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A Step-By-Step Guide to Starting an Independent Pharmacy 

How to Start a Pharmacy by Elements magazine |

November 19, 2019

Inside: Learn how to tackle financial challenges and regulatory mazes to get your independent pharmacy up and running. 

It’s one thing to have an idea to open a pharmacy, but it’s something else entirely to get the ball rolling. If you’ve never run a business before, opening an independent pharmacy may seem like an unachievable dream, but there are concrete steps that you can take to turn that dream into a reality.

Before you open your doors, you’ll have to make critical financial decisions and cut through layers of red tape. But even if the idea is intimidating, it’s not impossible.

Follow these steps to get your independent pharmacy off the ground.

Step 1: Write a Business Plan

Before you can start your business, you have to define it. Writing a business plan will help you refine what your pharmacy’s business is going to look like.

It will start with big-picture elements, like your vision statement and mission statement. A vision statement is a short, aspirational statement that defines why your business exists. A mission statement is longer and more specific. It lays out the ways you plan on accomplishing your goals.

After these broader elements, you’ll get down to brass tacks. In your objectives section, you’ll set specific parameters for your success. For pharmacies, these goals might be:


You’ll also want to perform some market research. The demographics of your community, economic factors like unemployment, income statistics, and more will determine if your pharmacy will be viable.

At this point, you’ll also want to be thinking about your pharmacy’s name. A few things to think about before you decide:


RELATED: Here Are the Best Pharmacy Names to Name (or Rename) Your Business

Step 2: Secure Funding

If you don’t have all your start-up funds sitting in your bank account, don’t worry: you can look outside your own pockets for funding.

Most independent pharmacies are eligible for loans backed by the U.S. Small Business Administration. These loans come from individual lenders (not the SBA itself), but the loan is partially backed by the administration to reduce the risk for the lenders.

Preparing an SBA loan application can be complicated, but the good news is that you already have your business plan done, which will be required for your application.

Additionally, you will have to write a statement of purpose that outlines how much money you’re seeking, the purpose of the loan, the terms of repayment, and any available collateral.

You’ll also have to get into the weeds with your pharmacy’s financials. For a brand new business, your SBA loan package will require:


The reason you have to include a personal financial statement is that SBA loans do require owners to have equity in their business. Even if you’re planning on relying on a loan, you’ll also have to invest some of your own money in the pharmacy.


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Step 3: Decide on a Structure

The business structure you choose can have a massive effect on your pharmacy. It determines several important things:


While there are quite a few business structures to choose from, independent pharmacies tend to fall into one of three categories: S corporation, C corporation, and limited liability corporation (LLCs).

S Corporation
According to the 2019 NCPA Digest, 59 percent of pharmacies organize as an S corporation. Filing as an S corporation offers owners protection of their personal assets, and these businesses don’t have to pay federal taxes at the corporate level.

 C Corporation
Ten percent of pharmacies organize as a C corporation, which offers the same personal protection as an S corporation but runs the risk of being taxed twice—when the pharmacy makes a profit and again when dividends are paid to shareholders.

Another 26 percent of pharmacies file as LLCs. In most cases, owners are protected from personal liability, but they’re also considered self-employed and must pay self-employment taxes. They also are “limited” in the sense that if a member leaves the LLC, it might have to be dissolved and reformed with new membership.

Step 4: Find a Location

Where your pharmacy is located can have an outsized effect on its future profits. If patients have to drive 15 minutes off their normal route to pick up their prescriptions, they might decide to settle for the chain pharmacy that’s closer to them, even if they don’t get the same great level of customer service.

Take your time finding the right spot instead of settling for the first space that seems like it could fit a pharmacy. Neighborhoods with these characteristics can set you up for success:


Even if you nab a space in a neighborhood with all these characteristics, it may not be right. The storefront should have high visibility, to remind patients of you every time they pass by. It should also have a spacious parking lot (ideally with room for a drive-through) and an interior that can fit all your inventory with room for growth.

Step 5: Register Your Pharmacy

At its simplest, registering your pharmacy means registering your business name with state and local governments. When you do this, you prevent someone else from opening a business with the same name in your state.

If you’ve chosen to structure your pharmacy as an S corporation, you also have to file Form 2553 with the IRS to make it official.

Right after you register your business, you need to get a federal tax ID number, or Employer Identification Number (EIN). You’ll need this to open a bank account for your business, pay taxes, hire employees, and apply for business licenses. You also may need a state tax ID if your pharmacy is required to pay state-level taxes. The requirements for this vary from state to state.

In order to do business, you’ll also need to obtain a pharmacy retailer license. The requirements for this are determined by your state board of pharmacy. You’ll also be required to have:


Step 6: Open a Business Bank Account

As the owner of an independent pharmacy, you need a business bank account to keep from mixing up your personal and business finances. At the very least, you’ll want to start with a business checking account, but you should also consider opening a savings account, credit card account, and a merchant services account for your pharmacy.

