Open a Drug Store

Owning a drug store can be a rewarding and profitable endeavor for someone who wants to provide a valuable service to a community. However, opening an independent pharmacy is a challenging process. There is market research to do, financial arrangements to make, licenses to get, staff to hire, and much more. Before trying to open a drug store, make sure you educate yourself extensively on what this will entail.

Steps

Conducting Market Research

1. Decide whether you will build a new pharmacy or buy an existing one. When opening an independent pharmacy, you have two choices: either build one from scratch or buy an existing one. There are different opinions on which option is better. Each choice has unique challenges and advantages that you should weigh carefully before making a decision.
   • Buying an existing pharmacy. With this option, you'll get a pharmacy that has already been established and has a consumer base. You may also be able to keep some of the staff that worked in the previous pharmacy, which will save time searching for employees later. However, it will most likely be more expensive to buy an existing pharmacy. You'll have to get a bigger loan, find more investors, and wait longer before you start turning a profit from your business.
   • Building a new pharmacy. This option is often cheaper than buying an existing business. With fewer financial arrangements to worry about, you can open the store faster. However, you'll be starting from scratch with customers, so earning a profit may take longer. You'll have to advertise extensively, preferably before your store opens, to make sure you have enough customers to keep your business afloat. It may take a while before enough people know your store to give you a consistent profit margin.
2. Analyze the local community. This will give you an idea of what sort of services your pharmacy should offer to set it apart from others. Spend some time talking to local residents about their healthcare needs. This way, you'll see if the local population has any unique needs that your drug store can cater to. By tailoring your services to the local community, you can successfully compete with chain stores that don't offer specialized services. Government agencies or chambers of commerce can often provide this type of information.
   • Determine demographic information that may affect your business. For instance, if the neighborhood has a large elderly population, you may want to consider catering towards geriatric needs.
   • Look at the economic state of the neighborhood. If the area is economically depressed, you'll have to keep your prices low to attract customers. This will also help determine the cost of owning a business in the area. If the area is affluent you may be able to charge more money, but you'll also probably pay more in rent, taxes, fees, etc.
   • Pay special attention to if an independent pharmacy recently closed in the area. If you can, investigate why it closed. You can find out what mistakes this owner made that you can avoid, or it may be a sign to avoid an area altogether.
3. Decide on a location for your pharmacy. One of the most important aspects to any successful business is location. When investigating a location, there are numerous things you'll want to keep in mind.
   • What is the competition in the area? If there are several chain pharmacies within a few blocks, you'll have a tough time building your business. It isn't impossible, however. Independent pharmacies can compete with chains if they offer better service or a higher level of expertise than these competitors. You will, however, have to work much harder to build a successful pharmacy if there are chains close by.
   • Is the area visible? Will people walking or driving by be able to notice your pharmacy? This is crucial for when you are just starting out, so you'll want to pick an area that is visible to the local population.
   • Look for nearby businesses. Office buildings and businesses are not only a potential source of customers, but also an indication if the area is good for business. Large chains like McDonald's usually conduct extensive research on a location before opening. If there are some of these nearby, it means other businesses have marked this as a profitable area.
   • Consider the accessibility of your store. It would be good if you had room for a parking lot or there was abundant street parking. Since many of your customers may be elderly, you'll also want an area without stairs or long walks. Do not forget to consider accessibility for those with disabilities as well. The Americans with Disabilities Act (ADA) website can provide additional information.
4. Talk to other businessmen and independent pharmacists. Running a small business is always challenging. It can be both reassuring and informative to talk to others who have been in your position. Meet with other businessmen and independent pharmacists and ask if they have any advice to offer. While independent pharmacists in your immediate area might not be willing to share secrets, you can join national organizations and talk with other professionals, who are not in competition with you, and get valuable advice. Click here for a list of national pharmacy organizations that you can join.

