How to Start a Pharmacy

Written by Dave Lavinsky

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In this article, you’ll learn how to open and run a successful pharmacy.

Importantly, a critical step in starting an pharmacy business is to complete your business plan. To help you out, you should download Growthink’s Ultimate Pharmacy Business Plan Template here.

How to Start Your Own Independent Pharmacy Business

If you want to start a successful pharmacy, follow these steps.

Write a Pharmacy Business Plan

Starting a pharmacy requires large expenditures of money upfront before generating any positive cash flow or returns. Without a solid business plan, you will have difficulty acquiring the capital necessary to start your own pharmacy.

A good, detailed business plan will contain the financial statements and data gathered from your market research about potential customers and demographics, expected location for store placement, store design ideas, equipment needs, inventory requirements, and more.

Identify Legal Regulations

Pharmacies are highly regulated businesses by both state and federal authorities so it is important to be aware of what rules apply in your area. Pharmacy rules vary greatly according to laws enacted at local levels so you must familiarize yourself with what regulations will apply to you when starting a new pharmacy in your city or state. Seek legal advice if you are unsure about any of the regulations. 

Acquire Inventory

You will also need an inventory before opening your pharmacy so you can fill prescriptions immediately when they come in. More established businesses typically deal with wholesalers who supply large amounts of drugs at a time to the pharmacy for resale.

New independent pharmacies often don’t have access to this inventory level and must order goods from their wholesaler on an individual basis until their business is well established.

Secure Insurance

You must secure your own liability insurance before opening your pharmacy or you can risk having no coverage.

General liability insurance covers pharmacy owners for incidents that happen within the pharmacy including slips and falls on the property, errors and omissions, medical malpractice, etc. while protecting your personal assets like your home, car, and bank account.

Commercial property insurance is also required which protects your physical building against damage or loss due to natural disasters or other unforeseen events including theft by employees or others who might gain unauthorized access to the property.

Finally, see if there are any other types of insurance like workers’ compensation or unemployment that you need to purchase before opening your pharmacy. Find an insurance agent who can handle all your business insurance needs in one place.

Choose a Pharmacy Location

Choosing the right location is crucial for your future business so you should choose carefully.

The easiest way to know which locations are best for opening up a pharmacy is by looking at what other independent pharmacies provide in the area and what they already share. This can tell you where people go to fill prescriptions and how many pharmacies currently exist in close proximity.

Besides customers, other resources like utilities, internet connectivity, clean drinking water sources, traffic flow patterns, nearby businesses, government offices, and more all factor into choosing where to locate your new pharmacy. Make sure that any of these resources needed by your business are available near enough to where you plan to establish your business.

Design Your Store

While getting your pharmacy established is often more important than the design of the store itself, it is still helpful to create a plan for how you will construct your new pharmacy. In addition to making sure that there are good accessibility points from all parking spaces and entrances, the layout of your business should also be taken into account.  Consider things like:

  • Where do customers enter?
  • How does one area flow naturally into another without overwhelming traffic on a single main pathway between areas?
  • Are certain sections or rooms reserved for particular functions or restricted from being used as general walk-through space?
  • What items will need to be regularly stocked regularly and how can those items be situated so they are easy to access by workers and customers?

Once you have your store layout planned out, consider how your current assets can be used like furniture, shelving units, and other items.

Finish Your Business Plan Today!

If you’d like to quickly and easily complete your pharmacy business plan, download Growthink’s Ultimate Pharmacy Business Plan Template and complete your plan and financial model in hours.

Obtain Necessary Licenses and Permits

There are both state and federal licensing requirements when opening a pharmacy.

State Licensing Requirements

Every state has its own licensing requirements which are then broken down into additional county or city licensing requirements. You will need to get an annual state pharmacy license and separate licenses for each location within that state if you plan on opening more than one pharmacy.

There are many types of permits required for opening up a pharmacy; however, not all states require the same types. Your local government office is usually responsible for providing information about specific permits that may be necessary like state licensure requirements, building code compliance documents (i.e., handicap-accessible parking spaces), environmental health department approvals (procedures for proper disposal of hazardous waste), or public works construction permits (maintenance of roads around the business).

Federal Licensing Requirements

Licenses required by the federal government usually apply to pharmacies that operate across multiple states. These may include licenses to distribute prescription drugs, mail order prescriptions, sell controlled substances, and others. These licenses can be extremely expensive so it is important to plan accordingly.

