This is Episode 5, Part II of the “Starting a Microgreens Business: What You Need to Know” Microgreens World series. If you missed the earlier posts in Part I, “Understanding the Market and Business Model,” you can explore them here: “Microgreens Business.”

Like many professionals, I worked a conventional corporate job for years, leaving me feeling unfulfilled. I wanted more meaning and impact in my life, but I wasn’t sure where to start. That all changed one summer night in 2018 when my friend Steven and I began dreaming up a plan to launch our own microgreens business during a beer chat. We both sought purpose and passion and found it in the aspiring vision of starting JPure Farms.

Neither of us had any prior experience in urban farming. Still, we dove headfirst, converting Steven’s basement into a makeshift microgreens operation. It was initially incredibly challenging to juggle our full-time office jobs while simultaneously trying to build an entirely new business concept from the ground up on nights and weekends. We were hooked on bringing our microgreens dream to life once we made our first small $20 sale at the local farmer’s market!

But one of the hardest lessons we learned was that the financial side of urban farming requires just as much careful planning and strategic thought as the growing aspects.

To finance a microgreens farm, thoroughly assess personal and business finances, build conservative revenue projections, determine break-even volumes, secure financing through grants, loans, and creative strategies, tightly control costs and cash flow, mitigate risks and leverage experienced advisors. Critical oversights are personal finances, creative financing, break-even analysis, cost control, and contingency planning.

Transitioning from spreadsheets to seed trays brought a new set of skills we had to acquire – especially around financial planning and money management. When starting any microgreens farm or business, a detailed financial plan is crucial. It provides a guiding map to set realistic targets, tightly control costs, properly secure financing, and ultimately build a pathway to profitability.

Based on my hands-on experience going from corporate number cruncher to urban microgreens farmer and co-founder of JPure Farms, I wanted to share some critical elements to crafting a solid plan for financing a microgreens business.

I hope these practical insights from our journey can help aspiring urban farmers get their dreams off the ground successfully!

QUICK READS

Conducting a Complete Financial Assessment of Your Microgreens Business
Building Detailed Financial Projections for Your Microgreens Farm
Determining Your Microgreen Farm Break-Even Point
Establishing Your Microgreens Business Milestones and Tracking Metrics
Diligently Managing Your Microgreens Farm Costs
Monitoring and Managing Your Microgreens Business Cash Flow
Exploring Traditional Financing Options for Your Microgreens Farm
Pursuing Innovative Microgreens Business Financing Strategies
Managing Microgreens Farm Risks and Planning for Contingencies
Assembling a Microgreens Business Expert Advisory Board (NOT OPTIONAL)
The Winding Road from Microgreens Farm Passion to Profit
Related Questions
Share the Guide
References & Resources

Conducting a Complete Financial Assessment of Your Microgreens Business

Before projection or planning, the first step is clearly understanding where you currently stand financially, personally, and for your envisioned business. Review current income streams from current jobs, investments, or side businesses. Tally up your ongoing personal living expenses for housing, transportation, utilities, debt payments, healthcare, food, entertainment, and any other bills.

Be sure to realistically account for your complete personal financial picture, even if you plan to eventually rely solely on your urban microgreens farming business income. Also, make a detailed list of assets you could leverage, including savings and investment balances, equipment, property, inheritance amounts, lines of credit, and other accessible capital.

Include all your current debts and liabilities, gathering details on mortgages, business or student loans, outstanding credit card balances, unpaid taxes, and accounts payable. Tracking everything down to the penny provides invaluable context.

For the business, inventory of currently available resources like land, tools, supplies, leased space, and any assets acquired. Calculate your overall personal and business cash flow across recent months and years using this extensive baseline financial data. Determine current profitability levels if any side businesses or projects are already ongoing. Gaining a comprehensive snapshot of your total capital and costs provides a foundation to build upon.

