As the world of independent pharmacy continues to grow and evolve, pharmacists have an exciting opportunity to become pharmacy owners. Instead of working alongside chains or underneath other professionals, pharmacists can open a practice and grow on their own.
Our comprehensive guide makes opening a pharmacy easy. We offer step-by-step instructions on what to do and when to do it — providing you with the information and resources you need to open a pharmacy that serves your patients and your pocketbook.
Our guide to opening a pharmacy breaks down into 3 overarching phases:
If you want to open a pharmacy business, start by doing your research. First, consider whether you’re ready for all that ownership entails. Ask yourself the following questions:
Once you determine your personal readiness, you should consider your financial readiness.
On average, it costs between $400,000-$600,000 to open a pharmacy business.
You should also consider the time commitment involved in the process, which can take anywhere from 1-2 years from start to finish.
Despite the high start-up costs and time investment, you should keep in mind that independent pharmacies have a high-profit margin, with an average of profit margin of 21.8%. This makes owning a pharmacy a potentially lucrative business venture.
If you decide you'd like to open a pharmacy business, you can move to the planning phase. Research the demand for pharmacies in your area and the demographics of its patients. Also, look into small business data and trends to get a better understanding of the industry.
Read articles, watch videos online, and reach out to pharmacy owners in your area for advice. By thoroughly researching the details of how to open a pharmacy, you can set yourself up for success.
When you decide to open a pharmacy business, you should have a team of people who can support and guide you in the process. Consider consulting the following:
Pharmacy associations — Organizations like the National Community Pharmacists Association (NCPA) can connect you to a network of other retail pharmacy owners.
Financial advisor — A financial advisor can help you determine how to fund your pharmacy business, including loans, credit, and more.
Insurance agent — An insurance agent can help you understand which policies and protections you need to open a pharmacy, such as general liability coverage, business property coverage, and data compromise coverage.
Legal advisor — An attorney with experience in health or pharmacy care can help you understand the rules and regulations for owning a small business and ensure that you are in compliance with local ordinances.
Other community pharmacists — Other pharmacists in your area or online can provide you with personalized advice and mentorship.
Pharmacy consultant — A pharmacy consultant can help you meet federal and state requirements, obtain necessary licensing and accreditation, and provide customized solutions for your pharmacy's needs.
"Having knowledgeable pharmacy advisors on your team before starting or buying a pharmacy is paramount to optimize your success. The right team will consist of a knowledgeable CPA and bank with experience in pharmacy, a healthcare attorney, and a wholesaler. The downside risks are too great to go down the path of ownership without the right team."
With the help of your advisors, begin to draft a comprehensive business plan.
Your business plan should lay the foundation for your pharmacy and help you to establish your long-term trajectory. Make sure to include the following details:
Executive summary — A brief overview of your pharmacy, including your mission statement, products and services, location, and team structure.
Company description — Detailed information about your pharmacy, including the problems it aims to solve and its unique advantages.
Market analysis — An analysis of your target market, competitors, and trends in the industry.
Organization and management — An outline of pharmacy managers, partners, or leadership investing in your business.
Service or product line — A list of the specific goods and services your pharmacy will offer.
Marketing and sales — A plan for attracting and retaining customers, including strategies for closing deals and making a profit.
Funding request — If seeking financial support from a bank or other third party, outline the amount of funding needed for the next five years and how it will be used.
Financial projections — Forecasted income statements, balance sheets, and budgets for the next five years, matching the funding request if applicable.
Appendix — Supplementary information not included elsewhere, such as legal documents, contracts, credit histories, and letters of reference.
Starting your own pharmacy is an expensive venture, but it is also a valuable investment.
When deciding on how to fund your business, there are several options to choose from.
As you consider each option, make sure to consult your team of advisors (particularly your financial advisor) so that you can make the right choice for your pharmacy.
Self-funding — Self-funding allows you to leverage your own financial resources, giving you the greatest amount of freedom and independence. Because you aren’t indebted to a third party, you have the ability to make your own decisions and spend your money how you choose. Self-funding can come in several forms: using your savings, asking friends and family members for capital, or tapping into your 401(k). On the other hand, self-funding can be risky — so make sure that you have a plan to prevent financial loss.
