How to start a tea business: from tea lover to owner

Starting a tea business is an exciting venture that combines a passion for unique blends with sharp business savvy. The global tea market is a multi-billion dollar industry, fueled by consistent demand from health-conscious consumers, specialty cafes, and everyday tea drinkers.

This guide will take you through the practical steps of validating your business concept, building supplier relationships, obtaining necessary licenses, and acquiring inventory to help you launch a successful tea business in the U.S.

Step 1: Plan and validate your tea business idea

Start by researching your target market. Use Google Trends to compare consumer interest in different tea types, like "herbal tea" versus "green tea," in your region. Also, visit local farmers' markets and cafes to see what is currently popular and where gaps exist.

Define your niche and competition

Analyze potential competitors by reviewing their websites and social media presence. Pay attention to their product selection, pricing strategy, and customer reviews. You can use a platform like Semrush to get a sense of their online visibility and top keywords.

Estimate your startup costs

Your initial investment will vary, but you can create a preliminary budget. Many new owners miscalculate the cost of packaging, so be sure to research boxes, labels, and bags early. Here is a typical breakdown for an online-only model:

• LLC formation: $50 - $500
• Licenses and permits: $100 - $700
• Initial inventory: $2,000 - $5,000
• Branding and packaging: $500 - $2,000
• E-commerce website: $1,000 - $5,000

Here are 3 immediate steps to take:

• Use Google Trends to research three different tea varieties you want to sell.
• Create a spreadsheet to compare the pricing and product offerings of two competitors.
• Draft a startup budget based on the cost estimates provided above.

Step 2: Establish your legal structure and obtain licenses

Choose your business structure

Consider forming a Limited Liability Company (LLC) by filing Articles of Organization with your Secretary of State. This structure protects your personal assets from business debts. It also provides pass-through taxation, meaning profits are taxed on your personal return, which avoids corporate double taxation.

Secure federal, state, and local permits

With your business structure in place, you can tackle licensing. Since tea is a food product, you must register your facility with the U.S. Food and Drug Administration (FDA). This registration is free and can be completed online through the FDA Industry Systems portal.

A frequent oversight is assuming you can operate from your home kitchen. Most states require you to use a licensed commercial kitchen. Check your state’s cottage food laws, but be aware they often have revenue caps or restrict sales channels, which can limit your growth.

At the state level, you will need a general business license and a seller’s permit to collect sales tax. Locally, contact your county health department for a food facility permit. Expect this to cost $100-$500 and take 30-90 days for inspection and approval.

Here are 3 immediate steps to take:

• Go to your Secretary of State website to find the Articles of Organization form for an LLC.
• Search for your state’s cottage food laws to understand the rules for home-based food businesses.
• Call your local health department to inquire about commercial kitchen requirements and permit fees.

Step 3: Secure your business insurance

Key insurance policies

Start with General Liability insurance, which covers claims like bodily injury or property damage. A standard $1 million policy typically costs between $400 and $900 annually. It is the foundational protection for your business operations.

With that in mind, Product Liability insurance is non-negotiable for a food business. Many new owners mistakenly believe General Liability is enough, but it often excludes claims from product-related illness. This policy protects you if a customer has an allergic reaction to your tea.

You can often bundle these policies. If you store inventory, add Commercial Property insurance. If you hire employees, you will need Workers’ Compensation. Providers like the Food Liability Insurance Program (FLIP), Hiscox, and The Hartford specialize in food businesses and can guide you.

Here are 3 immediate steps to take:

• Request a quote from the Food Liability Insurance Program (FLIP) to see a baseline cost.
• Ask an agent about bundling general liability, product liability, and property insurance.
• If you plan to hire, research your state’s Workers’ Compensation requirements.

Step 4: Secure a location and purchase equipment

Find your workspace

You will need a licensed commercial kitchen for blending and packaging, as a home kitchen is rarely compliant. Look for shared commissary kitchens that rent space hourly ($25-$50/hour) or monthly. A small, dedicated space of 150-300 square feet is usually enough to start.

