Do you want to start a mushroom farming business? If YES, here is a complete guide to starting a mushroom farming business with NO money and no experience.
Okay, so we have provided you an in-depth sample mushroom farming business plan template. We also took it further by analyzing and drafting a sample mushroom farming marketing plan backed up by actionable guerrilla marketing ideas for mushroom farms. In this article, we will be considering all the requirements for starting a mushroom farming business. So put on your entrepreneurial hat and let’s proceed.
Table of Content
- Why Start a Mushroom Farming Business?
- 1. Understand the Industry
- 2. Conduct Market Research and Feasibility Studies
- 3. Decide Which Niche to Concentrate On
- 4. Know Your Major Competitors in the Industry
- 5. Decide Whether to Buy a Franchise or Start from Scratch
- 6. Know the Possible Threats and Challenges You Will Face
- 7. Choose the Most Suitable Legal Entity (LLC, C Corp, S Corp)
- 8. Choose a Catchy Business Name
- 9. Discuss with an Agent to Know the Best Insurance Policies for You
- 10. Protect your Intellectual Property With Trademark, Copyrights, Patents
- 11. Get the Necessary Professional Certification
- 12. Get the Necessary Legal Documents You Need to Operate
- 13. Raise the Needed Startup Capital
- 14. Choose a Suitable Location for your Business
- 15. Hire Employees for your Technical and Manpower Needs
- 16. Write a Marketing Plan Packed with ideas & Strategies
- 17. Brainstorm Possible Ways to Retain Clients & Customers
- 18. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity
Why Start a Mushroom Farming Business?
Mushroom farming can be a very lucrative business for any entrepreneur that does not mind to put in the work. Mushrooms can be harvested in just a few weeks and requires low startup capital; however, while this might look like an easy business to start, it is necessary that you study the technique of cultivating mushrooms or you have the necessary experience.
If you have had a mushroom garden, it will be easier for you to move to the commercial scale as opposed to someone who has had no experience at all. What you will however need in addition to your experience is the ability to run a business.
There are different types of mushrooms in existence with each having different production costs which is why it is necessary that you also conduct a research to know which type customers prefer and how much it will cost you to produce and package it.
Knowing the production cost will also enable you to work out a detailed budget that will state how much you need to spend and also how you are likely to recoup your investment. Even though there are over 2,000 edible mushrooms in existence, only a few are eaten in the united states and they are the white button, criminis, portobellos, shiitake, oyster, wood ear, morels, chanterelles and enoki.
You will need to decide if you intend to buy ready-to-inoculate spawns from suppliers or produce the spawns yourself in order to start the culture. Keep in mind that the former will push your start-up costs higher especially if you intend to have a large farm.
Starting a Mushroom Farming Business – A Complete Guide
1. Understand the Industry
Globally, the market value for mushroom is expected to exceed $50 billion between the period of 2015 and 2022 and this is due in high part to the growing demand for mushrooms recently. The reason why the demand for mushrooms has grown tremendously is due to the fact that they are considered good for the health because they have low fat and cholesterol content.
Mushrooms also contain negligible sodium as well as gluten content and have various nutrients such as vitamins, potassium and selenium. Mushrooms can be consumed dried, fresh, frozen or canned, which has broken down the market into fresh and processed categories.
Mushrooms can be used for medicinal purposes especially due to its possession of vitamin B, D, calcium, potassium, phosphorus, magnesium and other mineral content. Mushrooms are parasitic in nature because of their dependence on other plants for food. Industrial wastes such as animal and bio-based are valid options for the cultivation of mushrooms.
Mushrooms do not require much land usage as they can be grown in polytunnels, lawns and in woodlands and this fact has encouraged more people to go into the cultivation of mushrooms especially as they also have a different life cycle in comparison to green plants.
In the near future, it is expected that the industry will have supermarkets, restaurants, hotels and cafeterias play a vital role that will help shape the industry. Another factor that will aid the mushroom market is the growing preference by customers for vegan food and also the need to substitute meat for something close.