Investors — Investors can help you kickstart your business with venture capital investments. In exchange for funding, investors hold a share in your pharmacy and play a role in making business decisions. Investor funding reduces the chance for debt but also requires you to relinquish some control. For some pharmacies, investor funding is worth it; for others, it isn’t. Decide what matters to you and your business model.
Small business loans — Small business loans are the most common way to fund a pharmacy. Third-party bankers can provide you with the funding you need, without asking you to give up a share of your business. However, loans can be difficult to get approved — so make sure that you have a comprehensive business plan ready to present to the bank. Your business plan should include financial projections, estimated spending, and a detailed plan of how you plan to pay off your debt.
With your financial matters out of the way, turn your attention to finding the right location for your pharmacy.
Whether it be a stand-alone store in a small town or a clinic in a big city, picking the right location is essential to running a successful business.
With this in mind, you should spend time researching your area, visiting potential sites, and considering which area would best reach your patients.
As you start your search, consider the following factors:
Demographics — Who lives in the area? Who will be your customer base? Factors like age and socioeconomic standing can help determine if your services are needed in the community and if your pharmacy will be profitable. Pick a location that reaches your target market and that will generate enough traffic to help your business succeed.
Physical location — What kind of structure should you have? Depending on your needs, you can open a pharmacy in a variety of places: an independent building, a shop in a strip mall, an office in a medical or professional setting, etc. Choose a location that can easily accommodate your patients and staff, and that gives you room to grow.
Visibility and ease of access — Will it be easy to spot and easy to reach? Your location should be situated in a populated area that patients can easily get to. Avoid hidden corners, obstructed views, and heavy construction. Instead, choose a location that will attract a wide range of people — even those that are just passing by.
Traffic — Will traffic be an issue? While you should aim to pick a populated place to start your business, too much traffic can be a deterrent. Aim to find a balance: with enough people to notice your pharmacy, but not too many to limit access to it.
Competition — Where are your competitors? Although it may seem like a smart decision to stay far from your competitors, experts agree that you should actually pick a location near them. Areas that have several pharmacies nearby already have the demand and traffic necessary to stay in business. When you move in, you simply need to provide better service to get potential customers to switch to you.
Before you can open a pharmacy, you will have to complete a fair share of behind-the-scenes work: filling out paperwork, applying for permits, and perhaps most importantly, completing licensing and legal requirements.
These requirements can be confusing, so call on your advisors to help walk you through them. Here are just a few that you will have to meet:
State pharmacy license — The first step to opening your business is applying for a state pharmacy license. Your state license will grant you all of the rights and responsibilities needed to treat patients. Every state is different, so find out what yours requires.
National Provider Identifier (NPI) number — An NPI number, which is granted through the National Plan and Provider Enumeration System (NPPES), is a 10-digit code that is unique to your pharmacy. It is used by the federal government for identification purposes. Apply for your NPI number early in the process of opening your pharmacy.
Drug Enforcement Agency (DEA) number — A DEA number allows you to fill prescriptions for patients, and it is used by the federal government for regulation purposes. To be able to dispense drugs, apply for a DEA number as soon as possible.
National Council for Prescription Drug Programs (NCPDP) Provider Identification Number —The NCPDP issues 6-digit identifying numbers to pharmacies in order to streamline transactions with third-party providers. A Provider Identification Number is essential to running the billing side of your business — so apply for one early on.
Medicare Provider Enrollment — To treat patients with Medicare, pharmacies must complete Medicare Provider Enrollment. Upon completing enrollment, you will receive a Provider Transaction Access Number (PTAN) to use in your pharmacy.
Any additional licensing requirements in your state — Some states require additional licensing before allowing you to open your pharmacy. Consult your state’s requirements to ensure you’ve met them all.
Employer Identification Number (EIN) — In accordance with the IRS, you must obtain an EIN before you can open your pharmacy. The EIN is a 9-digit number assigned to businesses for the purpose of identification. Apply from the IRS website.
Get insurance coverage — To protect your pharmacy from unforeseen circumstances, it is necessary to get insurance. Many types of coverage are available, including general liability, professional liability, and employment practice liability insurance. Talk to your insurance agent to find out which policy is right for you.
Get a pharmacy bank account — In order to process direct funds and reimbursements, you must open a pharmacy bank account. Make sure that all of your account information matches that of the EIN.
