How to Start a Produce Business

Do you want to start a produce business? If YES, here is a complete guide to starting a produce business with NO money and no experience.

A produce business is a lucrative business that needs a good blend of production know-how and market analysis. This business gives you the opportunity to earn more income within a month. If you plant more food than you and your family can consume, maybe because of a glut at harvest time, or because plants have proved more prolific than first thought, you can start this business and watch those surplus products bring in enormous income.

For certain fruits and vegetables you could use preserving techniques such as canning, fermenting, freezing and pickling to transform the food into forms that will last longer than if fresh.

Starting this business small, either as a sole venture or a side business has so many attractive benefits aside preventing food waste. This business provides you with a source of income; it allows consumers to shop locally making them have a direct relationship with the person who has grown the food they are going to eat.

Steps to Starting a Produce Business

1. Understand the Industry

Reports have it that the industry revenue is primarily dependent on market prices of fruits and vegetables. A general annual increase in the index price of fruits and vegetables has influenced a sustainable revenue growth for businesses in the industry.

But, the threat of wholesale bypass among retailers has grown, limiting revenue growth and profit margins. Experts in the industry expect industry revenue to grow an annualized 1.9% to $99.8 billion over the five years to 2022. It is believed that growing spending power of consumers will give industry businesses the base to keep prices high.

This will lead more competitors to enter the industry. The number of enterprises is expected to grow at an annualized 1.0% to 9,500 operators within the five years to 2022. You should also note that there are no companies with a dominant market share in this industry.

You need to understand that the barrier to entry into this lucrative industry is low and all rest on the scale of production the entrant pursues. Note that the scale of production defines the levels of capital, technology, labour and enterprise required to commence operations.

Due to the industry is highly fragmented, with the top four players generating 12.2% of revenue, industry experts believe that it is very much possible for new entrants to create a foothold in the industry.

Have it in mind that there are no licensing requirements (a wholesaler license is needed for tax purposes only), governmental regulations or significant resource constraints that prevent new entrants from venturing into this industry.

2. Conduct Market Research and Feasibility Studies

• Demographics and Psychographics

Any individual hoping to start this business should understand the appeal of locally grown food, and have the mind set to be able to deal with local bureaucracy, and possess the marketing knowledge needed to bring buyers and sellers together.

Have it in mind that your customer profiles in this business can vary depending on the audience you hope to attract. For instance, if you open for business in an inner city food desert, your customers will be area residents shopping for affordable groceries.

If you’re opening an organic food market, you might appeal to “foodies” who are concerned about nutrition and locally grown produce. Also if you open in a tourist location, you might most appeal to out-of-town visitors who want to experience shopping at a new location.

To really succeed in this business, you must have keen sales instincts and the ability to deal diplomatically with local governments and regulatory agencies. One of the first and perhaps most challenging task will be finding a suitable location to market your produce.

This is often on municipal land, and you might field objections from retailers, such as supermarkets, convenience stores and other food markets. The municipal government might also be wary of an increase in vehicle traffic, noise and mess.

Indeed a large proportion of the population consumes fresh produce, even though specific demographics can be targeted to boost sales. For instance, parents of young children want healthy foods to combat childhood obesity. Flexitarians are also a key market because they are likely to eat more fruits and vegetables than those who eat meat with every meal.

3. Decide What Niche to Concentrate On

When planning to start a produce business, you have to first and foremost know the exact products you want to sell. You also need to figure out if you want a combination of vegetables and fruits. Most people who engage in this business have a huge farm.

Apart from selling fruit and vegetables, you can also sell other types of produce such as flowers, herbs, eggs, milk, butter, cheese, and specialist foods such as olive oil, nuts and seeds, and organic produce.

You can also offer personalized service such as a delivery service, taking orders over the phone, by email or through websites or text messages. You can also supply local restaurants, guesthouses, and coffee shops in the area. All these and so much more are the reasons why you have to first prepare a business plan. This will help you understand the business process.

There are various points that you must think carefully about. Starting your own produce business is not an easy task. There are a lot of factors to consider like finding a commercial warehouse facility.

Note that as a wholesaler of foods, you have to guarantee that every food is safe to eat. This is why your preferred warehouse must also be temperature-controlled. Another factor that you need to consider is the used equipment. A lot of wholesale produce businesses offer delivery services. Therefore, you have to prepare a truck for the best business operations.

