How to Start a Hemp Farm

Hemp is a versatile and relatively easy to grow plant that can be made into a variety of products, including rope, textiles, clothing, biofuels, and more. It can also be grown for CBD production. Hemp farming is also a rapidly growing industry, worth nearly $1 billion in the U.S. alone. If you have some land and want to try your hand at farming, hemp could be a great profit maker.

But before you start planting, you’ll need to understand the business. Luckily, this step-by-step guide details all you need to know to start a successful hemp farm.

Step 1: Decide if the Business Is Right for You

Pros and cons

Hemp farming industry trends

Industry size and growth

• Industry size and past growth – The U.S. industrial hemp production industry is worth $938.6 million in 2023 after growing 46.5% annually for the last five years.((https://www.ibisworld.com/united-states/market-research-reports/industrial-hemp-production-industry/#:~:text=Industrial%20hemp%20production%20revenue%20is,expected%20to%20account%20for%207.8%25.))
• Growth forecast – The U.S. industrial hemp production industry is projected to grow 2.7% in 2023.

• Number of businesses – In 2023, 9,410 industrial hemp production businesses are operating in the U.S.

• Number of people employed – In 2023, the U.S. industrial hemp production industry employs 36,026 people.

Trends and challenges

Trends

• Most hemp in the U.S. is grown for CBD oil because it’s the most profitable produce.
• Many USDA programs are available now for hemp farmers.

Challenges

• The THC levels of hemp grown must stay within legal standards.
• Labor costs for hemp planting and production are extremely high, reducing the profit margins of hemp farms.

How much does it cost to start a hemp farm business?

Startup costs for a hemp farm if you already have the land are about $50,000, the bulk of which is a labor and operating budget. If you’re going to purchase land, your costs could be upwards of $1 million.

You’ll need a handful of items to successfully launch your hemp farming business, including: 

• Seed drill
• Transplanter
• Tractor
• Plow
• Irrigation system

How much can you earn from a hemp farming business?

When you grow hemp for CBD, you can probably make about $20,000 per acre per year in revenue. Your profit margin after labor and operating costs should be about 20%. 

In your first year or two, you could farm 10 acres, bringing in $200,000 in revenue. This would mean $40,000 in profit, assuming that 20% margin. 

As you gain traction, you might farm 20 acres. With annual revenue of $400,000, you’d make a tidy profit of $80,000.

What barriers to entry are there?

There are a few barriers to entry for a hemp farm. Your biggest challenges will be:

• Having or purchasing adequate land
• Learning the process of hemp farming

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Step 2: Hone Your Idea

Now that you know what’s involved in starting a hemp farm, it’s a good idea to hone your concept in preparation to enter a competitive market. 

Market research could give you the upper hand even if you’ve got the perfect product. Conducting robust market research is crucial, as it will help you better understand your customers, your competitors, and the broader business landscape.

Analyze your competitors 

Research hemp farms to examine their products, price points, and what sells best.

• Make a list of hemp farms that offer similar products. 
• Review your competitors’ products – their features, pricing, and quality – and marketing strategies
• Check out their online reviews and ratings on Google, Yelp, and Facebook to get an idea of what their customers like and dislike.
• Identify your competitors’ strengths and weaknesses. 

This should identify areas where you can strengthen your business and gain a competitive edge to make better business decisions.

Why? Identify an opportunity

You’re looking for a market gap to fill. For instance, maybe the local market is missing a hemp farm that grows for seed production, or a hemp farm with a hemp processing facility.

You might consider targeting a niche, such as CBD oil.

This could jumpstart your word-of-mouth marketing and attract clients right away. 

What? Determine your products

You’ll need to decide what type of hemp you want to grow and get the right hemp seeds. You could grow for the fiber that will be used for textiles, etc., for seeds, or for CBD oil.

How much should you charge for hemp?

Your prices should depend on market prices, but also on your production costs.

Once you know your costs, use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.

Who? Identify your target market

Your target market will likely be companies that make CBD products. You can connect with business owners on LinkedIn, or you can call them directly.

