Carolyn Young is a business writer who focuses on entrepreneurial concepts and the business formation. She has over 25 years of experience in business roles, and has authored several entrepreneurship textbooks.
David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.
Published on May 4, 2022
$365,000 - $912,000 p.a.
$73,000 - $183,000 p.a.
These are the critical aspects you should evaluate when launching your pharmacy:
Interactive Checklist at your fingertips—begin your pharmacy today!
You May Also Wonder:
Can a pharmacy be profitable?
Yes, pharmacies can be profitable. More importantly, though, a pharmacy serves the community in a valuable way, which can be much more rewarding than profit.
How can I become a pharmacist?
A Doctor of Pharmacy (PharmD) degree program requires at least two years of specific undergraduate college study followed by four academic years (or three calendar years) of professional pharmacy study. You can find continuing education opportunities on the National Community Pharmacists Association website.
How to create a pharmacy app?
To create a pharmacy app, you’ll need to outline the desired features and functionality, work with app developers or development tools, ensure regulatory compliance, integrate secure payment options, and conduct thorough testing to ensure a smooth user experience.
What type of pharmacy makes the most money?
Specialty pharmacies that focus on high-cost medications or niche therapeutic areas often have the potential to generate higher profits. However, the profitability of a pharmacy can also depend on factors like location, target market, and services offered.
How can I differentiate my pharmacy from competitors in the market?
Differentiate your pharmacy by focusing on personalized customer service, offering additional services like medication therapy management or health consultations, providing convenient online prescription refills and delivery options, and emphasizing a strong commitment to patient education and wellness programs.
Starting a pharmacy has pros and cons to consider before deciding if it’s right for you.
Trends in the pharmacy industry include:
Challenges in the pharmacy industry include:
Startup costs for a pharmacy range from $200,000 for a small community pharmacy to $700,000 or more for a larger pharmacy. The largest cost is the inventory of drugs and other items.
You’ll need a handful of items to successfully launch your pharmacy business, including:
| Start-up Costs | Ballpark Range | Average |
|---|---|---|
| Setting up a business name and corporation | $150 - $200 | $175 |
| Business licenses and permits | $100 - $300 | $200 |
| Insurance | $100 - $300 | $200 |
| Business cards and brochures | $200 - $300 | $250 |
| Website setup | $1,000 - $3,000 | $2,000 |
| Space rental | $3,000 - $5,000 | $4,000 |
| Space preparation | $10,000 - $20,000 | $15,000 |
| Full inventory | $100,000 - $500,000 | $300,000 |
| Operating budget | $50,000 - $100,000 | $75,000 |
| Labor budget | $40,000 - $80,000 | $60,000 |
| Total | $204,550 - $709,100 | $456,825 |
Prices for pharmacy items vary greatly. Some drugs cost hundreds of dollars, and pharmacy convenience prices also vary. These calculations will assume that the average customer in your pharmacy will spend $50 (some of which will be paid by insurance companies). Your profit margin after rent, overhead, cost of goods, and labor should be about 20%.
In your first year or two, you might have 20 customers a day, bringing in $365,000 in annual revenue. This would mean $73,000 in profit, assuming that 20% margin. As you build a strong reputation, you might have 50 customers a day. With annual revenue of $912,000, you’d make a fantastic profit of nearly $183,000.
There are a few barriers to entry for a pharmacy. Your biggest challenges will be:
If you’re still not sure whether this business idea is the right choice for you, here are some related business opportunities to help you on your path to entrepreneurial success.
Now that you know what’s involved in starting a pharmacy, it’s a good idea to hone your concept in preparation to enter a competitive market.
Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important, because it can help you understand your customers better, who your competitors are, and your business landscape.
Research pharmacies in your area to examine their products, price points, and customer reviews. You’re looking for a market gap to fill. For instance, maybe the local market is missing a small independent pharmacy, a pharmacy with a clinic, or a pharmacy with a delivery service.
You might consider targeting a niche market by specializing in a certain aspect of your industry, such as controlled substances or discount prescription medications.
This could jumpstart your word-of-mouth marketing and attract clients right away.
In addition to prescription medications you can offer a host of other items from over-the-counter drugs, to snacks, to cosmetics, and much more.
Prices vary greatly based on items. Check the prices other pharmacies charge to make sure you’re competitive. After all costs, you should aim for a profit margin of about 20%.Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.
Your target market will be extremely broad. You should spread out your marketing to include sites like TikTok, Instagram, and Facebook.
The location of your pharmacy is an important factor in attracting customers and ensuring your business’s success. Look for a spot in a busy commercial district or near a medical center or hospital.
Consider accessibility and convenience, ensuring that the location is easily reachable by public transportation and has ample parking.
By strategically choosing the right location, you can establish a profitable and successful pharmacy that provides essential healthcare services to customers and stands out in the competitive healthcare industry. You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.
When choosing a commercial space, you may want to follow these rules of thumb:
Here are some ideas for brainstorming your business name:
Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these.
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Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that sets your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.
Here are the key components of a business plan:
If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.
Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.
Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business!
Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you’re planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to pharmacies. If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state.
Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your pharmacy will shape your taxes, personal liability, and business registration requirements, so choose wisely.
Here are the main options:
We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have.
Choose Your State
We recommend ZenBusiness as the Best LLC Service for 2024
starts at $0, plus state fees starts at $0, plus state feesThe final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN.
Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.
The IRS website also offers a tax-payers checklist, and taxes can be filed online.
It is important to consult an accountant or other professional to help you with your taxes to ensure you’re completing them correctly.
Securing financing is your next step and there are plenty of ways to raise capital:
Bank and SBA loans are probably the best option, other than friends and family, for funding a pharmacy business.
Starting a pharmacy business requires obtaining a number of licenses and permits from local, state, and federal governments.
In addition to being a licensed pharmacist in your state, you’ll also need a pharmacy license. Check with your state for licensing requirements. You’ll also need the following:
You’ll also be subject to state prescription drug monitoring programs. Failure to comply with licensing requirements and regulations can result in severe disciplinary actions.
Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits.
You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more.
You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.
This is not a step to be taken lightly, as failing to comply with legal requirements can result in hefty penalties.
If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.
Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.
Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your pharmacy business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.
Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account.
Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.
Here are some types of insurance to consider:
Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of the above insurance types.
As opening day nears, prepare for launch by reviewing and improving some key elements of your business.
Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.
You may want to use industry-specific software, such as DATASCAN, EnterpriseRX, or Liberty, to manage your tasks, records, refills, billing, and payments.
Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism.
You can create your own website using services like WordPress, Wix, or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.
They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google.
Here are some powerful marketing strategies for your future business:
Unique selling propositions, or USPs, are the characteristics of a product or service that set it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your pharmacy meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire.
Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your pharmacy business could be:
You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a pharmacy business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in pharmacies for years and can offer invaluable insight and industry connections.
The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in pharmacies. You’ll probably generate new customers or find companies with which you could establish a partnership.
If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a pharmacy business include:
At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need. Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent.
Owning a pharmacy can be very fulfilling. You’re helping your community and meeting a critical need for countless locals and families. Pharmacies are also a growing industry, which means this is a lucrative opportunity as well. If you have a passion for prescriptions, and for serving others, starting a pharmacy could be a brilliant entrepreneurial decision.
You’ve now added business knowledge to your resume, so it’s time to get to work and launch your successful pharmacy!
