Opening a microgreens business can be very profitable. With proper planning, execution and hard work, you can enjoy great success. Below you will learn the keys to launching a successful microgreens business.
Importantly, a critical step in starting a microgreens business is to complete your business plan. To help you out, you should download Growthink’s Ultimate Business Plan Template here.
15 Steps To Open a Microgreens Business:
- Choose the Name for Your Microgreens Business
- Determine the Type of Microgreens Business You Will Launch
- Develop Your Microgreens Business Plan
- Choose the Legal Structure for Your Microgreens Business
- Secure Startup Funding for Your Microgreens Business (If Needed)
- Secure a Location for Your Business
- Register Your Microgreens Business with the IRS
- Open a Business Bank Account
- Get a Business Credit Card
- Get the Required Business Licenses and Permits
- Get Business Insurance for Your Microgreens Business
- Buy or Lease the Right Microgreens Business Equipment
- Develop Your Microgreens Business Marketing Materials
- Purchase and Setup the Software Needed to Run Your Microgreens Business
- Open for Business
1. Choose the Name for Your Microgreens Business
The first step to opening a microgreens business is to choose your business’ name.
This is a very important choice since your company name is your brand and will last for the lifetime of your business. Ideally you choose a name that is meaningful and memorable. Here are some tips for choosing a name for your microgreens business:
- Make sure the name is available. Check your desired name against trademark databases and your state’s list of registered business names to see if it’s available. Also check to see if a suitable domain name is available.
- Keep it simple. The best names are usually ones that are easy to remember, pronounce and spell.
- Think about marketing. Come up with a name that reflects the desired brand and/or focus of your microgreens business.
2. Determine the Type of Microgreens Business You Will Launch
The next step is to determine the type of microgreens business you will launch. The four main types of microgreens businesses are:
- Retail microgreens business: A retail microgreens business sells directly to consumers in a physical store or online.
- Wholesale microgreens business: A wholesale microgreen business sells directly to restaurants, grocery stores, and other businesses.
- Franchise microgreens business: A franchisee purchases the rights to open a microgreens business that is part of an existing brand or network.
- Microgreens farm: A microgreens farm grows and sells its own line of microgreens directly to consumers or wholesalers.
3. Develop Your Microgreens Business Plan
One of the most important steps in opening a microgreens business is to develop your business plan. The process of creating your plan ensures that you fully understand your market and your business strategy. The plan also provides you with a roadmap to follow and if needed, to present to funding sources to raise capital for your business.
Your business plan should include the following sections:
- Executive Summary – this section should summarize your entire business plan so readers can quickly understand the key details of your microgreens business.
- Company Overview – this section tells the reader about the history of your microgreens business and what type of microgreens business you operate. For example, are you a retail microgreens business, a franchisee, or a microgreens farm?
- Industry Analysis – here you will document key information about the microgreens industry. Conduct market research and document how big the industry is and what trends are affecting it.
- Customer Analysis – in this section, you will document who your ideal or target customers are and their demographics. For example, how old are they? Where do they live? What do they find important when purchasing products like the ones you will offer?
- Competitive Analysis – here you will document the key direct and indirect competitors you will face and how you will build competitive advantage.
- Marketing Plan – your marketing plan should address the 4Ps: Product, Price, Promotions and Place.
- Product: Determine and document what products/services you will offer
- Prices: Document the prices of your products/services
- Place: Where will your business be located and how will that location help you increase sales?
- Promotions: What promotional methods will you use to attract customers to your microgreens business? For example, you might decide to use pay-per-click advertising, public relations, search engine optimization and/or social media marketing.
- Operations Plan – here you will determine the key processes you will need to run your day-to-day operations. You will also determine your staffing needs. Finally, in this section of your plan, you will create a projected growth timeline showing the milestones you hope to achieve in the coming years.
- Management Team – this section details the background of your company’s management team.
- Financial Plan – finally, the financial plan answers questions including the following:
- What startup costs will you incur?
- How will your microgreens business make money?
- What are your projected sales and expenses for the next five years?
- Do you need to raise funding to launch your business?
4. Choose the Legal Structure for Your Microgreens Business
Next you need to choose a legal structure for your microgreens business and register it and your business name with the Secretary of State in each state where you operate your business.
