Starting a medical device business can be very profitable. With proper planning, execution and hard work, you can enjoy great success. Below you will learn the keys to launching a successful medical device company.
Importantly, a critical step in starting a medical device company is to complete your business plan. To help you out, you should download Growthink’s Ultimate Business Plan Template here.
15 Steps To Start a Medical Device Company:
- Choose the Name for Your Medical Device Company
- Determine the Type of Medical Device Company You Will Launch
- Develop Your Medical Device Company Plan
- Choose the Legal Structure for Your Medical Device Company
- Secure Startup Funding for Your Medical Device Company (If Needed)
- Secure a Location for Your Company
- Register Your Medical Device Company with the IRS
- Open a Company Bank Account
- Get a Company Credit Card
- Get the Required Company Licenses and Permits
- Get Company Insurance for Your Medical Device Company
- Buy or Lease the Right Medical Device Company Equipment
- Develop Your Medical Device Company Marketing Materials
- Purchase and Setup the Software Needed to Run Your Medical Device Company
- Open for Company
1. Choose the Name for Your Medical Device Company
The first step to starting a medical device business is to choose your business’ name.
This is a very important choice since your company name is your brand and will last for the lifetime of your business. Ideally you choose a name that is meaningful and memorable. Here are some tips for choosing a name for your medical device business:
- Make sure the name is available. Check your desired name against trademark databases and your state’s list of registered business names to see if it’s available. Also check to see if a suitable domain name is available.
- Keep it simple. The best names are usually ones that are easy to remember, pronounce and spell.
- Think about marketing. Come up with a name that reflects the desired brand and/or focus of your medical device business.
2. Determine the Type of Medical Device Company You Will Launch
The next step is to determine the type of medical device business you will launch. The four main types of medical device businesses are:
- Manufacturers – These companies create medical devices from scratch, using materials and designs they have developed.
- Distributors – Distributors purchase products from manufacturers and resell them to buyers such as hospitals, doctors’ offices, surgical centers, etc.
- Retailers – Retailers sell medical devices directly to consumers, such as over-the-counter products like thermometers and blood pressure monitors.
- Service Providers – These businesses provide installation, repair and maintenance services for medical devices.
3. Develop Your Medical Device Company Plan
One of the most important steps in starting a medical device business is to develop your medical device company business plan. The process of creating your plan ensures that you fully understand your market and your business strategy. The plan also provides you with a roadmap to follow and if needed, to present to funding sources to raise capital for your business.
Your business plan should include the following sections:
- Executive Summary – this section should summarize your entire business plan so readers can quickly understand the key details of your medical device business.
- Company Overview – this section tells the reader about the history of your medical device business and what type of medical device business you operate. For example, are you a manufacturer, distributor, retailer or service provider?
- Industry Analysis – here you will document key information about the medical device industry. Conduct market research and document how big the industry is and what trends are affecting it.
- Customer Analysis – in this section, you will document who your ideal or target customers are and their demographics. For example, how old are they? Where do they live? What do they find important when purchasing products like the ones you will offer?
- Competitive Analysis – here you will document the key direct and indirect competitors you will face and how you will build competitive advantage.
- Marketing Plan – your marketing plan should address the 4Ps: Product, Price, Promotions and Place.
- Product: Determine and document what products you will offer
- Prices: Document the prices of your products/services
- Place: Where will your business be located and how will that location help you increase sales?
- Promotions: What promotional methods will you use to attract customers to your medical device business? For example, you might decide to use pay-per-click advertising, public relations, search engine optimization and/or social media marketing.
- Operations Plan – here you will determine the key processes you will need to run your day-to-day operations. You will also determine your staffing needs. Finally, in this section of your plan, you will create a projected growth timeline showing the milestones you hope to achieve in the coming years.
- Management Team – this section details the background of your company’s management team.
- Financial Plan – finally, the financial plan answers questions including the following:
- What startup costs will you incur?
- How will your medical device business make money?
- What are your projected sales and expenses for the next five years?
- Do you need to raise funding to launch your business?
4. Choose the Legal Structure for Your Medical Device Company
Next you need to choose a legal structure for your medical device business and register it and your business name with the Secretary of State in each state where you operate your business.
Below are the five most common legal structures:
1) Sole proprietorship
A sole proprietorship is a business entity in which the owner of the medical device business and the business are the same legal person. The owner of a sole proprietorship is responsible for all debts and obligations of the business. There are no formalities required to establish a sole proprietorship, and it is easy to set up and operate. The main advantage of a sole proprietorship is that it is simple and inexpensive to establish. The main disadvantage is that the owner is liable for all debts and obligations of the business.
