Starting a Commercial Mushroom Farm Business for Profit

Some people get into commercial mushroom farming when their mushroom hobby starts getting bigger and bigger and bigger…. Others see a business opportunity from the start. Either way, farming is an exciting and potentially profitable line of work. And either way, there is going to be a moment when a prospective farmer asks themselves “what am I getting into?”

It’s an important question.

After all, starting any commercial-scale venture will require major investments of money, time, and blood, sweat, and tears. Doing some preliminary research is a necessary step to figuring out if one is ready to jump in to the farming life—or even if one really wants to.

This article is not a how-to. There is way too much to mushroom farming to fit in a little piece on the internet. Instead, it’s an introductory overview aimed at helping the prospective farmer decide if they are ready to take the next step. Much of it will be already familiar to experienced hobbyists, who may want to skip ahead to the “Business Matters” section, but for those to whom it is all new, keep reading.

How Mushrooms Grow

Mushrooms are not plants. They do not grow like plants, and therefor cannot be farmed like plants. Understanding the mushroom growth cycle is absolutely necessary if the rest of the article is to make sense.

The Life Cycle of Fungi

Mushrooms are, broadly speaking, the reproductive structures of fungi. Not all fungi produce mushrooms—some instead grow fuzz or crusts or other structures—but all mushrooms come from fungi. Fungi resemble plants in that they can’t get up and walk around, but they resemble animals in that they must eat to live. The substrates fungi grow in are not simply their home but also their food.

Life begins for a fungus with the germination of a spore the size of a dust-speck (indeed, many dust-specks are spores). Out of the spore grows an almost microscopic tube called a hypha (plural: hyphae). If that first hypha finds good growing conditions and the right food, it keeps growing, branches, and eventually forms a network called a mycelium. The mycelium is the body of the fungus. If a hypha from one mycelium meets a hypha from a different mycelium of the same species and a compatible mating type, they fuse. That is how fungi have sex. The baby grows its own, new mycelium from that point of fusion. “Mating types” are what, in animals and plants, are called the sexes, but fungi have many more than two.

When conditions are right, the mycelium starts producing fruiting bodies—mushrooms—in order to release spores. Most fungi can go through multiple fruiting cycles, and some can live to be very old, provided their food source holds out. The largest known living thing[i] in the world is a fungus—a honey mushroom fungus, specifically. It lives in Oregon, where it eats trees.

Note that fungi have a two-stage reproductive process, with spore production entirely separate from mating.

Some fungi add a few extra steps or other variations. Because of course they do. Biology is like that.

How Different Kinds of Mushroom Grow

Fascinating as mycology is, this article is not going to get into the biological details of the various cultivated mushroom species (sorry). But it’s important to remember that differences exist, and that fungi vary in their requirements in ways that have a huge impact on cultivation methods.

Most discussions of mushroom growing involve grow bags or blocks of sterilized plant matter (also called substrate), such as straw, grain, or coffee grounds, kept indoors in controlled conditions. These set-ups work well for most of the popular species of cultivated mushrooms—these are species that eat dead or dying wood in the wild. But for fungi that eat feces, including the domesticated white button, a very different set-up is required. Even some wood-loving fungi do better outdoors on logs or in specially-prepared beds. Some fungi live only in partnership with the roots of living plants, and those mushrooms usually can’t be cultivated at all.

So what kinds of facilities a farm needs depends on what kinds of mushroom the farmer wants to produce. A large farm can maintain multiple types of set-up, but beginners may have to choose—or circumstance might impose a choice; not everybody has access to logs or to large amounts of composted animal feces.

The Anatomy of a Mushroom Farm

Now comes the discussion of what a mushroom farm involves. Whatever the set-up, mushroom cultivation is a multi-stage process[ii] that requires several different facilities.