For JPure Farms, Steven and I started by gathering our paystubs, bank and investment statements, credit card bills, student loan statements, and Steven’s entire mortgage paperwork. We compiled a list of our existing assets, which included $10,000 in personal savings and $5,000 worth of initial growing equipment and supplies. We also detailed $15,000 in combined credit card debt and student loans. Clarifying where we stood financially helped contextualize what we could invest into launching JPure Farms.

Building Detailed Financial Projections for Your Microgreens Farm

With a clear picture of your current financial position mapped out, the next step is gazing into the crystal ball. Begin developing projected financials forecasting how your microgreens operation will likely perform over the next 3-5 years.

No! Don’t do that. That’s like writing a science fiction novel. You know, the none where you live happily ever after.

Don’t do that until you’ve been in business for at least six months. Focus on what we showed you as STEP NUMBER ONE: carefully do your market research into customer demand, competitive landscape, and your planned production schedule. You can use other urban farms’ financials as benchmarks to inform realistic expectations.

But do thoroughly project expenses starting with fixed overhead like rent, subscriptions, loan payments, and salaries guaranteed to crucial staff – the things you know. And plan for them. As your farm grows, you can better estimate variable operating costs based on production volumes like seeds, nutrients, packaging, utilities, delivery fees, labor, maintenance, and all other recurring expenses.

If you are going to estimate, then use them as targets. After six months, you will have a picture; after 12 months, you will be in a better position to “project.”

For JPure Farms, Steven created an Excel model that calculated revenue projections based on expected harvest yields and target customer pricing. We researched costs for all supplies, rent, labor, delivery, and other items to build a projected monthly P&L. Testing different production levels and cost scenarios provided ranges for potential profitability in our first year.

Keep it that simple.

Determining Your Microgreen Farm Break-Even Point

A pivotal element of projecting your financials is identifying the break-even point where total revenues exceed total costs. To determine this:

1. First, add all your unavoidable fixed overhead costs like rent, subscriptions, loan payments, and base salaries.
2. Write down your planned per-unit variable costs, like the cost per tray of microgreens harvested.
3. Next, factor in your expected per-unit sale price and
4. Desired profit margin percentage to calculate your per unit target net profit.
5. Finally, divide your total fixed costs by your per-unit net profit amount to determine the units of production required to reach your break-even point.
6. Multiply this output volume by the per unit sale price to find the revenue needed to break even monthly.

Tracking sales against this break-even target provides an invaluable ongoing indicator of profitability [3].

For JPure Farms, our initial monthly fixed costs averaged around $2000, including rent, subscriptions, loan payments, and Steven’s and my base salary draws. Our variable costs per 25-tray batch of microgreens came to $200 when factoring in labor, seeds, packaging, and other supplies. With a per-tray sale price of $20 and a 40% profit margin goal, we calculated $8 per tray net profit. Dividing our $2000 fixed costs by the $8 net profit showed a break-even volume of 250 trays per month, equating to $5000 in revenue.

You should know your initial costs. Your first few harvests will test as you get familiar with your product process. It will help you figure out the numbers above.

Establishing Your Microgreens Business Milestones and Tracking Metrics

Having financial projections and break-even targets provides essential goalposts, but you need additional measurable milestones to actively steer progress. Based on your projections and business model, establish specific monthly and annual financial goals around

• revenue growth,
• cost reductions,
• profitability,
• new customer targets and
• other key performance indicators.

Establish processes to monitor your performance across each metric compared to your established targets. Quickly identifying any areas where you fall short allows you to course correct. Consistently tracking progress against tangible milestones is imperative for any growing business.

For JPure Farms, we set one-year goals, including $10,000 in average monthly revenue, keeping variable costs below $6000 per month, and achieving $4000 in monthly net income based on our projections. We also created targets around new customer acquisition by market segment and production volumes by microgreen variety.

Monitoring your periodic and year-to-date performance against these benchmarks will keep you focused on your long-term microgreens financial roadmap.

Diligently Managing Your Microgreens Farm Costs

Closely managing costs and minimizing unnecessary spending is vital for microgreens business startups operating on tight margins. Monitor labor, seeds, packaging, utilities, delivery fees, supplies, contractor services, equipment maintenance, and any other recurring production expenses every week.

