A business plan moves a botanical extraction facility in the right direction, so extraction technicians and managers can budget for essential equipment for all extraction methods, including CO2, ethanol, and hydrocarbon. Expenses for extraction facilities include licenses, property, team training, a quality extraction safety room, and more.
The design, construction, and operation of a botanical extraction facility is an immensely complex process with many factors to consider.
We’re committed to elevating the industry, so we put together this article that explores the details necessary to start a successful extraction operation.
The initial phase of botanical extraction depends significantly on your chosen extraction method, the equipment you want to have on hand, and your budget for bringing it all together. Let’s dive in.
First, you must develop a comprehensive business plan. A well-thought-out botanical extraction business plan is crucial to developing a successful operation. Start by asking a few questions:
At this initial stage, the best thing to do is to put pen to paper and actually write your business plan, answering the above questions. It’s the first building block toward your ultimate goal of a successful extraction business.
A solid business plan will help you determine a few details, including:
The main job of your extraction equipment is to remove precious compounds from the raw plant material.
But there’s more than one way to extract a compound. The three main extraction methods are CO2, ethanol, and hydrocarbon. Each method brings a unique set of factors that can help determine the equipment you’ll need in your facility.
What Are Extraction Startup Costs?
As with any new business, entrepreneurs can expect to drop a sizable amount of money to get their extraction business off the ground.
Your startup costs encompass a handful of expenses, each with its own variables. This includes the extraction license, property and buildout, professional extraction team and training, safety room, and extraction equipment.
Getting an extraction license comes at a considerable cost, and it varies depending on where your facility is located.
In California, for example, the extraction licensing cost is adjusted based on your gross annual revenue. An initial non-refundable application fee is required, and that costs $1,000. Then there’s the state license fee, which ranges from $2,000 to $75,000, depending on your revenue.
In Nevada, extraction companies must pay a non-refundable application fee of $5,000 and a $10,000 production license. Then, the annual fee is $3,300.
And finally, in Colorado, the non-refundable application fee is $4,000, while the licensing fees range between $1,100 and $5,300, depending on the size of your business.
Property & Buildout
The cost of a building will be your first significant expense. Most prefabricated buildings will cost around $50 per square foot. However, operating inside an existing building through a lease rather than ownership will generally cost less. For example, let’s say you’ve decided to lease instead of own. This will run about $22,500 in initial lease costs.
The buildout and construction of the actual lab will run anywhere between $60-$100 per square foot to build out the space to code. The buildout should cost you about $200,000 and requires a team of experts, including a designer, an architect, an electrical engineer, and a mechanical engineer.
Professional Extraction Team & Training
This generally falls under “overhead,” along with rent, utilities, personnel, and administrative costs. Expect to shell out about $100,000 per year in salary for a laboratory director and facility manager and around $40,000-$45,000 for each lab technician.
When working with supercritical CO2, ethanol, or hydrocarbon, a C1D1 (Class 1 Division 1) compliant environment safety room is an imperative addition to your facility. Even if you’re implementing a “solventless” extraction, you still need the ventilation and filtration systems inherent in a C1D1 safety room.
These safety rooms are built to prevent fires, explosions, product damage, and human injuries. The rooms include:
A prefab C1D1 is the quickest and easiest way to get all the safety features you need in an extraction facility. Depending on the model, these can cost anywhere from around $30,000 to approximately $85,000.
Other equipment—such as stainless steel tanks, closed-loop extraction units, temperature control units, recovery pumps, vacuum pumps, and ovens—also carry costs. In total, you should expect to pay around $100,000 to $450,000 for the traditional lab equipment associated with the three main types of extraction.
Now, let’s focus on each type of extraction and learn about all the related costs and other finer details.
The cost of CO2 extraction equipment depends mainly on the scale of your operation. Check out this helpful guide:
CO2 extraction is performed with a closed-loop extractor containing solvent in a sealed environment. Generally, there are a few main parts to this system:
To perform CO2 botanical extraction legally, your facility must be licensed with a fully compliant laboratory. In addition, you must be able to store liquid CO2 tanks.
If you maintain a workplace facility that deals with hazardous chemicals, you’re required by Occupational Safety and Health Administration (OSHA) to implement a Hazard Communication Program (HCP).