The first step is to get fungal spores of the right species to germinate and grow into little baby mycelia. It’s a tricky process that begins in a petri dish, and many mushroom growers don’t bother with it. Instead, they purchase “spawn,” which are young mycelia that have fully colonized a small amount of food (often grain). The spawn is used to inoculate the substrate where the fungus will grow to maturity and produce mushrooms. Growers who want to produce their own mushroom spawn (either to save money or to have more control over the genetics of their stock) will need a suitable lab.

Unless the farm is a strictly outdoor set-up (and sometimes even then), it will need a prep area and a grow room. All farms need a processing area for preparing the harvest for distribution. And all farms (except some using outdoor beds) need some place to put spent substrate—either on on-site compost pile or an off-site facility.

The Lab

The lab must be kept absolutely clean. It is impossible to remove contamination once it takes hold, so the key is to keep it from entering in the first place. For a small operation, an enclosed table-top might work, and it can be broken down and packed away when not in use, but a larger, dedicated space is easier to work in. Besides being made of surfaces that are easy to disinfect, the lab must be near someplace the farmer, or cultivator, can shower and change clothes, because everything and everyone that enters the lab must also be clean.  Even the incoming air must be clean—that is done with a laminar flow hood, which can either be made at home or purchased.

The Prep Area

The prep area is where supplies such as grain for grain spawn (for farmers who do not buy commercial spawn) or straw or other substrates are prepared and sterilized. It should be clean but need not itself be sterile, and it must be large enough to safely accommodate the sterilization equipment. Again, a dedicated space is convenient but not necessary.

Alternatively, the prep area could be where the farmer soaks logs prior to inoculation, or conducts whatever other analogous tasks this particular farm requires.

The Grow Room

The grow room is where the mycelia grow to maturity and fruit (assuming it is an indoor set-up). What this room involves depends on what kind of substrate the set-up calls for, but careful control over temperature, humidity, and carbon dioxide level (like animals, fungi breathe in oxygen and exhale carbon dioxide) is a must. Grow rooms must be clean but in most cases need not be sterile.

It’s better to wear a mask when entering the grow room, especially once the mushrooms themselves start developing. That’s because frequent exposure to a lot of fungal spores can cause allergies, and the allergies usually get worse with continued exposure. It’s best to avoid the allergy in the first place by limiting exposure.

The Processing Space

Once the mushrooms are harvested, any lingering bits of substrate must be removed, and large clusters of mushrooms must be separated. Any unsalable product must be removed, and the mushrooms must be boxed up or packaged for shipment, delivery, or sale. How well a farmer does these steps has a lot to do with whether the product keeps selling.

Health codes might dictate some of the details of this room. It’s best to check.

The Compost Pile

Spent mushroom substrate makes great compost—and sometimes yields another flush or two of mushrooms. But there is going to be a lot of it. Even if the farm has enough space for the compost pile itself, the finished compost has to go somewhere. Identifying that somewhere must happen while the farm is still in its planning stages.

One option is to give it (or even sell it!) to gardeners as a soil amendment.

Business Matters

The real difference between a hobby and a commercial operation is that the latter is a business. That means budgeting, regulations, sales, and other such details that not everybody knows how to handle or even wants to handle, but somebody must or the farm will fail. While a good business plan is flexible enough to leave room for the unpredictable, it’s important to anticipate and figure out how to deal with as many costs and challenges as possible. The following is a brief discussion of some of the issues likely to come up.

Permits and Liability

It’s important to look up the current local regulations that might apply to the farm early in the planning process—it’s easier to be compliant from the beginning than to build a farm and then have to change things at the last minute in order to get the right permits.

It’s also important to understand what permitting bodies worry about and then address those concerns specifically in the application. Don’t just try to follow the rules; pay attention to the reason behind the rules. For example, local authorities may worry that a mushroom farm will smell bad (big farms growing mushrooms in manure very much do). Farmers who can show they have thought about the risk of bad odors and have a well-thought-out plan are more likely to get permits than growers who seem clueless, even if the actual farm isn’t going to have a bad odor.

