7 Steps to Start a Tea Business (1st $1,000 in Sales)
Tea is one of the world’s most loved drinks and the market is booming as people turn their attention to more niche tea markets, such as flavored teas.
When starting a tea business it’s crucial to establish a niche and advertise your products using marketing methods that will reach your target audience.
- Identify a Niche Audience
- Find a Niche Product
- Define Sales Channels
- Identify the Minimum Budget
- Form a Legal Entity
- Set Up the Shop
- Reach First $1,000 in Sales
How to Start a Tea Business?
1. Identify a Niche Audience
A niche audience is a group of people with certain types of interests or circumstances that dictate the products you buy. Every great business plan starts with identifying your target audience, and to do that, you need to identify a niche.
It can be tempting to try and market your products to everyone, but if you opt for a business that’s generalized, you’ll have more competition and find it harder to carve out a unique identity.
Men, for example, aren’t a niche audience. Men searching for caffeine-free teas that can improve fitness performance, however, are a niche audience with specific needs.
Here are some examples of niche audiences:
Example niche audience: Millenial women who use organic cosmetics as a means of relaxation and are Instagram influencers.
Example niche audience: Health-conscious small dog owners whose dogs are picky eaters.
1.1 Analyze Tea Niche Communities
The first step in finding your niche is looking for several niche online communities and learn from them. By searching through social media groups and forums, you’ll learn more about the niche tea communities that exist, what their problems are, and the ideas they have for new products. The more you can learn about your target audience’s lifestyle and needs, the better.
Plus, by performing this important research, you’ll gather more information about this demographic. If green tea lovers also tend to be into yoga, for example, this can be valuable knowledge when it comes to crafting your tea brand marketing strategy.
Here are some examples of tea niche communities:
1.2 Find a Problem or a Market Gap
When you’re conducting research for your tea business online, try and establish problems your target audience has or gaps in the market that haven’t yet been filled.
For example, if you’re on a forum for green tea, there might be users complaining that there aren’t enough fruit-flavored green teas on the market. Alternatively, the problem might be that green tea is decaffeinated, and some people want decaffeinated green tea. In both those examples, you could create a product to either solve the problem or fill the gap.
Also, search for tea-related keywords to find these problems or market gaps.
Potential Market Gap: None of the current products target loose leaf tea lovers on a budget
Potential Problem: Many of the most flavorful teas are caffeinated, meaning people who avoid caffeine can’t drink them.
Potential Market Gap: Iced tea that’s healthy and not full of sugar.
Potential Problem: Most teas currently on the market are too bitter for children.
1.3 Formulate the Niche Audience
To properly bring your plan together to sell teas online, you’ll need to tie together all the research you’ve done so far. Establish which audience has which problem, how bad the problem is, and whether solutions already exist.
Even if solutions exist, they may be unaffordable or unsustainable, or have other problems that leave a gap in the market. That’s where your product comes in. By defining your target audience around the problem or gap, you’ll be able to find the perfect product and shape your marketing strategy to attract the right demographic.
Here are some examples of niche audiences and the problems they encounter:
- Working families on a budget with interest in teas from around the world + most exotic, loose-leaf teas on the market are expensive.
- People who don’t like coffee but don’t know what else to drink + many teas currently on the market are too bitter.
- Environmentally and socially conscious millennial tea drinkers + many tea companies have murky supply chains with poor employment practices.
- Eco-conscious affluent people looking to reduce their plastic waste + most tea bags contain plastic.
2. Find a Niche Product
Once you’ve identified a niche audience, gotten to know their interests and needs, and established the problems they currently face, you must find a niche product that acts as a solution to those problems.
When starting a tea business, research what products already exist on the market and which ones have yet to be invented/modernized. If in doubt about finding the right product, talk to people you know who drink tea and discuss your ideas with them to gather their opinions.
Here are three examples of niche audiences and products to suit those particular audiences.
Please give 3 examples of niche audiences + products of companies (any niche, not this specific)
Example niche product: Teas with seasonal flavors, e.g. pumpkin during Halloween and Christmas cake during Christmas, aimed at those who don’t like traditional flavors.
