How to Start a Tea Business

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Quick Reference

Are you a tea lover, even going so far as to make your own blends?  A tea business could be a great opportunity for you to do what you love and make a living, or just some extra money if you choose to do it part time.

Business Overview

Tea has been around for thousands of years and owes its beginnings to the tea plant, Camellia Sinensis.  A tea business creates creative tea blends and sells them in a shop, to retailers, or online.  Some tea businesses simply buy tea wholesale and sell it at retail prices. Teas are often packaged as gifts, and sometimes sales are subscription based to encourage consistent repeat orders.

Industry Summary

According to Statista, the global tea market size is over $318 billion.  According to the Tea Association of the U.S.A. Inc., Americans consumed over 84 billion servings of the popular beverage in 2019.  More than half of Americans drink tea daily.  In the U.S. alone, the tea market grew from $1.84 billion in 1990 to about $13.12 billion in 2020.

Industry Trends

Specialty teas are increasing in popularity, driving the growth in the market.  Other market drivers are the fact that tea is all natural and has health benefits as well.  As the health consciousness of consumers increases, the size of the industry will continue to grow.

Target Market

Your target market will be tea lovers and health conscious individuals.

Skills, Experience, and Education Useful in Running a Tea Business

There are several specific skills that you will need to open a tea business.

  • Experience.  Experience working in a tea business is valuable, or at least experience making your own tea blends.
  • Education.  You can take courses and get a tea blending certificate.
  • Business knowledge and experience.  You will need to have at least some basic knowledge of marketing, finance/accounting, and human resources.
  • People skills. You’ll need to be able to build rapport with your customers so that you retain them as customers and keep them coming back.

Costs to Start a Tea Business

Here are the typical costs you will face when you open a tea business.

  • Shop lease if you choose to have a shop rather than an online store $500 – $5,000 per month
  • Tea making and kitchen equipment $2,000 – $5,000
  • Initial inventory $500 – $1,000
  • Initial packaging supplies $1,000 – $2,500
  • Initial marketing such as Facebook ads or search engine optimization for your website $500 -$1,000

Steps to Starting a Tea Business

Step 1: Write your Business Plan

After coming up with the idea, the next step in starting your tea business should be to write a business plan.  The business plan will make you focus on some important aspects of the business, such as who your customers are, how you plan to reach them, what makes your type of teas better than competitors, projecting sales and expenses, and more. You’ll also need to do some research to calculate exactly what your startup expenses will be, and what your ongoing expenses will be.

Not only will a bank require you to have a business plan if you need financing, but multiple studies have shown that having a good business plan increases the odds of starting a successful business. Writing the plan helps you to think through all the aspects of the business, and then serves as a guide as you begin.

Related:
How to write a business plan
Free sample business plans

Step 2: Name the Business

Finding the perfect tea business name can be challenging. Not only does the name have to reflect what you do and be appealing to customers, it also has to be available to use. You can check your state’s website to see if the name is available and register your name.  Your name should make you stand out, reflect your brand, and tell potential customers exactly what you do.

Step 3: Form a Business Entity

A business entity refers to how a business is legally organized to operate. There are four primary business entities to choose from, which include a sole proprietorship, partnership, corporation, and Limited Liability Company (LLC).  Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.

RelatedComparison of Business Entities

Step 4: Select your Location

If you are manufacturing your own tea, the facility may need to be certified and inspected by the local health department.

Additionally, most tea businesses sell their tea online or sell wholesale to craft retailers. if planning to set up a tea store as a small shop or kiosk, be sure to find an area with high foot traffic or choose to display at specialty events.

Related: Choosing a business location

Step 5: Apply for Business Licenses and Permits

You may need to obtain certain business licenses and permits. These permits and licenses can vary based on the state and town where the business is located. Check with your state for specific license and permit requirements for your tea business. You may need a food license. Some other common local, state and federal registrations an tea business may need include a sales tax permit and an Employer Identification Number.  

Related: Common business licenses, permits, and registrations by state

Step 6: Find Suppliers

You can purchase tea ingredients from wholesalers and experiment with creating the best tea flavors. If possible, select a tea manufacturer that’s located near you to make sourcing and purchasing your product easier. If that isn’t an option, be sure to choose a company whose products you’ve sampled and found to be of acceptable quality.

Often many tea blends start with a green tea, black tea, or white tea and then include dried fruits, flowers, spices, or herbs for flavor.

Step 7: Find Financing

While many tea businesses start as a home-based business and not much funding is needed, others will need funding to launch their brand. In order to get a loan, the borrower(s) will need to have good credit and be able to invest 15-25% of their money towards the total start-up costs.

Related: Finding the money to start a business

Step 8: Open a Business Bank Account

Keeping your business and personal finances in separate business bank and credit card accounts makes it easier to track the income and expenses of the business.

Step 9: Get your Marketing Plan in Place

A tea business will need to set aside a budget to cover marketing costs on a continuous basis. Common marketing techniques for a tea business include sampling at local events, online marketing and on social media platforms like Instagram and Facebook. Developing a website can be a significant expense, but it can also give your tea business greater visibility online.

Related: Low-cost ideas to market a new business

Step 10: Get Insurance

A tea business needs several types of insurance for full coverage:

General liability insurance can help protect you from third-party claims of bodily injury and property damage.

Professional liability insurance protects you from claims of professional errors or negligence that result in a financial loss.

Worker’s compensation insurance covers expenses like medical bills and legal fees that a business might face if an employee were ever hurt while working.

Insurance policies will vary. To get the most accurate idea of what to budget for insurance, request quotes from multiple providers. When comparing the quotes, consider not only the premiums but also how the plan exclusions, coverage limitations, and deductibles compare.

Related: Common types of insurance a business may need

Step 11: Hiring Employees

You may need employees to help you run your tea business.  Make sure that you select people with appropriate experience and training.

In addition to salary costs, your budget will also need to include other employee-related expenses. Workman’s comp insurance, unemployment insurance, and paid time off are common expenses that a business will need to cover when hiring staff.

Related: Hiring your first employee

Step 12: Set up an Accounting System

Setting up an accounting system for your tea business is critical to the long-term success of your business.

Staying on top of taxes not only keeps the business out of trouble with the government, but the numbers can be used to track and monitor trends and cash flow in the business and maximize profits.

Related: Setting up accounting for your business

How Much Can You Potentially Make Owning a Tea Business?

Your revenue will vary based on how you sell, whether online or in a shop.  If your average sale is $15 and you make 20 sales per day, you would make $109,500 in revenue per year.

In addition to selling teas, tea accessories such as mugs, pots, presses, and kettles can boost profits even more to your existing audience.

Things to Consider Before Starting a Tea Business

Running a tea business, or any business, will have its challenges.  You need to be prepared, and make sure that you know what you’re getting into.

There are several ways to get started in the tea business, from selling a private label (meaning you sell someone else’s product with your branding), dropshipping a wide variety of existing products from wholesalers, ready-to-drink beverage, or manufacturing custom varieties of teas, tea bags, and/or loose leaf tea products.

Marketing and acquiring customers will be your biggest challenge and an ongoing expense. Online marketing and search engine optimization will be your biggest source of customers, so you will need to have a budget for that.

You will face competition, so you need to offer a high-quality product and creative flavors to appeal to a wide variety of tastes.

Talk to other business owners for tips on starting a business and do your homework to determine costs.  Research other tea businesses to see what they offer and what prices they charge.

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