Where? Choose a hamp farm location

If you don’t have land, you’ll need to engage with a real estate agent to find suitable land that meets zoning requirements. Choosing a hemp farm location involves considering various factors to ensure the growth of healthy and productive plants. Here are the important factors to consider:

1. Climate: Hemp thrives in a mild climate with adequate rainfall (25-30 inches annually). Check local weather data for consistency.
2. Soil Quality: Opt for well-draining soil with a pH of 6-7.5. Sandy loam is ideal. Conduct soil tests to check nutrient levels and potential contaminants.
3. Topography: Flat or gently sloping terrains are best for machinery access and efficient water drainage.
4. Water Access: Ensure a reliable water source for irrigation, especially during dry periods.
5. Sunlight: Choose a location with maximum sunlight exposure, as hemp requires at least 12-14 hours of daylight during its growing season.
6. Local Regulations: Verify that hemp cultivation is legal in the chosen location and understand local regulations concerning THC levels, seed sourcing, and reporting.
7. Pest & Disease Pressure: Check the history of the land. Previous crops can indicate potential pest or disease issues. Rotate crops to prevent soil-borne diseases.
8. Proximity to Markets: Consider transportation costs and choose a location near potential buyers or processing facilities to reduce expenses.
9. Neighboring Crops: Avoid cross-pollination issues, especially if you’re growing hemp for CBD. Ensure there’s a buffer between your hemp farm and potential pollen sources, like marijuana farms or other hemp varieties.
10. Infrastructure: Ensure easy access to roads, storage facilities, and other necessary infrastructure.

Step 3: Brainstorm a Hemp Farm Name

Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.

Here are some ideas for brainstorming your business name:

• Short, unique, and catchy names tend to stand out
• Names that are easy to say and spell tend to do better 
• Name should be relevant to your product or service offerings
• Ask around — family, friends, colleagues, social media — for suggestions
• Including keywords, such as “hemp” or “CBD hemp”, boosts SEO
• Name should allow for expansion, for ex: “GreenFuture Farms” and “EarthBounty Enterprises” over “HempHarvest Haven” and “PureHemp Fields”
• Avoid location-based names that might hinder future expansion
• Use online tools like the Step by Step Business Name Generator. Just type in a few keywords and hit “generate” and you’ll have dozens of suggestions at your fingertips.

Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these. 

Finally, make your choice among the names that pass this screening and go ahead and reserve your business name with your state, start the trademark registration process, and complete your domain registration and social media account creation. 

Your business name is one of the key differentiators that sets your business apart. Once you pick a name, reserve it and start with the branding, it’s hard to switch to a new name. So be sure to carefully consider your choice before moving forward. 

Step 4: Create a Hemp Farm Business Plan

Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:

• Executive Summary: Provide a concise summary of your hemp farm business, including its purpose, location, and anticipated growth.
• Business Overview: Describe your hemp farming venture, highlighting the types of hemp products you plan to cultivate, such as CBD oil, fiber, or seeds.
• Product and Services: Detail the specific hemp products you will produce, along with any additional services like processing or distribution.
• Market Analysis: Analyze the hemp market, considering factors like demand for hemp-based products, legal regulations, and potential customer demographics.
• Competitive Analysis: Identify other hemp farms or suppliers in your region, emphasizing what differentiates your farm, such as organic farming practices or unique strains.
• Sales and Marketing: Explain your strategies for selling hemp products, including distribution channels, partnerships with retailers, and online marketing efforts.
• Management Team: If applicable, introduce key team members, such as agricultural experts, cultivators, and business administrators, showcasing their qualifications.
• Operations Plan: Describe the day-to-day operations of your hemp farm, from planting and harvesting to quality control and compliance with hemp regulations.
• Financial Plan: Present financial projections, including startup costs, crop yields, pricing models, and revenue expectations based on product sales and distribution.
• Appendix: Include any relevant certifications, licenses, or affiliations with agricultural organizations, as well as test results for hemp products if available.

If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.

Step 5: Register Your Business

Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business! 

Choose where to register your company

Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to hemp farms. 

If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state. 

Choose your business structure

Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your hemp farm will shape your taxes, personal liability, and business registration requirements, so choose wisely. 

Here are the main options:

• Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
• General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
• Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts. Here’s how to form an LLC.
• C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation. Read how to start a corporation here.
• S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just need to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.

We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have. 

Form Your LLC

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Step 6: Register for Taxes

The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN. 

Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.

The IRS website also offers a tax-payers checklist, and taxes can be filed online.

It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.

Step 7: Fund your Business

Securing financing is your next step and there are plenty of ways to raise capital:

• Bank loans: This is the most common method but getting approved requires a rock-solid business plan and strong credit history.
• SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
• Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
• Venture capital: Venture capital investors take an ownership stake in exchange for funds, so keep in mind that you’d be sacrificing some control over your business. This is generally only available for businesses with high growth potential.
• Angel investors: Reach out to your entire network in search of people interested in investing in early-stage startups in exchange for a stake. Established angel investors are always looking for good opportunities. 
• Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
• Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
• Personal: Self-fund your business via your savings or the sale of property or other assets.

