Creating the perfect cryptocurrency mining business plan doesn’t take a genius.
But you do need to be careful, structured and creative in your approach.
You’ll need to keep a tight grip on your expenses, understand the mining hardware you’ll require and analyse your competitors.
This guide will teach you exactly how to write a cryptocurrency mining business plan that’s planned for success.
I’ve also included some useful templates, tips and a four stage process to getting started.
1. Why You Need A Cryptocurrency Mining Business Plan
Let’s be honest:
The world of cryptocurrency mining is competitive.
There are so many mining businesses competing against each other, it’s almost impossible to go at this alone.
Most of them are actually very small businesses!
And most don’t even have a business plan.
They’re not thinking ahead.
And that’s your opportunity to gain a headstart on your competitors.
Plus a cryptocurrency mining business plan will help you:
- Develop your profitability strategy
- Strategise the type of hardware you’ll require
- Keep a tight hold on the budgets (costs can quickly rack up)
- Analyse your competition and understand how you can beat them
- Understand your strengths, opportunities, weaknesses and threats
So let’s get into it.
2. A Cryptocurrency Mining Business Plan Will Evolve
Your cryptocurrency mining business plan isn’t going to be an old document that gathers dust in the filing cabinet.
Far from it.
Just look at the way cryptocurrency mining has changed as an industry over the past few years.
A few years ago you could mine Bitcoin with a GPU:
But now you need an expensive, powerful mining rig to be profitable.
And the thing is, cryptocurrency technology never stands still.
So that means you can’t afford to either.
If you want to stay one step ahead of your competitors, you have to keep adapting.
Plus you’ll need to keep your mining equipment, knowledge and operations well maintained.
You should keep tweaking your business as your operations grow.
You might need to add more cryptocurrencies into the mix, change your hardware or switch up your team’s skill sets.
This will also require more training and investment as the industry evolves.
So when I say your cryptocurrency mining business plan is going to change, I don’t mean you’ll have to rewrite it from scratch.
But you will have to carefully tweak it.
This is a living, breathing document that’s going to steer your business to success.
The best cryptocurrency mining business plan is the one that’s streamlined for maximum profitability in your industry.
3. Your Plan Will Steer Your Cryptocurrency Mining Business To Success
Your cryptocurrency mining business plan is like a compass:
Whilst it’s useful for mapping out the mining equipment, hardware and financial details of your business, it’s also ensuring you become accountable.
You will need to set goals, targets and objectives within the plan to ensure you stay on track.
This will also help you measure your progress too.
But also bear in mind that progress might not be linear – the world of cryptocurrency is volatile.
So your business might suffer some setbacks due to problems in the market, such as:
- Government regulations
- Changes in demand
- Total market capital
- New upgrades to the cryptocurrencies you’re mining
- Price manipulation
4. Free Cryptocurrency Mining Business Plan Templates
It’s always insightful to see how others are operating:
That way you can use these templates for inspiration.
Check out the free PDF documents below to find an example of cryptocurrency mining business plans.
Plus, if you’re a newbie to the crypto mining industry then you should compare your strategy with your competitors.
It’s important to note that with cryptocurrency, your strategy will change depending on the coin you’re going to mine.
You can download each of the free cryptocurrency mining business templates in PDF format below:
I’d recommend using one of these templates as the framework to your business plan:
That way you’re going to save time, whilst basing your project on an already successful mining strategy.
5. How To Write The Perfect Cryptocurrency Mining Business Plan
Part 1: Executive Summary
Creating an executive summary is pretty easy.
But it’s also essential to your cryptocurrency mining business plan.
Here’s what you should summarise:
- Which cryptocurrencies you’re going to mine
- The conditions of the market you’re operating within
- The overall profit level and timelines you’re aiming to achieve
- Your market growth strategy
Some of this you won’t be able to write straight away.
So if you’re missing some details, wait until you’ve finalised your cryptocurrency mining business plan and then come back to it.
Part 2: Market Research
Now you need to research the market.
Because a solid cryptocurrency mining business plan relies on a strong analysis of current market conditions.
Let’s dive into the key considerations.
What Type Of Mining Will Your Business Do?
Not all cryptocurrencies are mined in the same way.
You can use different hardware to mine cryptocurrency – such as ASIC, GPU and CPU.
They all vary between:
- The amount of power they use
- How much they cost
- The type of cryptocurrencies they can mine
- The cost of maintaining them
- How much heat they let off (meaning you might need more cooling equipment)
Now let me explain each.
This is the most advanced type of cryptocurrency mining.
ASIC chips are expensive, but they’re also the most powerful.
Cryptocurrencies like Bitcoin can only be mined with an ASIC chip.
This also creates more complications to your cryptocurrency mining business plan because:
- You’ll need more expensive hardware
- You’ll need a powerful mining rig
- Some cryptocurrencies are ASIC resistant
- You need to have a lot of knowledge about how to optimise your ASIC hardware
- Competition in the ASIC mining world is the most heavily resourced
- ASIC mining generates a lot of heat
- ASIC mining rigs are large – so you’ll need to setup your mining business from a decent location
Overall, your cryptocurrency mining business needs a lot of resources, power and a large location to mine with ASIC Chip.
This is also known as a Graphic Processing Unit.
CPU cryptocurrency mining is probably the easiest of the lot.
But it’s also the least profitable.
You can CPU mine with very basic equipment – just a laptop and software will do.
Which Cryptocurrency Are You Going To Mine?
Make no mistake, picking your cryptocurrency of choice could make or break your business.
If you don’t factor in future cryptocurrency prices, you’re going to struggle.
For example, Bitcoin is almost unaffordable for most cryptocurrency mining businesses to mine right now.
