Start an algae farm 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 algae farm. 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 algae farm?
An open-air algae pond costs an average of $32,500 per acre, according to industry experts. A 100-acre algae farm would set you back more than $3 million. Due to the high start-up costs and niche market, successful algae farmers caution against starting off too big. Remember, slow and steady wins the race. Start small, perfect your system, get to know your market, and continually reinvest your profits to turn your algae farm vision into a reality.
What are the ongoing expenses for an algae farm?
Spirulina algae farming requires pool and equipment repair, maintenance, and periodic replacement. It also requires a great deal of water and the replenishment of products used in the growth and harvest stages. Business owners also should consider other ongoing expenses, such as utilities, licenses, insurance, legal fees, continuing education, and related travel costs. Those with long-term growth goals also must factor expansion costs into their annual budget.
Who is the target market?
The National Aeronautics and Space Administration (NASA) and other space exploration agencies work with algae to recycle human waste. Fish and animal farmers use algae as part of their feed. Pharmaceutical companies use algae in medicine and vaccines while cosmetics companies use various forms of algae in cosmetics and skincare products. In addition, scientists continue to discover new uses for algae every day. Aspiring algae farmers must thoroughly research the strains they plan to cultivate and define their target market based on their findings.
How does an algae farm make money?
As an algae farmer, you’ll generate revenue from each healthy crop you sell to the public. The specifics depend on a variety of factors, including your location, the strain(s) of algae you produce, and your buyers.
How much can you charge customers?
Like most products, prices depend on product specifics and demand. The Department of Defense reportedly paid $150 per gallon for jet fuel derived from algae oil while spirulina prices recently dropped to as low as $5 per kilogram.
How much profit can an algae farm make?
If your 100-acre farm earned 10 cents per gallon in profit and produced 15,000 gallons per acre per year, your annual net earnings would equal $150,000.
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 Business 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 algae farm 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.
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate an Algae Farm 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.
In addition, certain local licensing or regulatory requirements may apply. For more 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 algae farm
Once you identify your target market, you can develop a marketing strategy and plan. Start-up business owners should consider hiring a marketing agency to help them target potential customers. Because algae farming is a niche market with a tight-knit community, networking and community engagement can help drive your success.
How to keep customers coming back
Once your marketing strategy starts yielding results, you’ll need to work hard to gain new contracts and retain current customers. Consistent hard work, timely delivery of quality products, and listening to your clients’ pain points will prove critical to customer retention.
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 Algae Farm 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?
Launching and managing a successful algae farm requires a great deal of vision, planning, and patience. This business venture best suits entrepreneurs with a passion for conserving the Earth’s natural resources and a dedication to developing long-term solutions.
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 algae farm?
Regardless of if you choose to cultivate your algae crops in the open ocean or on land using a pond system, your farm will require great care and attention to detail. A spirulina farm uses open ponds in which the farmer must closely monitor the pH level and temperature. The algae needs regular feeding with a carefully selected culture medium, which helps the algae thrive and reproduce. Agitators then mix the nutrients, providing the perfect environment for algae growth. Once the spirulina is ready (on day 13), the farmer harvests the crop and starts the process all over again.
In addition to your farming duties, you’ll need to set aside time each week to tackle administrative and marketing tasks. You must return emails and phone calls, pay bills, and nurture industry connections. With new discoveries made nearly every day regarding the benefits of algae farming, your farm’s long-term success and growth will depend on your dedication to raising awareness and keeping pace with the latest industry news.
What are some skills and experiences that will help you build a successful algae farm?
Because algae farmers have so many opportunities available to them, operating this type of business requires a focused and detail-oriented mind. Business owners must conduct thorough research to identify which strains best suit their needs and determine market demand. Strong business acumen and a willingness to learn also are essential for launching and growing a successful algae farm.
What is the growth potential for an algae farm?
As a fairly new industry, the worldwide algae market is poised for significant growth. Industry experts predict the open pond cultivation segment alone will grow by almost 7 percent by the year 2025. Farmers striving for long-term growth should leverage this opportunity by staying on top of the latest trends and regularly networking within the community.
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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 algae farm?
As previously mentioned, the algae industry is incredibly diverse and can appear complicated. While ambition leads to success, taking an overly ambitious approach to this type of business can lead to failure. Choose your niche and plan for calculated growth as your knowledge, skills, and finances expand. Joining the Algae Biomass Organization and attending events like the Algae Biomass Summit will help you achieve your business goals.
How and when to build a team
As your business grows, you’ll need to consider adding employees to your team. New team members should have previous algae farming experience or undergo thorough training prior to working with your farm’s crops.