Your best bet may be to check the USDA website for programs you may be eligible for. 

Step 8: Apply for Licenses/Permits

Starting a hemp farm business requires obtaining a number of licenses and permits from local, state, and federal governments.

You’ll need either a state issued hemp license or be licensed with the USDA. Check with your state for specific requirements.

Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits. 

You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more. 

You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.

If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.

Step 9: Open a Business Bank Account

Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.

Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your hemp farm business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.

Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account. 

Step 10: Get Business Insurance

Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.

Here are some types of insurance to consider:

• General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
• Business Property: Provides coverage for your equipment and supplies.
• Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
• Worker’s compensation: Provides compensation to employees injured on the job.
• Property: Covers your physical space, whether it is a cart, storefront, or office.
• Commercial auto: Protection for your company-owned vehicle.
• Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
• Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of the above insurance types.

Step 11: Prepare to Launch

As opening day nears, prepare for launch by reviewing and improving some key elements of your business. 

Essential software and tools

Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.  

You may want to use industry-specific software, such as AgCode, farmbrite, or FarmLogic, to manage your planting records, crop care, and sales.

Accounting

• Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero. 
• If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.

Create a website

Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism. You can create your own website using services like WordPress, Wix, or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.

Your customers are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. SEO will help your website appear closer to the top in relevant search results, a crucial element for increasing sales. 

Make sure that you optimize calls to action on your website. Experiment with text, color, size, and position of calls to action such as “Buy Now” or “Order”. This can sharply increase purchases. 

Marketing

Here are some powerful marketing strategies for your future business:

1. Educational Workshops and Events: Host workshops or events to educate the community about the benefits of hemp, its various uses, and sustainable farming practices; this positions your farm as a knowledgeable and trustworthy source.
2. Partnerships with Health and Wellness Stores: Forge partnerships with local health stores, gyms, and wellness centers to distribute your hemp products, tapping into an existing customer base interested in natural and holistic remedies.
3. Social Media Challenges and Giveaways: Leverage social media platforms by organizing challenges or giveaways that encourage users to share their experiences with your hemp products, creating buzz and user-generated content.
4. Farm Tours and Open Houses: Open your doors to the public through farm tours and open houses, offering a firsthand look at your cultivation process and fostering a connection between consumers and your brand.
5. Community Sponsorships: Sponsor local events, sports teams, or community initiatives to enhance brand visibility, build trust, and showcase your commitment to the local community.
6. Environmental and Social Responsibility Campaigns: Highlight your commitment to sustainability and social responsibility in your marketing campaigns, appealing to environmentally conscious consumers who align with eco-friendly practices.
7. Collaboration with Influencers: Partner with influencers in the health, wellness, or sustainability niche to authentically promote your hemp products, reaching a wider audience and gaining credibility through trusted voices.
8. Product Bundles and Loyalty Programs: Introduce product bundles that showcase the versatility of hemp and create customer loyalty programs to incentivize repeat purchases, fostering long-term relationships with your consumer base.
9. Local Farmers’ Markets and Festivals: Set up stalls at local farmers’ markets and festivals to directly engage with potential customers, allowing them to sample and purchase your hemp products while enjoying community events.
10. Customer Testimonials and Case Studies: Showcase success stories and testimonials from satisfied customers or even conduct case studies, providing evidence of the effectiveness and quality of your hemp products to build trust among potential buyers.

Focus on USPs

Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your hemp farm meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire. 

Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your hemp farm business could be:

• Promoting environmentally friendly practices and producing high-quality hemp using organic and sustainable farming methods
• Cultivating hemp strains with high levels of cannabidiol (CBD) to meet the increasing demand for CBD-based products in the market
• Providing full traceability throughout the cultivation and production process, ensuring customers know the origin and quality of the hemp products they purchase

Networking

You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a hemp farm business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in hemp farms for years and can offer invaluable insight and industry connections. 

The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in hemp farms. You’ll probably generate new customers or find companies with which you could establish a partnership. 

Step 12: Build Your Team

If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a hemp farm business include:

• Laborers – plant and tend to crops, harvest hemp
• Salesperson – sell hemp products
• General Manager – manage crops, accounting

At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need. 

Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent. 

Step 13: Run a Hemp Farm – Start Making Money!

Since hemp farming became legal in 2018, the industry has taken off and is worth nearly $1 billion. It could be a great time to get in on the action by starting your own hemp farm. It’s a great way of life, and you can make a nice living. As the market continues to grow, you could expand your farm and build a hemp empire.

You’ve got the business know how now, so you’re ready to plant your seeds and get your successful hemp farm up and running!