Whereas Ethereum might be a better option.
Plus, some cryptocurrencies can only be mined with certain hardware:
E.g. Monero can be mined with CPU but not with ASIC (because it’s ASIC resistant).
Who Are Your Top Competitors?
Depending on the cryptocurrency you’re trying to mine, you could face a lot of competition.
After all, you’re trying to solve cryptographic algorithms on the blockchain before anyone else.
But your competition is going to vary depending on which industry you’re working within.
So when you’re creating your cryptocurrency mining business plan, you should analyse:
- The resources your competitors have
- Where they’re located
- If they’re a direct competitor or a substitute product – e.g. a mining pool vs individual cryptocurrency miners
- How successful they are
- Whether you can realistically compete with them
Cryptocurrency mining is a fast paced world.
Because prices are volatile, it’s a 24/7 market and there’s very little barriers to entry.
So what does the mean for you?
Well, you need to estimate the state of the mining industry over the next 3-5 years.
This could save your business a lot of frustration and money along the way.
For example, if you’d mined Bitcoin last year, it could have cost you thousands of dollars.
If you’d sold in December 2018, you’d have been profitable.
If you sold in February 2018, you might not have.
So the value of your mining business is constantly fluctuating with market prices.
Another example is electricity prices:
Mining cryptocurrency requires a lot of energy – both from your hardware and keeping your hardware cool.
But the cost of electricity is rising substantially in the western world.
If your electricity bills are higher than the value of the cryptocurrency assets you’re mining, you’re not going to break even.
And that’s a major threat to your business.
SWOT Analysis Of The Mining Industry
A SWOT analysis plays a major role in the success of your cryptocurrency mining business plan.
So it’s crucial to be thorough here.
You have to understand:
- Strengths: What are the unique internal competitive advantages your business has? It could be your resources, technical knowledge or your team
- Weaknesses: What weaknesses could hurt your business? E.g. Your lack of experience
- Opportunities: These are the external factors that could help make your mining business become profitable. Opportunities include an inflation in cryptocurrency prices, where your crypto assets would rise in value.
- Threats: The factors you can’t control within the mining/cryptocurrency industry that may harm your business. This includes regulations, legislation and hackers.
Part 3: Growth Strategy And Scaling Up
Your growth strategy is a vital part of the cryptocurrency mining business plan.
Because you need to think about scaling up your operations, if you truly want to become profitable.
So will you have a huge mining farm?
Or just a small but efficient mining rig?
It’s all about economies of scale:
The more buying power you have, the better results you can get – meaning more profitability.
Let’s look at a few examples:
- If you use a mass amount of power, you might be able to get a discount on electricity rates
- Buying hardware in bulk is cheaper
- Pooling your resources together will help you earn mining rewards faster
Here’s some other key considerations.
Are You Going To Hire A Team?
If you want to scale up, are you going to hire a team to manage your mining company?
The other benefit of hiring a team is that they might have more experience and expertise than you.
So you can tap into their cryptocurrency mining knowledge.
And that’s a powerful competitive advantage.
How Many Cryptocurrencies Will Your Business Mine?
Some giant mining corporations mine millions of tokens, across dozens of cryptocurrencies.
But others will focus on mining just one coin.
This really depends on your financial resources and the size of the team you’ve hired.
Will You Use A Mining Pool?
Mining pools are where a huge network of cryptocurrency miners will pool together to share their hash power.
This means they can earn rewards faster, and then share those rewards across the pool.
But also, some mining pools are more reputable than others.
What Hardware Do You Need?
Will you buy individual equipment, or will you develop a huge mining rig instead?
And are you going to mine via ASIC, CPU or GPU equipment?
What’s The Best Location For Your Business?
Electricity prices vary by country.
For example, most Bitcoin miners are based in China.
Some countries have even banned cryptocurrency mining, which means less options when it comes to your location.
You need to be legally compliant as a business.
So what legislation does your business need to comply with?
For example, is cryptocurrency legal in the country you’re operating within?
Part 4: The Financial Aspects of A Cryptocurrency Mining Business Plan
The financial elements of a cryptocurrency mining business plan are a little more complex than most businesses.
Just a tiny tweak can be a game-changer for your company’s profitability.
So what are the key things you need to consider?
What’s Your Budget?
First of all, you should have a clear idea of how much spending power you can tap into.
Because cashflow is the oxygen of any mining business.
E.g. If you can’t afford the electricity bills, you’re going to struggle.
So tied into your budget, you’re going to have expenses.
Mining cryptocurrency requires a lot of resources.
The main expenses for your business will be:
- Buying hardware
- Paying your electricity bills
- Renting a location
- Your staff’s salaries
- Transaction fees
- Maintenance of hardware
It’s going to take more resources and power to mine some cryptocurrencies than others.
I’d recommend looking at a cryptocurrency mining calculator.
Then you can plug in your key numbers and work out your break-even point.
Taxation rules normally are tricky enough.
But getting your head around cryptocurrency mining taxation is even harder.
This is going to vary location by location e.g. the US is really cracking down on taxing cryptocurrency miners and traders.
So it’s important to research tax legislation yourself, whilst also hiring an specialist crypto mining accountant.
You’ve worked out your expenses, your break even point and your budget so far.
Now it’s time to plot those numbers on a timeline.
Depending on your business goals, you could be planning ahead for 5+ years.
But also understand that this technology is evolving so much, your financial predictions could be way off.
This all comes down to the crypto market’s growth.
Essentially your cryptocurrency mining business plan should work by year:
- Your financial figures for each year
- In which year you’ll break even
- And when you’ll finally become profitable