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

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.

A business entity refers to how a business is legally organized to operate. There are four primary business entities to choose from, which include the 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.

When deciding on which business entity is best for a tea business, it normally comes down to the sole proprietorship and Limited Liability Company.

A partnership opens the owners up to unnecessary personal liability because if a partner does something to get the business sued, or runs off with cash from the business, the other partners are personally liable to repay. The corporation can be a good choice because it separates the business assets from the owner’s assets. If the corporation is sued or certain business debts can’t be paid back, the owners aren’t personally responsible to repay them. The downside to the corporation is that it is more complicated than all the other entities and requires more administration than the LLC. If you plan on raising a lot of investment though, the corporation is usually the better choice.

That leaves the sole proprietorship and LLC.

The sole proprietorship is the least expensive and easiest entity to start which is appealing. The downside is the owner is personally liable should anything happen to the business, which is an important consideration. The LLC offers the ability to operate as a sole proprietorship with the liability protection of a corporation. Depending on the state, the cost to form an LLC runs from $40 – $500, which is pretty inexpensive for protecting the owners from business-related lawsuits and certain debts.

Related: 3 steps to forming your LLC
 

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

If you are manufacturing tea, you will need licensing and approval from your local Health Department. State and Food and Drug Administration (FDA) regulation may also be required as well, depending on your location and teas that you sell.

In addition, there are some general business registrations needed such as a sales tax permit and an Employer Identification Number.  

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

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.

While many tea businesses start as home-based businesses and not much funding is needed, others will invest heavily in building a national tea 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

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.

Initially, doing some market research is critical to know if there is a market for your tea and the types of tea blends to create. Common marketing techniques for a tea company include sampling at local events, online marketing, and on social media platforms like Instagram and Facebook. Developing a website can give your tea business greater visibility online.

Before launching, consider doing market research to get feedback from potential customers about the types of teas you plan to sell.

Related: Low-cost ideas to market a new business

A tea business needs several types of insurance to fully protect the company. A few common types of coverage include:

– 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.

The cost of insurance for a tea business will vary on several factors. 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

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

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 the accounting for your business