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In this article we examine the items needed to open a pharmacy. We also discuss some of the common questions we receive from our clients when starting a pharmacy.
Are you thinking of starting a pharmacy? Knowing the requirements to open a pharmacy helps. The independent pharmacy world offers a lot of opportunities for pharmacy owners. You can be your own boss. No more 60 hour work weeks for a large pharmacy chain. Actually serve customers and help them take control of their health.
This all sounds great but the truth is..it’s a lot of work to start a pharmacy. No matter what you read, it’s a long journey from start to finish. You will encounter issues along the way. For example: City permits are always a pain. Finding a GC (general contractor) who actually cares about your project. Dealing with your state board of pharmacy, oh and expect a lot of delays.
I personally have been involved in opening over 50+ pharmacies across the country. I am writing this article based off of my personal experiences. Remember every state is different and some are easier than others to open a pharmacy.
Some topics covered in this article
What it takes to be a pharmacy owner (what to expect)
Developing a pharmacy business plan
How long does it take to open a pharmacy
How much money is needed to open a pharmacy
Using a pharmacy consultant for your startup
What to expect and what it takes to start a pharmacy
Starting and operating a pharmacy isn’t as easy as most think. There are many items to consider. No longer are you just verifying scripts, but you are also verifying payroll, marketing, inventory and more. Below are some key traits to have if you are thinking about opening a pharmacy.
Patience: If you don’t have patience, don’t expect to be a pharmacy owner. Everything in the independent pharmacy world requires you to wait. The independent pharmacy world is slow and I like to think it’s about 10 years behind any other industry. From insurance contracts to payment processors to government agencies.. It’s slow. Later in this article I will review the time frame to expect to open a pharmacy and trust me it’s longer than you think or read.
Resilience: As you slowly start to open your pharmacy you will think everyone is against you. From the landlord to the bank. Truth is.. they probably are. Community pharmacies aren’t always successful and they take a lot of resilience and dedication to be successful. I’ve had some clients take things personal and you can’t do that in the business world. If the opportunity between you and the bank or another entity doesn’t work out, move on. It’s not worth the time and effort.
Adaptable: The reason I include this trait as a pharmacy owner is simple, you have to be open to change. Most pharmacies start off as simply a retail pharmacy. Retail pharmacy sometimes isn’t enough. A majority pharmacies end up adding compounding, packaging or even specialty to their pharmacy services. These additional services help increase the pharmacy revenue and keep the ship sailing the first few years.
Lets first go over some essential terms needed to create a successful pharmacy operation. Understanding each of these key terms and how they relate to each other will require a bit of research. Be sure you have a solid understanding of these terms before you decide to move forward with your pharmacy. We will cover a few of these items later in the post.
- Pharmacy Systems – Which is best for my services and workflow?
- Location – Is my location clearly visible to potential patients?
- Construction – I need a contractor who is familiar with HIPAA/HITECH regulation.
- Inventory – What’s a good starting inventory to have?
- Financing/loans – How do I secure my loan or do I even need a loan?
- Technology – How can I use technology to better reach my patients?
- Marketing – What works in the pharmacy world in terms of marketing?
Developing A Pharmacy Business Plan
Any savvy business owner will create a business plan for their idea. A startup pharmacy needs a solid business plan that clearly defines the business. You will need to present your business plan to investors, banks and others. Your pharmacy business plan should clearly layout your goals for the pharmacy. For example: Most pharmacies business plans include a mission statement about caring for patients by offering free delivery, one on one counseling and more. Pretty much offer something they can’t get at a large chain pharmacy. Separate yourself and give customers a reason to choose you over a chain.
In addition to the overall goals of the pharmacy there are additional items to include in the plan. Some other items to include in your pharmacy business plan:
Services offered: Is your pharmacy more of a retail community pharmacy that focuses on it’s patients? Perhaps you offer in-home or delivery services with home medical items? There are many different services a pharmacy can offer. We suggest finding out what could the community benefit most from by looking at the competition and demographic in the area.
Financing: In this section you will need to state if you are working with a bank, self financing, etc.. You also will need to layout your total budget and banks usually want these items as line items. Be sure to include your building renovations, contractors, cabinets, drug inventory, technology, marketing etc.. These can easily go over $500k+
Marketing: A good marketing plan is a must for any pharmacy. How you will grow your pharmacy is of interest to investors and banks. What is your plan to acquire new patients and keep them? You can include items like direct mail, signage, grand openings, meeting prescribers face to face and more. Marketing is key to growing your pharmacy and you must have a sound marketing plan for your pharmacy to survive.
Financing options, how much is needed to start a pharmacy?
Starting your pharmacy is going to cost you some money. You need to be able to know how to apply for business loans with banks within the pharmacy industry to get approved. Once you open you will need to speak the language of business. That means understanding your cash flow. Balancing a budget for your pharmacy. Managing expenses and bringing in new revenue to keep your pharmacy breathing.
