Opening a pharmacy entails substantial costs that require careful consideration of various factors, including inventory, rent, and staffing.
In this guide, we’ll explore the financial aspects of establishing a pharmacy, highlighting the minimum investment required and the expenses involved in critical areas.
Determining the Minimum Investment
To embark on opening a pharmacy, you should be prepared to invest a minimum of around $880,000. However, it’s important to note that the actual amount may vary depending on the size and location of the pharmacy.
Standard Rent Expenses
While the average rent in Houston, Texas, is approximately $15 per square foot, in Scottsdale, Arizona, it soars to $20 per square foot. Considering an 800-square-foot pharmacy, monthly rent in Scottsdale would amount to over $16,000,
In Houston, it would be around $12,500. Opting for a more affordable location could save up to $150,000 annually.
The Bulk of the Budget: Inventory Costs
Inventory costs constitute a substantial portion of a pharmacy’s expenses, accounting for up to 68%. As pharmacies typically turn over their inventory approximately ten times a year, purchasing merchandise alone can amount to monthly fees of up to $100,000.
Consequently, annual inventory costs range from $600,000 to $1.2 million.
Major Staffing Costs
Staffing expenses are another significant consideration. Pharmacists earn an average salary of about $124,170 annually, while pharmacy technicians earn around $13 per hour.
A pharmacy with one pharmacist and one technician can expect to spend a minimum of approximately $150,000 annually on salaries. Expanding the staff to two pharmacists and two technicians could cost $300,000 annually.
Putting It All Together
When considering the budget allocation, it becomes evident that inventory costs comprise the most considerable portion of expenses. Monthly inventory expenses ranging from $50,000 to $100,000 translate to yearly fees of $600,000 to $1.2 million.
Combining these costs with rent and staffing expenses, the total annual expenditure for opening and running a pharmacy typically falls within the range of $880,000 to $1.8 million.
The Cost of Pharmacy Franchise and Other Expenses
Choosing an investment in recognized brands like Good Neighbor Pharmacy [1] or Medicine Shoppe requires additional considerations for those considering a pharmacy franchise. The franchise cost is approximately $7,188 per year and fulfills licensing requirements.
Benefits include brand recognition, comprehensive training, and ongoing support. Minimum investment estimates range around $290,000, with individual franchises setting fees.
Total Costs and Cash Flow Management
Considering the abovementioned expenses, the total investment required for opening a pharmacy falls within the range of $880,000 to $1,770,000.
However, it is vital to have sufficient cash flow to cover the next six months worth of bills since initial revenue might be harmful.
Conclusion
Opening a pharmacy presents unique challenges and costs, requiring careful financial planning and preparedness. While the investment required may seem substantial, the potential profitability and personal satisfaction of running a pharmacy can make it a worthwhile endeavor.