Financing Your Drug Store

1. Find an accountant. A good accountant is crucial for a small business' success. Acquiring the capital to start a business and managing the business' finances will be a challenge, so you'll need someone who is experienced to guide you through the process. An accountant not only helps you with taxes and balances your books- he will also be your financial adviser and counsel you on business decisions. Therefore, you'll want to hire someone you can trust. There are many things to consider when looking for an accountant.
   • A personal referral is usually the best way to find a reliable accountant. Ask other local small business owners who their accountants are and if they're satisfied with their work. You could also see if your local Chamber of Commerce hosts networking events for small business owners where you could connect with potential accountants.
   • Schedule an appointment with potential accountants. Most accountants will offer a free introductory meeting for potential clients. When you compile a list of candidates, meet with them and discuss their experience and qualifications to see if they would be a good fit for your business.
   • Find out if a candidate has experience working with a small business and in the medical field. Small businesses and pharmacies have unique needs, and you'll want someone who has worked with small businesses and pharmacies or other businesses in the medical field before and understands how they work.
2. Develop a business plan. Before obtaining a loan or finding investors, you'll need to develop a plan for your business. You will then present this plan to potential investors to attract capital to start your business. With the help of your accountant and any other financial/legal advisers you may have, draw up a plan for opening and growing your business. A good business plan should at least do the following.
   • A description of the service your business will offer. Does something set you apart from other drug stores? Will you cater to a specific niche? Investors will want to see this description to determine if your business will offer the kind of service to make it profitable.
   • A projection for the profitability of your business. What are projected annual earnings for your business? How long will it take for you to begin earning a profit? Where will your business be in the next few years? Long-term calculations are important to show investors that they will earn a profit if they provide you with the necessary capital.
   • A full breakdown of your costs. Exactly how much capital do you need to open this store? Include rent, legal fees, advertising costs, renovations, and anything else that will go into opening your store. Also include an amount needed for day-to-day operations. Pharmacies typically take several weeks to get money from insurance companies for the prescriptions they sell, so you'll need money to cover your expenses until you receive this revenue.
   • The money you've already acquired or will be putting down yourself. Investors and banks will usually want to see that you've put down money yourself for the business. This can vary, but it is usually around 20%.
3. Apply for a loan from the bank. Bank loans can cover a few months to few years of your pharmacy expenses, depending on the type of loan. Present your business plan to your bank while applying for a loan. A well-drawn out business plan will demonstrate to the bank that your drug store will be a sound investment, and it will be willing to grant you a loan. Also remember that the bank will probably ask more questions about the business in addition to what is in the business plan, so be prepared to fully explain the business and your own finances.
4. Find private investors. In addition to bank loans, you can find private investors to cover the opening and operating costs of your business. These can either be friends or family, or other business owners interested in diversifying their portfolios. Present your business plan to these potential investors to demonstrate that your pharmacy will bring them a profit.
   • In your agreement with investors, be sure to define exactly what your relationship to them will be. Are they just providing a loan that will be paid back with interest, or are they actually buying into your business? Make sure you are both clear on what your relationship will be if they provide you with capital to avoid any problems in the future. It would help to draw up a contract and have it notarized to make your agreement official and legally binding.
5. Insure your pharmacy. Like with all businesses, you'll need to insure your drug store to prevent financial loss for yourself. Some insurance, like theft and fire, are standard for small businesses. Others, like professional liability insurance, is more unique. Be sure to talk to your accountant, an insurance agent, and perhaps a lawyer to find out what kinds of insurance you'll need for your business.

Staffing Your Drug Store

1. Write a manual for employees. Running a small business can be unpredictable. It's therefore very important to have procedures in place so your employees will respond appropriately to the numerous situations they might experience. Require all new employees to read the manual as part of their training. This will ensure that all your staff are familiar with the store's policies and procedures.
   • Include the proper way to interact with customers in your manual. Keeping your customers happy is your main concern when starting a small business, so you should make certain all your employees are friendly and helpful.
   • Also include what is inappropriate behavior. Make clear what sort of activities are grounds for a warning and which ones are grounds for termination. That way if you have to resort to firing someone, you can say that this was all clearly spelled out in the manual.
2. Investigate all staff before hiring them. No matter how good you are at multi-tasking, you'll need a great staff in your pharmacy to help make it successful. Take care in hiring all of your employees, from pharmacists to cashiers. Perform background checks, interview them, and make sure they are all up to the task. A single bad employee can give your store a bad reputation, which will hurt your business.
3. Hire a pharmacist. All pharmacies need a licensed pharmacist on staff during open hours. If you're planning on starting a pharmacy, perhaps you are a pharmacist and will be performing that task. If this is the case, you should still have a few backup pharmacists to call in case you get sick or need a day off. As the business owner, you also have to concentrate on making the business successful. Sometimes this means taking a step back from pharmacy duties and managing the business at large.
4. Hire pharmacy technicians. Techs help pharmacists by counting pills, typing out prescriptions, and making phone calls. While techs usually don't need to have special qualifications, some pharmacies prefer to hire pharmacy students for these jobs because they are acquainted with drugs and pharmacy management. Try advertising at nearby pharmacy schools if you're looking for good techs. Usually a pharmacy has two techs on duty at all times, although if your store gets busy you may need more.
5. Hire cashiers. Usually drug stores have both a pharmacy and a convenience store that sells household items (usually called the "front"). If this is the case, you should have two cashiers, one for the pharmacy and one for the front. This way your lines won't get backed up and you'll keep everything running smoothly.
6. Hire stock workers. These workers make sure the shelves are neat and well-stocked, and the store is clean. They are very important because an untidy store will drive away customers. For smaller stores, usually having only one stock worker on duty at a time will do, but larger stores will probably need more to keep everything tidy.
7. Hire managers. If your store is small enough, you might be able to oversee the pharmacy and the front by yourself. For a larger store, however, you'll have to delegate duties. Managers oversee the employees and activities of their given area. They also help with insurance, billing, accounting, and other office tasks. If your store is large, you might need two managers, one to oversee the pharmacy and one to oversee the front. That way they can report to you and keep you updated on what goes on in the entire store.
8. Hire security if necessary. Unfortunately, pharmacies are becoming targets for robberies because of the drugs they carry. For this reason, it may be a good idea to have a security guard on duty who can help prevent robberies and keep the store safe.

