Costs for a New Pharmacy

The average startup costs for any venture typically range from $400,000 to a staggering $800,000.

If you’re looking to start your own pharmacy business, there are several costs that need to be accounted for; from rent and inventory expenses to staff salaries. It’s essential for potential business owners of a new pharmacy venture to properly plan out the amount needed for initial setup as well as how these payments will be made.

Starting a pharmacy can be pricey, ranging in cost depending on what type of inventory must be acquired and if the facility needs to arise from nothing or is already established. Although opening up shop within an existing building may need less money at first, obtaining all relevant permits and licenses could take more time than necessary when compared with an operational location.

When starting your own pharmacy, it is important to factor in the additional costs associated with getting off the ground. Alongside rent, utilities and medication fees, there are a few key expenses you should be aware of:

  • Location Rent
  • Licenses and Permits
  • Prescription Drug Inventory
  • Over-the-Counter (OTC) Medications
  • Business Insurance
  • Leasehold Improvements
  • Equipment & Furniture Costs
  • Staffing Costs

How to Start A Pharmacy (A 7-Step Basic Guide)

Here is a step-by-step guide on how you can start your own Pharmacy. Let’s Begin!

Step 1: Create a Business Plan

LLCGuys-Forming-a-Business-Plan

Before digging into the nitty-gritty behind launching a business bank account for your pharmacy, it’s essential to take a step back and look at the big picture. A business plan serves as an invaluable guide for your new venture, outlining vital information while providing you with helpful tips on how to expand in the future. Utilizing this blueprint is imperative if you want success!

How to Start a Pharmacy Business Plan

Crafting a successful business plan for a pharmacy requires including the following elements:

Executive Summary

Provide potential investors with an easily navigable, high-level synopsis of the most significant takeaways on a single page to give them all the information they need quickly.

Description of Business 

Here’s the scoop on your new pharmacy owners’ venture:

  • From market and branding to target demographics,
  • Location details,
  • Likely team members and positions they’ll fill,
  • Plus a rundown of potential costs.

Get ready – it’s time to dive in!

Description of Service(s)

What services do you dream of providing to your customers? This area outlines the potential revenue sources for your pharmacy, including prescription drugs, retail products, and unique healthcare solutions.

Marketing Plan 

To secure success and outperform the competition, you must have an analytical understanding of your competitors in addition to a well-thought out plan for promoting yourself. Your business strategy should include a comprehensive competitor analysis, innovative marketing and sales strategies, as well as SWOT analysis which will help assess the strengths and weaknesses of your business.

Financial Plan 

Outputting expected revenue, expenditures and considerable costs such as lease timelines, mortgage payments and approximate payroll should be noted here. In addition to that, any financial information in the form of a loan or other type of financing must also be included along with an exit strategy plan if applicable. To get you going smoothly on your business planning needs for a successful pharmacy owner or venture, this article provides a comprehensive example broken down into detailed sections.


Step 2: Define Your Pharmacy Brand

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Your brand is your business’s identity and it sets the tone for how customers will experience you, interact with you, and use your offerings. It leaves a lasting impression in their minds that helps differentiate you from competitors.

What Makes a Good Brand?

Many consider a brand to be only the visuals, such as logos and color schemes that are displayed on websites or business cards. However, there is much more than meets the eye when it comes to branding.

Several key elements go into creating an effective brand strategy, including:

Mission and Vision Statements

Your mission statement outlines your organization’s purpose and fundamental principles, showcasing what you do, how you do it and why.

Additionally, your vision declaration articulates the long-term objectives that will be accomplished in order to realize this mission. By utilizing these two powerful documents together as a compass for actionable decisions, companies can set forth on a successful path towards realizing their goals.

Value Proposition

To set yourself apart in the industry, you must discover what makes your business special and communicate it through a compelling value proposition. These could range from being located in an exclusive area (“the only pharmacy around”) to having family ownership (“family-owned pharmacy”), offering competitive costs, providing top-tier customer service, or even delivering specific services.

Naming and Trademarking

Naming a business is not an easy task, and you want something that will be memorable as well as accurately reflect your brand. If you opt for something creative or are determined to make sure it’s entirely yours and no one else can use it, applying for trademark protection could be the solution. This way, all of your hard work in crafting the perfect name won’t go wasted!

Visual Identity

Your brand’s face is its visual identity, encompassing a logo, color palette, typography, images and graphics – all of which are crucial for successful marketing and promotion.


Step 3: Set up Your Website

LLCGuys-Create-Your-Business-Website

You’ve established your brand, now let’s get it out into the world. For successful pharmacists everywhere, having a website and social media accounts is essential for helping potential patients find vital information such as services offered and location. Create an online presence today to increase visibility and kickstart your business!

Getting Your Domain and Social Handles

Unlocking the gates to a successful pharmacy website begins with procuring your preferred domain name. Verify that it is accessible by entering it into one of many domain search platforms, like Instant Domain Search so you can embark on the journey to create an amazing online presence.