Below are the five most common legal structures:
1) Sole proprietorship
A sole proprietorship is a business entity in which the owner of the microgreens business and the business are the same legal person. The owner of a sole proprietorship is responsible for all debts and obligations of the business. There are no formalities required to establish a sole proprietorship, and it is easy to set up and operate. The main advantage of a sole proprietorship is that it is simple and inexpensive to establish. The main disadvantage is that the owner is liable for all debts and obligations of the business.
A partnership is a legal structure that is popular among small businesses. It is an agreement between two or more people who want to open a microgreens business together. The partners share in the profits and losses of the business.
The advantages of a partnership are that it is easy to set up, and the partners share in the profits and losses of the business. The disadvantages of a partnership are that the partners are jointly liable for the debts of the business, and disagreements between partners can be difficult to resolve.
3) Limited Liability Company (LLC)
A limited liability company, or LLC, is a type of business entity that provides limited liability to its owners. This means that the owners of an LLC are not personally responsible for the debts and liabilities of the business. The advantages of an LLC for a microgreens business include flexibility in management, pass-through taxation (avoids double taxation as explained below), and limited personal liability. The disadvantages of an LLC include lack of availability in some states and self-employment taxes.
4) C Corporation
A C Corporation is a business entity that is separate from its owners. It has its own tax ID and can have shareholders. The main advantage of a C Corporation for a microgreens business is that it offers limited liability to its owners. This means that the owners are not personally responsible for the debts and liabilities of the business. The disadvantage is that C Corporations are subject to double taxation. This means that the corporation pays taxes on its profits, and the shareholders also pay taxes on their dividends.
5) S Corporation
An S Corporation is a type of corporation that provides its owners with limited liability protection and allows them to pass their business income through to their personal income tax returns, thus avoiding double taxation. There are several limitations on S Corporations including the number of shareholders they can have among others.
Once you register your microgreens business, your state will send you your official “Articles of Incorporation.” You will need this among other documentation when establishing your banking account (see below). We recommend that you consult an attorney in determining which legal structure is best suited for your company.
5. Secure Startup Funding for Your Microgreens Business (If Needed)
In developing your microgreens business plan, you might have determined that you need to raise funding to launch your business.
If so, the main sources of funding for a microgreens business to consider are personal savings, family and friends, credit card financing, bank loans, crowdfunding and angel investors. Angel investors are individuals who provide capital to early-stage businesses. Angel investors typically will invest in a microgreens business that they believe has high potential for growth.
6. Secure a Location for Your Business
Having the right space can be important for your microgreens business, particularly if you’d like to meet clients there. The location should be in an area with good access to a customer base, like a farmer’s market, grocery store, or health food store. If you plan to sell online, then the location doesn’t matter as much.
To find the right space, consider:
- Driving around to find the right areas while looking for “for lease” signs
- Contacting a commercial real estate agent
- Doing commercial real estate searches online
- Telling others about your needs and seeing if someone in your network has a connection that can help you find the right space
7. Register Your Microgreens Business with the IRS
Next, you need to register your business with the Internal Revenue Service (IRS) which will result in the IRS issuing you an Employer Identification Number (EIN).
Most banks will require you to have an EIN in order to open up an account. In addition, in order to hire employees, you will need an EIN since that is how the IRS tracks your payroll tax payments.
Note that if you are a sole proprietor without employees, you generally do not need to get an EIN. Rather, you would use your social security number (instead of your EIN) as your taxpayer identification number.
8. Open a Business Bank Account
It is important to establish a bank account in your microgreens business’s name. This process is fairly simple and involves the following steps:
- Identify and contact the bank you want to use
- Gather and present the required documents (generally include your company’s Articles of Incorporation, driver’s license or passport, and proof of address)
- Complete the bank’s application form and provide all relevant information
- Meet with a banker to discuss your business needs and establish a relationship with them
9. Get a Business Credit Card
You should get a business credit card for your microgreens business to help you separate personal and business expenses.
You can either apply for a business credit card through your bank or apply for one through a credit card company.
When you’re applying for a business credit card, you’ll need to provide some information about your business. This includes the name of your business, the address of your business, and the type of business you’re running. You’ll also need to provide some information about yourself, including your name, Social Security number, and date of birth.
Once you’ve been approved for a business credit card, you’ll be able to use it to make purchases for your business. You can also use it to build your credit history which could be very important in securing loans and getting credit lines for your business in the future.
10. Get the Required Business Licenses and Permits
In order to open a microgreens business, you will need to obtain certain business licenses and permits. The specific licenses and permits you need will depend on the location of your business and the type of business you are running.
