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How to Start a Medical Lab

Written by:

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 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.

How to Start a Medical Lab

Fast Facts

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

Medical labs provide invaluable services, taking medical tests that determine crucial health care decisions. As the population ages, the US medical labs industry has expanded nearly 24% in the last decade and is expected to continue to grow. 

If you’re a medical laboratory technician dedicated to improving people’s lives, you could start your own medical lab and help countless people while also making a good living.

But before you get started, you’ll need to understand how to launch a medical lab from a business perspective. Fortunately, this step-by-step guide details all you need to know to have success with a medical lab business. 

Step 1: Decide if the Business Is Right for You

Pros and cons

Pros

  • Higher Purpose – Contribute to the health and well-being of your community
  • Consistent Demand – Medical lab tests are always needed
  • Good Money – Many tests are quite pricey

Cons

  • Education Required – Certifications are a necessity
  • Legal Compliance – Many regulations to follow

Starting a medical lab has pros and cons to consider before deciding if it’s right for you. 

Medical lab industry trends

Industry size and growth

medical lab industry size and growth

Trends and challenges

Trends in the medical lab industry include:

  • Improving data tools and standardization are providing lab scientists with more advanced analytics. 
  • Traditionally, labs were designed according to the testing being conducted. Today, most labs use a form of “open” design with testing in one core area.

Challenges in the medical lab industry include:

  • Laboratories are facing shortages of employees trained in medical science.
  • Laboratories produce significant amounts of waste from bodily fluids and must dispose of them sustainably to protect the environment. 
medical lab Trends and Challenges

Demand hotspots

medical lab demand hotspots

What kind of people work in medical labs?

medical lab industry demographics

How much does it cost to start a medical lab business?

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: 

  • Microscopes
  • Hematology analyzers
  • Blood gas analyzers
  • Autoclaves
  • Hotplates
  • Chemistry analyzers
  • Differential counters
  • Histology and cytology equipment
  • Urinalysis analyzers
  • DNA analyzers
  • Gamma counters
  • Microplate readers/washers
  • Incubators
  • Point of care analyzers
  • Immunoassay analyzers
  • Refrigerator and freezer
  • Computer system
  • Waiting room furniture
Start-up CostsBallpark RangeAverage
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

How much can you earn from a medical lab business?

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.

medical lab earnings forecast

What barriers to entry are there?

There are a few barriers to entry for a medical lab. Your biggest challenges will be:

  • The education needed to meet licensing requirements
  • The startup costs of setting up the lab and purchasing lab equipment

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Step 2: Hone Your Idea

develop a business idea

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.

Why? Identify an opportunity

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. 

What? Determine your products or services

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. 

How much should you charge for medical lab services?

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.

Who? Identify your target 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. 

Where? Choose your medical lab location

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.

medical lab idea rating

Step 3: Brainstorm a Medical Laboratory Name

Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.

Here are some ideas for brainstorming your business name:

  • Short, unique, and catchy names tend to stand out
  • Names that are easy to say and spell tend to do better 
  • Name should be relevant to your product or service offerings
  • Ask around — family, friends, colleagues, social media — for suggestions
  • Including keywords, such as “medical lab” or “medical testing”, boosts SEO
  • Name should allow for expansion, for ex: “MedLab Innovations” over “Cardiology Lab Services”
  • Avoid location-based names that might hinder future expansion
  • Use online tools like the Step by Step Business Name Generator. Just type in a few keywords and hit “generate” and you’ll have dozens of suggestions at your fingertips.

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. 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.

Step 4: Create a Medical Lab Business Plan

Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:

  • Executive Summary: A brief overview of the entire business plan, summarizing key points and objectives.
  • Business Overview: A concise description of the medical lab business, its mission, and its goals.
  • Product and Services: Explanation of the medical tests and services offered by the lab.
  • Market Analysis: An assessment of the market for medical testing services, including target demographics and trends.
  • Competitive Analysis: Examination of competitors in the medical lab industry.
  • Sales and Marketing: Strategies for attracting customers and promoting the lab’s services.
  • Management Team: An introduction to the individuals responsible for running the business.
  • Operations Plan: Details on how the medical lab will function, including location, equipment, and staffing.
  • Financial Plan: Projections for the lab’s finances, including income statements, balance sheets, and cash flow forecasts.
  • Appendix: Additional information such as supporting documents, resumes, or any supplementary materials.
what to include in 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.

Step 5: Register Your Business

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! 

Choose where to register your company

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. 

Choose your business structure

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:

  • Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
  • General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
  • Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
  • C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation.
  • S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just need to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.
types of business structures

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.

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Step 6: Register for Taxes

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.

