We earn commissions if you shop through the links below. Read more
Written by: Carolyn Young
Carolyn Young is a business writer who focuses on entrepreneurial concepts and the business formation. She has over 25 years of experience in business roles, and has authored several entrepreneurship textbooks.
Edited by: David Lepeska
David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.
Published on June 15, 2022
Investment range
$38,550 - $77,100
Revenue potential
$390,000 - $780,000 p.a.
Time to build
3 – 6 months
Profit potential
$78,000 - $156,000 p.a.
Industry trend
Growing
Commitment
Full-time
Pay attention to these important factors as you establish your medical lab:
Starting a medical lab has pros and cons to consider before deciding if it’s right for you.
Trends in the medical lab industry include:
Challenges in the medical lab industry include:
Startup costs for a medical lab range from $40,000 to $80,000. Costs include a space rental and preparation, a considerable amount of lab equipment, and an operating budget.
Medical laboratory technicians must be licensed. You need to have an associate’s degree from an accredited program and pass an exam through either the American Society for Clinical Pathology Board of Certification or the American Medical Technologists Agency. Each state also has its own licensing requirements.
You’ll need to comply with regulations and requirements administered through the Centers for Medicare & Medicaid Services (CMS). You’ll also need a CLIA certificate. You can get information about this from the CMS.
You’ll need a handful of items to successfully launch your medical lab business, including:
| Start-up Costs | Ballpark Range | Average |
|---|---|---|
| Setting up a business name and corporation | $150 - $200 | $175 |
| Business licenses and permits | $100 - $300 | $200 |
| Insurance | $100-$300 | $200 |
| Business cards and brochures | $200 - $300 | $250 |
| Website setup | $1,000 - $3,000 | $2,000 |
| Space rental | $2,000 - $3,000 | $2,500 |
| Space preparation | $5,000 - $10,000 | $7,500 |
| Lab equipment | $20,000 - $40,000 | $30,000 |
| Operating budget | $10,000 - $20,000 | $15,000 |
| Total | $38,550 - $77,100 | $57,825 |
You’ll need to develop relationships with major insurance companies to ensure your services are covered by most plans.
Lab tests cost anywhere from $100 to $1,000 or more. These calculations will assume an average price per test of $300. Your profit margin after rent, overhead, and labor should be about 20%.
In your first year or two, your lab might do five tests a day, five days per week, bringing in $390,000 in annual revenue. This would mean $78,000 in profit, assuming that 20% margin. As you begin to get more referrals from physicians, you could do 10 tests per day. With annual revenue of $780,000, you’d make an outstanding profit of $156,000.
There are a few barriers to entry for a medical lab. Your biggest challenges will be:
Now that you know what’s involved in starting a medical lab, it’s a good idea to hone your concept in preparation to enter a competitive market.
Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important, because it can help you understand your customers better, who your competitors are, and your business landscape.
Research medical labs in your area to examine their services, price points, and customer reviews. You’re looking for a market gap to fill. For instance, maybe the local market is missing a clinical laboratory with a medical laboratory scientist or a pathology lab.
You might consider targeting a niche market by specializing in a certain aspect of your industry, such as medical testing or routine lab tests.
This could jumpstart your word-of-mouth marketing and attract clients right away.
The types of medical testing you do will be based on your skills and equipment. You should try to offer as wide a variety as possible.
Prices for lab tests range from $100 to $1,000 or more depending on the type of test. Check your local market for various test prices. Your profit margin after all costs should be about 20%.
Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.
Your target market will generally be physicians who will refer patients to you. You can connect with them on LinkedIn or find them on Google or Yelp and call them directly.
Choosing the right location for your medical lab is essential for attracting clients and ensuring its success. Look for a spot in a central and convenient area, such as a busy commercial district or a medical center. Consider accessibility and convenience, ensuring that the location is easily reachable by foot or public transportation, and has ample parking.