Some of the common licenses and permits required for a microgreens business include:
- Business license
- Food handler’s permit
- Tax ID number (EIN)
- Seller’s permit (if selling taxable items)
Nearly all states, counties and/or cities might also require:
- Zoning Approval: typically at the city or county level, this provides authorization for construction or use of a building or land for a particular purpose
- Fire Department Approval: a process by which the local fire department reviews and approves the installation of a fire alarm system.
Depending on the type of microgreens business you launch, you will have to obtain the necessary state, county and/or city licenses.
11. Get Business Insurance for Your Microgreens Business
When starting a business, it is important to protect yourself and your business with the appropriate insurance.
Some of the most common types of business insurance include:
- General liability insurance: Covers injuries or damages that occur as a result of your business operations. This includes slips and falls, product liability, and advertising injury.
- Product liability insurance: Protects you from claims that arise from defective or dangerous products.
- Property insurance: Provides coverage for damage or loss to your property caused by fire, theft, vandalism, or other covered events.
- Workers’ compensation insurance: Provides benefits to employees who are injured or become ill as a result of their job.
Other business insurance policies that you should consider for your microgreens business include:
- Auto insurance: If a vehicle is used in your business, this type of insurance will cover if a vehicle is damaged or stolen.
- Business interruption insurance: This covers lost income and expenses if your business is forced to close due to a covered event.
Find an insurance agent, tell them about your business and its needs, and they will recommend policies that fit those needs.
12. Buy or Lease the Right Microgreens Business Equipment
If you are starting a microgreens business, there are certain pieces of equipment that you will need to purchase. Below is a list of the most common pieces of equipment that you will need:
- Commercial kitchen scale
- Heat lamp
- Grow light
When purchasing equipment for your microgreens business, be sure to consider the following factors:
- The size of your business
- The types of microgreens you will be growing
- Your budget
- The amount of space you have available for storage and cultivation
You can buy or lease new or used equipment, depending on your budget and needs. If you do decide to purchase used equipment, be sure to inspect it thoroughly before investing in it.
13. Develop Your Microgreens Business Marketing Materials
Marketing materials will be required to attract and retain customers to your microgreens business.
The key marketing materials you will need are as follows:
- Logo: Spend some time developing a good logo for your microgreens business. Your logo will be printed on company stationery, business cards, marketing materials and so forth. The right logo can increase customer trust and awareness of your brand.
- Website: Likewise, a professional microgreens business website provides potential customers with information about the products you offer, your company’s history, and contact information. Importantly, remember that the look and feel of your website will affect how customers perceive you.
- Social Media Accounts: establish social media accounts in your company’s name. Accounts on Facebook, Twitter, LinkedIn and/or other social media networks will help customers and others find and interact with your microgreens business.
14. Purchase and Setup the Software Needed to Run Your Microgreens Business
The most important software for a microgreens business is a good accounting program. This software will help you track your income and expenses, as well as your inventory.
Another important piece of software for a microgreens business is a seed catalog program. This program will help you keep track of the seeds you have purchased and how many of each variety you have. It will also help you plan your seed orders for the next season.
There are many other types of software that can be helpful for a microgreens business, such as:
- A customer relationship management (CRM) program to help you track customer data
- A greenhouse management program to help with crop planning and scheduling
- A shipping and order fulfillment program to automate the process of sending orders to customers
Research the software that best suits your needs, purchase it, and set it up.
15. Open for Business
You are now ready to open your microgreens business. If you followed the steps above, you should be in a great position to build a successful business. Below are answers to frequently asked questions that might further help you.
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How to Open a Microgreens Business FAQs
Is it hard to open a microgreens business?
No, it is not hard to open a microgreens business. In fact, many of the steps can be completed online or over the phone.
However, if you follow the steps above, you should be able to open your microgreens business without too much difficulty.
How can I open a microgreens business with no experience?
If you have no experience in the world of microgreens, it is important to do your research before starting your business. This includes reading books, articles, and blog posts about the topic; attending workshops and webinars; and talking to other microgreens growers.
In addition, you should create a business plan that outlines how you will run your business. A business plan will help you stay organized and track your progress over time.
Finally, be sure to establish good marketing materials to attract and retain customers. With a little planning and preparation, it is possible to open a successful microgreens business without any prior experience.