The button and shiitake mushrooms for instance are regarded as meat substitutes and desired by consumers because of their rich protein sources. The growing shift in consumer preferences towards processed food consumption is also expected to aid the market between 2015 and 2022.
The cultivation of mushrooms is something that is considered as having high operational costs due to its high intensive labor. In order to be able to keep up with the high demands and also keep production costs down, some mushroom farmers have started engaging in unwholesome cultivation methods by using excessive fertilizers and chemicals.
This growing harmful trend is expected to hamper the growth of the market as growing health awareness will result in consumers shifting away from mushrooms. Another limiting factor is the fact that mushroom spores are harmful to the growers as they can cause respiratory diseases and so make growers make use of respirators further driving up their production costs.
Currently, various governments and international agencies are making contributions that will encourage mushroom farmers to develop new research and development technologies in order to ensure that the quality of mushrooms are being improved. Biotech laboratories have been playing a vital role in the breeding process of mushrooms as they have been optimizing the cultivation environment of mushrooms in order to have a better yield.
These sort of technological advancements coupled with the efforts of the government have allowed industry participants to experience growth opportunities. The low shelf life of mushrooms has however hindered the growth of the mushroom market as manufacturers are having to battle with increase in preservation costs.
Globally, the market has been dominated by North America as well as Europe with the Asia Pacific, the Middle East and Africa following close behind. China and india are however expected to also witness rapid mushroom demand due to their rising high population as well as growing health awareness.
The escalating food chain as well as food markets in developing countries as well as the ongoing research for other possible but undiscovered uses of mushrooms is likely to ensure that new opportunities are being made available for the mushroom market in the years to come.
In 2015, the Asia Pacific accounted for the largest market share and has been predicted to grow at a pace that is much faster between the periods of 2015 and 2022. The reason for the fast growth pace is the high consumption rate in countries like Japan, China and India.
The highest market share was however held by Europe in 2015 as the region accounted for the largest production of mushroom owing to the increase in demand for organic food from consumers. North America’s growth is getting elevated as there is a growing demand for processed food.
2. Conduct Market Research and Feasibility Studies
- Demographics and Psychographics
The demographic and psychographic composition of those who consume mushrooms or buy them are the local health food stores, supermarkets, farmer’s markets, hotels, restaurants, cafeterias and health conscious individuals.
3. Decide Which Niche to Concentrate On
There is little or no monopolist business in existence, therefore as an entrepreneur you must be ready to face similar businesses such as yours and then look for how to excel and stand out. One sure way by which you can do this is to find a niche that will allow you offer services that only a few can and in this way you can generate more revenue for your business.
It is however worthy to note that not all niches are profitable, so it is essential that you conduct a thorough research in order to find what niches will be most profitable for your business so that you do not end up wasting time and resources on a niche that will not allow you generate anything.
Below are some of the niche ideas that exist within the mushroom market that you can specialize in;
- Fresh Mushrooms
- Processed Mushrooms
- Gourmet Mushrooms
The Level of Competition in the Industry
In every industry, there is always a level of competition that exists and the mushroom market is no different. The level of competition that exists in this industry totally depends on what your niche is. If for instance you are selling only fresh mushrooms, then you have to be near your target market as opposed to the mushroom farmer that is into processed mushrooms.
What customers who are after fresh mushrooms want are quality mushrooms that have not stayed too long on the shelf and what customers who eat processed mushrooms want are quality mushrooms as well. This then means that no matter how customers want their mushrooms to be, all they are after is that the mushrooms are of high quality.
If you are therefore looking to start your mushroom farm in the United States, you should be aware that not only will you face stiff regulations in the industry but you will also face lots of competition from already established and successful mushroom farmers and you should therefore be prepared.
4. Know Your Major Competitors in the Industry
In every industry, there are brands that stand out and the mushroom market is not all different. These well-known mushroom farms or companies have either been long in business, have generated enough publicity or deal with quality mushrooms only. The reason why you should know popular brands is so that you can know how they operate and adapt some of their strengths into starting and running your mushroom farm.