Depending on the type of medical lab services you plan to offer, you may also want to consider the proximity to hospitals, clinics, or other healthcare facilities. When selecting a location, ensure that it meets all necessary safety and regulatory requirements for medical labs.
By strategically choosing the right location, you can establish a reputable and successful medical lab that provides quality services and stands out in the competitive healthcare industry. You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.
Here are some ideas for brainstorming your business name:
Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool below. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these.
Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that sets your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.
Here are the key components of a business plan:
If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.
Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.
Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business!
Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you’re planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to medical labs.
If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state.
Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your medical lab will shape your taxes, personal liability, and business registration requirements, so choose wisely.
Here are the main options:
We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have.
Choose Your State
The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN.
Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.
The IRS website also offers a tax-payers checklist, and taxes can be filed online.
It is important to consult an accountant or other professional to help you with your taxes to ensure you’re completing them correctly.
Securing financing is your next step and there are plenty of ways to raise capital:
Bank and SBA loans are probably the best option, other than friends and family, for funding a medical lab business.
Starting a medical lab business requires obtaining a number of licenses and permits from local, state, and federal governments.
Medical laboratory technicians must be licensed. You need to have an associate’s degree from an accredited program and pass an exam through either the American Society for Clinical Pathology Board of Certification or the American Medical Technologists Agency. Each state also has its own licensing requirements.
You must comply with regulations and requirements administered through the Centers for Medicare & Medicaid Services (CMS). You’ll also need a CLIA certificate. You can get information about this from the CMS.
Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits.
You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more.
You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.
This is not a step to be taken lightly, as failing to comply with legal requirements can result in hefty penalties.
If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.
Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.
Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your medical lab business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.
Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account.
Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.
Here are some types of insurance to consider:
As opening day nears, prepare for launch by reviewing and improving some key elements of your business.
Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.
You may want to use industry-specific software, such as qualer, HealthAxis, or CGM, to manage your workflows, records, compliance, specimen inventory, and billing.
Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism.
You can create your own website using website builders. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.
They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google.
Here are some powerful marketing strategies for your future business:
Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your medical lab meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire.
Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your medical lab business could be:
You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a medical lab business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in medical labs for years and can offer invaluable insight and industry connections.
The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in medical labs. You’ll probably generate new customers or find companies with which you could establish a partnership.
If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a medical lab business include:
At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need.
Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent.
Medical labs are a necessity in any community and provide valuable information to physicians and patients. Medical tests are also relatively expensive, which is why the industry is a major opportunity. If you have a desire to boost health care, you could start your own medical lab, have an impact on people’s lives, and make a good living at the same time.
You’ve added business education to your resume now, so it’s time to break out the microscope and get your successful medical lab going!
Medical labs are very profitable, and most bills are paid by insurance companies. More importantly, though, medical labs provide services that are vital to the health care system.
To market a medical lab, use targeted advertising through channels like medical journals and online platforms, develop referral programs with healthcare professionals, establish an online presence with a professional website and social media, and network at healthcare conferences and events.
Differentiate your medical lab from competitors by offering specialized services, such as rare tests or advanced technology, promoting accreditations and certifications, emphasizing quick turnaround times or personalized patient care, and highlighting any unique features or advantages your lab has.
To ensure privacy and security of patients’ medical information and test results, implement strict access controls and user authentication measures, encrypt sensitive data, train staff on data protection protocols, conduct regular security audits, comply with relevant privacy regulations (such as HIPAA), use secure communication channels, and have proper data backup and disaster recovery plans in place.
Published on November 4, 2022
The healthcare industry is booming and expected to continue growing as more Americans age and require healthcare services. The emergence of morecoro ...
Read Now
Published on July 29, 2022
Just about everybody wants to live in a warm, welcoming close-knit community, and you can help build one by starting a business that helps peopleliv ...
Read Now
Published on July 14, 2022
Even before the coronavirus pandemic swept the world, consumers were spending more on products focused on better health, nutrition and immunity. Ify ...
Read Now
No thanks, I don't want to stay up to date on industry trends and news.
Comments