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How to Start a Christmas Tree Farm

How to Start a Christmas Tree Farm

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How to Start a Christmas Tree Farm

How To Start A Christmas Tree Farm

The holiday season is a magical time of year, and for many families, finding and decorating the perfect Christmas tree is an essential tradition. If you love the outdoors, enjoy working with plants, and want to spread some holiday cheer, starting a Christmas tree farm may be the perfect business for you.

Growing trees is only one piece of the puzzle. This type of business demands a mix of agricultural know-how, business acumen, and an understanding of market trends. To help you get started, this guide provides an overview of the business, steps to get started, and answers to common questions.

Business Overview

A Christmas tree farm grows a variety of Christmas tree types to sell to customers. They might provide the cutting as well or allow people to cut them themselves. Often, other Christmas items, such as wreaths, are sold as well.

At first glance, a Christmas tree farm might seem like a seasonal operation focused solely on selling trees for a few weeks each year. However, it’s a year-round commitment involving land preparation, planting, maintenance, marketing, and finally, harvesting and sales.

Industry Summary

There are 25-30 million real Christmas trees sold each year and in 2023, the industry is expected to generate $1.33 billion in sales. There are close to 15,000 Christmas tree farms in the U.S., located predominantly in the Northwest, Midwest, and Northeast regions. The top Christmas tree producing states are Oregon, North Carolina, Michigan, Pennsylvania, and Wisconsin and the most common tree varieties grown for Christmas are fir, spruce, and pine.

The Christmas tree industry has been fairly stable over the past decade. However, there are some trends to be aware of:

  • Shift towards artificial trees: More families are opting for artificial trees. Farmers need to focus on quality and experience.
  • Increased sales of live potted trees: Potted trees that can be replanted after the holidays are gaining popularity.
  • Demand for pre-cut trees: For convenience, some customers prefer trees that are pre-cut and sometimes pre-wrapped.
  • Emphasis on choose-and-cut: Many customers enjoy coming to the farm and cutting their own tree. Farmers should focus on making this an enjoyable experience.
  • Holiday experience: There’s a growing trend in “agritainment,” where farms offer more than just trees. They provide an entire holiday experience complete with hot chocolate stands, sleigh rides, and tree-cutting ceremonies.

Steps To Start A Christmas Tree Farm

Step 1: Conduct Market Research

Starting a Christmas tree farm is a venture that requires careful planning and research. So, before you dig that first hole or plant that first seedling, understanding your market is an essential first step, especially focusing on customer demand, pricing strategies, and nearby competitors.

Why Customer Demand Matters

It’s not just about having land and growing trees; it’s about growing trees people actually want to buy. Are people in your area interested in natural trees, or have they mostly turned to artificial options? What types of trees are they looking for? Some might prefer the aroma of a Balsam Fir, while others may go for the durability of a Blue Spruce.

To gauge customer demand, consider running surveys or focus groups. You could also check social media groups or community boards where people often discuss their preferences. Another tip is to visit other Christmas tree lots to see which types are selling out fast. Understanding what your potential customers want ensures you don’t waste time and resources growing trees that won’t sell.

Setting the Right Price

Pricing is a complex beast. Set your prices too high, and you risk alienating customers. Set them too low, and you could operate at a loss. Market research can help you strike the right balance. Investigate how much people are willing to pay for a Christmas tree, and what factors influence their willingness to pay a premium. Maybe they are willing to pay more for organic farming practices or for extra services like home delivery.

Look at pricing models of competitors as well. Are they offering package deals or discounts for early shoppers? All these details will guide you in setting a competitive yet profitable pricing structure.

Keep an Eye on the Competition

Even if you think your trees are the best in town, you’re not operating in a vacuum. There are other businesses vying for the same customers. Who are your direct competitors? Are there nearby tree farms, garden centers, or even big-box retailers selling Christmas trees?

Visit their locations, take note of their tree varieties, and see how busy they are. It also pays to observe their marketing methods. Are they doing something you haven’t thought of, like evening hayrides for families or hot cocoa stands? By understanding what others in your space are doing, you can find ways to set your farm apart.

Step 2: Create a Business Plan

Many think that because farming is a ‘simple’ business, there’s no need for a detailed business plan. Like any good business, planning and strategic thinking are critical when it comes to setting up your tree farm for long-term success. This is where creating a solid business plan comes in. Writing a well-thought-out business plan will provide clarity, direction, and structure around your primary goals and how you plan to achieve them.

Another benefit of a business plan is the section on financial projections. By projecting your income and expenses, you’re essentially trying out your business in a risk-free environment. This allows you to see whether your Christmas tree farm will be a feasible endeavor. If your projections show that expenses consistently outstrip income, that’s a red flag indicating the need for a more in-depth look at your business model.

Not only will a bank require you to have a business plan if you need financing, but multiple studies have shown that having a good business plan increases the odds of starting a successful business. Writing the plan helps you think through all the aspects of the business and then serves as a guide as you begin.