Any additional legal requirements in your state, county, or city — Different areas maintain different business requirements, so contact your local ordinances to make sure that you have completed all of the necessary legal steps.
The most important piece of technology you can buy is a pharmacy software.
Your software system manages every aspect of your business, so it should be as innovative and industry-changing as your new pharmacy.
Above all else, your pharmacy software should simplify your work while allowing you to provide the most comprehensive patient care possible.
For more information, read our blog on How to Choose a Pharmacy Software.
Once you have finalized your business plans, picked and purchased your ideal location, and met all of the necessary licensing requirements, you can begin the hands-on work.
When you move into your new pharmacy, begin by buying all of the necessary supplies and equipment to get up and running. Then, move to setting up your store.
To help you get started, here are some of the things you should include on your shopping list:
Inventory — Most of the supplies in your pharmacy will be prescriptions, so keep an up-to-date inventory of all of the drugs you need. Partner with a wholesaler who can get you discounted rates, flexible payment options, and fast delivery.
Furniture and fixtures — Personalize your pharmacy and help your patients feel at home with furniture and fixtures. Taking the extra time to decorate and design your pharmacy will make a difference in setting the right atmosphere.
Technology — Most of your pharmacy will run via technology, so be sure to get the fastest and most efficient systems possible. Pieces of technology to consider are an automated dispensing system for easy prescription filling, a mobile app for ordering and inventory, and a point-of-sale system for streamlining transactions. Check what is already included and integrated in your pharmacy software, as well.
Equipment — To dispense medications and provide clinical care, you will need to have several pieces of equipment: tablet counting machines, liquid dispensers, autoclaves, mortars and pestles, compounding slabs, and testing equipment are just a few examples. To serve patients on the front end of your pharmacy, you will need equipment like cash registers, credit card processors, printers, and scanners. Automation in your pharmacy is also a great way to increase efficiency.
Once your supplies have been purchased and delivered, set up your store in a way that works for you.
Experiment with workflow in the back and decide how to make transactions in the front. Set up your equipment, install your technology, and hang signage to get started. Then, organize your dispensing area, optimize your clinical area, and stock your shelves.
However you choose to go about it, make sure that the setup of your pharmacy enables you to work effectively and efficiently.
“Choosing the right pharmaceutical distributor is critical to your pharmacy’s success. Here are 10 essentials you should expect from your primary drug wholesaler:
1. Fully licensed to serve your state(s).
2. “Full-line” distribution at competitive pricing across all drug classes of brand and generic pharmaceuticals, OTC, and Home Health Care products.
3. Authorized Distributor of Record (ADR) with the pharma manufacturers or authorized entities.
4. NABP-accredited to verify good standing, meeting best practices criteria for pharma distributors.
5. Capable of meeting upcoming regulatory requirements of the Drug Supply Chain Security Act (DSCSA).
6. Providing control-drug compliance monitoring and auditing for today’s regulatory environment.
7. Offering guidance and solutions for 340b pharmacy.
8. Personalized account management – having a dedicated, experienced, field professional assigned to you who understands your objectives and cares about your pharmacy’s success.
9. Personalized customer service – having immediate phone access to experienced in-house support-professionals to help with ordering or other issues.
10. Providing other programs or services to enhance pharmacy profitability and competitiveness.
Beyond the essentials, which primary drug wholesaler you partner with will much depend on your ownership / management style and how much control you want over your drug spend and operations. There are several reasons Morris & Dickson can be a great match for independent pharmacy owners. Because we’re independently owned, we answer only to our customers, not to investors or shareholders. We can be nimble and flexible, addressing issues quickly by empowering our unmatched field professionals to make on-the-spot decisions, without bureaucratic red tape and delays. We’re easy to work with and respect your independence. And we’re a trustworthy partner — free of contracts, GCR requirements, and restrictive group affiliations.”
One of your final — but most important — tasks is to hire a team of pharmacists, technicians, and other pharmacy staff who can help you create the pharmacy you dream of.
To start the process, consider how you want your team to run. Generally, it is best to appoint a pharmacist-in-charge (who can be you, or a hired professional), along with pharmacists, technicians, and clerks.
Think about how many team members you want in your pharmacy, how much you are willing to pay them, and how you can attract them to the positions.
