How to Start a Green Business

“Going green” means making product and lifestyle choices that reduce your negative impact on the environment. Going green is a good way to help save the environment from pollution, climate change, and other problems. One way to go green, and encourage others to do so, is to start a green business. A successful green business can draw customers from less environmentally conscious businesses and educate them on green products and practices. A green business not only benefits the environment, it also provides you an opportunity to market and differentiate your products. Green businesses can exist in almost any market including food production, cosmetics, and cleaning supplies. To start a green business, focus on your business goals and aspirations. With a plan in mind, create your business entity, finance your business, and get green certified.

Method #1 – Evaluating Green Business Opportunities #

Research existing green businesses

Apart from brainstorming business ideas, you need to determine if the market already has a solution to your problem, or if other businesses are poised to solve it. If something already exists, you might not want to start a business that will be difficult to maintain and compete with other businesses. Do internet searches using keywords you have already brainstormed.

  • For example, if you want to make a green packaging material, Google “green packaging options” and see what comes up. If you are thinking about creating an environmentally friendly bathroom cleaner, Google “environmentally friendly bathroom cleaners” and look through the results.

Identify a gap in the market

Once you have a good idea of where your strengths and weaknesses are, you need to brainstorm how you can use your skills in starting a new business. Again, use a pen and paper to jot down questions and possible answers. Your objective here is to identify space in the market where a new green business could exist and thrive. For example, you might decide to start any of the following types of green business:

  • A locally-sourced grocery store, restaurant, or food truck.
  • A store selling green products.
  • An installer of energy-efficient home improvements.
  • An electric/hybrid transportation service.

Identify environmental problems

Ask yourself what big environmental problems exist and need to be solved. For example, maybe nobody has created an environmentally friendly packaging material to replace Styrofoam and plastic. As you might know, Styrofoam and plastics do not readily break down in the environment and can be hazardous to wildlife. In addition, the production of these materials is incredibly fossil fuel intensive.

  • It may help to think of environmental problems that bug you personally. Here, ask yourself about what little problems you try to solve at home every day.
  • For example, maybe you send a lot of packages and you are constantly buying Styrofoam and bubble wrap. Maybe you think there is an opportunity to create a better packaging product that can even be reused.

Method #2 – Determining the Optimum Green Business Opportunity #

Think about your strengths and weaknesses

Before you start a green business you need to determine what your strengths and weaknesses are. Do this by sitting down with a pen and paper and jotting down notes. Record your skills, experience, personal interests, and other green knowledge you can bring to the table.

  • For example, if you have worked in manufacturing all your life, write this down. This might lead you to think of green business opportunities in the manufacturing sector (e.g., non-toxic cleaning supplies, energy efficient home appliances).
  • In addition, maybe your last job required you to sell and market a specific set of products. If this was the case, maybe you will try to start a green business where you can sell and market environmentally friendly products that your company will manufacture.
  • Make sure that you have the skills and experience required to run your business and product the product or provide the service that your green business plans to offer.
  • Finally, consider your financial capacity. You might be limited to certain types of business based on how much money you have to invest. For example, going into manufacturing might require more capital than is feasible for most individuals to have or raise.

Use your personal network to your advantage

Apart from your own strengths, consider your professional network and the strengths they may have with green business. For example, if you have a friend who is a business lawyer, tax professional, or accountant, ask them to help you with your endeavor.

  • In addition, maybe you have friends that share the same passion for the environment as you. If you have these friends, ask for their input. They may be able to help you come up with business ideas.

Research business requirements for each opportunity

Use resources like the Small Business Administration (SBA) website and to research requirements for starting each business you are considering. Look at licensing, permits, corporate structures, insurance, and other important regulations surrounding the industry. Then, try to estimate startup costs including buying equipment, obtaining inventory, hiring employees, and getting licensed operate. You may find that some ideas are too expensive to pursue and that others can be started cheaply.

Select the optimum business opportunity

Creating a green business is not as easy as doing what you love. You must also be able to make money doing it. Therefore, once you have created a list of your strengths and where possible gaps in the business market might be, you need to consider the possibility of turning a profit. To do this, take your green business idea and create an outline of a business plan. Your business plan outline will force you to take your general ideas and think about them in a business context.