Related: How to write a business plan

Step 3: Secure Funding

You’ve done your homework, laid out your business plan, and there’s promising demand for your Christmas tree farm. What’s next? It’s time to face what can be one of the most challenging phases of the startup journey: securing the necessary funds to turn your plan into a reality.

Your first source of funding will likely be your personal savings. This money serves as your initial investment into the business, and it shows lenders and investors that you are committed to making the business succeed. However, personal savings alone often aren’t enough to cover all startup costs. This leads us to outside sources of funding. Common ones for this type of business include:

Traditional lenders: Banks and credit unions are often the first stop for business funding. These institutions usually require borrowers to invest around 15% to 25% of their personal funds into the total project cost. You’ll also need a good credit score and sufficient collateral, such as land or equipment, to secure the loan. If the bank views your project as too risky, they might back your loan with an SBA (Small Business Administration) or USDA (United States Department of Agriculture) guarantee to reduce their risk.

Friends and family: Another funding source is loans or investments from friends and family. While this can be a quick way to secure funds, it’s crucial to treat these transactions as formal business agreements. Putting the terms in writing protects both parties and ensures that everyone is on the same page regarding payback terms or equity shares.

Microloans: If your funding requirements are minimal and traditional credit isn’t an option, consider microloans. These are small loans, often less than $50,000, provided by economic development organizations. One unique aspect of many microloan programs is that they offer business training and support in addition to funding. This could be invaluable for someone new to the farming or business sector.

Local investors: For some, the idea of bringing local investors on board might come to mind. While investors can provide substantial financial support, bear in mind they usually look for businesses with high growth potential. Christmas tree farms may not promise rapid, high-scale growth, but a compelling business plan can show prospective investors that your venture offers stability and reasonable returns.

Step 4: Acquire Property

Once you’ve secured the funding and completed the registration process, the next step is to focus on the location. Finding the right land is crucial; it needs to have the right soil conditions, climate, and accessibility to make your Christmas tree farm a success. Your farm could be on some property you own or rent from a landowner or farmer. Accounting for loading areas and access paths, you can plant up to 1,500 trees per acre.

Start by conducting soil tests to make sure it’s suitable for the types of trees you want to grow. The soil type, drainage, climate, etc., will impact the quality and types of species that can be grown. There are several popular types of Christmas trees include; Fraser fir, Douglas Fir, Balsam Fir, Virginia Pine, Scotch Pine, White Pine, Norway Spruce, Blue Spruce, and White Spruce, but research will be needed to see which ones will grow best on your property. You’ll also want to consider access to water sources for irrigation. Is the land easily accessible by road, both for you and future customers? These factors will greatly influence your farm’s success.

After acquiring the land, set up the essential infrastructure. This may include fencing to protect the trees, a storage shed for equipment, and possibly a small retail area if you plan to sell directly to consumers.

You might also need zoning permits, especially if you’re planning to sell directly from your farm. Check with your local county or city government to find out what’s required.

Step 5: Register the Business

You’ve got your business idea, your market research is promising, and you’re financially ready. Your next big step is to legally establish your Christmas tree farm. Each state in the U.S. has its unique requirements for business registration, licensing, and operation, but here is a general overview.

Choosing your business structure: First things first, decide what kind of business structure best fits your needs. There are four main types:

  • Sole proprietorship: Simplest to set up and typically the least expensive. All business income, losses, and liabilities are solely yours.
  • General partnership: Similar to a sole proprietorship but involves two or more individuals. Profits, losses, and liabilities are shared.
  • Corporation: A more complex structure offering liability protection but involves higher costs and administrative responsibilities.
  • Limited Liability Company (LLC): A hybrid, combining features of a corporation and a sole proprietorship or partnership. The LLC provides liability protection without the administrative burdens of a corporation.

Each structure has its pros and cons. Sole proprietorships are easy and cheap to set up, while corporations and LLCs offer liability protection.

Related: Comparison of business structures

Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.

Some popular LLC formation services include:

IncFile - $0 plus state fees & free registered agent for 1 year!

ZenBusiness - Best for beginners. $0 plus state fees & free registered agent for 1 year!

Northwest - Best privacy protection. $39 plus state fees & free registered agent for 1 year!

Business name registration: After registering the business structure, you may need to register your business name. This process will vary depending on what business structure you pick. Sole proprietors and partnerships will often be required to register a “Doing Business As” (DBA), while corporations and LLCs register with the state during the formation process.

During this time, it’s also a good idea to check if the name you want is available as a web domain, even if you’re not ready to set up a website yet.

Related: Finding a domain name for your business

Obtain business licenses and permits: You’ll need various licenses to operate your Christmas tree farm. Specifically in some states, a license is required before harvesting trees. For example, in Washington State, you would need to apply for a Christmas Tree Grower license Washington State Department of Agriculture.

In addition, general business registrations may be required, such as a local business license, sales tax permit, and an Employer Identification Number.

Related: What licenses do Christmas tree farms need?