When you review a lease, ask for a one or two-year term instead of a longer commitment. This gives you flexibility. Also, clarify if utilities and CAM (Common Area Maintenance) fees are included in the rent, as these can add 15-20% to your monthly cost.

Get your equipment and supplies

You can begin with a modest equipment investment. Many people are tempted to use a home kitchen scale, but you need a commercial-grade one for accuracy and compliance. Focus your budget on items that directly impact product quality and safety.

• NTEP-Certified "Legal for Trade" Scale: $200 - $400
• Industrial Heat Sealer: $100 - $300
• Stainless Steel Blending Tubs: $75 - $200
• Wholesale Tea: Suppliers like Rishi Tea & Botanicals or The Tea Spot have minimum order quantities of 5-10 pounds per tea.

Here are 3 immediate steps to take:

• Search online for "commissary kitchen [your city]" and schedule a tour.
• Compare prices for an NTEP-certified scale on a site like WebstaurantStore.
• Request a wholesale catalog and price list from two bulk tea suppliers.

Step 5: Set up payment processing

Choosing a payment processor is a key decision. Many new business owners focus only on the monthly fee but forget about transaction rates, which can quietly eat into your margins. Average commission rates often hover between 2.5% and 3.5% per sale, so read the fine print.

For tea businesses that need to accept payments on-site or on-the-go, JIM offers a streamlined solution. With JIM, you can accept debit, credit and digital wallets directly through your smartphone - just tap and done.

At just 1.99% per transaction with no hidden costs or extra hardware needed, it's particularly useful for selling at farmers' markets or pop-up events. This rate is competitive when you consider other providers.

• Get Started: Download JIM app for iOS
• Make a Sale: Type the sales amount, hit sell, and ask your customer to tap their card or device on your phone
• Access Funds: Your money is available right on your JIM card as soon as the sale is done - no waiting for bank transfers

Here are 3 immediate steps to take:

• Compare the transaction fees of two different payment processors.
• Download the JIM app to see how the interface works.
• Calculate how a 1.99% fee versus a 2.9% fee impacts your profit on a $15 bag of tea.

Step 6: Fund your business and manage finances

You might want to start by exploring an SBA Microloan. These loans range from $500 to $50,000 and are well-suited for new businesses. Lenders often prioritize a strong business plan over a long credit history, with interest rates typically between 8% and 13%.

Grants are another option, though they are competitive. Look into programs like the Amber Grant, which supports women entrepreneurs. You should also check your city’s economic development website for local funding opportunities that might fit your business.

Plan your first six months of cash flow

With funding in mind, you need to map out your working capital. Many new owners budget for inventory but overlook other operating costs. For the first six months, plan to have $8,000 to $15,000 set aside for rent, marketing, and utilities.

This financial buffer ensures you can operate smoothly before sales become consistent. It helps prevent the cash crunch that trips up many new food startups in their first year.

Here are 3 immediate steps to take:

• Use the SBA’s Lender Match service to find a microloan provider near you.
• Search the Amber Grant website to review its eligibility requirements.
• Draft a six-month operating budget that includes marketing and rent costs.

Step 7: Hire staff and set up operations

Your first hire will likely be a Production Assistant. This person handles blending, packaging, and managing inventory. Look for someone with attention to detail and a genuine interest in tea, as their passion often translates into better product quality.

Expect to pay $16-$22 per hour. A frequent misstep is not verifying credentials. Ensure any employee handling food has a valid Food Handler Permit, which is usually a simple online course required by your local health department.

Streamline your daily workflow

As you bring on staff, you can use scheduling software like Homebase or When I Work to manage shifts. Many offer free plans for businesses with just a few employees. This keeps your scheduling organized from day one.

For future planning, a common industry benchmark is one full-time employee for every $100,000 to $150,000 in annual revenue. This ratio helps you decide when it is time to hire again without hurting your profitability.