2) Partnerships
A partnership is a legal structure that is popular among small businesses. It is an agreement between two or more people who want to start a medical device business together. The partners share in the profits and losses of the business.
The advantages of a partnership are that it is easy to set up, and the partners share in the profits and losses of the business. The disadvantages of a partnership are that the partners are jointly liable for the debts of the business, and disagreements between partners can be difficult to resolve.
3) Limited Liability Company (LLC)
A limited liability company, or LLC, is a type of business entity that provides limited liability to its owners. This means that the owners of an LLC are not personally responsible for the debts and liabilities of the business. The advantages of an LLC for a medical device business include flexibility in management, pass-through taxation (avoids double taxation as explained below), and limited personal liability. The disadvantages of an LLC include lack of availability in some states and self-employment taxes.
4) C Corporation
A C Corporation is a business entity that is separate from its owners. It has its own tax ID and can have shareholders. The main advantage of a C Corporation for a medical device business is that it offers limited liability to its owners. This means that the owners are not personally responsible for the debts and liabilities of the business. The disadvantage is that C Corporations are subject to double taxation. This means that the corporation pays taxes on its profits, and the shareholders also pay taxes on their dividends.
5) S Corporation
An S Corporation is a type of corporation that provides its owners with limited liability protection and allows them to pass their business income through to their personal income tax returns, thus avoiding double taxation. There are several limitations on S Corporations including the number of shareholders they can have among others.
Once you register your medical device business, your state will send you your official “Articles of Incorporation.” You will need this among other documentation when establishing your banking account (see below). We recommend that you consult an attorney in determining which legal structure is best suited for your company.
5. Secure Startup Funding for Your Medical Device Company (If Needed)
In developing your medical device business plan, you might have determined that you need to raise funding to launch your business.
If so, the main sources of funding for a medical device business to consider are personal savings, family and friends, credit card financing, bank loans, crowdfunding and angel investors. Angel investors are individuals who provide capital to early-stage businesses. Angel investors typically will invest in a medical device business that they believe has high potential for growth.
6. Secure a Location for Your Company
Having the right space can be important for your medical device business, particularly if you’d like to meet clients there. You may need a place to store and assemble products, or you might need to rent office space. Additionally, if your product requires the use of large equipment, such as 3D printers or milling machines, it will be important for you to find a space large enough to accommodate these needs.
To find the right space, consider:
- Driving around to find the right areas while looking for “for lease” signs
- Contacting a commercial real estate agent
- Doing commercial real estate searches online
- Telling others about your needs and seeing if someone in your network has a connection that can help you find the right space
7. Register Your Medical Device Company with the IRS
Next, you need to register your business with the Internal Revenue Service (IRS) which will result in the IRS issuing you an Employer Identification Number (EIN).
Most banks will require you to have an EIN in order to open up an account. In addition, in order to hire employees, you will need an EIN since that is how the IRS tracks your payroll tax payments.
Note that if you are a sole proprietor without employees, you generally do not need to get an EIN. Rather, you would use your social security number (instead of your EIN) as your taxpayer identification number.
8. Open a Company Bank Account
It is important to establish a bank account in your medical device business’s name. This process is fairly simple and involves the following steps:
- Identify and contact the bank you want to use
- Gather and present the required documents (generally include your company’s Articles of Incorporation, driver’s license or passport, and proof of address)
- Complete the bank’s application form and provide all relevant information
- Meet with a banker to discuss your business needs and establish a relationship with them
9. Get a Company Credit Card
You should get a business credit card for your medical device business to help you separate personal and business expenses.
You can either apply for a business credit card through your bank or apply for one through a credit card company.
When you’re applying for a business credit card, you’ll need to provide some information about your business. This includes the name of your business, the address of your business, and the type of business you’re running. You’ll also need to provide some information about yourself, including your name, Social Security number, and date of birth.
Once you’ve been approved for a business credit card, you’ll be able to use it to make purchases for your business. You can also use it to build your credit history which could be very important in securing loans and getting credit lines for your business in the future.
10. Get the Required Company Licenses and Permits
The types of licenses and permits you need for your medical device business will vary depending on the state or jurisdiction you are doing business in. However, some of the most common licenses and permits you may need include:
Company License – A business license is generally required to operate a business in a particular jurisdiction. This license allows you to operate your business under a certain name and conduct certain activities.