Example niche product: Tea bags that come with a matching bar of chocolate aimed at food lovers and chocaholics.
Example niche product: Iced tea that’s sweet but sugar-free, aimed at health-conscious people.
2.1 Analyze the Competitors
In order to establish what’s already on the market, you’ll need to conduct competitor research. Look at other small tea businesses and make a note of the target audience they appeal to, the products they offer, and the marketing they conduct.
If there are existing successful companies in your niche, that shows there’s money to be made from the audience you’re targeting. Look at their online reviews to see what they’re not quite getting right and how you could improve upon the offering. For example, if the products are great but the customer service is poor, focus on your customer service.
Here are three popular competitors in the tea market:
Harney & Sons https://www.harney.com/
Buddha Tea https://www.buddhateas.com/
Simple Loose Leaf https://simplelooseleaf.com/?sscid=b1k6_1za0e
2.2 Unique Selling Proposition
A unique selling proposition is a unique aspect of your business that your company offers to consumers.
Here are some examples of five popular brands and their USPs:
- Walt Disney Co: Disney has years of experience and offers the widest range of family-friendly films and spaces.
- L’Oreal: L’Oreal offers hair and skincare products that feel luxury at affordable prices.
- McDonald’s: McDonald’s can be found in most cities and offers quick food suitable for all budgets.
- SlimFast: SlimFast provides meal replacement products to help people lose weight without cooking.
- Amazon: Amazon has same-day delivery available on some of its products.
Here are the USPs of the three competitors we identified:
- Harney & Sons: Harney & Sons sells unique blend of tea that can’t be found elsewhere.
- Buddha Tea: Buddha Tea offers free shipping over $50 and only organic ingredients.
- Simple Loose Leaf Tea: This company offers a custom tea subscription.
2.3 Choose a Product
Bring all your research together to get into teas and choose a product that not only appeals to your target audience, but also solves their problem. If you’re unsure which product fills a gap in the market, organize focus groups with tea drinkers, or simply ask your friends and family who drink tea what they think of your idea.
When choosing your product, consider the quality and whether you want to promote your brand as a luxury or a budget brand. Here are examples of products that could appeal to particular target audiences and solve their issues.
Millennials interested in tea but don’t know where to start might be interested in a tea subscription plan that offers all types of alternative and unique flavors, which you could create.
Another demographic is affluent tea drinkers who also drink alcohol, and the product could be tea cocktails.
2.4 Find Suppliers
Suppliers can make or break your business because they’ll create or contribute to the product you’ll sell. Plus, if there are any delays in your supply chain, your customers will suffer. With that in mind, it’s crucial to choose the right supplier.
Contact other business owners in the tea community to see if they have any recommendations, and look up online reviews and testimonials of suppliers to check how other businesses like your tea online store have found them.
If you’re struggling to find a supplier, look at these popular tea suppliers to source teas to sell:
Related: How to Start a Teeth Whitening Business?
3. Define Sales Channels
It’s crucial to establish a sales channel for selling teas for a living – the online (or physical) store where your customers can find and purchase your products.
While setting up a physical store is an option, it’s much easier to set up an online store or even a tea business on Instagram while you make money, before moving to a brick-and-mortar store if you feel it will help.
Join forums and communities for small business owners to discuss their preferred sales channels and the ones that would work for your sector. Discuss with tea-drinking friends and family members how they’d prefer to buy their tea.
Here are some examples of potential sales channels:
- Your personal: Facebook friends, Instagram followers, colleagues, schoolmates
- Paid advertising: Google ads, Facebook ads, Tiktok ads, Twitter ads, Pinterest ads
- Marketplaces: Amazon, Etsy, Ebay
- Communities: Facebook groups, Reddit, Quora, forums
- Other: Blogging, Craigslist, promoting in the real world (e.g. schools, workplaces, malls)
4. Identify the Minimum Budget
You can actually start your business with up to $1000 if necessary, so don’t let a small budget put you off.
In the first instance, aim for your first $1000 of sales before investing too much money in the business before it’s taken off.
Identify the minimum budget you’ll need to make the first $1000. This budget will need to include money for products, your eCommerce platform, and any paid marketing.
