Medicinal Herbs for Commerce: Planning
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Step 3: Planning
Have a Business Plan
A successful business always includes a good business plan. The bottom line is that a new agricultural enterprise needs to produce profits to be worthwhile for the farmer. In order to assess if a new crop or product, like medicinal herbs, will work for your business you’ll need to “run your numbers” and flush out the details by preparing a sound plan. The process of developing a business plan allows entrepreneurs to spot risks and pitfalls in a new idea and determine the profitability of that idea. In addition, lenders and funders may require a business plan prior to financing your operation.
Business plan designs and formats vary, but free templates are available on the Internet (see links below) to help get you started. Plans usually include sections such as Mission Statement, and Objectives, Marketing, and Financials. Profit plans, farm enterprise budgets, and competitive analyses are also included.
The medicinal herbs industry is very different from that of more traditional crops grown in North Carolina. There are hundreds of different herbs used in the industry and they are sold in a wide variety of forms, including fresh, dried, whole, powdered, and
extracted. Buyers include wholesale producers of herbal products, like tinctures or capsules, that require strict growing standards and packaging that needs to be included in your initial planning. Getting familiar with this unique market leads us to the next step.
Marketing Your Product
Before you grow any herb, you should know who you are producing it for, what volumes it is needed in, how it should be packaged, and when it should be delivered. This is the time to research the market, develop relationships with buyers, and write the market plan section of your business plan.
To fully engage in this process will mean that you, the future herb grower, will contact others who are already active players – influential types, buyers, owners, and anyone in the business – willing to give you a piece of their time to learn. The work might seem tedious but the rewards can be tremendous. Without a written plan, one’s chances for success are extremely low. While working out the rigors of putting your plan to paper, then carrying out, you can trial herbs of interest for use and readiness later on.
The following enterprise budgets developed based on research data, actual farmers’ results, and data from cooperating growers in the Medicinal Herbs for Commerce Project. Through continued research and cooperating grower participation, we are collecting data to be used to refine and update these enterprise budgets so that they are as accurate and useful as possible. While enterprise budgets can be a useful planning tool to give you an idea of what kind of returns you may expect from a particular crop, keep in mind that everyone’s experience is going to be different. They should be used only to get a general idea of required inputs and potential returns. There are many ways to alter your production practices so that you can lower your costs of production and thereby increase your profits. Prices received for products, however, are always changing. Include in your planning a range of prices so you can determine where your breakeven point probably is. Then study the price history and future projections for the crop you are interested in growing.
Bloodroot- Artificial Shade (MS Excel)
Ramps Budget- Woods (MS Excel)
Echinacea Budgets (MS Excel)
Save this blank excel document to use as a template for your enterprise:
Blank Enterprise Budget (MS Excel)
It is critical to keep good records of your production practices and your expenses every step of the way in medicinal herb production. Good records will enable you to see where you may be able to cut costs and increase profits in the future. They will also help you develop your own enterprise budgets based on your experience. Cooperating growers in the Medicinal Herbs for Commerce Project are encouraged to keep detailed records in a field journal. The field journal includes sheets for recording Direct Weekly Expenses, General Weekly Reports, Planting and Soil Preparation Details, Harvest and Processing Details, 7-year Field History, and Notes.
- Building a Business Plan for Your Farm: Important First Steps The Ag Manager website has an invaluable section on Business Planning and Budgeting that is specifically geared towards farming operations.
- Templates for Your Business from SCORE Score is a nonprofit organization comprised of “Counselors to America’s Small Business”, that offer free advice and free business plan templates, along with many other tools.
Business Startup Resources
- US Small Business Administration Starting, Financing, Managing, Business Opportunities, Disaster Recovery…lots of information on small business and free utilities to help get you started.
- Small Business Center Network The objective of the Small Business Center Network (SBCN) is to increase the success rate and the number of viable small businesses in North Carolina by providing high quality, readily accessible assistance to prospective and existing small business owners and their employees. Each Small Business Center (SBC) will be a community-based provider of education and training, counseling, information and referral.
- The American Herbal Products Association (AHPA) is the national trade association and voice of the herbal products industry. Founded in 1983, AHPA is the recognized leader in representing the responsible center of the botanical trade, and is comprised of the finest growers, processors, manufacturers and marketers of herbal products.
- As a registered member with Natural Products Industry Insider via its website, it will allow you to solicit and receive requests for proposals for goods (including raw materials, ingredients, and finished goods). It provides detailed information on potential buyers of herbs, medicinals, and food ingredients in whole/cut powder, extract/concentrate, or certified organic format.
- Nutritional Outlook is a manufacturer’s resource for dietary supplements and healthy foods and beverages. Similar to NPII (above), it lists numerous manufacturers (buyers) of herbs and botanicals.
- Frontier Coop As a co-op, it is owned by its wholesale customers, and as a company, their customers provide the capital for the business to operate. They started in 1976 and are now a major supplier in the booming natural products industry. Their history of success is a great source to learn from in charting one’s own future. This company is only the tip of the iceberg of possibilities to gain insight from as one writes their marketing plan.
Jeanine Davis, NC Alternative Crops & Organics Program, Department of Horticultural Science, NC State University (updated 2/8/2022).