Obtaining an EIN (Employer Identification Number): Any business needs an EIN to operate a business and hire employees. Be sure to get your EIN from the IRS. You will want to fill out an SS-4 form that you can download from irs.gov
Finding the right bank for your loan: There are few pharmacy specific banks that provide loans to pharmacy owners. The first two off the top of my head are Live Oak Bank and First Financial Bank. These banks know the loan process for a pharmacy start up better than most banks. We recommend you give them a call to discuss a loan for your start up pharmacy.
Don’t expect it to be cheap: You can easily spend at least $450,000 for a small pharmacy. Financiers will request you are willing to add your own cash as well. This tells the loan officer you are serious about your project. Be ready to have your background checked, credit and work history. These banks are dealing with you directly, not a business.
Be prepared for the future
Have your business plan and documents ready: We recommend you are well prepared and ready to submit any document asked. A business plan will be required. This is a well thought out presentation that includes: Projections, projected revenue, all costs associated with your business, how you will make money and more. To obtain a business plan we recommend following this guide from the SBA. You may also reach out to pharmacy advice consultants such as Independent Rx Consulting.
Have enough money to get you through a few years: Most pharmacies will not turn a profit the first year or two. You need to account for this in your loan. Be sure to have enough money to pay your bills, employees, insurances etc..
Location and Market Research is vital
Location of your pharmacy is tied to the success of your pharmacy. I cannot stress this enough. Your pharmacy location must be thoroughly researched. Many pharmacies fail simply because nobody even knew it existed.
Finding the right location: Look for other pharmacies in the area. Are they independents or large chain pharmacies? Just because there is a CVS in the town doesn’t mean there isn’t opportunity. Large chains have plenty of angry patients that are ready to switch for one reason or another.
Medical offices and prescribers: Look for locations near medical offices and other prescribers. Stop in and ask them if they think the community could use an independent pharmacy in the area.
Be visible with access availability: Try to be near busy intersections with clear visibility of the pharmacy. You want people driving by to clearly see your pharmacy and know that they have options. Also consider LED signage if your city allows it.
Research your target audience: Be sure you understand your community and what services they may need. Some communities can really benefit from services such as free delivery or medication synchronization. You can easily pull this information online.
These are just some of the items required in a pharmacy business plan. There are other items to include and you should be as detailed as possible. If you need help creating a pharmacy business plan check out a checklist by NCPA here.
Designing Your Pharmacy & Construction
A very fun but expensive project is designing your pharmacy. This includes the layout, construction and all your fixtures. Everyone wants a nice and vibrant looking pharmacy, while not spending a fortune. The trick is to find the right people at the right prices.
Think about your workflow: How will your workflow flow? This is what you need to figure out before you start designing the inside of your pharmacy. Will everyone pass everything to the left, center or right? Will you have an extra data entry station in the back? Where will your point of sale be located? Don’t forget about drive-thru. Most pharmacy workflows are based on the pharmacy software and technology. We will address this later.
Find a general contractor that actually cares: As a pharmacy consultant I personally have worked with many contractors. I can honestly say about 70% of them are overpriced and inefficient. You will want to ask other business owners who they recommend. Another option is to check with the BBB in your area. Consider the contractors relationship with the city. This is often where delays happen. Some city permits are submitted through your general contractor. If your contractor has a good relationship with the city, your process should move along quicker.
Leave a lasting impression to your new patients
Choose a cabinet company: There are a few pharmacy specific cabinetry companies. A few that I personally have worked with are Pharmacy Design Services and Pharmacy Design Group. A good cabinet company will work with you to come up with a design that fits your workflow and layout space. Often, these cabinetry companies will visit your pharmacy on-site to get a better idea.
Be ready to expect a hefty price tag for your cabinetry. Most pharmacy cabinet projects are at least $50,000 and easily go above $150,000 for larger pharmacies.
Comply with ADA and HIPAA: You will want to be sure your pharmacy is compliant and easily accessible for everyone. We recommend following the guidelines from the ADA checklist here. A great read at The Pharmacy Times here talks about why your pharmacy needs to be ADA compliant.
HIPAA guidelines should also be considered. A good cabinet designer will know these guidelines and apply them to your project.
How Long Does It Take To Open A Pharmacy?
Most people start out thinking it will take a few months to open a pharmacy. Reality is it takes 8+ months or even years to open a pharmacy. Be ready to be delayed by landlords, city permits, insurances, state boards, bank loans and more.
A good piece of advice is do not open until you have ALL of your important contracts. The last thing you want is a new customer to come into the pharmacy just to find out you can’t accept his/her insurance. Odds are that customer isn’t coming back.
You can often research to see which insurance is popular in your area. Do everything you can to have this contract before you open.