  • Your outline might simply start turning your general ideas into business ideas. You can do this by looking at business plan templates to get an idea of what is expected.
  • For example, most business plans will include a description of your market, your business strategies, your marketing strategies, and your finances.

Create business plan

Use your outline to Write a Business Plan for a Small Business. This business plan will be used throughout the first few years in order to run your business and get financing. In fact, most banks, venture capitalists, and other funding sources will require that you show them a quality business plan. If you have never put together a business plan before, look online for templates. The Small Business Administration (SBA) even has a tool on their website that will help you build your business plan. Your business plan should include the following information:

  • Your vision (i.e., where you see yourself – the end goal)
  • Your mission (i.e., your plan to provide a solution)
  • The need (i.e., what problem you are going to solve)
  • The market (i.e., who will be using your product)
  • Your objectives (i.e., small goals you intend to achieve in the short term)
  • Your strategies (i.e., how you plan to achieve your objectives)
  • Your marketing (i.e., how you are going to get your product to your market)
  • Finally, your business plan should lay out how much startup money you need and a three to five year financial plan. Some examples of expenses you might run into include buying supplies and inventory, paying payroll and rent, buying equipment and fixtures, and buying computers.

Method #3 – Creating and Financing a Green Business #

Determine the best legal structure for your business

A green business, like any other business, can be created and structured as a corporation, limited liability company (LLC), a partnership, or a nonprofit to name a few structures. The business structure you choose will dictate how your business will operate, how it will be taxed, and how profits will be used.

  • If you want to raise money through passive investors, you might want to create a corporation. A corporation also protects your assets by legally separating the business’s finances from your own.
  • If you want your business’s profits to be fed back into the business, you could consider creating a nonprofit. Becoming a nonprofit requires compliance with a large number of federal and state regulations.
  • If you want to simplify your taxes, consider creating a partnership or sole proprietorship. However, this structure may also leave you liable for the business’s debts.

Form a legal business entity

Each state will have different rules on creating a business entity. Hire an attorney to make sure you form your business in accordance with these regulations. Work with the attorney to form the following parts of your business organization:

  • A board of directors. In general, every state will require you to create a board of directors consisting of at least one person. This person does not need to be a resident of the state where you are incorporating and there is usually no age requirement.
  • An appropriate name. Every state will require you to choose a business name that conforms with certain rules and obligations. Your name must be unique, may have to contain a descriptor of your legal structure, and should relate to your operations.
  • A registered agent and office. A registered agent is a requirement for most business structures in every state. A registered agent is an agent of your business responsible for being served with any process, notice, or demand. In most states, you must obtain the registered agent’s consent to use them.
  • A certificate of formation. Your actual business will be created when you prepare and file your certificate of formation with the secretary of state in the state you are incorporating in. Each business structure will have its own certificate of formation forms.
  • File your formation documents. Once you fill out the certificate of formation you need to deliver it to the secretary of state’s office. In order to file and create your business, you will need to pay a filing fee, which is usually around $300. Most offices will allow you to mail your certificate or drop it off in person.
  • Bylaws. Soon after your business is formed you will want to create a set of bylaws. Bylaws lay out internal rules and procedures for the corporation. Most states do not require bylaws but every business should have one. This is particularly important for green businesses as you want to make sure every aspect of your business is run in an environmentally friendly manner.

Finance your business

You’ll need a way to get the startup money you need to get your business off the ground. The easier way to do this is by using your own savings to start your business, as this doesn’t leave you in debt to anyone. If this is impossible, you have several other options for financing your business:

  • Your first option is to take our a small business loan. While some business loans are unsecured (i.e., no collateral is needed), most business loans will be secured (i.e., you will have to pledge assets to secure the loan payment).
    • Examples of unsecured loans include credit cards, unsecured lines of credit, and family loans. Examples of secured loans include leases and mortgages. Some states, for example California, even offer loans specifically for environmental businesses.
    • Common forms of collateral include equity in your home, accounts receivable, business inventory, and business equipment.
    • When you go to a bank for a business loan, they will look through your assets to determine what they can use as collateral and how much they will lend you.
  • Alternately, you can sell equity in your company. If you do not want to take on debt (i.e., loans), another option is to raise money and give investors an ownership interest in your company (i.e., equity). Examples of equity sales include stock sales and the involvement of venture capitalists.
    • When you get money in return for giving up ownership interests, the investors who gave you money will be repaid through business profits.