Once you can provide to a bank that your business is sustainable, you’re more likely to be eligible for a bank loan, which can help grow your tea business over time.
4.1 FFF and Personal Money
FFF stands for friends, family, and fools (naive) – people you know well and people with little investment experience looking to support your tea shop. Often, friends and family won’t expect to be repaid for their funds, and they won’t charge you interest like a bank would.
If you have little business experience, this is an easier financing method than applying for a bank loan. Alternatively, you can use your own personal money, such as savings. If you don’t have any savings, consider taking on extra work or another part-time job before you start your business to allow you to save up.
4.2 Bank Loans
Applying for a bank loan is one of the best ways to get a significant sum of money, but it’s not the easiest financing method.
When banks lend you their money, they want as little risk as possible. If you have a well-thought-out business plan and previous experience in running a successful business, they’re more likely to lend you more.
To apply for a loan to open a tea shop, you’ll first need to research which banks offer business loans, and which business loans have the best rates. Look for a bank that’s reputable but has cheap interest rates, so you’ll have to pay less back over time.
4.3 SBA Guaranteed Loans
Another great financing method for selling teas online is an SBA-guaranteed loan – a government initiative. If you’d struggle to get a loan otherwise, the SBA will help by lowering the risk for the lender.
Banks are reluctant to lend money to first-time business owners because of the risk, so they often need something called collateral, e.g. you’d give them your house if the business went bust.
The SBA guarantee substitutes the necessary collateral, providing the lender with the security needed to support the loan. If you fail to pay back the loan, the bank can recover a portion of the loan from the SBA.
4.4 Government Grants
An alternative to a repayable bank loan if you can’t gather enough money from FFF is a government grant. Unfortunately, government grants are only available to certain types of businesses, so you’d need to check online if your tea shop online would be eligible.
The benefit of a government grant is that, unlike a loan, you don’t have to pay it back or accrue interest. You would, however, have to meet the criteria that the government sets out. If you’re unable to do that, the best bank loan alternative financing method is asking family and friends for money or crowdfunding.
You’ve probably come across crowdfunding before when somebody you know has set up a ‘GoFundMe’ or similar page when they’ve run a marathon for charity or something similar. You can also crowdfund to start a business.
Crowdfunding allows members of your family and friends to raise money to help you to open a tea shop. For the most successful crowdfunding campaign, post your campaign on social media and to social media business groups, then ask your friends and family to share the post, too.
Email the crowdfunder to everybody in your contacts and ask them to forward it to their contacts.
5. Form a Legal Entity
When starting a new tea business, there are few things more important than following federal and state rules and regulations. Before launching your selling teas online business, check all the requirements for a legal business entity and make sure you meet them.
One of the most common types of business structures owners opt for is an LLC – a limited liability company. The legal benefit of making your business an LLC is limited responsibility for the debts and liabilities of your company. The taxation is more flexible, too, and people who own LLCs avoid double taxation since they don’t pay federal corporate income tax.
5.1 Business Name
As part of registering your business with the government, you’ll need to decide on a business name.
Getting the right business name is important because it becomes the central pillar of your brand identity. If you can’t think of the perfect tea shop names straight away, don’t worry. You can change the company’s name further down the line.
If you’re unsure what to call your business, research tea business names to get an idea of the type of structure and tone of voice they typically have. Once you have some ideas, run them by friends and family to get their opinion on which is the best.
5.2 Choose a Business Structure
Every teas small business will need a business structure. Select yours from the following:
- LLC: A limited liability company is allowed by state statute, and the owners are called members. LLCs allow for flexible taxation.
- Sole proprietorship: A sole proprietor is someone who owns an unincorporated business by themselves.
- Partnership: A partnership is a relationship between two or more people who enter into business together.
- Corporation: In a corporation, prospective shareholders can exchange money or property in exchange for the corporation’s capital stock.
- S corporation: S corporations can pass corporate income, losses, credits, deductions, and losses through to their shareholders for federal tax purposes.
5.3 Register for Taxes (EIN)
Every tea dealer business or business owner has to register for taxes in order to follow the legal rules and regulations. The amount of tax you pay will likely depend on the state you’re conducting business in, but failing to pay it could amount to serious legal consequences. You may have to pay both federal and state taxes.