Pharmacy Marketing and Designing Your Brand
Just like any other business, pharmacies need precision marketing to reach new patients and prescribers. Most pharmacies think they only need to market to patients and forget about the prescribers who can send you patients! Having a good and trustworthy brand will certainly help. Your marketing goal should be to find and keep loyal customers.
Be sure people know you exist, including prescribers. Have unique and customizable services that will benefit your patients. Let’s go over some key details about marketing and designing your brand.
Pharmacy Name and Brand Design: Choosing a pharmacy name is a lot more difficult than most think. You can choose a traditional name or go for a more modern short name. Take a look at our article on choosing a pharmacy name. Once you pick your name be sure to register your domain with GoDaddy, BlueHost or another Internet domain registrar.
Designing your logo and website: Every pharmacy needs a professional and trustworthy logo and website. We recommend having a professional design your logo and website. Successful pharmacies create and spread brand awareness through professional design. Take a look at some of our logos and websites we have designed for our clients. We would be glad to help you get started with your pharmacy brand.
Marketing for your community
Coming up with a marketing plan for your pharmacy: Before and after you open you will want to have a solid marketing plan. A marketing plan includes different ideas to grow your pharmacy and reach new patients. These can include mailings, social media postings, Google Ads, grand openings and more. Take a look at our marketing plan blog post. A good marketing plan can start a pharmacy off on the right foot. Here are a few ideas for marketing your pharmacy:
- Services – Delivery, Medication sync, medication packaging, MTMs, vaccines, short wait times, travel health etc..
- Staff – Promoting your staff is great way to show how genuine your pharmacy is. If you’re in a small community this is very effective.
- Pricing – Most people think a community pharmacy is more expensive than a large chain pharmacy. Show potential customers it saves to shop local.
Know the community: A great way to market your pharmacy is to be involved in local events. Be sure to check out all local business events in your area, especially related to healthcare. Try to join local city boards and attend meetings in your community. Talk to other business owners to get their perspective on running a business in the community.
Social Media: I’m sure by now you know everyone is on social media. However, did you know you can market on most social media platforms with a small marketing budget? We advise you to take advantage of this, especially on Facebook. Target a radius around your pharmacy address and keep your page updated weekly with organic fresh content.
Pharmacy app: Think about having an app for your pharmacy. A pharmacy mobile app will provide convenience to your patients. Most pharmacy and IVR systems offer mobile app development.
Technology in Pharmacy
Technology is vital to pharmacies. Having the right technology in your pharmacy is very important because your pharmacy revolves around tech. There are many pieces of technology in a pharmacy. For example: Pharmacy systems, automation (robots), workstations, printers, networking devices, IVR systems, internet/phone providers, Point of Sale, delivery routing and more. We invite you to take a look at our Technology Learning Center to learn more about pharmacy technology. Each piece of technology helps shape your pharmacy, lets take a look at some of them.
IVR Systems: An IVR is menu that callers hear when they call into your pharmacy. IVR also allows your patients & prescribers to request refills 24/7. This is very important and many patients and prescriber expect this. Therefore, all pharmacies should have some sort of IVR in their pharmacy. IVR services can also do outbound notifications. For example, when a script is ready to be picked up. The IVR service can automatically notify the patient. Some IVR services work better with certain pharmacy systems. Here are a list of IVR services:
Pharmacy Hardware: When it comes to computers, printers, scanners, tablets etc.. You have a few options. Purchasing directly from the pharmacy system or buying items yourself. If you decide to purchase directly from your pharmacy system, expect to overpay because their equipment is outdated and overpriced. Pharmacy systems make money off the hardware you purchase from them,
If you are looking to save some money however, purchase the equipment yourself. Often doing this will result in newer equipment at a better price. To make it easier for you, we created a list of the popular hardware in pharmacies. Take a look at our list of hardware and pharmacy networking items to save some cash purchasing items yourself.
Note: Certain items for example, the pharmacy server and POS items we recommend purchasing from the pharmacy system.
Reliability and uptime are key
Phone and Internet: Pharmacies utilize both phone and internet services to operate. You will want to make sure you have a consistent internet and phone connection. A backup internet is always recommended because there will be times your internet goes down. Another item to mention is VOIP phone services. VOIP is newer technology allowing phone calls to go through the internet. VOIP often has much lower prices than traditional phone services.
Be sure you get a good rate on both services. Take a look at our free pharmacy internet and phone search here. We developed this page for pharmacy owners to receive discounted rates from all major phone and internet providers.
Security: A must have in any pharmacy is security. Therefore, we recommend having cameras and alarms in all pharmacies. Most states require an alarm system but cameras are optional. Alarms and cameras these days are controlled and viewed on your smart phone. They don’t cost an arm and a leg anymore. We have partnered with most major alarm companies in the country, feel free to contact us here. We will make sure you are not overpaying and you have the right alarm system.