Another way to get financing is to apply for grants

The best form of financing is generally a grant. A grant is “free money” that you can put towards your business. While this seems ideal, grants can be incredibly difficult to obtain.

  • Grants are usually offered through an application process whereby you will have to ask for the money from the provider. During the application process you will have to detail every aspect of your business including how you plan to spend the money.
  • These applications can be very long and detailed. Some organizations even have employees whose sole job it is to apply for grants.
  • In addition, a lot of grant money is earmarked, which means your free money is not actually free. When you read grant requests, some of them will limit how the money can be used or what types of organizations can apply.

Acquire products to sell

If you plan to sell green products as part of all of your business operations, you’ll need to acquire the products before you can open. Search online to find green-certified products to buy for your store.

  • For information on how to identify green products, see how to avoid greenwashing.

Develop services to provide

If your business plans to offer green services, you will need to specify exactly how it will do so. Create plans for providing the service, including materials used, the sources and costs of those materials, and how the service will be carried out. Hire employees to provide the service and train them in doing so. Create a system for invoicing and charging customers for your service. Make sure that any materials used in the provision of your services are green as well.

Implement your marketing plan

Your business plan should have included a marketing plan that spells out how you plan to reach potential customers. Carry out your plan by implementing any advertising, networking, or local outreach plans you created. Remember to keep your focus on your target market of environmentally-conscious people.

Method #4 – Obtaining Green Business Certifications #

Identify green certification options

Green business certifications are everywhere. By doing a simple internet search, you will be able to find ways to differentiate your products and your brand in order to create the most recognizable environmental products available. The SBA website offers a large list of certification programs available in different areas and for different types of green businesses. Some common, well-respected green certification options include:

  • USDA’s organic program
  • Green Seal
  • LEED certification
  • Green e-Certification
  • the EU’s Eco-Label Program

Look for certification programs that fit your business

Getting certified as a green business or as having a green product will help you attract green customers and/or create environmentally sustainable products. Look through certification options and find ones that fit your business.

  • For example, if you are selling a green product, you might be eligible for a Green Seal, which sets product standards and awards its labels to environmentally friendly products.
  • If you are thinking about building a structure for your business, consider getting the building LEED certified, which is an award given to buildings that meet certain environmental standards.

Visit each accreditation website

Once you find possible certification programs that fit your business’s needs, visit those certification websites and learn about their process. For example, if you want to become a “B Corporation”, which is a designation given to corporations that meet certain moral and environmental standards, you will have to first meet performance standards set by B Corporation. You can take a test on their website to help you determine if you would qualify.

  • Each website and certification organization will have a different process for accreditation. Make sure you understand what will be required of you and whether you will qualify before you apply.

Apply for certification

Once you have a pretty good idea of whether you will qualify for certification, you send in your application for each certification you wish to receive. Each certification organization will have different application procedures. Some applications will be relatively simple and may only require you to make a pledge to environmental causes.[16] On the other hand, other applications may require you to sign legal documents, submit business plans, submit product ingredient lists, and submit financial statements.

  • Make sure you are prepared for the application process before you begin. Some applications may take months, or even years, to complete.

Utilize certifications in your marketing

Some certification organizations will allow you to use specific labels on your products. These labels will tell consumers that you meet certain environmental standards.

  • For example, if you have a Green Seal on your product, consumers will know that your product is sustainable.
  • In addition, if your fruit or vegetable is labeled as USDA Organic, consumers will know your product was not farmed with any pesticides or created through genetically modified organisms (GMOs).
  • If your building is LEED certified, you may want to tell people this information in television advertisements or on the back of your product. This will help differentiate your green business from others and will help you prove your environmental friendliness.

Source #

How to Start a Green Business, WikiHow