A cold storage business is a commercial facility for storing perishable products such as fruits, vegetables, meat, fish, furs, etc. under controlled conditions for longer periods. Based on the storage conditions, cold storage may be classified into three categories – short-term or temporary storage, long-term storage, and frozen storage.

Available data shows that the U.S. cold storage market size was estimated at USD 15.84 billion in 2019 and is expected to reach USD 16.43 billion in 2020. The global cold storage market size was valued at USD 107.18 billion in 2020, but it is expected to expand at a compound annual growth rate (CAGR) of 13.5% from 2022 to 2028.

The market has benefitted significantly from the stringent regulations governing the production and supply of temperature-sensitive products.

Steps on How to Start a Cold Storage Business

  1. Conduct Market Research

If you are considering starting a cold storage business, you would need reliable market research to be able to maximize profits from the business. The first step in the market research process for your cold storage business should be to develop market-based research questions in line with your overall business goal and objective.

In this regard, you should source for information that will help you maximize your business, help you know what your potential market will be looking out for from the business, and also help you operate your cold storage business with less stress.

a. Who is the Target Market for Cold Storage Business?
  • Fruit and vegetable farmers
  • Poultry and livestock processors
  • Fishermen
  • Furs traders
  • Importers of temperature-sensitive goods
  • Exporters of temperature-sensitive goods.
b. Is Cold Storage Business a Profitable Business?

Yes, the cold storage business is very profitable but you must be deliberate in marketing and promoting your facility if indeed you want to keep the business profitable all year round.

c. Are There Existing Niches in the Industry?

No, there are no existing niche ideas when it comes to the cold storage business.

d. Who are the Major Competitors?
  • Lineage Logistics
  • Americold Logistics
  • US Growers Cold Storage Inc.
  • United States Cold Storage
  • XPO Logistics
  • VersaCold Logistics Services
  • Penske Logistics
  • Burris Logistics
  • Conestoga Cold Storage
  • Midwest Refrigerated Services
  • Trenton Cold Storage
  • Hanson Logistics
  • Confederation Freezers
  • FW Logistics
  • RLS Logistics
  • Covenant Logistics Group
  • Geodis (North America)
  • Rinchem Co.
  • Peoples Services
  • VersaCold
e. Are There County or State Regulations or Zoning Laws for Cold Storage Business?

Yes, there are county and state regulations or zoning laws for cold storage business, and players in this industry are expected to work with the existing regulations or zoning laws governing similar businesses in the county where their business is domiciled.

f. Is There a Franchise for Cold Storage Business?

No, there are no franchise opportunities for the cold storage business.

g. What Do You Need to Start a Cold Storage Business?
  • A Feasibility Report
  • Business and Marketing Plans
  • Business Licenses and Permits
  • Furnished and Equipped Cold Storage Warehouse
  • Insurance
  • EIN (Employer Identification Number)/Federal Tax ID Number
  • A Corporate Bank Account
  • Employees
  1. Memorable Cold Storage Business Names

  • Farmers Network© Cold Storage Warehouse, Inc.
  • Generation Next® Cold Storage Warehouse, LLC
  • Storage Solutions® Cold Storage Warehouse, Inc.
  • Future Solutions® Cold Storage Warehouse, Inc.
  • Smart Sot™ Cold Storage Warehouse, Inc.
  • Storage Base™ Cold Storage Warehouse, LLC.
  • Jenny Blank© Cold Storage Facility, LLC
  • The Arena® Cold Storage Warehouse, Inc.
  • Ocean View© Cold Storage Facility, Inc.
  • Central Park© Cold Storage Warehouse, Inc.
  • Jades Investment® Cold Storage Warehouse, LLC
  • Profitable Venture® Cold Storage Warehouse, LLC
  • The Mark™ Cold Storage Warehouse, LLC
  • Storage Plug© Cold Storage Warehouse, Inc.
  • Pentagon Group® Cold Storage Warehouse, Inc.
  • Your Choice™ Cold Storage Warehouse, Inc.
  • Caleb Brothers™ Cold Storage Warehouse, Inc.
  • Newton Joe and Co© Cold Storage Warehouse, Inc.
  • Storage Hub® Cold Storage Warehouse, LLC
  • Sub Zero™ Cold Storage Warehouse, Inc.
  1. Register Your Business

a. What Type of Business Structure is Best for Cold Storage Business?