Some business structures (such as an LLC) allow for more flexible taxation. If you’re unsure which business structure will provide the type of taxation that’s best for your tea business, consult an accountant.
You can register to pay your taxes easily online using this link.
5.4 Bank Account & Credit Card
To sell teas online, you should have a business banking account. Business bank accounts are available with most commercial banks, and some come with special perks. Research bank accounts from various banks to see which best fits your needs.
It’s also beneficial to get a credit card because you might need access to a line of credit in an emergency that leaves you with little cash flow. Some credit cards offer perks and rewards like cashback when you spend on certain items.
Having a credit card also means you can invest in inventory items without having the cash upfront, just don’t wait too long to repay the card, or you risk ending up in debt.
5.5 Insurance & Accounting
No business owner wants to be hit with a lawsuit, so you’ll need to protect your tea business from any potential legal issues with business insurance. There are various types of insurance available. These include general liability insurance, business owner’s insurance, professional liability insurance, and tax liability insurance.
Most business insurance is available from regular small and large insurance firms. If you know any other small business owners doing a similar type of work, ask them for advice in finding the right insurance firm for you. Search online for cheap deals from reputable companies and check online reviews and scores.
5.6 Permits & Licenses
Some businesses require permits or licenses at the state or federal level to operate legally. For the most part, the businesses requiring these types of licenses sell products such as firearms and alcoholic beverages, but it’s worth double-checking whether they apply to your tea business.
If you opt for a quirky niche such as tea cocktails, or your tea counts as medicinal, there’s a high chance you will need a permit. These licenses range from $50 to hundreds or even thousands of dollars, so if you require one to run your tea business, factor it into your initial budget.
6. Set Up the Shop
You can’t have a thriving business without a vessel through which customers can actually buy your products from you. Once you’ve sorted the legal side of things, it’s time to set up the shop itself, i.e., the website.
Keep in mind how you want to website to look and how this will match your brand identity. If you opt to use an eCommerce platform like Shopify, you can choose from their themes to style your website, or alternatively create your own custom theme.
It’s also worth having an idea of how much you want to make in the first few months, as this will dictate the pricing you opt for and how much inventory you order.
6.1 Define the Pricing
It’s a good idea to decide whether you want to sell teas online at a budget price or a luxury price. Much of this will depend on your target audience. If you set your prices too low, you risk not making enough of a profit margin to be sustainable.
If you set your prices too high, you risk people not buying your teas. Go for a price that feels right in comparison to your competitors, or price your products slightly cheaper than theirs to try and entice some of their customers. You can always change the pricing down the line if it doesn’t produce results.
6.2 Create an Online Store
Setting up an online store is easier than ever with eCommerce platforms like Shopify, BigCommerce, and WooCommerce – even if it’s your first time launching one. Look at the different platforms available and see which one fits your budgets and has the features you need.
Platforms like Shopify offer integrations and apps. For example, you can download a Shopify shipping app that allows your customers to track their shipments, making for a better customer service experience.
Start on one of the cheapest plans with fewer features. That way, when your online store grows and you inevitably need to upgrade your functionality with it, you can simply move up a price plan or two.
6.3 Order Inventory
Before opening a teas shop you’ll need to order products to sell to your customers. Don’t overcomplicate this. Order enough tea stock for around $2000 worth of sales, or slightly less if you’re working to a really tight budget.
Before ordering inventory, check with your suppliers how long the stock usually takes to arrive. That way, you won’t disappoint your customers by advertising products that haven’t yet arrived with you.
Over time, keep an eye on how quickly your tea products sell. Doing so will help you establish how many products you’ll need going forward, so you don’t over or under order.
7. Reach First $1,000 in Sales
At this point, you should be ready to launch your business, upload your products online, and start sending out your first orders. Instead of worrying about long term results at this stage, focus on reaching the first $1000 of sales in your tea company.
To do this, send your shop to friends and family and ask them to purchase a product, then ask them to send the information to their friends for more sales.
Create a free Instagram account for your tea business and encourage social media users to post images of your tea when they buy it, for social proof. Offer a discount on future purchases for the first 100 customers at your store.