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 medicinal herbs 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 medicinal herbs business?
The cost of starting this type of business differs greatly depending on the business model but there is a place in this industry for people with almost any budget.
The easiest and cheapest way to start this type of business is to purchase medicinal herbs through a wholesale distributor and then resell these herbs online. This type of setup would require getting the proper licenses, a website, bulk herbs, and packaging material. Someone could start this type of business for less than $300 if he or she already owns a computer. For only a little more money, someone can easily rent a booth at a farmers market or fair and sell directly to customers.
Opening a permanent store to sell medicinal herbs requires a person to have access to much more capital. The biggest expense is rent, which can be thousands of dollars a month. In addition, if someone wants to go this route, they will need to invest in inventory, store fittings, utilities, insurance, and everything else which comes with running a retail location. Potential medicinal herb business owners who are interested in operating a retail location may want to consider one of the medicinal herb retail franchises which are available.
The largest expense for those who decide to grow their own medicinal herbs is the land. Land costs vary depending on the location and the quality of the land. Potential business owners who do not currently own land may wish to rent land at first to save money. Besides the cost of the land, costs include seeds, tools, water, and labor. Greenhouses and polytunnels can cost hundreds or thousands of dollars, but can extend your growing season. In order to label herbs as "organic", growers need to apply for at least one certifying organization in the US for an organic certification. The certification process can cost up to $1500. Transporting products to market is an additional expense.
What are the ongoing expenses for a medicinal herbs business?
Depending on your business model, you will have to pay monthly for rent, utilities, seeds, inventory, and labor.
Who is the target market?
Medicinal herb businesses have several kinds of customers. The best retail customer is a person interested in living a natural, healthy lifestyle and already has experience with herbal medicine. A good wholesale customer is an established herbal medicine store which is looking to expand its product line. Herbal practitioners interested in earning more money by creating a white-label brand under their own name are great potential customers.
How does a medicinal herbs business make money?
Medicinal herbs business owners make money by selling herbs.
How much can you charge customers?
It depends on your product's quality, uniqueness, and where you choose to sell. Resellers who handle name-brand products can face stiff competition online which can drive down the prices customers will pay. Business owners with unique products have much more flexibility on setting their own prices.
How much profit can a medicinal herbs business make?
Growers can earn as much as $25 a square foot over the course of a year depending on the type of herbs they grow and the customer base. Medicinal herbs businesses which re-sell bulk herbs typically charge 30% or more over their costs.
How can you make your business more profitable?
Businesses which grow medicinal herbs can also plant culinary herbs to diversify their customer base. All owners of medicinal herbs businesses can create "value-added" products like herbal pillows and gift sets. Teaching classes in the proper use of herbs or on herb gardening is also a good way to increase profits.
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 medicinal herbs 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
In most states, it is necessary to obtain an herb business license. Certain state permits and licenses may be needed to operate a medicinal herb 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 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.
Certificate of Occupancy
A medicinal herb business is generally run out of a garden. Businesses operating out of a physical location typically require a Certificate of Occupancy (CO). A CO confirms that all building codes, zoning laws and government regulations have been met.
- If you plan to lease a location:
- It is generally the landlord’s responsibility to obtain a CO.
- Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to a medicinal herb business.
- After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.
- If you plan to purchase or build a location:
- You will be responsible for obtaining a valid CO from a local government authority.
- Review all building codes and zoning requirements for your business’ location to ensure your medicinal herb business will be in compliance and able to obtain a CO.
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
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 medicinal herbs business
The best way to market a medicinal herbs business which sells straight to individuals is to provide information about the benefits of medicinal herbs. You may wish to do this online, through articles and websites, or in person by giving talks and hosting classes on herbal remedies. You should contact large companies directly if you plan to sell wholesale.
Recommended: Get started with local advertising for your business with a $300 credit from Yelp.
How to keep customers coming back
Become part of the community by being a resource for more than your products, but for your knowledge as well. Since this industry is part of healthcare, customer service is especially important.
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 Medicinal Herbs Business In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
The owner of a medicinal herbal business should have a background in using herbs as a medicine, even if they are not a certified herbalist. Owners who plan on growing their own medicinal herbs need a background in gardening and enough land to grow herbs. All owners should be open and care about people, and they should have a desire to give back to their communities, but the industry also requires a shrewd business sense to stay profitable.
What happens during a typical day at a medicinal herbs business?
Herbal medicinal business owners spend much of their time handling marketing and sales. This may mean working in a store or creating websites and running ads to sell online. Medicinal herb business owners which grow their own herbs will spend a good portion on their days planting, tending to, and harvesting herbs. Those owners which buy wholesale will need to talk with suppliers, order supplies, and repackage herbs.
What are some skills and experiences that will help you build a successful medicinal herbs business?
The owner of a medicinal herbs company needs to have an understanding of the proper use of medicinal herbs. This does not mean that everyone who owns this type of company needs to be a certified herbal practitioner, but this would certainly help. Owners who grow their own herbs need to have an adequate level of gardening skills and knowledge. All owners of this type of business need to know how to run a retail or wholesale operation and have some experience with marketing.
What is the growth potential for a medicinal herbs business?
There is a massive growth of natural products and healthier alternatives to more common medical issues in the US. This will mean there will be a higher demand for medicinal herbs in the future.
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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.
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 medicinal herbs business?
Do enough research to learn about the current demand for medicinal herbs in your local area or the area where you plan to sell. Ensure that you actually have a viable market before investing in purchasing or growing herbs. Once you have a good sense of who your customers will be, start off small. Avoid a financial disaster by building your business slowly.
How and when to build a team
Larger retail and growing operations will require employees. Make sure when hiring new employees they share your vision and dedication to herbal medicine. Consider hiring long-time customers as employees if they show interest.