Set Up Your Business Finances Properly

Once your pharmacy begins to make sales, you will need to set up proper financial guidelines for how these funds are stored, distributed, or spent.  Basic steps include:

  1. Open a business bank account as soon as possible so that you can deposit sales from customers into this account rather than a personal one. This will help you to avoid misplacing sales revenues and also allows businesses to track the success of their various ventures more efficiently.
  2. Create a budget for your pharmacy, including income goals as well as expenses. Decide how much money you want to make monthly or yearly depending on the type of future growth you seek. Remember though that this is not an exact science since there are many variables that may change these projections at any time.
  3. Create a tax ID number for use by your pharmacy as an official company entity. This step is usually handled by a CPA or other financial advisors at the local, state, and/or federal levels.
  4. Keep track of all transactions associated with your pharmacy to make sure that you are in compliance with any regulations including drug pricing information, prescription documentation procedures, and other such information if required by law within your area. This is usually done through a POS system although you do have the option to use spreadsheets or pen and paper for this task.
  5. Include business plans from other successful pharmacies as well as their prices for goods and services so that you can stay competitive while still making a profit which will help ensure its continued success.
  6. Incorporate the pharmacy as a legal subsidiary of your company. This is done by meeting with a lawyer and having them draft the necessary documents so that you can file for recognition as an official legal entity within your local area.

Start Marketing Your Business

Once you have all of the necessary permits and licenses to run your pharmacy, you should start marketing.  While there are many different ways to go about this process, it is important to consider not only the customers in your area but also how your business may be able to reach out and support other businesses in their service goals as well.

You should always keep an eye on local news coverage as well as charitable events that may affect those around you as a way of getting free advertising for your new pharmacy.

As far as advertisements go, there are plenty of inexpensive forms like print advertisements, direct mail, or even social media platforms that can help get the word out. Just make sure that whatever methods you decide to use include information like:

  • how well your pharmacy is prepared to handle customer sales, prescription renewals, and other such tasks 
  • how quickly customers can expect to receive their medication
  • any coupons or special discounts for first responders and other people in the community who may be particularly supportive of your pharmacy

Hire Pharmacists and Other Employees

You must make sure that any employees within the pharmacy are properly trained and capable of handling duties like prescription orientation, helping customers select medication, counseling on appropriate therapies, and other such tasks.  As far as hiring goes:

Search local schools and colleges for potential candidates to fill available positions. You should also share job listings with businesses or organizations that work closely with your pharmacy’s mission so they can help spread the word about your new business as well.

Choose candidates based on their qualifications for the specific position(s) rather than those who may be more qualified but do not fit the image you want to portray as a new pharmacy owner because this will affect how others view your pharmacy throughout its growth. Finally, before you hire, always conduct criminal background checks.

Once you have hired new employees, make sure to provide adequate training for them in all aspects of the pharmacy.  This should be done on a regular basis so that they are always aware of any changes or updates to your policies or procedures.

Launch Your Business

Finally, launch your business by beginning with a grand opening celebration, airing advertisements through social media and print forms of media, asking friends and family to spread the word about your new opening, etc. Don’t forget to include grand opening discounts or special sales in order to get customers into the store quickly which you can then begin building customer loyalty over time. Building a sufficient prescription base will be a key part of ensuring a successful startup and long-term success for your pharmacy.

If you’d like to quickly and easily complete your business plan, download Growthink’s Ultimate Pharmacy Business Plan Template and complete your business plan and financial model in hours.

How Big is the Pharmacy Industry?

The US pharmacy and drug-store industry is a profitable one with an estimated annual market size of $338.2 billion. The growth rate for the industry is expected to maintain the 7.1% annual compound growth rate that has been sustained over the last five years.

The Pharmacies & Drug Stores industry ranks as the sixth-largest retail trade sector by revenue and 29th largest overall among industries in America, according to data from IBISWorld, which monitors industries all across North America and internationally, as well as within other countries and continents worldwide.


What are the Key Segments of the Pharmacy Industry?

There are 4 main market segments of the pharmacy and drugstore industry: Large-Chain Retailers, Independent Pharmacies, Wholesalers, and Others. Each segment serves different purposes in the pharmaceutical industry as a whole.

Large-Chain Retailers such as CVS and Walgreens sell both non-prescription drugs such as over-the-counter medication as well as prescription drugs which they fill on site. The financial success for these companies is reliant upon their ability to cater to consumers’ demands which have allowed them to expand into large chain stores with hundreds of locations.

Small Independent Pharmacies typically serve small communities where customers are able to shop at stores that offer personal attention. They compete with chain pharmacies by offering personalized services and locally produced items which appeal to customers’ desire for small business support within their communities. Large independents account for about 20% of all retail pharmacy revenue in the United States, but only 2% of the number of stores.

Wholesalers sell both prescription and non-prescription drugs directly to pharmacies or hospitals at a reduced cost through large-scale distribution centers. These wholesalers then markup the cost between 300% – 400%.