Below are some of the well-known mushroom farms in the United States of America as well as globally;
- California Mushroom Farms Inc
- Detroit Mushroom Factory
- Fresh Stock
- Monterey Mushrooms, Inc
- Monaghan Mushrooms
- Modern Mushroom Farms
- The Mushroom Company
Mushrooms are usually processed, produced and consumed on a large scale in so many countries and the demand for mushrooms has been on the increase coupled with high demand for organic and healthy food products. Mushrooms are very popular in many Asian countries and as such Asia has a majority of the market share followed closely by North America and Europe. Europe however leads in mushroom production and processing.
The mushroom market on a global level is divided on the basis of types into oyster, button and shiitake. On the basis of category, it is divided into canned, fresh, chilled, frozen and processed categories. In applications, the mushroom market is segmented into direct consumption, recipes and F&B processing and by geography into North America, Asia-Pacific, Europe, The Middle East and Africa.
The mushroom market is driven by certain factors such as the continuous development of high yield systems, increasing saturation in demand as well as shifting consumer preference for value-added products. Other factors are the rising health awareness, increase in demand for organic products as well as increasing power of supermarkets.
The mushroom market is also facing several inhibiting factors as well especially the due to the short shelf life of mushrooms as well as the use of harmful ingredients in the cultivation which has been due to the increase in competition as mushroom growers look to keep up.
5. Decide Whether to Buy a Franchise or Start from Scratch
When looking to start any business, one of the decisions that you have to deal with is whether to start your business from scratch or whether to buy a franchise. Be reminded that while each of the option has its pros and cons, it is necessary that you choose only that which will bring you closer to achieving your goals and objectives.
Franchises in the mushroom market aren’t that popular and so most entrepreneurs usually prefer to start off by themselves especially if they are starting on a small scale. If you are however starting alone, having experience in growing mushrooms help, all you might have to grapple with is how to attract customers and generate revenue that will grow and sustain your business.
6. Know the Possible Threats and Challenges You Will Face
When starting any kind of business, it is necessary to understand that you will be facing several threats and challenges to the business and therefore you must be prepared to handle them whenever they arise. Some of these threats and challenges are ones that cannot easily be handled and so when they occur, all you have to do is remain optimistic.
Some of the threats and challenges that you are therefore likely to face when starting your mushroom farm is handling the mushrooms properly as you do not want to deal with lawsuits from food poisoning, having to deal with competition from already existing mushroom farms, and having to deal with strict regulations in the industry.
7. Choose the Most Suitable Legal Entity (LLC, C Corp, S Corp)
- Best legal entity to use for this type of business
When starting any business, it is important that you choose the right legal entity that will have a positive impact on your business. Every farmer in the United States usually chooses from four basic legal entities especially if the business they are running is aimed at generating profit; sole proprietorship, partnership, Limited Liability Company (LLC) or corporation. If however you are running a non-profit business, then a nonprofit corporation must be formed.
If you are running a nonprofit entity, then you should know that it may be formed under state and federal law. If the corporation will be formed under the state law, then it must adhere to the following characteristics which are that; no stock is issued; income isn’t distributed to member, director or officer; the entity is operated for charitable purposes and that upon dissolution, the assets are distributed to another charitable organization or government entity. This does not however mean that nonprofit organizations cannot conduct business as a means to generate revenue.
In running a for-profit entity, there are some distinct characteristics that you can use to decide which legal entity will best suit your business. Some of the features are; flexibility and ease of control, taxation issues and liability issues. If for instance you intend to run a business that has lots of risks, then it would be to your benefit to go for an entity that will not leave your personal liabilities exposed.
A sole proprietorship is one of the most common legal entities that most entrepreneurs starting out usually go with. One thing with a sole proprietorship is that as soon as the business expands, the entrepreneur can later change without much hassle to another legal entity. While a sole proprietor might be the easiest to form, it leaves the entrepreneur exposed when it comes to personal liabilities. A general partnership is much like a sole proprietor; the only difference is that two or more people are involved.