Preparing Your Drug Store to Open

1. Acquire all the necessary equipment for your business. You'll need at least the following to make your drug store ready to open. This is only a suggested list, and you'll likely find that you need other items to get your store ready.
   • Computers and all the necessary software.
   • Cash registers.
   • Phones and phone lines.
   • Good-quality chairs for waiting areas. Make sure these chairs have arm rests so elderly or disabled patients can get up easily.
   • Inventory for the front of the store, like paper towels, OTC drugs and products, food, cleaning supplies, and anything else you'd like to sell.
   • Vials and pill bottles for the pharmacy.
2. Set up your store effectively. The store's layout is important for making customers want to shop with you. A cluttered store with a poor layout will drive away customers, which will hurt or even sink your business. Keep the following guidelines in mind when designing your floor plan.
   • Have a cash register by the front door so customers can check out and then leave conveniently.
   • Keep all pharmacy-related activities behind a counter in the back of the store. This will ensure that pharmacy staff can work efficiently, and is also important for safety.
   • Make aisles wide enough for wheelchairs and people with disabilities to easily travel down.
   • Designate an area for counseling. Your drug store should have a private area where pharmacists and techs can counsel patients on their medications. In some locations, this is even a law. Ideally this should be back by the pharmacy, so your pharmacist doesn't have to travel far from his post to counsel a patient.
   • Organize aisles by product and hang signs above aisles indicating which products are there. This will help customers find what they need quickly and ensure they leave happy.
3. Set up a security system. All businesses need security in place to keep employees safe and protect your financial investment. You should look into surveillance cameras, alarms, grates for windows, and a safe to help thwart robberies.
4. Get all the licenses, permits, and certifications necessary for opening. These certifications vary depending on the location of your pharmacy, so you'll have to consult local laws to ensure that you are meeting all necessary qualifications. It would be helpful to consult a lawyer who is familiar with the laws for your industry to make sure you are getting all the paperwork you need.
   • For example, in the United States, a state pharmacy license. Each state has a board of pharmacy that evaluates pharmacies and grants licenses. Contact your state's board of pharmacy to get this certification. Sometimes the state board of pharmacy will also want to inspect your pharmacy before it opens, so stay in contact with this office to make sure you are complying with all laws.
   • An additional requirement in the United States is a DEA number. The Drug Enforcement Agency regulates the sale of narcotics, so you will have to register with this agency for permission to do so. Contact your local DEA office to get federal certification.
5. Open your pharmacy before your "grand opening." Any new business will have a few bugs that have to get worked out- your drug store will be no exception. Therefore, it is a good idea to have some time before the official grand opening to work out the kinks.
   • If you have a big flood of customers on your grand opening and you experience problems, you and your staff can easily be overwhelmed. If service suffers because of it, your store could get a bad reputation right from the start.
   • To avoid big problems, open your doors one or two months before your actual grand opening. This will help you work out any kinks in your system with only a few customers to deal with. That way, you can make sure everything runs smoothly on your grand opening.

Marketing Your Drug Store

1. Market your store before it opens. You'll want to make sure that by your opening day, everyone in the community knows about your store. There are many ways you can advertise your business before your grand opening.
   • Hang a large "Coming Soon" banner outside your store to pedestrians and drivers will know that a business will open soon, and take out an ad in the "Coming Soon" section of your local newspapers.
   • Send out circulars in the mail or place them on houses manually. These flyers should describe your business and the services you will offer. It would also be good to include some opening day sales to attract customers.
   • Use social media. Start a social media page for your business. Share it on your own personal page and ask friends, family, and staff to do the same. With enough shares, you can get a lot of free advertising.
2. Sponsor a large celebration for your grand opening. When your store is all set up and you've worked out any problems in your system, announce to your local community that you've officially opened. Contact local news outlets and see if they will cover the event. Also see if the mayor or another local politician will partake in a ribbon-cutting ceremony- this will attract the press and a lot of community attention. With a big grand opening event, you can ensure that the entire community will know about your store opening.
3. Join local community organizations. Pharmacists and other small business owners are often active in their local communities. This helps expose both them and their businesses to the public and helps profits. See if there are any events at local schools, parks, religious institutions, and civic associations. Stay active in your local community to have your business recognized.
4. Partner with other medical professionals in the area. Referrals from doctors can be a great way to grow your consumer base. If there is a doctor's office nearby, go in and introduce yourself. Ask if the doctor would mind you leaving a few business cards or circulars in his office. If you make a good impression and demonstrate that you're a health professional who cares about your patients, he may start referring his patients to you.

Tips

• Join professional organizations and associations to stay abreast of new developments in the industry.
• Consider using a staffing agency if you're having difficulties finding qualified staff.

Warnings

• One of the biggest reasons for pharmacies failing is under-capitalization. Be sure to come up with a very good estimate of what your day-to-day costs will be when asking for a loan. Otherwise, you could end up short and have to declare bankruptcy.
• Never open a drug store without having sufficient insurance coverage.

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Sources and Citations

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