Social media accounts can do wonders for your ranking in search engines and attract more visitors to your website. If you want the best results, create profiles on Twitter, Instagram, and a Facebook Business Page with user names that are similar to the name of your business.

Pharmacy Website Basics

If you’re considering providing digital tools and services or collecting patient health information, then it’s essential that your pharmacy website is HIPAA-compliant.

A successful pharmacy site should express your brand identity, physical location, & contact info as well as an introduction to products/services/staff – all connected to social media accounts for additional customer outreach.


Step 4: Pick a Pharmacy Location

LLCGuys-Select-Your-Location

Before you dive into the search for a pharmacy location, take time to ask yourself key questions about pharmacy ownership in your area of choice.

  • How many other stores offer similar services and are they direct competitors?
  • Does the prescription base satisfy everyone’s needs?
  • Will there be too much competition?

Evaluating local pharmacies and their offerings can assist in narrowing down potential opportunities for other business owners as well as assessing any possible threats.

What Makes a Good Business Site

If you’ve ever heard a real estate professional utter the phrase “location, location, location,” then you know that selecting the ideal spot for any business is key. To help make sure your pharmacy ends up in a prime position, here are some of the factors to ponder as part of your search process:

Accessibility 

When considering a new site for your business, it’s essential to ponder the amount of foot and vehicle traffic, visibility from roadsides, convenience of parking lots, points of entry and exit – not forgetting if there is enough space for drive-thru services or even curbside pickups.

Size 

Is there enough space to conduct business and achieve growth? Take into account the number of locations you wish for, as well as the services, products, and personnel required to stay afloat.

Previous tenants 

If there are other pharmacies occupying the same space, it’s wise to research why they decided to cease operations. This could be a sign of an abundant customer base or a red flag you should take into account before establishing your own pharmacy in that area.

Other business sources 

When selecting a site for your business, be sure to investigate locations close to other complementary services such as medical offices or clinics. This will ensure increased exposure to potential customers, and perhaps create possibilities of forming beneficial partnerships down the line.


Step 5: Determine Your Financials

Prepare a comprehensive business plan that includes an estimate of your pharmacy’s startup and operational expenses, as well as the sources of financing you intend to seek. Establishing your pharmacy’s financial needs will support you in submitting loan applications or speaking with potential investors.

Consider these associated costs when planning:

Build-out costs

Our services span from mortgage down payments, construction, and renovations to fixtures and interior design.

Inventory

Outfit your store with a comprehensive inventory of both prescription and over-the-counter medications, plus other healthcare or retail items.

Operating expenses 

To ensure that your pharmacy has an ample amount of time to generate a profit, make sure you have enough capital set aside to cover daily costs for at least half a year after the doors are open.

Have peace of mind that your funding is securely in place, and track all current and future costs with a pharmacy income statement.

This will help you easily calculate your:

  • Revenue,
  • Sale deductions,
  • Net sales,
  • Cost of Goods Sold (COGS),
  • Gross profit,
  • Net Profit,
  • Profit Margins,
  • Operating expenses,

Making financial forecasting a breeze.


Step 6: Get Your Licenses in Order

LLCGuys-Poster-Business-Permits-and-Licenses

Launching a pharmacy can be an exciting and complex process, with paperwork for registration as legal business entity as well as federal and state licensing requirements that must be satisfied. Get the ball rolling by filing your business entity in your state, obtaining your EIN number from the IRS, and opening up a bank account. Following this initial setup step-by-step will ensure you have fully complied with all necessary regulations so that you may begin operations successfully!

In order to practice pharmacy, you must obtain a state-issued license or permit and register for controlled substances.

Additionally, you’ll need:

And if that wasn’t enough paperwork – depending on where your practice is located – you might be required to meet additional state requirements for pharmacists too!


Step 7: Prepare for Opening!

You are nearly ready to launch your business, but before you do, ensure that all of the essential last-minute details are finalized.

Investing in Digital Tools

To ensure successful operations, get off to a strong start by organizing your workflow and giving patients the multichannel digital experience they deserve. Invest in an efficient pharmacy management system (PMS) and utilize an interactive voice response (IVR) solution for inbound calls. Additionally, leverage a powerful digital communications software that enables secure messaging services as well as spot clinical opportunities.

Inventory Ordering

In order to protect yourself from any potential losses, you should seek out wholesalers with whom you can develop long-term relationships. To begin on the right foot, request sample orders of both prescription and OTC medications so that your independent pharmacy business won’t suffer financially while it grows.

Front of Store Flow and Design

Visualize the experience you want your patients to have when they enter your store. Strategically arrange products, personnel, and counters in order to create a pleasant flow of traffic through generous aisle space that leads directly to checkout lines. Your customers will appreciate it, and so will your revenues!

Online and Offline Advertising 

To draw in customers, strategically place signage towards high-traffic areas and consider reaching out to local publications for an interview about your new business. Additionally, begin crafting a digital marketing strategy that leverages the power of social media channels and paid advertisements to spark interest around your brand launch and drive visitors directly to you website.

To commemorate your success, treat yourself and your team to a celebration! A party is a perfect way to honor this new milestone in your journey.


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