The Level of Competition in the Industry

Reports had it that the demand in this industry is driven by consumption of fruits and vegetables. But profitability for businesses depends on establishing and maintaining a high quality and varied selection of produce and on efficient operations.

Note that larger businesses gain from economies of scale in purchasing and transportation, while smaller companies may compete by specializing in certain products such as tropical fruits or organic products, or by focusing on a geographical area.

You need to understand that the main products in this industry are fruits and vegetables and the business process involves getting fruit and vegetables from producers to customers. Major products include fresh fruits (about 55% of industry revenue), whole fresh vegetables (30%), and pre-packaged fresh-cut vegetables (10%).

Note that businesses in this industry may also offer products such as fresh spices, herbs, seasonal nuts, salad dressings, tofu, juice, or flowers.

Some companies specialize in exotic produce and staples of various ethnic cuisines such as enoki mushrooms and lotus root (which are used in many Asian dishes) or corn husks and cactus pads (common ingredients in traditional Latin American foods).

4. Know the Major Competitors in the Industry

• Caito Foods Service (US)
• Coast Citrus DISTRIBUTORS (US)
• FreshPoints (US)
• Tom Lange Company (US)
• Fresh Produce Group (Australia)
• Fyffes (Ireland)
• IG International (India)
• Oppenheimer Group (Canada)
• Tokyo Seika (Japan)
• Total Produce (Ireland)

Economic Analysis

Even though the goods are perishable, this business is an easy business when done right. If you are a grower or you’re passionate about fresh fruits and vegetables, a produce stand is a way to showcase local bounty and to also start a business on a budget.

Your stand or booth can be a fully outfitted building or an improvised structure with saw horse tables. But then your ability to make profits will depend upon how well you display and manage your inventory and how well you understand your clientele.

Starting as a roadside produce stand offers unique advantages: it provides value for both proprietor and customers. Indeed it makes sense to set up a roadside produce stand if you are a grower yourself and have neighbours who harvest an abundant array of vegetables.

We suggest you set up your produce stand on a road that’s reasonably busy. Find a location that has enough space on both sides for customers to pull off the road and park. Create displays that are visible from the road.

You can establish relationships with area growers so you can buy directly from them. A strong local supply chain allows you to offer better value because you don’t have to pay middleman mark-ups. Note that it also gets you produce more quickly and fresher than going through a distributor.

In this stand, promote the benefits you offer in price and freshness in your marketing materials. Research grocery store prices, and aim to sell items of comparable quality that you offer for a better price or fruits and vegetables of superior quality for the same price. You can also start this business in the farmers market.

In a farmers market, produce stands have a built-in target market showing up week after week to buy local produce. But then in farmers markets, you must grow your own fruits and vegetables, but you keep all of what you charge for your offerings, minus your stall fee.

Because you’ll sell alongside other local farmers, look for ways to stand out. We suggest you create a specialty such as culinary herbs.

5. Decide Whether to Buy a Franchise or Start from Scratch

Starting a farm produce business from the scratch comes with a lot of financial risks and concerns. Without an operational history, it’s hard to predict how your start-up will actually perform in the marketplace.

Note that financial risk management requires you to at least consider the possibility of exploring franchise opportunities. A lot of entrepreneurs buy an existing business for the sole purpose of tapping into the financial benefits of an established customer base.

Note that a well-established business franchise also has documented assets and earnings – a big advantage with lenders and investors. As a prospective produce business owner who wants to reduce your chances of failing, it’s a good idea to look into franchise options.

If you are thinking about opening a produce business, a smart move is to determine whether buying a franchise could help you avoid personal entrepreneurial mistakes.

6. Know the Possible Threats and Challenges You Will Face

Farmers are faced with a lot of challenges, same as produce businesses. Starting a produce business does not mean that you should just pick out some random fruit, plant them or buy them from suppliers, and start looking for buyers. It is not the ideal way to start this business if you really want to succeed. The possible challenges you will be facing may include:

• Viable market
• Capital
• Land space
• Produce attacking diseases

7. Choose the Most Suitable Legal Entity (LLC, C Corp, S Corp)

Deciding on a business entity for your produce business can be confusing, but do not make the mistake of starting your business without proper legal foundation. The LLC is the best legal entity for your produce business. The costs and efforts to set up an LLC are relatively low and it gives a level of protection to your personal assets that a sole proprietorship does not.

As you start your farm, you should think forward and anticipate growth and its complications. The LLC provides the liability protection for your Produce business with the tax structure of a partnership, while providing operational flexibility.

