Start an online pharmacy by following these 10 steps:
You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple guide to starting your online pharmacy. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
Check out our How to Start a Business page.
STEP 1: Plan your business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How much can you charge customers?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening an online pharmacy?
Owners will need to buy plenty of medical insurance in the case of a liability claim. The average cost of a pharmaceutical claim is more than $14,000, and those numbers will likely increase due to the still somewhat unregulated online healthcare space.
Medical professionals will also need to obtain licenses for the state from which they sell their prescriptions and the states to which they sell. (The costs for these licenses will vary depending on the state.) Entrepreneurs will also need to hire a lawyer to ensure they’re following all rules to the 0 and pay their healthcare professionals a substantial salary to guarantee quality care. Finally, owners need to account for the wholesale cost of prescription drugs, which will vary by supplier.
What are the ongoing expenses for an online pharmacy?
Online pharmacy owners will have the following ongoing expenses:
- Liability insurance
- Legal expenses
- Advertising costs
- Wholesale prescription costs
- Employee salaries
- Administrative costs (e.g., website upkeep, etc.)
Who is the target market?
For the time being, it will likely be people between the ages of 30 to 50 who will order from a online pharmacy. They’re the ones who will be most comfortable navigating pages, chatting over a video platform, and using an online shopping cart.
How does an online pharmacy make money?
Online pharmacies make money by marking up the costs of the drugs from wholesale. They may or may not charge people to speak to the pharmacist or doctor on-site.
How much can you charge customers?
The markup for a prescription drug is based on both demand and location. The best way to determine how much you can charge is to do research on what people are paying in the markets you serve, and what their insurance will typically cover for each drug.
How much profit can an online pharmacy make?
Online pharmacies stand to make a significant portion of the more than $370 billion spent on prescription drugs each year. These numbers are only expected to rise due to both an aging population and standard inflation. If your pharmacy sells 1,000 prescriptions a month at at average of $400 a piece and operational costs are $300,000 a month, that's still $100,000 in profit per month.
How can you make your business more profitable?
Online pharmacies may include premium subscription services as they grow. For example, a person with a Gold plan will get 5 hours a month of direct pharmaceutical care from a licensed doctor. They will have access to personalized treatment plans or more detailed advice about their conditions.
What will you name your business?
Choosing the right name is important and challenging. If you don’t already have a name in mind, visit our How to Name a Business guide or get help brainstorming a name with our Online Pharmacy Name Generator
When registering a business name, we recommend researching your business name by checking:
- Your state's business records
- Federal and state trademark records
- Social media platforms
- Web domain availability.
It's very important to secure your domain name before someone else does.
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your online pharmacy is sued.
Form Your LLC
Read our Guide to Form Your Own LLC
Recommended: You will need to elect a registered agent for your LLC. LLC formation packages usually include a free year of registered agent services. You can choose to hire a registered agent or act as your own.
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
Small Business Taxes
Depending on which business structure you choose, you might have different options for how your business will be taxed. For example, some LLCs could benefit from being taxed as an S corporation (S corp).
You can learn more about small business taxes in these guides:
There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Additionally, learning how to build business credit can help you get credit cards and other financing in your business's name (instead of yours), better interest rates, higher lines of credit, and more.
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Recommended: Read our Best Banks for Small Business review to find the best national bank, credit union, business-loan friendly banks, one with many brick-and-mortar locations, and more.
Open net-30 accounts
When it comes to establishing your business credit, net-30 vendors are considered the way to go. The term "net-30," which is popular among vendors, refers to a business credit arrangement where the company pays the vendor within 30 days of receiving goods or services.
Net-30 credit terms are often used for businesses that need to obtain inventory quickly but do not have the cash on hand.
Besides establishing business relationships with vendors, net-30 credit accounts get reported to the major business credit bureaus (Dun & Bradstreet, Experian Business, and Equifax Business Credit). This is how businesses build business credit so they can qualify for credit cards and other lines of credit.
Recommended: Read our guide on the best net-30 vendors so you can start building business credit now, so you never have to worry about cash flow in the future. Keep in mind that poor cash flow is the #1 reason businesses fail!
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
Federal Business Licensing Requirements
There are many federal regulations regarding the production and distribution of prescription drugs. Before opening your online pharmacy, be sure to review this FDA page regarding drug distribution, as well as any other relevant FDA laws.
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate an online pharmacy business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
For information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
STEP 7: Get business insurance
Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.
There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.
Learn more about General Liability Insurance.
Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
If you aren't feeling confident about designing your small business logo, then check out our Design Guides for Beginners, we'll give you helpful tips and advice for creating the best unique logo for your business.