Liability is another issue. Even if there is no good reason anyone might want to sue the farm, someone might file a law suit anyway, and even a successful legal defense could cost more than a small farm can spare. Good liability insurance is a must. Creating a legal entity such as a limited liability corporation is important, too, since it means debts (including legal debts) incurred by the farm won’t belong to the owners of the farm. That way, the farm might go bankrupt, in a worst-case scenario, but the farmer won’t have to.

Choosing Which Mushrooms to Grow

A hobbyist decides which mushrooms to grow based on a combination of personal preference and situational constraints. For example, maybe a grower really likes pink oyster mushrooms but doesn’t have the reliably warm grow room pink oysters need. So the hobbyist chooses blue oysters instead. A commercial grower has these same considerations, but also must consider what’s likely to sell.

The goal is to choose species that customers will like but can’t otherwise get. Some species, such as king oysters, can turn out very differently depending on how they’re grown, so a grower can also stand out by providing a familiar, popular species with an unusual twist. Lions Mane is a good target as it’s sought after by high end restaurants.

Then there’s the choice of whether to focus on one species or to offer a variety. There are advantages and disadvantages to each. Growing just one mushroom species is simpler, and might be a better option for beginners or for people who mostly sell to restaurants or stores looking to receive a consistent product in quantity. Growing multiple species, though, offers buyers an appealing variety, and is a good way to attract attention at farmer’s markets.

Marketing and Sales

Where and how to sell the mushrooms is another detail to sort out early in the planning stages, because who will buy the product dictates many aspects of the farm’s design.

Generally speaking, the options are to sell to restaurants, grocery stores, or farmer’s markets. It may also be possible to set up a CSA (Community Supported Agriculture) operation, meaning that the farm sells shares of the harvest rather than mushrooms—each shareholder then gets a box of mushrooms weekly for as long as the mushrooms keep coming. Some farms use a mix of strategies, perhaps starting out as a small CSA and selling extras through a friend’s farmer’s market stall.

The point is that each avenue of sale comes with its own requirements that the farm might or might not be able to meet, depending on how it operates.

Selling to grocery stores is difficult for small-scale producers because of their stringent rules for safety, quality, and regular deliveries of specified amounts of product. Suppliers who can meet those demands can make real money, though, and grocery stores often like working with local suppliers because it helps build their brand. Selling to restaurants generally requires building relationships with chefs and a reputation for quality. Working a farmer’s market can be a simpler and more flexible option, or it might not be an option at all, depending on the rules of that particular market. For example, there is the cautionary tale of the market whose organizers interpreted their “locally-grown produce only” rule as banning mushrooms grown with commercially-sourced spawn. The mushroom grower set up his own mini-market half a block away from the main one, hoping to lure customers with a very large sign.

Mushrooms don’t sell themselves. The business end of the business is at least as important as the cultivation.

FAQ (Frequently Asked Questions)

How much does it cost to start a Mushroom Farm?

It really depends on the sophistication of your would be farm and what things you already have. If you have a garage, you can use that as a grow room and save considerably on rent. If you own acreage, you have even more of a leg up as your prep area’s etc can take place right on your property. If you are part of a subdivision or live in a condo, you’re going to have additional costs of renting land etc. Assuming you have the land, and a building I’d say you can easily get started with under $5000, which is pretty reasonable considering most other businesses require a lot more capital than that.

How much space do you need to Grow Mushrooms?

Realistically, you need some type of acreage to make it, comfortable for all the different areas or “stations” you require. However; if you don’t have the space you can easily rent some land from a farmer for a reasonable price and work from there.

How profitable can a Mushroom Farm be?

A Mushroom farm can be extremely profitable. Considering the startup cost is low and the equipment is minimal. The main costs is labor. High end culinary mushrooms like Lions Mane can fetch a pretty penny if you have the right contacts.


[i]       Imster, E. (2017). The Largest Land Organism Is…a Fungus

[ii]      Shields, T.(n.d.). Everything You Need to Know About Starting a Small-Scale Mushroom Farm


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