8. Choose a Catchy Business Name from the ideas Below

• Green Produce
• Cash spice
• Wailers Produce
• Foralis farm
• Herbicot farm
• Ecovus farms
• Oakwood Produces
• Edenfront farms
• Producetonic
• Hopeberry
• Bell farms
• Fountina farms
• Everitina Produces

9. Discuss With an Agent to Know the Best Insurance Policies for You

You should understand that insurance is a very huge part of doing business especially if you are going to be getting your produce from suppliers. Even if you plan to cultivate them yourself, you should buy insurances to take care of injuries and mishaps. These insurance may include:

• General Liability
• Property Insurance- Including Buildings/Equipment/Stock/Inventory
• Homeowners insurance
• Farm Owners insurance
• Automobile insurance
• Worker’s Compensation insurance
• Life Insurance
• Public liability insurance
• Income protection/personal accident cover

10. Protect your Intellectual Property With Trademark, Copyrights, Patents

Intellectual property rights which are made up of patents, trademarks, trade secrets and copyrights–even the right URLs–, play a key role in monetizing innovation. For instance, if you let others to steal your ideas, you can quietly take yourself away from the lane or path to success.

Indeed intellectual property does not feed the world, but it does provide the invisible infrastructure that allows innovation and success in any agricultural business. Only a few decades ago, agriculture as a whole was an empirical science based on trial and failures.

But with the advent of technology and modernization, innovations are processed with sophisticated science and technology, including cell biology, genome and proteome research, gene mapping, marker-assisted breeding and hybridization. 

Intellectual property protection is needed in any agricultural related business to protect patents and new ideas, registered and unregistered trademarks, copyright, and trade secrets.

11. Get the Necessary Professional Certification

First and foremost, professional certification or qualification is a distinction you can earn that credits you with a high level of skill or expertise in some areas. They can serve as indicators of professionalism and aptitude. Certifications are often regulated by a professional organization.

There is no known certification available to produce businesses because all you need to promote or show your prospective customers is your product which is the result of your creativity. You can earn some other agricultural certifications but it won’t have a direct effect in your business, unless you’re looking to serve as a consultant in the field.

12. Get the Necessary Legal Documents You Need to Operate

Every business has legal documents that would help to manage its day to day activities. For instance, if you plan to sell 2,000 or more pounds of fresh or frozen fruits and vegetables, you must obtain a Perishable Agricultural Commodities Act license, commonly known as a PACA, from the U.S. Department of Agriculture.

You’re exempt from needing the license if you only sell what you grow. If you plan to sell produce from your own stand, we suggest you inquire about any permits needed by your state, county or local government.

• Operating agreement for LLCs.
• Tax
• Insurance
• Business license
• Drivers insurance
• Employment agreement
• Business plan

13. Raise the Needed Startup Capital

Starting this business can be capital intensive of you don’t already have a farm. No matter how you see or analyze it, a produce business needs finance just like other businesses to flourish and expand. It needs finance to buy manure, insecticide, pesticides, and herbicides if you’re planning to grow your products or finance to buy them from suppliers. Ways of financing a produce business may include…

• Family loans
• Community schemes
• Peer-to-peer loans
• Micro loans and grants
• Crowdfunding
• Angel investors
• Factoring
• Cash advances
• Bank overdrafts

14. Choose a Suitable Location for your Business

Whether you grow or buy the fruits and vegetables, this is a very crucial decision for your business. Local farmers sell their crops in bulk to traders, or you can learn to grow your own and harvest them for sale. Note that traders usually divide bulk purchases into smaller containers and price the smaller amounts for resale. We suggest you investigate what competitors are selling before settling on the right price to charge customers.

If you plan to grow your produce

Then you have to find an appropriate farm property for your farm. You can employ a real estate agent who specializes in farmland sales and consider leasing an existing farm. This business requires land, equipment, farm buildings and supplies.

An experienced farmland realtor gets these requirements and can direct you to a land that will best aid your produce business. You should also consider existing farm businesses to save money because they most times add farm equipment as a part of their price.

You should also consider hiring an attorney to review all business contracts, and before you sign any contract, check local and state zoning laws to address any compliance problems and make sure the property’s mineral rights are included in the sale.

Make sure that the supposed location comes with accessibility on your part. Make sure there are no animals and other plants that can disrupt the growth process of your crops.