Here are 3 immediate steps to take:

• Draft a job description for a Production Assistant, including blending and packaging duties.
• Research the Food Handler Permit requirements and costs in your county.
• Create a free account on Homebase to explore its scheduling features.

Step 8: Market your business and acquire customers

Build your online presence

Focus your initial efforts on visual platforms like Instagram and Pinterest. Post high-quality images of your tea, packaging, and the brewing process. A frequent misstep is to chase follower counts; instead, prioritize engagement from a small, dedicated audience that genuinely loves your product.

You should also start an email list immediately with a service like Mailchimp or Klaviyo. Offer a 10% discount for new subscribers. A healthy email list in this industry can see open rates of 20-25%, making it a powerful channel for driving repeat sales.

Engage with customers directly

Collaborate with local food bloggers or micro-influencers who have 1,000-10,000 followers. You might want to offer them free products in exchange for a post. This approach often yields a better return than paid ads, as their followers trust their recommendations.

Consider running a giveaway to build early momentum. For example, you could offer a tea starter kit to one winner chosen from your new email subscribers. This helps grow your audience and your email list at the same time, giving you a direct line to potential customers.

Here are 3 immediate steps to take:

• Set up an Instagram business account and plan your first five posts.
• Sign up for a free plan on Mailchimp to start collecting emails on your website.
• Identify three local food bloggers to contact for a potential collaboration.

Step 9: Price your tea for profit

Your pricing strategy directly impacts profitability. A popular method is cost-plus pricing, where you add a markup to your Cost of Goods Sold (COGS). People often forget to include packaging, labels, and a small amount for labor in this calculation, so be thorough.

For specialty tea, a markup of 100% to 300% is standard. If your COGS for a bag of tea is $3, your retail price would be between $6 and $12. This range provides a healthy gross profit margin of 50% to 75%, which you need to cover other business expenses.

Analyze your competitors

Look at what your direct competitors charge. You can create a simple spreadsheet to track their prices per ounce or per bag for similar tea types. This helps you position your products without starting a price war, which can hurt everyone's margins.

You might also consider value-based pricing. If you offer a rare single-origin tea or a unique wellness blend, you can command a higher price. Customers often pay a premium for exclusivity or perceived benefits, beyond just the base cost of the ingredients.

Here are 3 immediate steps to take:

• Calculate the full COGS for one of your main tea products, including the bag and label.
• Create a spreadsheet to compare the prices of two competitors for a similar product.
• Set a test price for your product using a 150% markup over your COGS.

Step 10: Maintain quality and scale your operations

Establish your quality standards

Consistency is your top priority. Create a quality control checklist for every batch. Document the exact weight of each ingredient and the final packaged weight. This ensures every customer gets the same experience. A common mistake is to eyeball measurements, which leads to inconsistent flavor.

You might also consider certifications like USDA Organic or Fair Trade. These can take 6-12 months and cost $1,000-$2,500, but they build trust. Look at them as a future goal once your sales are steady. Track customer reviews and aim for a return rate below 2%.

Plan your growth

Once you hit $100,000 in annual revenue, it is time to hire your first full-time employee. This benchmark helps you grow without straining your finances. At this stage, you should also evaluate moving from a shared kitchen to your own small production space.

As your orders increase, manual tracking becomes difficult. You can use inventory management software like Katana or inFlow Inventory to manage stock levels, supplier orders, and production schedules. This prevents stockouts and keeps your operations running smoothly.

Here are 3 immediate steps to take:

• Create a quality control checklist for your main tea blend.
• Research the USDA Organic certification process and costs.
• Explore the features of an inventory management platform like Katana.

Your tea business is about more than just good taste; it's about building a brand people trust. Remember that your story and the quality of your blends are your greatest assets. With a solid plan, you are ready to take the first step.

And when you make that first sale, you'll want a simple way to get paid. JIM turns your phone into a card reader for a flat 1.99% fee, with no extra hardware. It helps keep your costs predictable as you grow. Download JIM.