Even though there are several options when it comes to the business structure of a cold storage business, the one that most players in this line of business consider is an LLC. It is common to consider an LLC because providers want to protect themselves from lawsuits. Please note that an LLC will need an EIN if it has employees or if it will be required to file any of the excise tax forms listed below.

b. Steps to Form an LLC
  • Choose a Name for Your LLC.
  • File Articles of Organization.
  • Choose a registered agent.
  • Decide on member vs. manager management.
  • Create an LLC operating agreement.
  • Comply with other tax and regulatory requirements.
  • File annual reports.
c. What Type of License is Needed to Open a Cold Storage Business?
  • General Business License
  • Zonal Permits
  • Signage Permit
  • Operational State Facility Inspections for your facility
d. What Type of Certification is Needed to start a Cold Storage Business?

You don’t need any certification to start a cold storage business.

e. What Documents are Needed to Open a Cold Storage Business?
  • DBA
  • EIN
  • Business and liability insurance
  • Federal Tax Payer’s ID
  • State Permit and Building Approval (For your cold storage warehouse)
  • Certificate of Incorporation
  • Business License
  • Business Plan
  • Employment Agreement (offer letters)
  • Operating Agreement for LLCs
  • Insurance Policy
  • Online Terms of Use
  • Online Privacy Policy Document
  • Contract Document
  • Company Bylaws
  • Memorandum of Understanding (MoU)
f. Do You Need a Trademark, Copyright, or Patent?

If you are considering starting a cold storage business, usually you may not have any need to file for intellectual property protection or trademark. This is so because the nature of the business makes it possible for you to successfully run it without having any cause to challenge anybody in court for illegally making use of your company’s intellectual properties.

  1. Cost Analysis and Budgeting

a. How Much Does It Cost to Start a Cold Storage Business?

According to management firm JLL, “cold storage construction cost averages $150-170 per square foot, compared to $50-65 per square foot for dry warehousing space”. Hence it could range from as low as $120,000 to one million USD and more to set up a cold storage business.

b. What are the Costs Involved in Starting a Cold Storage Business
  • The total fee for registering the business in the United States of America – $750.
  • Legal expenses for obtaining licenses and permits as well as accounting services – $1,200.
  • Marketing promotion expenses – $1,500
  • The cost for hiring a business consultant (writing of business plans inclusive) – is $4,500.
  • Insurance (general liability, workers’ compensation, and property-casualty) coverage at a total premium – $2,400.
  • The cost of accounting software, CRM software, and Payroll Software – $1,500
  • The cost for leasing a facility (long-term lease agreement) – is $175,600.
  • The cost for facility remodeling and construction of cold storage warehouse – $150,000.
  • Phone and utility deposits will cost – ($3,500)
  • Operational cost for the first 3 months (salaries of employees, payments of bills et al) – $20,000
  • The cost for the purchase of office furniture and gadgets (Computers, Printers, Telephone, TVs, tables and chairs et al) – $10,000.
  • The cost of launching an official website – $600
  • Miscellaneous – $2,500
c. What Factors Determine the Cost of Opening a Cold Storage Business?
  • The size of the cold storage business (number of storage spaces and the size of the facility)
  • The choice of the office location
  • The required licenses and permits
  • The cost of hiring a business consultant and attorney
  • The cost for branding, promotion, and marketing of the cold storage business
  • The cost for furnishing and equipping the cold storage facility
  • The cost of insurance
  • The cost for registering the business
  • Cost of recruiting and training your staff
d. Do You Need to Build a Facility? If YES, How Much Will It Cost?