Choosing a location for your stand

It’s your duty as a business owner in this industry to choose where to locate your produce stand. You have to choose a location that is visible and highly trafficked by potential customers. If you set up in an indoor location such as a garage or barn, you need to put up signs so your customers can find you.

Another option is to have a mobile produce stand, selling and delivering produce door-to-door. Have it at the back of your mind that a basic stand is made up of a flat, elevated surface for displaying your produce. You can use tables or you can build your own stand. Your stand can be as simple or as elaborate as you want it to be.

15. Hire Employees for your Technical and Manpower Needs

When starting this business, you might first want to contact local restaurants that are always looking for top quality produce. The notion that you have cultivated the food in harmony with nature and without artificial and chemical fertilizers or pesticides is a good selling point.

If possible, it is something to highlight in your sales technique if you choose another selling option, such as taking a pitch at a local farmer’s market or flea market. If your local area does not have a food market, it could be a good project to canvas to the community – along with local farmers and smallholders – as to whether such a venture would be a welcome addition to the community.

Equipment

No matter the selling method you choose for your produce business, you will probably need to invest in some equipment.

If you are simply selling from a stall at the local market, this can be as minimal as a display table, some bags and boxes to put goods in for the customer to carry away, some scales for measuring produce, and an awning to protect the goods from the elements.

But if you are going to transport goods around several locations or at a distance, you may need to invest in portable refrigeration devices to keep the goods fresh for delivery. If you are delivering you goods by vehicle, try to minimize the energy expenditure by working out efficient routes and delivering every other day rather than daily.

Produce Storage

Apart from the equipment for transporting and selling your produce, you will also need effective storage. Have it in mind that you won’t be selling everything every time you set up your pitch, so good refrigeration or freezing equipment is needed if you want to keep the goods in a very good condition for selling another day.

If you have a pitch at a market that runs on consecutive days or at the weekend, a fridge will do, but if you are only selling weekly you may want to freeze some produce.

The Service Delivery Process of the Business

Indeed produce business owners sometimes emerge from completely unrelated industries. But the most common startup scenario is a local farmer expanding his business to include the sale of produce directly to consumers. Note that the simplest expansion vehicle is the establishment of a roadside produce stand or a booth at a farm market; both are tried and true methods for selling farm fresh produce to area consumers.

But for serious entrepreneurs, a small produce stand isn’t enough. Increasingly, farms are venturing into the produce business by starting full-scale retail produce facilities that combine food sales with various forms of agritainment and agro-tourism.

In the United States, you don’t have to look very far to find successful farm produce stores featuring an assortment of merchandise and hands-on family activities like mazes, petting zoos, ice cream booths etc. But as you plan to start a produce business, understand that every activity you offer comes with a new set of challenges that needs to be addressed.

Also more importantly, supplemental business activities can distract your business from executing its core competency, which is the delivery of high quality produce to your customers. Indeed every small business needs to contend with a certain amount of health and safety concerns.

Safety concerns are a particularly relevant concern for produce businesses given the public’s awareness of food safety issues in the US. Right from the very first day of operation, it’s very necessary that you take every precaution to make sure the produce you sell is safe for consumption.

Since a lot of consumers frequent produce businesses because they believe the food products they receive are healthier than the products they buy at the grocery store, a single safety lapse can have very bad consequences for your business. In order to stay on top of food safety concerns, we recommend maintaining membership in organizations like United Fresh, a trade association that educates produce retailers about health, safety and other concerns.

Also in this business, a good display shows the care the gardener has taken in the cultivation of the food. You will probably need somewhere to wash the fruit and vegetables before you display them, so consider were this would be (always aware of not wasting water – perhaps wash them on your plot and catch the water for reuse as irrigation on garden beds).

Also, try not to deprive yourself of produce from your plot. While it can be tempting to sell as much as possible, one of the joys of permaculture is to eat food that you have grown yourself and become more self-sustainable; so only sell the surplus.

16. Write a Marketing Plan Packed With ideas & Strategies

In this competitive age, one thing separates successful produce businesses from companies at the bottom of the food chain.

It all boils down to one thing – marketing. Have it in mind that the right market approach lets smaller produce businesses scale their visibility with consumers. The key is to market smart through the consistent application of fundamental marketing concepts.

Improve Your Business Sign

Experts and facts have shown that excellent signage is a Business 101 concept. Even though produce businesses are very different from each other, every business in this industry should thoughtfully consider what it’s signage says to potential customers.

