How to start a Pharmacy Business
By Bazal Razzaq
Chief Editor
Updated: October 13, 2023
Editorial Note: We earn a commission if you use the services recommended on this page. Commissions do not affect our opinions or recommendations.
- Plan your Pharmacy Business
- Make your Pharmacy a legal entity
- Register your Pharmacy business for taxes
- Open a business bank account and get a credit card
- Maintain accounts for your business
- Obtain necessary permits and licenses
- Get Pharmacy Insurance
- Define your brand
- Create a Pharmacy website
- Set up a business phone system
- Frequently Asked Questions (FAQs)
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Nowadays, every locality has at least one or more Pharmacy stores to provide health and beauty products, greeting cards, food, and necessary medication. Pharmacies are found inside hospitals, clinics, emergency facilities etc.
We have provided a guide for you to start your own Pharmacy business and whether it is good for you or not.
10 Steps to Start Your Pharmacy Business:
- Plan your Pharmacy Business.
- Make your Pharmacy a legal entity.
- Register your pharmacy for taxes.
- Open a business bank account and get a credit card.
- Maintain accounts for your business.
- Obtain necessary permits and licenses.
- Get Pharmacy Insurance.
- Define your brand.
- Create a Pharmacy website.
- Set up a business phone system.
#1 Plan your Pharmacy Business
Having a clear plan helps you become a successful entrepreneur. It allows you to pay attention to every detail and discover the unknowns. Before starting a business you should have answers to the following questions:
- What will you name your business?
- What will be the startup and ongoing costs?
- Who will be your target audience?
- How much will you charge your customers?
We have tried to answer these questions for you.
What will you name your business?
It is important and difficult to think of a business name. If you haven’t thought of one, you can use a Pharmacy Name Generator.
If you run a sole proprietorship, then operate under a business name other than your personal name.
We recommend researching your name by checking the
- State’s business record.
- Federal and state trademark records
- Social media Platforms.
- Availability of web domain.
What will be the startup and ongoing costs?
You will need to buy a storefront or get one on a lease, hire employees, purchase computers for POS and Prescriptions, and invest in pharmaceutical orders.
You will be required to have $1 million to $2 million dollars for the first year and 5 year business plan, $1 million to $2 million dollars.
The biggest expense would be to maintain the stock of medicines. You should have enough medicine supply to cover the need for at least a month. Salaries and payroll are also other expenses.
Who will be your target audience?
In a neighbourhood pharmacy, the target audience will be people of society belonging to all age groups.
Some prescriptions may earn you higher profits than others. But you should keep your focus on serving society.
How much will you charge your customers?
The pharmaceutical and insurance companies determine the pricing of the prescription. Customers agree to pay from some dollars for common medicines to thousands for rare drugs used to treat life-threatening diseases. You will have to monitor competitors to stay ahead of them in the neighbourhood.
#2 Make your Pharmacy a legal entity
The sole proprietorship, partnership, limited liability company (LLC), and corporation are the common business structures. When you form a legal
a business entity such as an LLC or corporation, it protects you from being held liable in case the pharmacy gets sued.
It is simple and easy to form an LLC on your own and pay the minimal state LLC costs or hire an LLC service for an additional fee.
#3 Register your Pharmacy business for taxes
You are supposed to register your business for several state and federal taxes before you start it. To register for taxes, you must first apply for an EIN. The EIN can be obtained from the IRS website.
There are some state taxes that can be applied to your business. You must read it before you plan to register your pharmacy business.
#4 Open a business bank account and get a credit card
You must get a dedicated bank account and a credit card for your business to protect your personal assets like your home, car, other property etc. In business law, it is called ‘piercing your corporate veil.’
Open a Business Bank Account:
When you open a business bank account, it is beneficial in the following things-
- Separates personal and company assets to protect your personal property.
- Makes tax filing and accounting easier.
Get a Credit card:
The business credit card helps you with-
- Separates business expenses and brings it all in one place.
- Build a credit history of the company.