In an LLC, the owners are regarded as a separate entity from the business, which means should there be any claims against the business; their personal liabilities are being protected. In dealing with tax, owners under the LLC usually report on their personal tax returns just like a sole proprietor and partnership form of legal entity. The corporation though similar to the LLC is more formal and taxation is usually double for members.
8. Choose a Catchy Business Name
One of the first things that you must have to deal with when looking to start your mushroom farm is what name you will call the farm. A business name is just like a personal name, if it is distinctive enough, it is likely going to attract attention. While, it is necessary that our business name be distinct, it is also necessary that it be easily pronounced.
Below are some catchy business names for your mushroom farm;
- Quality Mushrooms Inc
- Divvy Mushroom Farm
- Mush-Room Farms
- Variety Mushroom Farms
- Bob’s Mushroom
9. Discuss with an Agent to Know the Best Insurance Policies for You
Having insurance policies when starting any sort of business in the United States of America is very necessary as insurance should be part of your risk management strategy. When you have insurance, you shift some of the risk associated with your business to that of the business carrier.
As an entrepreneur, you should know that there are many insurance policies in existence and it is best you meet with an insurance agent or broker who will help point out which insurance policies will be best for your mushroom farm. Below are the basic insurance policies that you might need to consider buying if you are looking to start your mushroom farm in the United States of America;
- General Liability
- Property Insurance
- Workers’ Compensation Insurance
- Vehicle Insurance
- Crop Insurance
- Business Interruption Insurance
- Health Insurance
- Employee Dishonesty Insurance
- Key Employee Insurance
10. Protect your Intellectual Property With Trademark, Copyrights, Patents
Intellectual property protection is one very serious aspect of business especially if you are going to be designing or building something that no one has. While the mushroom business is pretty straightforward, it doesn’t mean that you cannot stumble on a technology that no one has thought about. Should this ever happen, it is always best to engage the services of an attorney experienced with patents and trademarks to help you out.
If you haven’t invented anything and wish to protect your company name, logo or domain name, you can do so. However, most entrepreneurs in this segment do not usually bother with getting an IPP.
11. Get the Necessary Professional Certification
While experience and skills are needed to start and run a mushroom farm, having professional certification is not one of them.
If you are however looking to improve your management, finance or marketing skills, there are professional certifications available for you. All you need to do is ensure that you are getting the certifications from an accredited place.
12. Get the Necessary Legal Documents You Need to Operate
Any business that is started in the United States requires legal backing i.e an identity as well as legal documents. Except you are looking to run a business that is illegal in nature, getting legal documents is a must especially if you do not want to get in trouble with the authorities.
If you do not know what legal documents you will need before starting your mushroom farm, it is best to ask other mushroom growers, visit the city council or best engage the services of an attorney. Below are some of the legal documents that you will need to start and run your mushroom farm;
- Insurance policies
- Sales Tax
- Business Permits and License
- Service contract or agreement
- Employee Injury Report
- Safety Signage
- Certificate of Incorporation
- Operating Agreements for LLCs
- Business Plan
13. Raise the Needed Startup Capital
The fact that you will require money to run your mushroom farm and also pay for the labor that you will use goes to show that having the required finance to start off the business is not something that can be overlooked. Sourcing for start-up capital is not always easy especially if you are just starting your business, which is why it is advised that every entrepreneur has a business plan as this is the document that can easily convince your potential investors on your seriousness and commitment to the business.
Below are some of the ways you can finance your mushroom farm;
- Generate part of the capital from personal savings and sale of stock
- Source for soft loan from family members and friends
- Apply to the bank for a loan
- Get a business partner to invest in your mushroom farms
14. Choose a Suitable Location for your Business
One serious decision that you must take into cognizance is where you intend to locate our mushroom farm. The location of your mushroom farm will be determined by your niche and in extension who your target market is. If you are targeting the locals who prefer fresh mushrooms, then you will need to be located somewhere close by.