After the first four weeks, put detailed variable budgets for each operating cost.

Analyze each budgeted line item for savings, whether through bulk purchasing discounts, finding cheaper providers, substituting alternate materials, or tapping into unused urban resources like rainwater.

Take advantage of tax credits, agriculture incentives, and small business accounting tools to maximize your tax savings and deductions. Maintain careful inventory controls and prevent product spoilage that erodes profits. To lower utility and maintenance costs, consider upgrading to more efficient lighting, irrigation, climate control, and other systems. Continuously analyze distribution routes, production facility layouts, and workflows for opportunities to decrease expenditures.

At JPure Farms, we developed, over time, granular cost budgets for soil, trays, labels, delivery fees, and all other variable items. We got bulk discounts on seeds, shared extra cooler space with a nearby restaurant to lower rent, and diligently recorded everything to maximize tax write-offs. Keeping costs in check allowed us to re-invest more into accelerating JPure’s growth.

The bottom line? As a small business, you must “run a tight ship,” as the saying goes.

Monitoring and Managing Your Microgreens Business Cash Flow

From 1994-2019, only 48.9% of small businesses survived at least five years.

And according to CBInsights and Forbes, the #1 reason they failed, whether in their first, second, or fifth year of business, is they “ran out of cash or failed to raise new capital. [1]”

Carefully monitoring and managing cash flow is critical in a capital-constrained startup. Continuously update cash flow projections, anticipating periods where expenses and bill payments may strain available cash reserves based on sales cycles. When lean periods are unavoidable, negotiate extended payment plans, discounts, or other flexible terms from suppliers and landlords to ease pressures. Consider offering customers early payment or volume discounts to incentivize more upfront purchases.

Also, pursue payment plans and sliding scales for higher fixed costs like equipment leases, subscriptions, and loan repayments. Prioritize addressing any accounts payable so you remain in good standing with partners. Postpone non-critical investments until cash flow stabilizes.

Use accounting software, like QuickBooks, and online tools to gain visibility into upcoming outflows and availabilities. The ability to quickly adjust and adapt around cash flow constraints will determine the survival of your microgreens farm business.

Exploring Traditional Financing Options for Your Microgreens Farm

Very few microgreens farm operations can be entirely bootstrapped from the ground up long-term. Beyond available savings and cash flow, you will likely need to access external financing to fund your expansion. The best resources for starting your research are:

• Government small business grants,
• agricultural microloans,
• SBA programs, and
• local economic development agency resources.

Your specific microgreens business model, stage of operations, and growth prospects will determine suitable financing solutions to explore. More traditional options like business bank and SBA loans, equity financing, and angel investors tend to fit established businesses with solid financials and expansion plans. Consider both upsides and risks when weighing financing strategies.

For JPure Farms, we qualified for a $7500 microloan from our city’s redevelopment fund, given our public benefit mission. We also utilized personal credit cards for an additional $5000 in initial capital to cover equipment and supplies until sales ramped up.

Understanding the entire landscape of traditional funding sources for financing your microgreens farm can open growth doors.

Pursuing Innovative Microgreens Business Financing Strategies

In tandem with traditional options, small and urban microgreens farmers should get creative by incorporating financing strategies designed explicitly around local food systems and communities. For example, offering multi-tiered CSA farm share subscription packages can provide upfront seasonal capital. Educational workshops, community events, and hands-on experiences like a “day on the farm” can generate ancillary service income streams.

Consider leveraging dynamic market-based pricing, where you charge more for high-demand crops and windows based on freshness, quality, and scarcity factors. Study vertical farming innovations that allow you to sustainably maximize yields and dollars per square foot. Seek out urban agriculture innovation grants, resources from the city, and non-profit programs invested in local food systems.

Building community funding models like crowdfunded microlending circles aligns financing with your unique values and story. Cooperative urban farm ownership frameworks allow sharing of costs and risks. Strategic partnerships with restaurants, grocers, schools, distributors, or aligned businesses can expand your reach and resources. When you get creative, the definitions of “financing” and “funding” extend far beyond just dollars from banks.