#5 Maintain accounts for your business
Keep a track record of your expenses and sources of income to understand the financial performance of the company. If your accounts are well maintained, it helps a lot during annual tax filing.
#6 Obtain necessary permits and licenses
You should acquire all necessary permits and licenses to avoid heavy fines or let your business shut down. The categories are as follows:
- Business Licensing Requirements by Federal-
You will need certain Federal permits and licenses to operate your pharmacy. Kindly read the details on FDA regulations for the licensing of pharmaceutical distributors.
- Business Licensing Requirements by State-
You will also require certain state permits and licenses to operate a pharmacy. The necessary information can be obtained from SBA’s reference to state licenses and permits.
- Certificate of Occupancy (CO)-
A Pharmacy business often runs out of a storefront or location. A storefront is a place where customers visit to purchase medicines, consult with pharmacists and get health-related products and services.
A business operating out of a physical location will require a Certificate of Occupancy.
Lease a location:
- The landlord should obtain a CO.
- Confirm the landlord has a CO applicable to a Pharmacy.
- After renovation, a new CO can be issued. If your business place was renovated before opening, you must include in your lease agreement that lease payment will not be paid until a valid CO is issued.
Build a location:
- You will have to buy a CO from the local government authority.
- To operate your business legally and obtain a CO, you must review all building codes and zoning requirements for your business location.
#7 Get Pharmacy Insurance
Your business requires insurance just like a license and permits to operate safely and legally. Business Insurance safeguards the financial well-being of the company at the time of loss.
There are many types of Insurance policies crafted for businesses involving different risks. If you are a new entrepreneur, you can go with General Liability Insurance which is the most common business Insurance.
There are some businesses that require Workers’ Compensation Insurance if the business has a good number of employees.
#8 Define your brand
A company’s brand is what it stands for and what people think of it. A strong business provides you a chance to stand out from your competitors.
After defining a brand, you can create a logo and add it to a QR code with the help of a QR code generator.
#9 Create a Pharmacy website
Once you have defined your brand, and created a logo, think about creating a website to provide online presence to your business. We have listed below some reasons to explain why it is important to have a business website.
- All legitimate businesses have a website.
- Social media platforms like Facebook, and Instagram cannot replace the importance and necessity of a website.
- Website-building tools like GoDaddy Website Builder have simplified the website-building process. You really don’t need to hire a web developer or designer to create your website.
You can also use WordPress, WIX, Weebly, Squarespace, and Shopify to build a website.
#10 Set up a business phone system
You must get a separate phone set up for your business to separate your business and personal life. It also helps you to automate and streamline your business and brings your customers closer to you.
The entrepreneurs who wish to open a pharmacy business should have an interest in supporting the health sector of the neighborhood. They may not have a Doctorate in Pharmacy but must have a good knowledge of how insurance companies and Medicare reimburse pharmacies.
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Frequently Asked Questions (FAQs)
Once pharmacies receive reimbursement from pharmacies, they make a profit of 10-30% on those medicines. If your drugstore has a steady flow of customers and continuous sales, the owner can make $300,000 per year.
You can visit doctors’ clinics, hospitals, clinics, and urgent care centers to spread the word and become a recognized face in the medical community. You can distribute handouts through local newspapers, place ads on radio and television, use direct mail campaigns etc. You can also attend family events, neighborhood programs, road races, etc.
A typical day includes-
- Receiving and filling prescriptions according to FDA regulations
- Inventory medications and place orders to maintain the current stock.
- Place products on display in an attractive and engaging manner.
- Give medical advice to some customers to use their medications safely and effectively.
- Work in collaboration with doctors.
- Forwarding prescriptions to health insurance companies for reimbursement.
- Hire clerks and staff to support you.
- Hire trained technicians who can support PharmD.
- Maintain the pharmacy store.
- Maintain financial records, distribute salaries, work with a variety of vendors.
You must spread the word to the local community that you have started a business, meet doctors, and visit clinics, and hospitals to let them know about your business. You can also distribute business cards, rent a table etc.