Which Pharmacy Systems should I use?
Choosing the right pharmacy system is a long process full of demos and research. You may be going to pharmacy trade shows and seeing amazing booths and tons of freebies. That’s all great, but what really matters is how the software helps you reach your pharmacy goals. Don’t be fooled by flashy new features, do your research and choose the right pharmacy software for your business. Remember, we are also here to help you with choosing a pharmacy system for your pharmacy. Below we take a look at some items to consider when choosing a pharmacy system.
What are your offered services?: A pharmacy system you choose should have modules for all of your services. For example, if you plan on offering compounding and mailing, be sure your pharmacy software offers great modules for these services. Some pharmacy systems have better modules for certain services than others. We recommend talking to other owners and asking them their opinion.
Spend a week on demos: Take a full week and demo 4-5 different pharmacy systems. Learn and ask questions about each product. Remember to have your workflow in mind and how this software can help make it more efficient.
Learning curve: How long does it take to train a technician or pharmacist on the software? I personally can tell you some systems are so robust it will take you 4-6 months to fully understand. However, some systems you can learn in a few days. Do you plan on having multiple pharmacies? If so, perhaps a easier and simpler system is more appropriate for training purposes.
Be sure to include future growth when evaluating
Mobile: Does the pharmacy system offer mobile functionality? Can you access your pharmacy system on a laptop from a health fair or a physicians office while you are working a flu clinic? How about mobile payments at their front door during prescription delivery? Speaking of delivery, some pharmacy systems can actually map your delivery route for you.
What training is available?: Every pharmacy system should offer some sort of training on their system. Some will come on site to your pharmacy while others will offer training over the phone.
Point of Sale system: One aspect of pharmacy software that is always overlooked is the POS system. The pharmacy system should have a clean, straight to the point POS system with great reporting. There are some really terrible POS systems out there, make sure you ask to see the POS system for any software you evaluate.
Which system to choose? Here is a list of some pharmacy systems available for start up community pharmacies. We are available to help you choose which system, feel free to contact us. We are pharmacy owners and have installed and worked on most systems available to independent pharmacies.
|Best RX||Enterprise RX||HBS|
Start the hiring proccess
If you’re at this stage congratulations! You’re almost finished and can open your pharmacy soon. It is important to hire the right employees for your pharmacy. There are rules involved with hiring and you want to make sure you stay within those rules. Get advice on tax forms, government regulations and insurance requirements before you start.
Perhaps you have some experience hiring employees at your previous job, that is great. However, as you may know hiring is an art form. Your first employees should be excited about the start up pharmacy. Lets explore some hiring requirements and tips.
Register with your state labor department: This is a requirement for any employer hiring employees. Once registered you will have to pay state unemployment compensation taxes. Your payment goes to your states compensation fund for unemployment. Check out the Department of Labor’s page for a list of state unemployment insurance tax agencies.
Workers’ Compensation : Another requirement is workers’ comp in most states. This protects workers from on the job injuries.
Patients are an employees priority
Post a job description online: This is always a challenge for most pharmacy owners. You don’t want to forget anything in a job description. Therefore, you should write a detailed job description for your pharmacy. Most independent pharmacy employees wear many hats unlike the large chains, be sure to include as much as possible in your job post. Here is a great guide on writing job descriptions for business owners.
Interview your potential team members: Before you meet the applicant in person have a 10-15 minute phone call. During this call make sure they meet the basic requirements and listen to their phone etiquette. During the in-person interviews be sure to ask the right questions. Ask about their history in pharmacy. What are their strength and weaknesses? Be sure to emphasizes patients come first in community pharmacy.
In the interview process determine if they will be a good fit with you and your team. Making sure employees work good together is probably the most important factor.
You’re Not Alone in your Journey
Pharmacy consultants are great resources. Consultants have experience opening their own pharmacies or helping others. A pharmacy consultant helps you make accurate business decisions. They should be able to tell their clients to pursue or walk away from opportunities.
Pharmacy consultants offer a variety of services. Including location analysis, inventory management, loan consulting, business plans, market analysis, lease negotiations and more. Consultants can often save their clients thousands through their partners/vendors. Consultants receive better deals from vendors and this deal gets passed along to their clients.
If you are considering a pharmacy startup you should consider our Start A Pharmacy Package where we come onsite to your location to setup your pharmacy. I also recommend you check out our article on hiring a pharmacy consultant.
As stated in the first paragraph, opening a pharmacy is hard work. You will have ups and downs before and after you open your pharmacy. It often takes 1-2 years for an independent pharmacy to break even. If you are determined enough and willing to put in the hours your pharmacy will be a success. Keep in mind there are tons of resources at your disposal including books, consultants, blogs, workshops and more.
The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only.