Here are some innovative ideas for financing your microgreens business or small urban farm outside of traditional sources:

• Crowdfunding campaigns through platforms like Kickstarter and Indiegogo to raise funds from the local community. Offer rewards or equity in return.
• Farm-to-table dinners and workshops that generate ancillary revenue while building your customer base.
• CSA or subscription model where customers pay upfront for produce boxes. Provides working capital.
• Fiscal sponsorships with non-profits who can receive grants and tax-deductible donations to support your mission.
• Partner with schools, restaurants, and grocers on branded products and crop planning. Co-finance upgrades that benefit both entities.
• Peer-to-peer micro-lending circles within the urban agriculture community.
• Invoice factoring or revenue-based financing where lenders provide capital against outstanding invoices.
• Airbnb “farm stays” or other agri-tourism activities create secondary income streams.

The key is creatively monetizing assets, community connections, strategic partnerships, and ancillary services beyond the core farming output. Every dollar from non-traditional sources helps increase self-sustainability.

Managing Microgreens Farm Risks and Planning for Contingencies

Urban microgreens farms face distinctive risks ranging from tight space constraints and city permitting challenges to weather disruptions, seasonality, supply shortages, and more. Conduct scenario planning sessions on “what if” style risks and exposures specific to your business model and environment.

Develop customized contingency protocols addressing weather events, power outages, equipment failures, water access issues, pest control, supply chain disruptions, and other potential business disruptions.

Explore specialty urban agriculture insurance options to mitigate risks. Start building an emergency business savings fund as an added safety net where feasible. Cross-train employees across your operation so that critical functions have redundancies. Establish relationships with multiple vendors and farms to avoid over-reliance. Taking proactive measures to prepare for unexpected hiccups will help ensure resilience.

Assembling a Microgreens Business Expert Advisory Board (NOT OPTIONAL)

One of the most valuable assets any early-stage business can develop is an experienced advisory board.

But more specifically, sustainable businesses that want to last more than five to ten years have allies and advisors. These are people willing and able to provide critical resources to you without interest in profit or fee. That could be a spouse who carries the burden of household income during the launch and a parent who loans capital or provided free labor in the early days. Stephen and I were lucky. We found all three examples.

Consider recruiting dedicated advisors with specialized finance, legal, marketing, operations, and urban agriculture expertise. Offer potential compensation through equity shares or defined fees to attract quality advisors genuinely invested in your success.

Clearly outline roles, expectations, term lengths, and responsibilities in advisory agreements. Maintain open and consistent communication channels through regular meetings, strategy updates, financial reporting, and engagement. Lean on your hand-picked team for unbiased guidance and insights on pivotal strategic and operational decisions. Their outside expertise can prove invaluable in avoiding costly missteps.

For JPure Farms, our advisors became indispensable partners. Our financial advisor helped develop pricing strategies and inventory controls. Our agriculture expert connected us with a new secondary supplier when we had a seed shortage. Our legal advisor ensured zoning and permitting compliance. Their niche experience buoyed us through many early hurdles blindly felt by most startups.

But your allies could also be people you’ve come to know in the urban farm business who can sponsor and support you despite being new and unproven.

The Winding Road from Microgreens Farm Passion to Profit

For us, the journey from corporate office jobs to urban farm startups was filled with enlightening pivots, empowering challenges, and profound learning curves. JPure Farms took tremendous vision, patience, resilience, and strategic planning to transform our passions into a financially sustainable business. But the rewards of pursuing purpose exceeded our expectations.

I hope these practical insights into financing a microgreens farm provide a helpful roadmap for turning your urban farming dreams into a thriving reality.

The financial intricacies of any early-stage venture can seem daunting at first glance. But you can build a runway for small farm success by taking a methodical approach, doing your homework, getting creative with funding options, and leveraging available expert resources.

