The Cannabis/CBD industry is growing at a fast rate and more investors are pumping money into it on a daily basis. Most entrepreneurs who have been paying attention to the marketplace in recent years will be well aware of the fact that the cannabis industry has grown at an astonishing pace. What far too few of them realize is that this growth isn’t likely to abate anytime soon, meaning you can still cash in on the ongoing CBD bonanza if you know how you start a CBD company with a solid business plan behind you.
10 easy steps to start a CBD company.
1). Choose Your CBD Niche and Products
A quick sweep through the (digital) shelves of any wellness store will prove that you can now buy CBD anything. You should take note of this before you start a CBD company. Creams and ointments, human and pet chewies, hemp clothes, and accessories — when the consumer interest is high, loads of entrepreneurs try to capitalize on the hype.
What should you sell then: the trendy stuff or the “classics”? Well, that’s for you to decide. When assessing the overall market prospects, look into the general niches first. Here are the most popular ones:
- CBD-infused foods/beverages.
- Supplements/wellness products.
- CBD-based cosmetics.
- CBD pet products.
Next, you should zoom in on your product types. Most of these differ, based on the CBD consumption method.
2). Find out about the Law surrounding CBD.
The Farm Bill, passed at the end of 2018, legalized the commercial production of hemp in the United States. Specifically, you can grow industrial hemp and then legally sell products containing hemp-derived CBD across the country.
But there are some restrictions to take note of before you start a CBD company:
- The hemp you are using to produce CBD cannot contain more than 0.3% of THC. Any cannabis plant with a higher concentration of THC is automatically considered a marijuana plant and stronger regulations kick in.
- CBD, produced from marijuana plants, is legal in 15 states for recreational cannabis usage and in 36 states for medical use.
- Now when it comes to cannabinoids as a substance, the regulatory matter gets complicated. To date, FDA has approved only one CBD-based prescription drug, Epidiolex. Meaning that no other CBD brand can make health claims regarding their CBD products. Also, the FDA prohibits adding cannabinoids into food, or marketing anything with it as dietary supplements.
3). Map out a Thorough CBD Business Plan
Jumping into a business without a solid business plan is like driving without a rearview mirror: you can do it, but you may miss a huge obstacle heading your way.
When it comes to the CBD niche, your business plan is also your navigator for staying on top of changing regulatory policies, conflicting operational priorities, and new business opportunities, fueled by market demand. Plus, it’s the document your financial supporters and other stakeholders will want to see.
Here’s what should go into your business plan for eCommerce CBD operations before you start a CBD company;
- Start with market analysis
- Pick your brand name and confirm product range
- Determine your financing.
- Always add extra padding for ‘unplanned’ expenses because these will surely happen.
- Include a realistic marketing plan
4). Get Your CBD company Documents ready.
Before you start your CBD company, you need to obtain two types of licenses:
- A regular business license: get incorporated and register a business with your state to start operations. Also, request an EIN/TIN for your newly created company from the IRS.
- Reseller license: If you plan to purchase CBD from wholesalers, you may also need to get a Reseller’s license (certificate) from your state. This document is hugely important because it allows you to buy products wholesale without paying sales tax. The license also lets you collect sales tax from your customers afterward.
5). Source for a CBD Supplier
Arguably, the most important step as you start your CBD company is finding a reliable CBD supplier. There are a few reasons for that.
First, if you are selling nationwide, you need to ensure that you are selling CBD, derived from hemp plants, not marijuana ones. The latter contains a higher THC dosage, making them legal only in a handful of states. The wrinkle, however, is that there’s no affordable testing for determining the levels of THC in the plant. This can make purchasing raw materials from a farmer challenging if neither you nor they have the capabilities to test the crop.
Reputable wholesalers, on the other hand, typically do lab testing and can provide certificates of analysis (COA), detailing the product content. Not being able to provide one is a major red flag.
6) Be on the lookout for quality CBD products.
Your product quality will impact customer satisfaction and your CBD brand reputation. After all, 24% of CBD users named the ability of the product to generate the “desired effect” as their primary purchase driver. When your product fails to deliver on the ‘effects’ promise due to poor content, you’d struggle to win repeat business. Other buying priorities include ingredients quality, price, concentration, and consumption method (e.g. oil, edible, vape).
Considering that CBD production remains underregulated, many ‘fake’ products end up on the shelves: ones containing no cannabidiol inside.
7). Hire Competent and experienced workers.
If you want to start your CBD company, you should already be looking at prospective employees to determine if they can contribute to your commercial ambitions. Believe it or not, the founding entrepreneur isn’t the only person who matters in a new company; you’ll need a dedicated workforce of tireless and qualified professionals if you want your brand to take off where others have failed in the past.
Many entrepreneurs who know their way around a cannabis plant have relatively little business experience elsewhere, however, which unfortunately leads them to hire the wrong people for the wrong reasons.
8). Create a website for your CBD company.
When you start your CBD company, you should make provisions for a website and an eCommerce store for your CBD products. Set up product description and images to attract potential customers to your store. Don’t forget to customize your designs for maximum optimization.
9). Market your CBD company and products.
Make use of social media platforms market your CBD company when you start. Leverage on ads and SEO to build your brand. You can also make use of online influencers to create awareness and boost sales for your CBD Company.
10). Always have an emergency backup plan.
Finally, Before you start a CBD company, you should have an emergency plan ready to be enacted at a moment’s notice. This is because cannabis is still beset by countless regulatory and political questions, and the future of even the CBD marketplace isn’t entirely secure. Those advocating to expand the war on drugs would be happy to see cannabis companies shut down.