If your home has enough space outside, then starting your mushroom farm in your home is not totally a bad idea especially if you are looking to keep down overhead costs involved in starting the mushroom farm. If your home is not big enough or you are planning to run a very large scale mushroom farm, then leasing a place will not be a bad idea.
Wherever you intend to lease for growing your mushroom farm, it is important that you are able to control illumination as mushrooms do not require light before they can grow. Therefore, you might need to build rooms to grow your mushrooms so that they can be protected from direct sunlight. When working on the mushrooms, you can use miners’ lamps rather than illuminating the entire room.
It is important that the location is well ventilated and that you are able to control the humidity and temperature of the place. If the mushrooms need more moisture, you can add it to the air, wet the floors or the wall and if the moisture is too much, you can introduce drier air.
If you are going to be leasing a place to grow your mushrooms, ensure that you have set aside a budget and that you do not spend more than your budget so that you do not end up causing a strain on your overall budget.
15. Hire Employees for your Technical and Manpower Needs
Mushrooms are normally easy to grow but some varieties are easier than others. The oyster mushroom is considered one of the easiest mushrooms to grow followed by the shiitake mushrooms. The mushroom business is a hands-on kind and requires everyday attention, so it is necessary that you possess the skills and knowledge required to grow your mushrooms.
The start-up expenses required to start a mushroom farm are usually minimal. A commercial mushroom farmer needs to have at least 500 square feet of space to grow at least 12,000 pounds of mushrooms every year. This amount of space can be provided in the homes of most farmers, so leasing a space is usually not necessary. However, it is necessary that the farmer is able to control the humidity, light and temperature of the space.
The operating cost that is involved in growing mushrooms involves buying medium and spores, getting logs of wood, straw, cardboard, used coffee grounds and any other cheap materials that can serve as growing mediums. Asides from what you will use to grow the mushrooms, you will also need packaging materials as well as office supplies. In getting office supplies, you can go for new or fairly used ones.
If you are just starting off your mushroom farm, this is a business that you can totally run on our own or get another hand to help out. If however, your farm expands or starts to generate revenue that will support you paying the salaries of employees, then you can do so.
This therefore means that for you to be able to run your mushroom farm effectively, you can make do with just one or two people especially as mushrooms demand only little attention when compared to some other kinds of businesses.
The Service Delivery Process of the Business
In growing mushrooms, there are three basic steps that are usually undertaken, the first step is to prepare a growing medium which usually takes a few hours and can be done once every week.
The next step is to mist the growing mushrooms. This is not a hard task except you have a huge farm as the misting of the mushroom should be done every day till they are harvested. Once the mushrooms are mature they can then be harvested. Mushrooms don’t take too long to mature.
The mushroom farmer must then look for ways to package the harvested mushroom depending on if the farmer is delivering fresh or processed mushrooms. Once the mushrooms have been packaged, the farmer must then deliver the mushrooms to customers that would have already been sourced as soon as the mushrooms started growing.
16. Write a Marketing Plan Packed with ideas & Strategies
- Marketing ideas and Strategies
Marketing is one sure way of generating the needed revenue that will sustain and grow your business. However, marketing not only allows you to generate revenue for your business, it also ensures that your products or services get the required notice it deserves from your target market – existing or potential.
Even if you have the needed experience to grow your mushrooms and extend its shelf life or package it, without marketing, you will be struggling to generate sales which might affect your business so much that you might need to close down. Therefore, marketing can be said to be a very important aspect of a business either new or already existing.
Marketing involves knowing what it is your intended target market wants and ensuring that you are able to meet this need. You can either conduct marketing physically or via the internet; however you must ensure that all is in order before you market your mushrooms. If you have good marketing strategies, you cannot only compete effectively against your competitors; you can also penetrate the market as well and get a fair share for your business.
Before you can however create any marketing strategy that will be very effective, there is need to conduct a thorough market research because this will enable you to identify your target market, know what to expect from them and what they also expect from you. Also, your market research will enable you identify who your competitors are, what their weaknesses and their strengths are and how you can best them and become the preferred brand of your intended target market.