Remember to let your “why” drive you forward – then the “how” will follow. Wishing you an abundantly fulfilling and prosperous journey ahead growing urban microgreens! Let me know if any other questions come up along the way.

Related Questions

What are the startup costs for a microgreens farm?

Startup costs include initial investments in equipment like growing trays and lighting and recurring expenses like seeds, nutrients, and rent. Total startup costs often range from $2,000-$5,000 for a small operation.

What is the most profitable way to grow microgreens?

Maximizing revenue per square foot through vertical growing, managing costs through bulk purchasing and streamlined operations, and selling to high-value customers like restaurants and grocers.

What is the easiest microgreen to grow?

Many consider pea shoots and sunflower greens easier than beginner microgreens given their faster growth rate and higher germination success. Arugula, radish, and some Asian greens are also more forgiving.

How much does a microgreens business make?

Revenue potential varies widely based on scale, and markets served. Small home-based microgreens farms can make $500-$1,500 monthly, while more extensive commercial operations make $5,000-$30,000 monthly.

How do you get financing for a vegetable farm?

Financing options include USDA Farm Service Agency loans, state/local agricultural grants and loans, crowdfunding, community-supported agriculture, and innovative partnerships with restaurants, grocers, and distributors.

Share the Guide

Want to turn your microgreens passion into a thriving urban farm business? Make sure financing a microgreens farm doesn’t become an afterthought.

Implement these practical tips to set your microgreens venture up for sustainable success. Share this guide with fellow aspiring farmers to help spread the word.

For more urban agriculture insights and resources, subscribe to our newsletter using the form below. We’ll send helpful info right to your inbox.

And don’t miss our upcoming episode, “How to Choose the Right Microgreens for Your Business (Product Development and Pricing).” You’ll discover essential strategies for selecting the best greens varieties, dialing in your germination process, maximizing your yields, and much more.

Growing amazing microgreens is just the beginning – building the business behind them is what creates true impact. Let’s cultivate a community that empowers urban farmers nationwide!

Remember, the more you learn, the more you grow. So, keep exploring, keep sharing, and keep growing! Sign Up below for our free Microgreens Business Model Email Course.

• Discover more business tips in the post, “13 Solutions to Mastering the Challenges of Your Microgreens Business Journey.”
• For a wealth of knowledge, read the post “Harnessing Technology for a Greener Future: A Guide for Microgreens Entrepreneurs.”
• Discover how to grow microgreens. Read this post, “Beyond the Windowsill: Growing Microgreens on Your Balcony or Patio.“
• Interested in nutrition and health? “The Beginner’s Nutritional Guide to Incredible Microgreens” to explore more about microgreens.

References & Resources

1. Main, Kelly. “Small Business Statistics of 2022 – Forbes Advisor.” Www.forbes.com, 7 Dec. 2022, www.forbes.com/advisor/business/small-business-statistics/.
2. U.S Small Business Administration. “Write Your Business Plan.” U.S. Small Business Administration, 2019, www.sba.gov/business-guide/plan-your-business/write-your-business-plan.
3. Hayes, Adam. “Break-Even Analysis.” Investopedia, Dotdash Meredith, 7 Mar. 2023, www.investopedia.com/terms/b/breakevenanalysis.asp.
4. Caramela, Sammi. “CO— Strategy Studio: Managing Your Cash Flow.” Https://Www.uschamber.com/Co/, 28 Mar. 2023, www.uschamber.com/co/events/strategy-studio/co-strategy-studio-managing-your-cash-flow. Accessed 7 Aug. 2023.
5. “Prepare for Emergencies.” Prepare for Emergencies, www.sba.gov/business-guide/manage-your-business/prepare-emergencies.
6. “Urban Growers.” Farmers.gov, 26 Apr. 2022, www.farmers.gov/your-business/urban-growers.
7. “USDA Urban Agriculture Toolkit | USDA Climate Hubs.” Www.climatehubs.usda.gov, www.climatehubs.usda.gov/hubs/northeast/tools/usda-urban-agriculture-toolkit. Accessed 7 Aug. 2023.