Start a hemp farm by following these 10 steps:
- Plan your Hemp Farm
- Form your Hemp Farm into a Legal Entity
- Register your Hemp Farm for Taxes
- Open a Business Bank Account & Credit Card
- Set up Accounting for your Hemp Farm
- Get the Necessary Permits & Licenses for your Hemp Farm
- Get Hemp Farm Insurance
- Define your Hemp Farm Brand
- Create your Hemp Farm Website
- Set up your Business Phone System
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 hemp farm . These steps will ensure that your new business is well planned out, registered properly and legally compliant.
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 a hemp farm ?
Hemp farming requires land. Buying farmland — along with farming and irrigation equipment — will require a sizable, upfront investment if you aren’t already farming. If you’re already a farmer, your initial costs will mostly focus on seed stock or clones for starting crops. You’ll also need to secure any required state and local licenses as well as insurance. Most costs associated with growing row crops, such as fertilizer and pest control, are already factored in for annual operating costs.
What are the ongoing expenses for a hemp farm ?
Most ongoing expenses include buying seed stock or clones as well as farming supplies, maintaining farm equipment and buildings, paying worker salaries, and purchasing individual and farm insurance.
Who is the target market?
Hemp farming has both commercial and retail markets to consider. As a textile product, hemp’s commercial market includes businesses looking to compete with various products they can now make with hemp. Plastics, paper, building products, and fabrics are all products challenged by hemp.
In the retail space, customers buying hemp products tend to be younger and more liberal-minded although hemp fabrics and cannabidiol (CBD) sales reach into a wide range of demographic markets. College-educated people aged 25 to 50 represent a core group of hemp customers.
How does a hemp farm make money?
Hemp farms make money from the sale of their bulk, dried hemp.
How much can you charge customers?
Hemp is sold as a commodity so the market dictates the price. Farmers can sell their hemp plants as the fiber, the seeds, or both — with each option priced accordingly. Although prices continue to increase, as a market average, beware of ballooning figures based on speculators. Some in the industry fear hemp’s meteoric rise in popularity may cause a bubble similar to what the technology industry experienced in the early 2000s. Current wholesale prices vary between raw and processed hemp products, ranging from $3 to $3,000 per XXX.
How much profit can a hemp farm make?
Farming is a tricky business. While farmers don’t often turn a huge profit, it’s possible to keep overhead costs low by handling as much of the work as possible with a small crew. Hemp farming has the potential for good profits, but you must temper your expectations with the knowledge that Mother Nature can sometimes be a fickle and difficult partner. Average hemp farming profits typically fall in the range of $200 to $250 per acre.
How can you make your business more profitable?
Currently, hemp farming is experiencing a popularity surge. Offer the general public a chance to see what you do in an effort to destigmatize this plant. Many people will enjoy guided tours and farm visits. You might even consider using your farm as a backdrop for photo shoots. Some individuals would love to be immortalized on film, surrounded by your leafy greens.
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 hemp 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.
Make LLC accounting easy with our LLC Expenses Cheat Sheet.
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 a Hemp 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.
If you already have a logo, you can also add it to a QR code with our Free QR Code Generator. Choose from 13 QR code types to create a code for your business cards and publications, or to help spread awareness for your new website.
How to promote & market a hemp farm
Because you’ll mostly sell to wholesalers, your advertising should feel more like an ad for your entire industry. Create a social media presence and business website to showcase your farming process. Use these platforms to share the final products manufactured from your hemp as well. People really like to see stores and the understanding of how this product can improve daily life is critical.
How to keep customers coming back
Clients will tend to stay with a commercial source as long as it delivers a fair price and a consistent product. Clients stake their businesses on your hemp supply. If you can align your crop rotations and harvests with your clients’ needs, you should also retain those customers.
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. Check out our review of the Best Business Phone Systems 2022 to find the best phone service for your small business.
Recommended Business Phone Service: Nextiva
Nextiva is our top choice for small business phone numbers because of all the features it offers for small businesses and it's fair pricing.
Start A Hemp 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?
Because hemp farming is, in essence, the same as cultivating other field crops, it’s a potential fit for individuals with experience farming and harvesting acres of crops. Many traditional produce and commodities (e.g., corn, soybean) farmers now include hemp in their crop rotations or transform entire fields for this industrious material. To prosper in this business, you’ll need a solid understanding of crop rotation, waiting and reutilizing strategies, pest prevention, and harvesting and baling.
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 a hemp farm ?
Much like any farm, most days involve monitoring existing farm systems and equipment as well as your crops. Farming often involves waiting for certain times — both for planting and harvesting. With hemp, the growth cycle averages 110 days. Farmers can stagger or “cycle” their fields between planting, growing, and harvesting to generate a larger annual yield and a constant flow of work. After harvesting and baling their hemp, farmers ship it to manufacturing plants around the country. As such, some daily operations may include the logistics of shipping and receiving.
What are some skills and experiences that will help you build a successful hemp farm ?
Farming experience is a great start. Growing crops involves much more than soil, water, and sun. Experience in the tractor saddle really can give you an edge. Understanding the business world and, specifically, the hemp market, also will prove critical to success.
While this industry is poised to explode in popularity and demand, the structure and legality of hemp products remain subject to sweeping changes. Understanding the political nature of this crop and how to navigate dissenting opinions of your industry also will be essential.
What is the growth potential for a hemp farm ?
With the legalization of hemp farming around the country, many textile and clothing manufacturers now recognize the benefits of hemp fibers. Hemp has been used for thousands of years in numerous products, such as fabrics and rope. Today, modern manufacturing also uses hemp fibers as a biodegradable plastic replacement. Of course, there is the ever-growing cod market, which has been embraced by numerous citizens from all walks of life as a pain reliever and beneficial dietary additive. Overall, industry experts project hemp farming will remain increasingly popular and profitable for the foreseeable future.
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 a hemp farm ?
Hemp farming requires a solid demand for your product. Luckily, that demand continues to grow more and more each day. Your business also will need big voices and backers to help share and promote your vision. These include industry leaders in textiles, fabrics, and building materials. The stigma of hemp’s relation to marijuana will continue to turn away some potential clients, but, more than ever, consumer approval seems too positive to ignore.
Align your business with other forward-thinking businesses and act as a voice for environmentally conscious farming. Hemp farming challenges some large industries, such as forestry and fossil fuels, so retaining a market share requires finding allies at all levels. Growing your support team and customer base will be key for growing your overall company.
How and when to build a team
Because of the nature of rotational farming, your team will ebb and flow. For harvesting and baling, your team will swell. But, you won’t need much help during the growing phase. A medium-sized farm may only need two or three people to keep it operating, for example, plus a few more field hands during harvest. A large-scale farm might need three to five equipment operators and a few more field hands to round out its team.