Tax Identification Number – You will need to register with the IRS and get an Employer Identification Number (EIN). This number is used to track your payroll tax payments.
Professional License – If you are providing professional services as part of your medical device business, you may need to obtain a professional license. For example, if you are a doctor providing medical consultation services, you may need to obtain a medical license.
Health Department Permit – If your medical device business involves selling or distributing products that come into contact with human skin, you will likely need to obtain a health department permit from the relevant authority.
Nearly all states, counties and/or cities have license requirements including:
Zoning Approval: typically at the city or county level, this provides authorization for construction or use of a building or land for a particular purpose
Fire Department Approval: a process by which the local fire department reviews and approves the installation of a fire alarm system.
Depending on the type of medical device business you launch, you will have to obtain the necessary state, county and/or city licenses.
11. Get Company Insurance for Your Medical Device Company
Medical device businesses face a variety of risks that can potentially lead to costly losses. This is why it’s important for medical device businesses to have business insurance.
There are a variety of business insurance policies that medical device businesses can purchase, including:
Product Liability Insurance – This insurance policy provides coverage for damages that may be incurred as a result of a defective product.
General Liability Insurance – This insurance policy provides coverage for damages that may be incurred as a result of accidents or injuries that occur in your business.
Professional Liability Insurance – This insurance policy provides coverage for damages that may be incurred as a result of malpractice or negligence by your employees.
Find an insurance agent, tell them about your business and its needs, and they will recommend policies that fit those needs.
12. Buy or Lease the Right Medical Device Company Equipment
Medical device businesses need a variety of equipment in order to operate, including:
- Medical devices
- Test equipment
- Lab equipment
- Packaging and shipping supplies
- Office supplies
- Marketing materials
When purchasing or leasing medical device business equipment, it’s important to consider the following factors:
- What type of medical device business you have
- The size of your business
- Your budget
- The amount of space you have available for equipment
- The type of equipment you need
When purchasing medical device business equipment, it’s important to shop around and compare prices. You may also be able to get discounts by buying equipment in bulk or through a supplier. Leasing medical device business equipment can be a more affordable option than purchasing equipment outright, but it’s important to make sure you understand the terms of the lease agreement.
Some common pieces of medical device business equipment include:
Lab Equipment: This includes centrifuges, incubators, ovens and autoclaves.
Test Equipment: This includes pH meters, microscopes and spectrophotometer.
Packaging and Shipping Supplies: This includes boxes, packing material, labels and tape.
Office Supplies: This includes computers, printers, fax machines and office furniture.
Marketing Materials: This includes brochures, website design and trade show displays.
13. Develop Your Medical Device Company Marketing Materials
Marketing materials will be required to attract and retain customers to your medical device business.
The key marketing materials you will need are as follows:
- Logo: Spend some time developing a good logo for your medical device business. Your logo will be printed on company stationery, business cards, marketing materials and so forth. The right logo can increase customer trust and awareness of your brand.
- Website: Likewise, a professional medical device business website provides potential customers with information about the products you offer, your company’s history, and contact information. Importantly, remember that the look and feel of your website will affect how customers perceive you.
- Social Media Accounts: establish social media accounts in your company’s name. Accounts on Facebook, Twitter, LinkedIn and/or other social media networks will help customers and others find and interact with your medical device business.
14. Purchase and Setup the Software Needed to Run Your Medical Device Company
To run a medical device business, you will need accounting software to manage your finances, a CRM system to keep track of customer data, and a manufacturing or inventory management system to track your product line.
There are a variety of software programs available for each of these tasks, so it’s important to research the options and find the system that best suits your needs. Make sure to ask your software provider about any special requirements the software may have in order to run on a Mac or PC.
Research the software that best suits your needs, purchase it, and set it up.
15. Open for Company
You are now ready to open your medical device business. If you followed the steps above, you should be in a great position to build a successful business. Below are answers to frequently asked questions that might further help you.
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How to Start a Medical Device Company FAQs
Where Can I Download a Medical Device Business Plan PDF?
You can download our medical device business plan PDF here. This is a business plan template you can use in PDF format.
How much does it cost to start a medical device business?
The cost of starting a medical device business can vary significantly, depending on the type of business, the products offered, and the location. The average startup costs for a medical device company vary. These costs include the cost of licensing and permits, research and development expenses, equipment costs, marketing costs, website design and hosting fees, personnel costs, and more.
In addition to these startup costs, you should also factor in ongoing operational expenses such as employee salaries and benefits; rent or lease payments.