Visibility, branding elements and other considerations are all factors in the design and size of your operation’s business signage. Also because signage in produce businesses is unlike the signage for other types of businesses, it should be incorporated into your core marketing strategy.

Broadcast Advertising

You need to note that broadcast advertising has clearly taken some hits over the past couple of decades. For instance, the number of consumers who tune-in to local TV and radio has reduced, and the industry has struggled to regain its footing, but then it still offers you a platform to reach your customers.

Today’s leading produce businesses still strive to find ways to attract audiences to their brand through broadcast media.

Patronizing Farmers’ Markets

When farmers market is mentioned, you probably think it’s tables filled with vegetables and piles of pumpkins on the tailgates of pickup trucks, followed by a group of farmers in straw hats. But farmers’ markets have gone past that description.

They now include freshly baked breads, handmade items, and other assorted goodies. You can sell your produce and other products in this market. It will also serve as a wonderful opportunity to introduce your products to local consumers.

Mailings

Understand that at a given point, your produce business will need to engage in direct marketing. Note that direct mail has the benefit of delivering targeted messaging to qualified contacts within your company’s market segment.

Third-party providers have a reputation for generating accurate mailing lists that can be sorted to accommodate niches and subsections of the market. By investing in premium mailing lists for direct mail, email, and telemarketing campaigns, you gain the assurance that your lists are always accurate and up-to-date.

Making use of the Internet to Drive Sales

In today’s interconnected world of the Internet and social media, reaching out to your customers and making sales can be done with the click of some buttons and a little ingenuity. The internet has made a lot of things easier for our generation and you can leverage it to get what you desire or the sort of marketing you need.

17. Develop Iron-clad Competitive Strategies to Help You Win

In this business, it is a smart move to know how many competitors you have. Competition is indeed good for business for those who understand. It brings about Innovation and hard work. If you are willing and innovative, you can make it in a crowded field, even if it is filled with a couple of big players. Ways to win your business competitors may include:

• Building a customer-centric culture
• Don’t compete on price but on quality
• Create new ideas and innovation
• Remember that saturation can mean strength

18. Brainstorm Possible Ways to Retain Clients & Customers

You need to firstly talk to your customers to find out whether they are happy with the produce you are supplying or whether they would refer different options. You need to understand that building a direct relationship between customers and producers helps to build trust and to make each party feel they have an equal stake in the exchange.

You can also participate in community events to establish relationships with your customers. Keep a look out for local fairs and municipal open days and research whether there are ways of getting involved as a produce seller.

Have it in mind that you can also ask customers for their email address and use this customer list to offer discounts or special deals when you have surplus of a particular produce. Customer feedback may also affect the decisions you make for next season’s planting if your small produce business is a viable entity.

• Learn how to survey your customers the right way
• Email is the best way of increasing customer retention
• Tap into social media to track and monitor customer satisfaction so you can keep your customers happy
• Respect your customers
• Focus on measuring customer satisfaction
• Use customer loyalty to increase customer retention
• Set customer expectations early

19. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity

Even if you offer the greatest products in the world, but if no one is aware of it, you may not make a single sale. Have it at the back of your mind that one of your most important task as a business owner is to build, sustain and boost the brand awareness of your business. Ways to boost your brand awareness and create a corporate identity in a produce business may include;

• Open-air music festivals: rock, jazz, classical, band concerts. The closer to the bandstand you can locate your truck, the better the sales.
• Sporting events: motocross, road, and sports car rallies, hill climbs, Little League, Pony League, and minor league baseball, soccer matches, Sunday pickup football games.
• Arts and crafts fairs.
• Saturday markets, flea markets, even shopping centre parking lots.
• Drama presentations, especially big-tent, touring summer stock productions.
• Any other tent shows: religious revivals, amateur shows, etc.
• VFW or civic league picnics. Sometimes forest rangers will let you sell in state parks, sometimes they won’t.
• Recreational affairs: boat and air shows, displays of snowmobiles, motorcycles, and recreational vehicles.
• Animal exhibitions: dog and horse shows, cattle judging’s, grange fairs, rodeos.
• Circuses and carnivals. (Permits may be required. Inquire a month or two ahead of time.)
• Special event picnics
• Dedications, inaugurations, town celebrations, centennials.
• Large construction sites or wherever many workers are likely to be assembled during lunch hour.
• Roadside turnouts close enough to forest preserves, wildlife refuges, or recreational locations to attract picnickers.
• Parking lots of deserted gas stations at busy intersections.