What’s more, many safety regulations are involved in any extraction method. These safety regulations include:
Used to calculate the thickness measurement of pressure vessels operating at pressures that exceed 15 psi (internal or external). ASME BPVC Sect. V111, Div. 1 also addresses connections and bends in pipes and reinforcement.
The up-front cost of ethanol extraction equipment is much more accessible to smaller companies. Ethanol extraction equipment ranges from $1,000 to over $100,000 for heavy-duty equipment meant for large-scale operations.
The most common pieces of equipment required for ethanol extraction are mid- to large-scale centrifuges. These centrifuges are explicitly built for ethanol extraction and cannot be used for CO2 or hydrocarbon extraction.
You must be a legally licensed, fully compliant laboratory with the ability to store ethanol.
Along with the ability to store ethanol, you must comply with the same safety requirements mentioned in the CO2 extraction section of this article.
Hydrocarbon extraction equipment can cost anywhere from $5,000 to more than $100,000, depending on the size of the operation and the capabilities you require.
For closed-loop hydrocarbon extraction using butane or propane, you need a collection of crucial pieces of equipment to do it right.
To perform hydrocarbon extraction, you must be legally licensed in a fully compliant laboratory with the ability to store flammable liquids, including liquid butane.
Along with the ability to store flammable liquids, you must comply with the same safety requirements mentioned in the CO2 extraction section of this article.
Recalls and facility closures can cost extraction companies thousands of dollars a day in lost revenue, refunds, and raw materials and labor costs. Along with dollars and cents, recalls and facility closures can also cause untold damage to a company’s brand and reputation.
This section will explore a few ways to avoid recalls and facility closures.
The Importance of Good Manufacturing Practice (CMP) Compliant Products
The Good Manufacturing Practices (GMP) system ensures the production of various goods within commercial facilities is consistent and controlled according to strict quality standards. GMP systems are in place for food, cosmetics, pharmaceuticals, and all botanical extracts.
Regulated by the Food and Drug Administration (FDA), GMP guards against potential consumer risks, including mislabeling, cross-contamination, and adulteration. cGMP means Current Good Manufacturing Practices because GMP standards are constantly updated as new information is discovered.
Extraction professionals must proactively approach GMP and cGMP in the botanical extraction industry. First, you must choose GMP-compliant extraction equipment for your facility. This specialized equipment must have manuals, clean-in-place standards, and suitable build material to meet GMP regulations.
Ventilation, Cleanliness, and Sanitation
Not only does regular cleaning and maintenance of botanical extraction equipment keep everyone safe, but it also ensures optimal performance and maximum yield.
The botanical extraction industry is growing—as is the demand for extracts. Proper upkeep is crucial to maintaining a long-term foothold in the extraction market. You need to know when to clean, how to clean, and when to schedule maintenance and replace certain parts.
Human error is always possible when you have humans operating heavy-duty machinery. However, there are steps you can take to reduce instances of human error, and when human error does occur, you can do things to mitigate the damages.
Saving time has always been a significant benefit of workflow implementation, but extraction facilities can save money through this time-honored approach to organizational processes. Here are some ways that a workflow can help botanical extraction facilities reduce costs:
Sourcing high-quality biomass for your desired botanical extract is critical to obtaining the characteristics you want, such as compound content, flavors, consistency, and potency. When you practice plant material consistency, you are less likely to find out after extracting that your product isn’t viable.
Starting with high-quality biomass ensures a high-quality end product. In addition, these more refined botanical extracts have a better chance of resonating with consumers, ultimately performing better in the marketplace.
A surefire way to guarantee quality biomass and plant material consistency is to test the plant material in an analytical lab before the extraction occurs. While an added expense up front, analytical labs can pay off by helping you establish a reputation for excellence.
Botanical extractions—CO2, ethanol, or hydrocarbon—consume much energy. As a result, power is one of the highest costs for any botanical extract manufacturing facility. When you implement energy-efficient practices, you can help reduce your monthly electric bill and reduce wasted energy.
One way to be more energy efficient in an extraction facility is to run extraction systems during off-peak hours. This is when energy prices are at their lowest. This might mean working the graveyard shift, but it could be highly cost-effective if you can find a technician. You should also seek out equipment that keeps power consumption in check and operate your systems using environmental standards that reduce waste.
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