It is not compulsory to build a new facility for your cold storage business, but if you have the required finance, it will pay you to build your own cold storage warehouse from the scratch. The truth is that building or reconstructing a cold storage facility will help you come up with a facility that will perfectly fit into your overall business goals and vision.

e. What are the Ongoing Expenses of a Cold Storage Business?
  • Electric bills
  • Utility bills (internet subscriptions, phone bills, signage and software renewal fees et al)
  • Salaries of employees
  • maintenance
  • Insurance
  • Marketing costs
f. What is the Average Salary of your Staff?
  • Chief Operating Officer (Owner) – $60,000 Per Year
  • Facility Manager – $45,000 Per Year
  • Maintenance Engineer (Refrigerator) – $44,800 Per Year
  • Admin and HR Manager – $40,800 Per Year
  • Marketing and Sales Executive – $35,000 Per Year
  • Customer Care Executive / Front Desk Officer -$30,000 Per Year
  • Operators and Cleaners – $26,000 Per Year
  • Security Guards – $24,500 Per Year
g. How Do You Get Funding to Start a Cold Storage Business?
  • Raising money from personal savings and sale of personal stocks and properties
  • Raising money from investors and business partners
  • Sell shares to interested investors
  • Applying for a loan from your bank/banks
  • Pitching your business idea and applying for business grants and seed funding from the government, donor organizations, and angel investors
  • Source for soft loans from your family members and your friends.
  1. Write a Business Plan

a. Executive Summary

Sub ZERO® Cold Storage Company, LLC is a licensed and secured refrigerated storage facility that will be located in a commercial hub in Austin – Texas. Our basic aim of setting up the business is to make available refrigerated warehousing and storage facilities for our clients who have businesses  in Austin and in neighboring cities.

b. Service
  • Storage of goods that need to be refrigerated
  • Leasing or rental of mini refrigerated storage trucks
  • Handling of goods that need to be refrigerated
  • Transportation of goods that needed to be refrigerated
  • Providing blast freezing services
  • Providing tempering services
  • Operating modified atmosphere cold storage facility (private and public)
  • Other related cold storage services
c. Mission Statement

Our mission for establishing Sub ZERO® Cold Storage Company, LLC is to build a standard cold storage facility that can favorably compete in the industry in the United States of America.

Vision Statement

Our vision is to become the number one cold storage warehouse provider in the whole of Austin, Texas, and to have cold storage warehouses in key cities all across the United States of America.

d. Goals and Objectives

The goals and objectives of a cold storage business are to provide a commercial facility for storing perishable products such as fruits, vegetables, meat, fish, furs, etc. under controlled conditions for longer periods.

e. Organizational Structure
  • Chief Operating Officer (Owner)
  • Facility Manager
  • Maintenance Engineer (Refrigerator)
  • Admin and HR Manager
  • Marketing and Sales Executive
  • Customer Care Executive / Front Desk Officer
  • Operators and Cleaners
  • Security Guards

Marketing Plan

a. SWOT Analysis
Strength:
  • A centrally located cold storage warehouse facility
  • Well-equipped and furnished cold storage warehouse facility
  • Experienced, trained, and certified professionals.
  • Excellent customer testimonials.
Weakness:
  • Not enough finance to build our facility
  • We may initially struggle to procure enough revenue to offer the company to the public and sell shares.
  • Inability to attract high paying clients as a new business.
Opportunities:
  • A growing number of startups that make use of cold storage warehouse facilities in the United States
  • Build upon existing clientele
  • Online market, new services, new technology, and of course the opening of new markets.
  • Favorable government policies and trends
Threat:
  • Loans diminish profitability until they are paid off
  • The first year will be financially tight while we gain customers and pay off loans
  • Competition in the area could increase
  • Management of employees requires time, money, and effort
  • Lack of capital to keep going if the business model doesn’t work
  • Economic downturn; when the economy is bad it affects the flow of cash which in turn impacts businesses negatively.
b. How Do Cold Storage Business Make Money?