Other companies in this market segment provide services to pharmacies and hospitals that help them prepare for inspections, store medical records or manage the prescription drug programs and/or insurance claims of patients. These companies are reliant on how many prescriptions are filled at each pharmacy.


What External Factors Affect the Pharmacy Market?

There are many external factors that affect how the pharmacy and drug store industries operate:

  • Health & Dental Insurance: The Patient Protection and Affordable Care Act (ACA) requires health insurance providers to offer free preventative care, including physical exams and vaccinations. This has increased the number of immunizations performed by pharmacies which is beneficial for both patients and providers due to savings in doctor visits.
  • Generics: Generic drugs have been proven to be just as effective as name brand medications, but at a lower cost to consumers, however, they do affect where someone goes when obtaining their prescription medication. Name brands will always generate more money for retailers because they are higher priced than generics meaning people who can afford it will go to retail locations to purchase name-brand prescriptions rather than going to a pharmacy that only carries generics.
  • Pharmacies & Hospital Mergers: With large hospital systems buying up private practices and acquiring smaller hospitals, they are also acquiring more pharmacies within their system. This allows them to control the prices of prescription medications that circulate through their health and pharmacy system which could potentially change the relationship between customers looking for prescriptions from pharmacies and these larger organizations.
  • Home Care: Many people are choosing to be cared for in their homes rather than in a nursing home setting or facility due to improvements in healthcare technology and procedures. This means that individuals aren’t visiting retail locations as often because visits by nurses/pharmacists come directly to them at their home address saving time and expense from going to a physical location.
  • Online Pharmacies & Telemedicine: The ease of using online technology has made it much easier for pharmaceutical companies to offer remote consultations with physicians, this, in turn, allows patients to have access to their prescriptions without having to leave home and travel to a local pharmacy. This convenience is changing how the consumer obtains medication because people who don’t have a prescription via their doctor can go directly online and purchase them in bulk, eliminating the need for a retail setting entirely.
  • Price Transparency: Consumers are now able to use multiple resources including internet pharmacy listings, pharmacy websites/apps on mobile phones, etc., anyone can now look up the price of medications at any time or set alerts on when they want or need to purchase a certain product, making it more difficult for retail locations to increase prices without consequences on lost customers.
  • Direct-to-consumer (DTC) Advertising: Pharmaceutical companies spend millions of dollars on advertising and promoting their drugs to consumers directly who then go out and ask their doctors for the medication they saw advertised. This affects how patients request medication because they are no longer willing to accept the generic version of a drug or less expensive brand instead they want exactly what was advertised which could be an unreasonable cost to anyone not insured by the pharmaceutical company producing the drug.
  • Competitors: Pharmacies compete with one another but there has been some controversy over Walgreens’ ability to open up shops within grocery store chains like Kroger or Safeway, creating pharmacy-grocery hybrids which could mean lower prices for consumers, but also puts pharmacies out of business because they are unable to compete with large retail settings offering products at less expensive prices.


Who are the Key Competitors in the Pharmacy Market?

Pharmacies are among the businesses in healthcare. Direct competitors include those that offer the same product lines as pharmacies, such as discount and convenience stores. Indirect competitors include pharmacists’ offices, hospitals, and clinics. For instance, a pharmacist may have their own office where they see patients.


What are the Key Customer Segments in the Pharmacy Market?

Pharmacies generally target three main customer segments:

  • Seniors (people who are 55+) who would like to receive discounts on prescriptions and other goods
  • Middle Class (household income between $50,000 – $100,000) consumers who want convenient access to the pharmacy, but don’t like high prices or waiting in line
  • Elite/Upper Class (household income over $100,000) consumers are looking for the most convenience when it comes to prescription medications, which may include private delivery services

All of these groups make up a desirable target market because they all purchase medication from pharmacies. The key is finding out what each one wants so you can tailor your services towards those specific needs. If done correctly, it will increase sales and keep loyal customers coming back.


What are the Typical Startup Costs for a New Pharmacy?

Average Startup Costs: $400,000 – $800,000

New pharmacy start-up costs can include rent, inventory, equipment, staff salaries, and any other items that the pharmacy needs to operate. It is important for entrepreneurs and other business owners interested in starting a pharmacy to carefully plan out how much they will need for starting costs as well as how they will pay for those expenses.

The costs to open a pharmacy can vary widely depending on such factors as whether the pharmacy is in an existing building or will need to be built from scratch and what type of equipment and inventory will be needed. Opening a pharmacy in an existing building may require less startup capital than opening one in a new location; however, acquiring permits and licenses may take longer for a new location than one that already exists.

