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 step guide to starting your lobster fishing business. 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 long it will take you to break even?
- 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 lobster fishing business?
The costs of opening a lobster fishing business are substantial. Business owners need:
- A lobster boat, which costs $200,000 fully equipped
- Lobster traps, which cost $80 each with a buoy
- A license, which costs $167 to $501
- Trap tags, which cost $0.50 each
Based on these figures, outfitting a new business with 800 traps would cost a little over $264,400.
Business owners who aren't able to obtain a license or outfit a boat probably shouldn’t enter this industry. While Maine lets residents place up to five lobster traps for personal use, there are harsh penalties for selling lobster without a commercial license.
What are the ongoing expenses for a lobster fishing business?
The ongoing expenses for a lobster fishing business are substantial. They include annual licensing fees, boat maintenance and repairs, fuel, and bait. Bait alone can cost $300 per day, and a new engine could run $30,000.
Who is the target market?
Cold water lobsters ultimately end up in restaurants and supermarkets, but lobster fishing businesses don’t sell directly to these businesses. Instead, fishers sell to wharf owners. Most wharf owner then sell catches to processors or distributors.
How does a lobster fishing business make money?
A lobster business makes money by selling the lobster that’s caught. The lobster is sold to the owner of the wharf that a lobster fishing business uses, and most businesses consistently dock at the same wharf.
How much can you charge customers?
In 2012, lobster fishers sold their catches for $2.00 to $2.50 per pound. That was a historic 30-year low, and the price has increased since.
How much profit can a lobster fishing business make?
For those who manage to get licenses, lobster fishing can be profitable despite the costs that come with running this type of business. Some business owners clear six figures in profits annually.
How can you make your business more profitable?
Since how much they make is dependant on what their wharf owner pays for their catch, business owners can increase their profits by selecting the best-paying wharf in the area. Co-ops that own wharves and call around to see what buyers are paying the most tend to offer business owners the best possible prices.
What will you name your business?
Choosing the right name is very important. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your lobster fishing business is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.
You should also consider using a registered agent service to help protect your privacy and stay compliant.
For most small businesses forming an LLC is a great option, but if you still want to weigh all your options check our our article, What Structure Should I Choose for My Business?
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?.
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.
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.
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 a lobster fishing 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.
For 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.
When selling food, you will need licensing from a local health department; all establishments serving food are required to pass a health inspection. Tips for faring well on a health inspections
There are federal regulations regarding what can and cannot be added to, sold as, and processed with food. Attached is a resource from the Food and Drug Administration detailing the process of starting a food business: How to Start a Food Business
To avoid liability and potential lawsuits, Lobster fishing businesses should have their clients sign waivers.
An example of an appropriate waiver can be found here.
Labor Safety Requirements
The lobster fishing business can present some occupational hazards, so it is important that you follow all of the regulations set forth by the Occupational Safety and Health Administration (OSHA).
STEP 7: Get Business Insurance
Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.
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.
How to promote & market a lobster fishing business
Because lobster fishing businesses sell directly to the wharf they dock at, there’s little marketing the business owners need to do. The most they must do is find a wharf to dock at. Wharves may be privately owned by a company, family owned or owned by a co-op.
Recommended: Get started with local advertising for your business with a $300 credit from Yelp.
How to keep customers coming back
Business owners in Maine don’t have to worry about retaining customers, but they do need to keep their licenses. Under the current system, lobster fishers who give up their license for any reason must again go through the two-year apprenticeship and wait for a new license. Until the licensing system changes, business owners should do whatever they can to keep their licenses.
STEP 9: Establish your Web Presence
A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
Start A Lobster Fishing Business In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Anyone who enjoys being on the water and working alone may enjoy running a lobster fishing business. Business owners spend a lot of time by themselves on their boats, pulling up and replacing lobster traps.
Some business owners catch lobster year-round, while others do it as a seasonal business. Winter brings harsh working conditions, and catches are sometimes smaller during the colder months.
What happens during a typical day at a lobster fishing business?
Catching lobster is hard work. Hauling days start before sunrise, and business owners will haul traps for hours on end. During this time, they’re:
- Pulling up traps
- Grabbing and banding lobsters
- Removing debris from traps
- Re-baiting traps
- Dropping traps
At the end of the day, business owners bring their catch to a wharf where it’s sold.
On non-hauling days and during the winter, business owners spend time mending their traps, repairing their boat, and focusing on other aspects of their business.
What are some skills and experiences that will help you build a successful lobster fishing business?
In order to obtain a Maine lobster license, prospective business owners must first work as an apprentice on a lobster boat for at least two years. They can only apply for a license after a captain endorses them, and the waiting list for licenses is lengthy. Applicants wait years, and at times even decades.
Maine is reviewing the current licensing system as the population of lobster fishers ages.
What is the growth potential for a lobster fishing business?
The growth potential for a lobster business is finite. Maine accounts for about 80 percent of the United States’ lobster fishery, and the state heavily regulates the industry. Commercial lobster fishers in Main must be licensed, and there’s a limit of one license and one boat per person. The number of traps that a licensed business owner can drop is limited to 800.
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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.
What are some insider tips for jump starting a lobster fishing business?
While Maine is a difficult state to start a lobster fishing business in, the state’s waters are the most promising for lobster fishing businesses.
As ocean waters have warmed, the waters in Southern New England and the Mid Atlantic have become too warm for lobster to reproduce at a respectable rate. In contrast, the waters in the Gulf of Maine have become the perfect temperature for lobsters. Lobsters are breeding at faster rates in these waters, which largely why business owners are seeing record catches.
Thus, lobster businesses in Maine have much more potential than those in Massachusetts, Connecticut, New York, and New Jersey.
How and when to build a team
Lobster fishers may choose to work alone or with an apprentice. Some have family members help on the boat, especially if the license holder is older and children/grandchildren are waiting for a license. Business owners can hire an apprentice or family member as is appropriate for their situation.