How to promote & market an online pharmacy
It’s not just low prices that customers want when it comes to their prescriptions — they also want effective and convenient advice. Since you’ll be running your store online, you should primarily be advertising your services online. Use social media, blogs, and even Google Ads to boost your online presence. However, you may also want to establish relationships with local doctors in your area, and consider finding ways to advertise specifically to their patients. This may be done either by direct recommendations from the doctor or with printed flyers around the hospital.
How to keep customers coming back
The more important thing is to deliver safe drugs alongside an equally safe treatment plan. The doctor or pharmacist should have excellent people skills and the ability to quickly develop relationships with their patients. They should also be knowledgeable and ready to find the answers if they're unsure of something.
Still unsure about what kind of business you want to start? Check out the latest Small Business Trends to help inspire you.
STEP 9: Create your business website
After defining your brand and creating your logo the next step is to create a website for your business.
While creating a website is an essential step, some may fear that it’s out of their reach because they don’t have any website-building experience. While this may have been a reasonable fear back in 2015, web technology has seen huge advancements in the past few years that makes the lives of small business owners much simpler.
Here are the main reasons why you shouldn’t delay building your website:
- All legitimate businesses have websites - full stop. The size or industry of your business does not matter when it comes to getting your business online.
- Social media accounts like Facebook pages or LinkedIn business profiles are not a replacement for a business website that you own.
- Website builder tools like the GoDaddy Website Builder have made creating a basic website extremely simple. You don’t need to hire a web developer or designer to create a website that you can be proud of.
Using our website building guides, the process will be simple and painless and shouldn’t take you any longer than 2-3 hours to complete.
STEP 10: Set up your business phone system
Getting a phone set up for your business is one of the best ways to help keep your personal life and business life separate and private. That’s not the only benefit; it also helps you make your business more automated, gives your business legitimacy, and makes it easier for potential customers to find and contact you.
There are many services available to entrepreneurs who want to set up a business phone system. We’ve reviewed the top companies and rated them based on price, features, and ease of use.
Recommended: Find the best phone system for your business; check out our review of the Best Business Phone Systems 2021.
Start An Online Pharmacy In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Is this Business Right For You?
This business is suited for entrepreneurial doctors/pharmacists or business people who can partner with pharmacists or doctors. An online pharmacy owner should have an inherent interest in the healthcare space and follow the many trends in insurance, patient care, and consumer preferences.
Want to know if you are cut out to be an entrepreneur?
Take our Entrepreneurship Quiz to find out!
What happens during a typical day at an online pharmacy?
Doctors or pharmacists are required to be employed on-site to handle and quality check the medications. If you’re the employer, you will be responsible for managing the online inventory and general customer service. Reduce your liability by consistently evaluating communication protocol and working with suppliers to determine which drugs will best serve your audience.
What are some skills and experiences that will help you build a successful online pharmacy?
A business owner doesn't need to be a doctor or pharmacist, but they need to employ a qualified and licensed professional to distribute drugs on an online platform. If the business owner doesn’t have a formal medical background, they will need to be industrious, organized, and diligent. They should have at least some experience working with suppliers, lawyers, and insurance companies before jumping into this career.
What is the growth potential for an online pharmacy?
The growth potential is huge for online pharmacies. Based on recent statistics, it’s thought there will be 4.25 billion prescriptions written in the US alone by 2019. While there has been plenty of bad press for online pharmacies selling fake or otherwise unsafe drugs, those that offer a consistent, reputable service will find they can quickly grow their business.
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Take the Next Step
Find a business mentor
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
Learn from other business owners
Want to learn more about starting a business from entrepreneurs themselves? Visit Startup Savant’s startup founder series to gain entrepreneurial insights, lessons, and advice from founders themselves.
Resources to Help Women in Business
There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:
If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.
What are some insider tips for jump starting an online pharmacy?
There is a lot of fraud to be found online, so it helps to establish your reputation as soon as possible. Many online pharmacies will unknowingly work with disreputable suppliers, so owners have to understand where their drugs are coming from and how they’re made.
You will also need to be on top of any compliance or industry changes when it comes to your business. For example, you can’t sell an imported drug to a patient unless they’ve been seen in-person by a doctor. Poorly run online pharmacies have left a bad taste in both the public’s and the government’s mouth, so harsher changes and regulations may be on the horizon.
And with the popularity and profitability of prescriptions, you’ll want to be careful of potential competitors. CVS recently acquired Aetna, which has sparked rumors that Amazon may be looking to get into the prescription business. It will be difficult to compete with a juggernaut like Amazon when it comes to price, but online pharmacists can choose to establish local loyalty first before branching out.
How and when to build a team
Depending on the quantity and the types of drugs you sell, it’s likely you’ll need to build a team at the very beginning. If you’re aiming for excellent customer service, you’ll want to decrease wait times and increase patient compliance. This will take time and effort on the part of the medical professional, so you’ll need to find people with patience and people skills. You'll also need a lawyer with a background in the medical industry to give advice on how to stay within the legal code of conduct.