How can I start a medical device business with no experience?
If you are starting a medical device business with no experience, it is important to do your research and learn as much as you can about the industry. There are a variety of resources available, including books, articles, and online courses.
Another important thing to keep in mind is that you don't need to know everything about the medical device industry to start a business. You can always partner with other companies or individuals who have more experience in this field.
Finally, make sure to contact your local Small Company Association (SBA) office for help and advice on starting a medical device business.
What type of medical device business is most profitable?
Some of the most profitable medical device businesses are those that offer innovative and cutting-edge products. These businesses often have higher research and development costs, but can also reap greater rewards if their products are successful.
Another factor that can affect the profitability of a medical device business is the size of the market it serves. Companies that serve a large market have the potential to be more profitable than those that serve a smaller market.
Is it hard to start a medical device business?
There are many resources available to help you get started.
However, if you follow the steps above, you should be able to start your medical device business without too much difficulty.
What are the ongoing expenses for a medical device business?
The ongoing expenses for a medical device business can vary significantly, depending on the type of business, the products offered, and the location. The average ongoing expenses for a medical device company range. This includes the cost of licensing and permits, research and development expenses, equipment costs, marketing costs, website design and hosting fees, personnel costs, and more.
In addition to these ongoing expenses, you should also factor in regular updates and upgrades to your products, as well as the cost of maintaining your inventory. You may also want to consider purchasing advertising or marketing materials, or investing in training or certification courses.
How does a medical device business make money?
There are a few different ways that medical device businesses can make money. One way is to sell the products that they develop to hospitals or other healthcare providers. Another way is to provide contract manufacturing services to other medical device companies. Medical device businesses can also make money by providing consulting services or licensing their patents and intellectual property.
Medical device businesses often have high research and development costs, which can be a major expense for the company. However, these businesses also have the potential to reap greater rewards if their products are successful. By selling their products to healthcare providers or providing contract manufacturing services, medical device businesses can generate steady income and profit over time.
A third way for medical device businesses to make money is by providing consulting services or licensing their patents and intellectual property.
Is owning a medical device business profitable?
Yes, owning a medical device business can be very profitable.
A medical device business owner can earn between $50,000 and $250,000 a year in profit. However, this depends on the size of the business and the type of products or services offered. Additionally, some medical device businesses may require significant upfront investments in equipment and personnel before they become profitable. The potential for success is also greatly affected by factors such as existing competition and market demand.
Some of the key things you can do to make your medical device business more profitable include:
- Invest in marketing and advertising to attract clients
- Offer products that are in high demand
- Provide quality products and services that meet or exceed your clients' expectations
- Keep your operating costs as low as possible
- Make sure you are registered with the FDA and other relevant agencies
- Maintain a good reputation in the industry
- Optimizing your website for SEO to increase online visibility
- Creating a unique selling proposition
- Building references from clients who are willing to recommend you to their friends
Why do medical device businesses fail?
There are a number of reasons why medical device businesses can fail, such as:
- Lack of capital – It can be expensive to start and run a medical device business, so it's important to have enough financial resources in place to sustain you during the early stages.
- Lack of experience – If you don't have the necessary experience or knowledge in the medical device industry, it will be difficult to succeed.
- Poor marketing – If you don't invest in marketing and advertising, you'll likely find it difficult to attract new clients.
One of the main reasons that medical device businesses fail is a lack of planning. This can include not having a detailed business plan, not doing research on the industry, and not targeting the right customers.
Another reason is a lack of marketing and sales skills. This can include not creating a sales process and not have a clear and strong value proposition.
The last main reason is a lack of financial management skills. This can include not having a realistic budget, not tracking expenses, and not investing in the business.
Who are key players in the medical device market?
The medical device market is made up of a variety of different players, including small businesses, large enterprises, and even individuals.
Some of the key players in the market include:
- Medtronic
- GE Healthcare
- Stryker Corporation
- Philips Health
However, there are many other players in your specific target market, and it is important to research the market to identify the key players that may have the most direct influence on the success of your business.
How much should I charge for my medical device products?
Medical device fees can vary depending on the type of medical device products being offered.
However, some common medical device fees include:
- Heart Monitors - $300-$2,000
- CT Scanners - $20,000-$150,000
- Ultrasound Machines - $10,000-$50,000
- MRI Machines - $200,000+
The best way to determine the right fee for your medical device products is to research the rates of similar businesses in your industry, and to also consider the value that you will be providing to the client.
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