Start small. You can offer your products to friends and family members, or to local businesses. Once you have a few clients, you can then start marketing your business more aggressively.
What type of microgreens business is most profitable?
The profitability of a microgreens business will vary depending on your skills, experience, and resources.
However, a retail microgreens business is usually the most profitable. Retailers are able to sell their microgreens at a higher price point, as they have access to a larger customer base. Furthermore, they can offer customers a greater variety of products and services than producers who focus on growing microgreens only.
In addition, farmers' markets and CSA programs are often popular options for selling microgreens. These types of businesses are typically run on a smaller scale, but they can still be profitable if you have the right marketing strategy and customer service system in place.
How much does it cost to open a microgreens business?
The cost of opening a microgreens business can vary. However, the average startup cost ranges. These costs include equipment and supplies, software to run your business, marketing materials, and any other expenses associated with launching your business.
What are the ongoing expenses for a microgreens business?
The ongoing expenses for a microgreens business can vary, but some of the most common costs include:
- Supplies: This includes seeds, soil, fertilizer, and other materials needed to grow microgreens.
- Equipment: This includes items such as greenhouses, hydroponic systems, and lighting systems.
- Labor: This includes the cost of hiring employees or contractors to help with production.
- Marketing: This includes advertising and marketing materials, as well as website development and design.
The average range for ongoing expenses is between $1,000 and $5,000 per month. However, this will vary depending on how big your business is and how quickly it grows.
How does a microgreens business make money?
A microgreens business can make money in a variety of ways, including:
- Selling products to retailers: This includes selling microgreens to local grocery stores, restaurants, or farmers' markets.
- Offering services to businesses: This includes providing microgreens to local businesses for use in their products or services.
- Selling products online: This includes selling microgreens through online marketplaces or your own website.
- Participating in CSAs or farmer's markets: This includes selling microgreens directly to consumers through a CSA program or at a local farmer's market.
Is owning a microgreens business profitable?
Yes, owning a microgreens business can be very profitable.
A microgreens business owner can earn between $10,000 and $100,000 per year in profits. The amount of money a microgreens business owner can make will depend on how much they invest in equipment, how many products they offer, how successful their marketing strategies are, and how well they manage the day-to-day operations of the business.
Some of the key things you can do to make your microgreens business more profitable include:
- Researching the industry and market
- Investing in quality equipment
- Offering a wide range of products
- Developing effective marketing strategies
- Offering add-on services that complement your main offering
- Optimizing your website for SEO to increase online visibility
- Creating a unique selling proposition
- Providing outstanding client service
Why do microgreens businesses fail?
Microgreens businesses that fail often overlook key aspects of their operations. Common reasons for failure include:
- Not understanding how to effectively market their microgreens business, or how to reach potential customers and clients.
- Failing to invest in quality equipment or outsourcing tasks that could be completed more efficiently.
- Not having a clear understanding of the needs of their target market, and how they can meet these needs with their microgreens service.
One of the main reasons that microgreens businesses fail is a lack of planning. This can include not having a detailed business plan, not doing research on the industry, and not targeting the right customers.
Another reason is a lack of marketing and sales skills. This can include not creating a sales process and not have a clear and strong value proposition.
The last main reason is a lack of financial management skills. This can include not having a realistic budget, not tracking expenses, and not investing in the business.
Who are key players in the microgreens market?
The microgreens market is made up of a variety of different players, including small businesses, large enterprises, and even individuals.
Some of the key players in the market include:
- Farmbox Greens LLC
- Urban Cultivator
- Grow-Tech Inc
- Freight Farms
- Sky Greens
However, there are many other players in your specific target market, and it is important to research the market to identify the key players that may have the most direct influence on the success of your business.
How much should I charge for my microgreens products?
Microgreens fees can vary depending on the type of microgreens products being offered, as well as the size and scope of the project.
However, some common microgreens fees include:
- Retail Pricing - Depending on the type of microgreens products and how they are packaged, retailers typically charge anywhere between $3.00 - $8.00 per item.
- Wholesale Pricing - For larger orders, bulk pricing is usually offered at a discount, sometimes ranging from 10% - 20% off retail prices.
- Delivery Fees - Delivery fees can be a flat fee, or often calculated based on how far the delivery needs to go.
The best way to determine the right fee for your microgreens products is to research the rates of similar businesses in your industry, and to also consider the value that you will be providing to the client.