Once you decide to start hiring, let the community know: list openings on job-hunting sites like LinkedIn, Indeed, and Glassdoor; advertise on social media; contact local pharmacy schools; and spread the word in your day-to-day conversations with other professionals.
When interviewing candidates for the job, don’t just look at their education and experience — but consider their knowledge, their warmth, and their passion for advancing the field of pharmacy.
In addition, think about how they will fit in with your pharmacy, interact with your patients, and help you fulfill the mission you have set for your business. Ask the following questions to help you decide:
What does community pharmacy mean to you?
What is your strategy for treating patients?
What is the biggest challenge pharmacists face?
Where do you see the future of pharmacy?
What sets you apart from other candidates?
As you put together your team, make sure to set aside proper time for training: generally, starting several weeks before you open offers time for new staff to get to know you, your pharmacy, and your expectations.
During training, make time to connect with your team and strengthen your pharmacy from the inside out. It will make a difference.
Hiring the right people for the right seats in the pharmacy isn’t just important…it’s EVERYTHING! While we’d all love for hiring to be a ‘science,’ the hard truth is that it’s more an ‘art.’ However, when owners, leaders, and managers get clear on the mission, vision, and values of the business, it becomes easier to hire for alignment. When you have alignment, the team can be unstoppable, performance accelerated, and business results exponentially improved. Leading then becomes joyful… what a gift!”
With all of the decisions made, the details decided, and the team assembled, your final step before opening up your pharmacy is marketing to your community.
In this final step, your job is to spread the word about your up-and-coming business, get the conversation going, and make potential customers excited about the future.
As you work to create buzz around your business, try incorporating a few marketing tips:
Use traditional advertising methods — Consider purchasing billboards, putting out signs, and sending out flyers that promote your pharmacy. This is one of the best ways to advertise to your local community, without added stress or hassle.
Use social media — In the digital age, social media is a powerful tool to market and grow your business. Take your pharmacy to the next level by creating accounts on your favorite platforms. Post routinely, engage with followers, and promote your business accordingly. As you gain traction online, you will gain customers in real life.
Make a website — In addition to marketing on social media, you can advertise your pharmacy online by making a website. Almost all small businesses, including pharmacies, need a website — so kickstart the effort before your pharmacy even opens. It will help future patients learn more about you and what you can offer them.
Use local directories — Online directories are a powerful way to help people in your community find you. Simply add your pharmacy to a directory of pharmacies in your area, along with a bit of basic information, so that patients know where to find you. One of the most widely used examples of this is a Google My Business profile.
Talk to people — Get into your community and have conversations with the people around you. The main advantage of community pharmacy is being able to receive personalized care, so give your (future) patients a dose of it by talking to them, getting to know them, and showing them how your pharmacy can benefit them.
"One of the biggest marketing struggles any new pharmacy faces is findability. It is crucial that your marketing be focused on helping people first find you - then learn about your offerings. Especially since you are competing against established pharmacies that have been around for years and have built both an online and community presence."
After many months (or even years) of hard work, your pharmacy is finally ready to open. Congratulations! Take the time to recognize your accomplishments and celebrate with your team — and then get ready for opening day.
For best results, host both a soft opening and a grand opening.
To work out any kinks in your system, and to ensure that your grand opening runs as smoothly as possible, first plan a soft opening.
This opening should happen several weeks before you officially open your door to customers. For your soft opening, invite a few patients — including family, friends, and other community members — into your pharmacy to test things out.
Operate your pharmacy as you plan to in the coming weeks: fill prescriptions, offer clinical services, and sell OTC products. Give your patients time to get to know you, your team, and your services.
Give advice, answer questions, and most importantly, ask for feedback. Use the suggestions that customers give you to help prepare for your official opening.
The final step is also the most exciting one: opening your doors.
On the day of your grand opening, be excited and be enthusiastic — at long last, you have reached your goals and achieved your dream.
Your grand opening is a celebration, so treat it like one: buy snacks and refreshments, bring in live music, and set out games and activities for your patients to enjoy.
Up to this point, you have done your fair share of preparation: preparing your business, preparing your team, and preparing your customers. Now, though, it is time to prepare yourself to be an owner.
For your patients, prepare to give high-quality, personalized care. For your team, prepare to offer leadership and encouragement.
And, for yourself, prepare to have the day — and run the pharmacy — you have always imagined.
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