Step 7: Fund your Business

Securing financing is your next step and there are plenty of ways to raise capital:

  • Bank loans: This is the most common method but getting approved requires a rock-solid business plan and strong credit history.
  • SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
  • Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
  • Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
  • Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
  • Personal: Self-fund your business via your savings or the sale of property or other assets.

Bank and SBA loans are probably the best option, other than friends and family, for funding a medical lab business. 

types of business financing

Step 8: Apply for Medical Lab Business Licenses Permits

Business Licenses and Permits

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.

Step 9: Open a Business Bank Account

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. 

Step 10: Get Business Insurance

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:

  • General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
  • Business Property: Provides coverage for your equipment and supplies.
  • Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
  • Worker’s compensation: Provides compensation to employees injured on the job.
  • Property: Covers your physical space, whether it is a cart, storefront, or office.
  • Commercial auto: Protection for your company-owned vehicle.
  • Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
  • Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of the above insurance types.
types of business insurance

Step 11: Prepare to Launch

Launching a Business

As opening day nears, prepare for launch by reviewing and improving some key elements of your business. 

Essential software and tools

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.

Accounting

  • Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero
  • If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.

Develop your website

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. 

Marketing

For your medical lab, the marketing strategy should focus on highlighting the accuracy, efficiency, and reliability of your laboratory services. Emphasize the advanced technology and methodologies you use, your compliance with health and safety standards, and your ability to provide a range of diagnostic services. Here are some powerful marketing strategies for your future business:

Kickstart Marketing

  • Professional Branding: Your branding should convey trust, precision, and expertise. This includes a professional logo, business cards, and a well-designed website.
  • Direct Outreach: Network with healthcare providers, clinics, hospitals, and research institutions to introduce your lab services. Collaborate with local physicians and specialists who may need regular lab services.

Digital Presence and Online Marketing

  • Professional Website and SEO: Develop a website that outlines your lab services, certifications, and specialties. Optimize with SEO best practices to rank for local searches related to medical testing, diagnostic services, and lab facilities.
  • Social Media Engagement: Use LinkedIn for professional networking and to share industry news, research findings, and lab advancements. Facebook can be used to engage with the wider community and share health-related information.

Content Marketing and Engagement

  • Healthcare Blog: Share blog posts about advancements in medical testing, health tips, and insights into laboratory practices that would interest both healthcare providers and patients.
  • Email Newsletters: Keep healthcare providers informed about new testing capabilities, changes in regulations, and advances in medical research.
  • Video Content: Create informative videos that tour your facility, explain complex testing processes, or highlight the importance of accurate diagnostics.

Experiential and In-Person Engagements

  • Open House Events: Host open house events for healthcare providers to tour your facilities, meet your staff, and understand the range of services you offer.
  • Participation in Medical Conferences: Attend medical conferences and trade shows to network with healthcare professionals and stay updated on industry trends.

Collaborations and Community

  • Partnerships with Healthcare Facilities: Establish partnerships with local healthcare facilities for their regular testing needs.
  • Collaboration with Educational Institutions: Work with local universities or medical schools for research projects or to provide practical experiences for students.

Customer Relationship and Loyalty Programs

  • Referral Programs: Implement a referral program that rewards healthcare professionals for referring patients or other providers to your lab.
  • Service Agreements: Offer service agreements or contracts to regular clients, ensuring a steady flow of business.

Promotions and Advertising

  • Targeted B2B Advertising: Use medical journals, online healthcare platforms, and professional networks to advertise your services to healthcare providers.
  • Community Health Initiatives: Participate in community health initiatives or sponsor local health events to build brand awareness and demonstrate community involvement.

Focus on USPs

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: 

  • Accurate lab test results in 24 hours
  • Reliable medical testing with quick results
  • A sustainable medical lab for all your testing needs
unique selling proposition

Networking

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. 

Step 12: Run a Medical Lab – Build Your Team

Building a Team for a New Business

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:

  • Medical Laboratory Technicians – perform testing
  • Medical Laboratory Scientists – perform more advanced testing
  • General Manager – scheduling, accounting
  • Marketing Lead – SEO strategies, social media, call on physician’s offices

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. 

Step 13: Start Making Money!

Running a Business

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 Lab Business FAQs

How profitable is a medical lab?

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.

How much should I charge for medical tests in my lab?

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.

How do you market a medical lab?

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.

How can I differentiate my medical lab from competitors in the market?

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.

What are some effective marketing strategies for a medical lab?

Effective marketing strategies for a medical lab include building relationships with healthcare providers, offering educational materials or workshops, providing excellent customer service, leveraging online platforms for content marketing and social media engagement, participating in community events, and utilizing search engine optimization techniques.

What measures can I take to ensure the privacy and security of patients' medical information and test results?

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.

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How to Start a Medical Lab