Cold storage warehouse businesses make money by;

  • Storage of goods that need to be refrigerated
  • Leasing or rental of mini refrigerated storage truck units
  • Handling of goods that need to be refrigerated
  • Transportation of goods that need to be refrigerated
  • Providing blast freezing services
  • Providing tempering services
  • Operating modified atmosphere cold storage facility (private and public)
  • Other related cold storage services.
c. Payment Options
  • Payment via bank transfer
  • Payment via credit cards
  • Payment via online bank transfer
  • Payment via check
  • Payment via mobile money transfer
d. Sales & Advertising Strategies
  • Introduce your cold storage business by sending introductory letters to fruit and vegetable farmers, poultry and livestock processors and farmers, fishermen, furs traders, importers and exporters of temperature-sensitive goods et al in and around your city.
  • Advertise your cold storage warehouse on national dailies, local TV and radio stations
  • Promote your cold storage warehouse business online via your official website and all available social media platforms
  • Hire the services of experts to make your brand the first choice in your city and other cities where you will open your cold storage business
  • Adopt direct mailing coupon marketing approach to attract investors
  • Position your signage/flex banners at strategic places

Financial Projection

a. How Much Should You Charge for your Product/Service?

The amount you can charge should depend on some factors, and the monthly prices could range from about $90 for a small storage to nearly $300 for a large one.

b. How Much Profit Do Cold Storage Business Owners Make a Year?

It depends, because cold storage business income directly depends on the capacity of cold storage and what items you store inside it. But on the average, a cold storage warehouse owner can rake in a profit of $60,000 to well over $150,000 annually.

c. What Factors Determine the Amount of Profit to Be Made?
  • The size of the cold storage facility
  • The services offered by the faciltiy
  • The management style of the cold storage business
  • The business approach of the cold storage business
  • The advertising and marketing strategies adopted by the cold storage business.
d. What is the Profit Margin of a Cold Storage Business?

According to Pertel, an ordinary warehouse yields about 4% a year, whereas a cold storage facility can yield 5.5%.

e. What is the Sales Forecast?

Below is the sales forecast of a cold storage business. It is based on the location of the business and other factors as it relates to such startups in the United States;

  • First Fiscal Year: $350,000
  • Second Fiscal Year: $600,000
  • Third Fiscal Year: $1.8 million
  1. Set Up your Shop/Office

a. How Do You Choose a Perfect Location for Cold Storage Business?
  • The demography of the location especially as it relates to agriculture startups and small exporters and importers
  • The purchasing power of businesses and residents of the location
  • Accessibility of the location
  • The number of cold storage businesses in the location
  • The local laws and regulations in the community/state
  • Traffic, parking and security et al
b. What State and City are Best to Open a Cold Storage Business?
  • Austin, Texas
  • New York City, New York
  • Los Angeles, California
  • San Francisco, California
  • Washington DC
  • Chicago, Illinois
  • Denver
  • Dallas-Fort Worth, Texas
  • Atlanta, Georgia
  • Boston, Massachusetts
c. What Equipment is Needed to Operate a Cold Storage Business?
  • Cold Room
  • Crates, boxes, and Casings
  • Forklifts
  • Temperature gauges.
  1. Hire Employees

When it comes to hiring employees for a standard cold storage business, you should make plans to hire a competent chief executive officer (you can occupy this position), facility manager, maintenance engineer (refrigerator), admin and HR manager, sales executives, customer service executives, operators, cleaners, and security guards.

  1. Launch the Business Proper

You can choose to open your cold storage business with an opening party, but note that this is not compulsory. The most important thing when starting this business is to make businesses and individuals know of your services so that your cold storage facility would be occupied all the time. You lose money each time your cold storage facility is not fully occupied.

a. What Makes a Cold Storage Business Successful?
  • Choose a good location and facility to launch the business
  • Hire only competent, hardworking, and trustworthy staff
  • Be deliberate with equipping and furnishing the facility
  • Encourage the use of word of mouth to promote your cold storage business
  • Leverage on all available online and offline platforms to promote your cold storage business
b. What Happens During a Typical Day at a Cold Storage Business?
  • The business is open for the day’s work
  • The cold storage facility is cleaned and ready for clients.
  • Clients are attended to (their goods are stored)
  • Maintenance of the cold room is carried out at regular intervals
  • Marketing/website upkeep is carried out
  • Other administrative duties are carried out
  • The business is closed for the day.
c. What Skills and Experience Do You Need to Build a Cold Storage Business?
  • Excellent facility management skills
  • Excellent interpersonal skills
  • Excellent customer services skills
  • Business management skills
  • Bargaining skill
  • Work experience in a cold storage facility
  • Experience in managing people
  • Experience in business administration