If the pharmacy will be located in an existing building, landlords may require that the space meet certain criteria to rent it. Meeting these standards usually requires significant renovations. Renovations could include adding walls for privacy between patient areas and dispensing areas or making other changes to meet local codes. Landlords may require a tenant to meet additional criteria, such as having a certain number of parking spaces or being open a minimum number of hours. These requirements could affect the cost and timeline for opening the pharmacy location.

It’s important to note that these numbers are just a guideline and can vary greatly depending on the entrepreneur’s vision for their business. For instance, if you have plans to open a multi-location or chain pharmacy, your startup costs will be much different than someone who wants to open up a small retail shop in an area with little competition.

In addition to any funds needed to cover ongoing expenses for rent, utilities, and prescriptions, there are certain costs that are related specifically to starting your business. These are some key costs associated with starting your own pharmacy:

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

Finish Your Business Plan Today!

If you’d like to quickly and easily complete your pharmacy business plan, download Growthink’s Ultimate Pharmacy Business Plan Template and complete your plan and financial model in hours.

Is Owning a Pharmacy Profitable?

Yes, owning an independent pharmacy is a very profitable undertaking. To improve the profitability of your pharmacy, look to add a few different types of patients that you do not already serve, such as the elderly and the uninsured. This will increase your business volumes and help you achieve profitability faster. You can also add more staffers, such as technicians and sales representatives, to help you fill more prescriptions.


What are the Keys to Launching a New Pharmacy?

Here are the keys to launching a new pharmacy:

1. Write Your Own Pharmacy Business Plan

A pharmacy business plan will help you stay on track with your independent pharmacy by setting goals and milestones. It is a working document that can change as you go but needs to be completed before starting your pharmacy.

To enhance your planning process, incorporating insights from a sample pharmacy business plan can be beneficial. This can provide you with a clearer perspective on industry standards and effective strategies, helping to solidify your own business approach.

2. Determine Your Location

Deciding on the best physical location for your pharmacy will give you a head start in your business venture. 

3. Pharmacy Layout & Design

You won’t always have the luxury of selecting the layout of your pharmacy’s location, but when you do, try to optimize space by incorporating shelving units or displays to maximize foot traffic and sales.

4. Pharmacist & Staff Hires

Hiring staff can sometimes be as stressful as starting a pharmacy. Finding someone with experience who is willing to work at a startup pharmacy may be difficult so working as a team is essential from day one. You will need pharmacists to work at the pharmacy, techs to assist pharmacists and pharmacy technicians as well as support staff for accounting or customer service.

5. Insurance Coverage

Insurance coverage can make starting a pharmacy smooth sailing or a nightmare depending on the type of coverage you choose and what limits you purchase for Retail Malpractice & Shoplifting insurance. We suggest contacting an independent agent to help with your choices not only for these coverages but also Pharmacist Errors & Omissions if you plan on being a pharmacist-owned pharmacy.


How to Finish Your Pharmacy Business Plan in 1 Day!

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How to Start a Pharmacy FAQs

Pharmacies look for building spaces that are in high-traffic locations. Pharmacies also need great signage, easy access to municipal services, and ample on-site parking or reasonable street parking.

In terms of interior space, pharmacies are also looking for spaces that have high ceilings to allow room for product placement on shelves, large windows with lots of natural light, first-floor pharmacy locations over accessible public transportation lines, and enough room to accommodate an increasing number of employees as the business grows.

A great starting point for creating your own customized pharmacy business plan is to use this free pharmacy business plan pdf download.

Want to quickly and easily complete your pharmacy business plan, get Growthink’s Ultimate Pharmacy Business Plan Template and write your plan in less than 1 day.

This cost will vary depending on if you are opening a franchise or an independently-owned pharmacy and what type of licensing is required by the state. The average investment is $400,000 - $800,000. This includes the building itself and all of the medical equipment and pharmaceuticals required at the initial startup and throughout the operation.

The investment process is often dependent upon the type of pharmacy you are opening. A traditional pharmacy, which only requires the licensing and startup costs outlined above, can usually receive funding from friends and family or even your own personal finances. However, investors will take more interest in franchise pharmacies and medical dispensaries because they require higher start-up costs and may be able to contribute more capital quickly.

Depending on the size of your pharmacy, you may want to purchase a banner in order to advertise in your local community. Banners are relatively inexpensive and can be purchased in bulk from several online retailers for multiple locations. If your pharmacy only requires one or two employees, social media marketing is another great way to market outside of traditional methods like newspapers or billboards.

Pharmacies vary in size and opening time frames, but it typically takes at least six months to open a pharmacy. In addition to extensive business planning, which includes deciding on a business structure, pharmacies need to obtain local permits, which can take up to four months. Pharmacies also need to hire staff members, order inventory, and amass the necessary equipment before grand opening day.

You can download our pharmacy business plan PDF template here. This is a business plan template you can use in PDF format.


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