Most entrepreneurs that start out are often overwhelmed by the marketing process and so either get an experienced marketing consultant or hire a marketing team that will help achieve its marketing goals and objectives. Whether you are hiring experienced individuals to help you out as regards marketing or you are doing it all by yourself, it is important that you continue to review the strategies so that you can remove the ones that are ineffective and will not allow you achieve your goals and objectives.
Below are some marketing ideas and strategies that you can use for your mushroom farm;
- Ensure that you have a stand in the farmers’ market in your locality as this will help market your products to visitors and other farmers
- Encourage your loyal customers to help spread the word about your mushrooms
- Send out mushroom samples with an introductory letter to restaurants, hotels and cafeterias around you
- Use your social media platforms such as Facebook, Twitter and Instagram to spread the word about your mushroom farm
- Pay for adverts spots in your local newspapers and related magazines as well as radio and television stations in order to spread word about your mushroom farm
- Distribute handbills and fliers in various strategic locations
17. Brainstorm Possible Ways to Retain Clients & Customers
Businesses that are succeeding know that without their customers they wouldn’t be where they are which goes to show how important customers are. Mushrooms are consumed by humans – either ones that have health goals or those that consume it as they do other meals – and so it is vital that these humans are courted in such a way to make them loyal to your own brand.
However, while it is very important to have strategies in place that will attract the customers you will need for your business, it is more important that you retain a high number of the customers that you are patronizing your business.
According to research, companies that always spend to attract customers spend higher than those that have high retention of customers and this is due to the fact that retained customers also helps a company attract new customers, thereby making it a win-win for the company.
There are several reasons why customers stick to a brand as opposed to going to another and that is the quality of the product or service. In growing your mushrooms, it is important that you are consistent with the quality so that your customers know that they can always rely on you for quality mushrooms.
Customers love incentives and are always on the lookout for where they can get incentives on their purchase. To this effect, it is important that you incorporate an incentive or reward program into your customer retention strategy. You could give customers that refer others an extra pack of mushrooms to motivate them in continuing to refer more customers to you. Customers also love a company that attends to their complaints and is quick with their orders, it is therefore important that you imbibe an excellent customer care relationship with your customers.
18. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity
If you grow gourmet high quality mushrooms that no one knows about, you will still find yourself failing, which is why publicity is very important to the success and growth of the business. There is no entrepreneur that does not want to be known even if he or she is engaged in a niche product or service or in a local town somewhere. Every entrepreneur knows that for the goods to be sold or services to be paid for, a good amount of publicity has to be carried out – either paid for or not.
Mushrooms grow quite quickly and have a short shelf life and so as an entrepreneur in the perishable food business, it is important that publicity is part and parcel of running our business especially as there are some consumers that do not want their mushrooms dried, canned or frozen. Publicity helps ensure that you not only get awareness for your products but that you are able to generate the revenue that will sustain and grow your business whilst also competing favorably against your competitors.
Before you can however decide on the best publicity strategies for your mushroom farm, it is necessary that you conduct a research on your target market – potential and existing – so that you know where they likely congregate or visit, that way they will be able to see your brand when it is being publicized.
It is worthy to note that not all publicity strategies will cost you an arm and a leg before it is very effective especially as the internet has opened up several possibilities for entrepreneurs of this age. Ensure that you set a budget so that you do not end up spending more than you already intended.
Below are some of the strategies that you can use to boost the awareness and create a corporate identity for your mushroom farm;
- Ensure that you create a website and deploy SEO strategies so that your website can rank tops in search engines
- Ensure that you distribute fliers and paste notices in strategic locations around the area where you intend operating your mushroom farm
- Participate in community events such as food festivals, trade fairs and other such programs in order to network and generate awareness for your mushroom farm
- Take advantage of your social media platforms such as Facebook, Twitter, Instagram and Google Plus to generate awareness for your business
- Place adverts for your mushroom farm in local newspapers, food and lifestyle magazines as well as on radio and television stations
- Create a unique and distinct logo and ensure that it is used on your delivery truck as well as on customized tee shirts for your workers