Step 6: Set Up Sales Channels

Starting a Christmas tree business isn’t just about growing healthy, green spruces or firs. It’s also about finding effective ways to get those trees into customers’ living rooms. Your sales channels should reflect your customer base and business goals. For example, if you’re a small-scale farm aiming to create a community atmosphere, focusing on on-site sales and local markets makes sense. On the other hand, if you’re planning to operate on a larger scale, combining traditional, online, and wholesale channels would likely be more effective.

When you think about selling Christmas trees, a few traditional sales channels might come to mind:

  • On-site sales: The most straightforward approach. Customers visit your farm, pick their tree, and you handle the transaction there. Some operations will cut the trees for customers, while others have the customers pick and cut their own tree.
  • Local markets and pop-ups: Another direct route to consumers, taking your products to where customers are already shopping for holiday items.
  • Wholesale: Larger retail outfits may be interested in buying your trees in bulk and reselling them.

Step 7: Prepare to Launch!

You’ve sown the seeds, both literally and metaphorically, for your Christmas tree farm. But before you open the gates to the public, there are a few more pieces of the puzzle to put into place. While everyone’s situation will differ, here are some common items for most farms.

Business insurance: Accidents happen. And when they do, you’ll be grateful you invested in business insurance. Look into liability insurance for customer accidents and property insurance for equipment or assets.

Setting up bookkeeping: Tracking income and expenses is crucial to understanding your business’s financial health. Whether you do it yourself with software like Wave Accounting (FREE) or Quickbooks, or hire an accountant, make sure to set up a reliable bookkeeping system.

Opening a business bank account: Keep personal and business finances separate by opening a business bank account. This not only makes bookkeeping easier but also gives you a clearer picture of your business’s financial standing.

Accepting credit cards: Customers appreciate the convenience and security of card payments, and offering this option can increase your sales potential.

Creating a marketing strategy: Your farm won’t be successful if people don’t know about it. Create a logo and website as the cornerstone of your brand. Utilize social media and consider seasonal promotions to attract customers.

Joining industry associations: Joining industry associations like the National Christmas Tree Association, American Christmas Tree Association, or your state’s Christmas tree association can provide valuable networking opportunities and professional development resources. These organizations often offer educational materials, marketing assistance, and industry-specific advice.

Greg’s Tip: Espcially if you don’t have a farming background, don’t overwhelm yourself at first. Begin with a small acreage and expand as you become more comfortable with the farming process.

Greg's Business Tip

Common Questions When Starting A Christmas Tree Farm

How much does it cost to start a Christmas tree farm?

The total costs to start a new Christmas tree farm often range from $20,000 to $60,000 or more, depending on acreage and scope.

Major costs include:

Land purchase: Plan to invest $10,000 to $30,000+ to purchase 5-10 acres or more of land suitable for growing Christmas trees.

Seedlings and planting: Seedlings may cost $1-$3 each and you will need hundreds per acre. Total of $2,000-$5,000.

Irrigation and equipment: A good irrigation system and basic equipment like a tractor, mower, and baler can total $8,000 to $20,000.

Facilities: A basic barn, storage shed, and sales shop will likely require at least a $5,000 initial investment.

Permits, licensing, and insurance: Plan for $1,000 or more for operational permits, business licenses, and liability insurance.

Initial marketing: Print ads, website, and signage could total $2,000-$5,000 to promote a new farm.

How profitable is a Christmas tree farm?

The profit potential of a Christmas tree farm can vary greatly depending on acreage, tree varieties, and sales methods. However, we can provide a general estimate.

Industry statistics show the average farm has 500-1,000 harvestable trees per acre. With wholesale prices around $20-50 per tree and retail prices of $50-100 per cut tree, revenues can range from $10,000-$100,000 per acre. Typical annual operating costs, including labor, maintenance, marketing, and equipment leases, average around 40-50% of gross revenue.

Given these averages, a 10-acre Christmas tree farm selling at retail could generate roughly $500,000 in annual revenue, with about $250,000 in expenses. That results in an estimated $250,000 in potential annual profit for the farm.

Of course, profit margins can fluctuate year-to-year and depend heavily on the local market. But with sound horticultural and business practices, Christmas tree farming can be a profitable seasonal enterprise.

What skills are helpful in running a Christmas tree farm?

Running a Christmas tree farm requires a mix of hard skills related to agriculture and soft skills related to business and people management. Here are some key skills that could be helpful:

Agricultural knowledge: Understanding soil preparation, planting, fertilizing, weed control, and pest scouting and control is crucial. Familiarity with the different types of Christmas trees and their specific care requirements can also be beneficial.

Equipment operation: You’ll need to know how to operate various pieces of farming equipment, such as tractors, augers, plows, shearing knives, chainsaws, netters, and bow saws.

Business acumen: Understanding pricing, margins, and sales techniques is essential for achieving profitable sales. Additionally, you’ll need to navigate obtaining the necessary licenses and permits for running a farm.

What is the NAICS code for a Christmas tree farm?

The NAICS code for a Christmas tree farm is 111421, which also includes nursery and flower growing businesses.

The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.

Related: What is a NAICS code and how to find yours

How to Start a Christmas Tree Farm

How to Start a Christmas Tree Farm

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