Business bank accounts can come with a lot of fees, so the SBA says you should consider these factors when opening your checking or savings account:


A merchant services account allows you to accept credit and debit cards from patients, and they can come with a whole extra set of fees like transaction fees, monthly minimum fees, and more.

Step 7: Insure Your Pharmacy

While your business structure should protect your personal property from business liabilities, insurance is necessary to fill in the gaps. You’ll probably need a few kinds of insurance to keep your business running smoothly.

Professional liability insurance is a must for a high-risk business like a pharmacy. It protects you from the consequences of mistakes like dispensing the wrong drug or the wrong dose.

If you have employees, you’re legally required to protect them with workers’ compensation. That means if an employee is injured on the job, they can get all the care they need without draining your business bank account.

You’ll also need property insurance whether you rent or own your property. This will protect your inventory in case it’s destroyed in an accident.

Step 8: Find Your Team

The average independent pharmacy has around eight non-owner employees, according to the NCPA Digest. While you might not start out with that many, you probably won’t be going it alone. Before you open your pharmacy, you have to put a great team in place.

A detailed, accurate job description is crucial in attracting people who are up to the task. If any requirements, licenses, or certifications are required, make sure they are listed so only the most qualified candidates apply.

When you bring people in for an interview, standardize your process to avoid any unintentional bias in hiring.

After you’ve decided who to hire, do a little research on them. This doesn’t have to mean conducting a full background check (although you could), but certainly call previous employers to make sure they come highly recommended and check out any public social media profiles.

RELATED: How to Hire Great Non-Pharmacy Employees

Step 9: Secure Suppliers

The bulk of your inventory costs will come from prescriptions, so it’s important that before you open your pharmacy, you’ve established a beneficial relationship with your primary and secondary suppliers.

A primary wholesaler should not only offer you competitive prices every single day, they should also offer you attractive discounts and rebates, good payment terms, and fast delivery.

In the case that your primary wholesaler doesn’t have what you need, you’ll need a reliable secondary supplier waiting in the wings. Since there are many fly-by-night suppliers offering deep discounts on potentially suspect drugs, you should make sure your secondary supplier is VAWD-accredited and HDA-certified.

Joining a buying group like ProfitGuard® can make establishing these supplier relationships a breeze. ProfitGuard does all the negotiating to make sure you get the best possible contract terms with your primary wholesaler and offers access to PBA Health’s warehouse as a quality backup supplier.

Step 10: Start Your Marketing Engines

As opening day approaches, you should start a marketing campaign to get your name out there. Work on creating a brand, including:


You should also set up your web presence. This isn’t only your website, but social media accounts for the pharmacy, too. You also need to set up your business on review sites like Google, Yelp, Foursquare, and others to help new patients find your pharmacy.

RELATED: How to Get Five Stars From Review Websites

The pre-opening marketing campaign you undertake will depend on your community’s demographics. If you have an older clientele, traditional marketing channels like direct mail, newspaper advertising, and radio campaigns will serve you well.

If you’re targeting younger patients, you’ll need to make your marketing efforts digital. Social media advertising and email promotions are more likely to catch their attention. Preparing a mobile app tells young patients that you are convenient and easy to work with.

Final Step: Open Your Doors!

After months of legwork, you’re finally ready to open your pharmacy! Do something to celebrate.

You could throw a grand opening party and invite community members into your pharmacy to see what sort of products you have on the shelves and what services you offer at the pharmacy.

Print out promotional materials about any special offerings you have, like pet medicine or immunizations. You can also hand out coupons or offer other discounts to entice people back into your store after your opening event.

Even though you’ve poured all your effort into getting the pharmacy to its opening day, the real work is just beginning. Don’t lose focus on the real job of making your community a healthier place.


These Are the Most Important Pharmacy Metrics to Measure

This white paper includes 30+ formulas to calculate the most important metrics for independent pharmacies. You’ll learn to think like a retailer, discover the methods to track and measure meaningful pharmacy metrics, and learn ways to use pharmacy metrics to get insight into business performance.

Get the free white paper. 



An Independently Owned Organization Serving Independent Pharmacies

PBA Health is dedicated to helping independent pharmacies reach their full potential on the buy side of their business. The company is a member-owned organization that serves independent pharmacies with group purchasing services, expert contract negotiations, proprietary purchasing tools, distribution services, and more.

PBA Health, an HDA member, operates its own VAWD-certified warehouse with more than 6,000 SKUs, including brands, generics, narcotics CII-CV, cold-storage products, and over-the-counter (OTC) products.

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