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 spice 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 spice business?
Costs to get started can be relatively low, depending on the types of spices you buy. For example, saffron is incredibly rare, and costs hundreds of dollars an ounce. Many people get into the business by starting at home, which involves the cost of ordering the actual spice plus any equipment you may use. A regular spice grinder may cost as little as $25. If you’re not sure where to start, there are plenty of places that sell spices online and in bulk. If you’re planning to open a storefront, then you’ll need to take into account the rental space, as well as business permits (fees vary by location.)
What are the ongoing expenses for a spice business?
A spice business continually needs fresh product, so one of your largest ongoing expenses will be buying new spices to stock your shelves. Other common ongoing expenses include:
Who is the target market?
If you’re planning to sell to customers directly, you’re looking for home cooks or even local restaurants who need a regular supplier. People with good palates will recognize the value of quality spices, and they’ll be willing to pay for freshness.
How does a spice business make money?
Spice businesses make money by charging customers a premium for each bottle or weight of spices sold.
How much can you charge customers?
One single vanilla bean can be sold for over $2, while a pound of saffron is $10,000. People are willing to pay for spices that last, though you'll also want to do research about how much each spice costs in local supermarkets or specialty stores. These prices will give you a base, so you can determine your own profit margin. If your product is vastly better than others, don't be afraid to up the prices though.
How much profit can a spice business make?
The spice business is billions of dollar each year, so there is definitely profit to be made in this industry. Selling 100 bottles a week at a farmers market at a $2 profit margin will bring in enough for a steady side business. Once you build up the clientele, you can make well into the 6 figures.
How can you make your business more profitable?
Spices are generally bought by people who enjoy gourmet foods. You may wish to sell accessories (e.g., grinders, aprons) or other specialty foods.
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 spice 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.
Federal Business Licensing Requirements
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
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate a spice 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.
Certificate of Occupancy
A spice business is generally run out of a storefront. 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 spice 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 spice 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
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 spice business
Most spice owners distribute rather than opening up a storefront. You can start by selling to your family and friends, or by going to local farmer’s markets to give people free samples of food featuring your special blends. You’ll also need to find distributors and showing off your skill. The more serious you are about quality and flavor, the more likely it is you’ll start opening doors to bigger markets. Owners may want to think of starting their own website as well, to give people a way to research and learn more about the products.
Recommended: Get started with local advertising for your business with a $300 credit from Yelp.
How to keep customers coming back
The best way to attract customers is to give them something they can’t find in the store. The more consistent you are with the products you sell, the more likely it is people will trust you for their next meal.
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 Spice Business In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
People who understand how spices flavor food will do well in this business. Each spice has its own characteristics, and reacts differently to storage and the passage of time. Without fully understanding the details, it's easy to make mistakes. But it’s equally important to understand how to work with different types of people. The spice business is largely built on relationships with the growers, distributors, and customers, so entrepreneurs should have a grasp on the art of compromise and negotiation.
What happens during a typical day at a spice business?
Spice business owners may do the following tasks in a day:
- Spice blending/grinding
- Network with distributors
- Grow spices
- Schedule sales
- Product optimization
What are some skills and experiences that will help you build a successful spice business?
Ingenuity, passion, and sensibility will all help. You need to know how to work with distributors, and how to find the growers. Passion will drive your knowledge of freshness and shelf life, which will in turn help you make better decisions for your business.
Spice merchants will tell you that trust is a huge factor when it comes to success. You'll need to put your trust into those who produce the spices because you won't be there to actively watch their process. As the popularity of spices continues to grow, it's the relationships that ensure a mutually beneficial (and profitable) business.
What is the growth potential for a spice business?
A spice business can have unlimited growth potential by finding the right clientele. There is definitely a need for those who thoroughly know and understand the nature of spices. Customers are always looking for the next great blend for the grilling season, and creating a popular flavor can get customers hooked quickly.
This is also a smart business idea in terms of longevity. If the economy takes a turn, people will start to cook more at home. In fact, home cooks and chefs may start to rely more on quality spices when they're looking to cut back on their budget. Spices can transform cheaper vegetables and meats into delicious and cohesive meals.
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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 spice business?
Spice owners will tell you that this business is built on relationships. The growers are typically located in Asia, though spices come from all over the world. Only recently have herbs started to be more widely grown in the US, so now may be a good time to experiment if you’re interested in producing rather than just selling spices. If you’re planning to blend your own spices, you’ll need to know what's on the market now and how you can make your product different. You’ll also need to know what foods each spice or blend pairs best with, so you can give helpful tips to you customers.
Spices have a very limited shelf life, so it’s necessary to understand how to give all customers the best in flavor. It can be difficult to stand next to the major spice brands, but small spice owners get the edge because they sell a fresher product. Typically owners make money off the popular spices, as opposed to the fancier ones (e.g., saffron.) In wintertime, cinnamon is a big seller, while in the summer, grilling spices like cumin go the distance.
How and when to build a team
You won’t necessarily need a team unless you plan to have a storefront and need employees to man the cash register. Any workers you hire should understand the flavor profiles and combinations, so they can assist customers with common questions.