Guide to Start a CBD Business

Introduction 

CBD businesses are on the rise, and CBD’s popularity has increased dramatically in recent years. While the projected adult CBD usage rate in the US was 6% in 2018, Statista projects that number to rise to 35% by 2024. The industry now projects a stunning 10% yearly growth rate until 2027.

This growing popularity of CBD is due to a greater understanding of its health advantages, which include pain relief, anxiety relief, and other treatments.

Starting a CBD business can appear difficult, even overwhelming. Now that you’re here, let us go over exactly what CBD is along with a step-by-step approach to getting started.

What is CBD? 

Cannabidiol, or CBD for short, is a ‘wallflower’ cousin of the more potent delta-8-tetrahydrocannabinol. The cannabis plant contains these two substances in addition to about a hundred other different kinds of cannabinoids.

Whereas marijuana is derived from marijuana plants, industrial hemp, which is grown under a USDA-approved license, contains less than 0.3% THC on a dry-weight basis. This means that it doesn’t make you feel “high,” but rather has a lot of health and medicinal advantages.

Also Read: How to Start a CBD Business?

Comprehensive 11 Step Guide to Start your CBD Business!

Market & Competitor Analysis 

CBD businesses are surely profitable, but without the proper market research, no business is profitable. So you need to dig down into what’s happening in the market, what your competitors are doing, and what the future holds. 

To properly position your organization when entering the CBD market, you must have a thorough awareness of the industry environment. A detailed market and competitor study assists in discovering opportunities, comprehending client wants, and assessing competition.

• Conduct legal and regulatory research to make sure that CBD products and business are compliant with all applicable federal, state, and local regulations.
• Examine the most popular product categories, consumer preferences, and new market segments for the CBD sector.
• To customize your product offers and marketing methods, identify your target audience based on their demographics, interests, and purchasing habits.
• Analyze your competition’s product offerings, marketing approaches, pricing plans, consumer feedback, and market share.
• Evaluate the raw material quality and availability in the supply chain, as well as the dependability of the producers and suppliers.

Also Read: Marketing Ideas for CBD Business

Conduct a SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats) to assess your internal strengths and external market conditions, and then decide how to proceed. 

Collect data from industry publications, consumer surveys, and other market intelligence sources to develop a future-proof and profitable business strategy that will remain relevant in the long run.

Understanding the Legal Landscape 

The 2018 Farm Bill legalized CBD, but the business faces considerable regulatory challenges. All cannabis-derived products with less than 0.3% THC are regulated by the Food and Drug Administration (FDA).

It is permitted to consume CBD, which is derived from marijuana plants, for medicinal purposes in 36 states and for recreational purposes in 15 states.

To make sure that your CBD business is operating legally, you must secure specific licenses or documents regardless of where you are located. For example, if you intend to purchase CBD from wholesalers, you might need to obtain a reseller license in addition to a company license. 

In addition, you will most likely need to register your firm with your government and request a tax ID number for your new company in order to legally disclose and file business taxes. Don’t forget to examine what kind of insurance you’ll require and what labeling standards you have to follow when selling CBD goods, and make sure you label your products appropriately.

Also Read: How to Get a CBD License?

Business Planning 

Every business needs a plan, and CBD firms are no exception. Instead, due of its regulatory requirements and compliance, a strong business plan is necessary. This will serve as a manual to assist your CBD business in launching and accomplishing its long-term objectives. Additionally, a business plan helps prospective investors and partners comprehend your organization and its goals:

• Executive summary: An executive summary is a brief overview of your CBD business plan that highlights important information including objectives, financial predictions, and the business concept.
• Business Overview: An outline of the CBD company’s goals, objectives, and the market issue it seeks to address.
• Product & Services: Detailed information about the CBD products and services available, emphasizing their unique selling characteristics.
• Market Analysis: An examination of the CBD market, including target population demographics, size of the market, trends, and potential opportunities for growth.
• Competitive Analysis: An assessment of competitors in the CBD business, highlighting strengths, flaws, and unique features.
• Sales and Marketing: Techniques for advertising, branding, and sales channels that are used to promote and sell CBD goods.
• Management Team: Provide an overview of the major players driving the CBD industry, highlighting their backgrounds and qualifications.
• Operations Plan: Information about the manufacturing, supply chain, and logistics of the CBD company.
• Financial Plan: Cash flow predictions, balance sheets, income statements, and analyses of the CBD company’s financial performance.
• Appendix: Supplementary resources, such as additional papers, graphics, or supplementary facts that provide depth and credibility to the CBD business plan.
  

Sourcing High-Quality CBD 

Unless you’re starting your own hemp manufacturing business, you’ll need to rely on third-party manufacturers for CBD product suppliers. It is crucial to locate a trustworthy source that provides high-quality materials while you are just starting out and expanding.

You must conduct extensive research to choose a supplier who complies with local laws about the permitted THC levels.

Look out for the sourcing: First and foremost, make sure that the CBD you are selling is made from hemp plants rather than marijuana if you are doing national sales. The latter is only authorized in a few states due to its higher THC content.

The content of the products: Reputable wholesalers guarantee your operation remains federally lawful (under 0.3% THC) by providing certificates of analysis with comprehensive chemical content. Expert CBD distributors have to be able to offer you a certificate of analysis (COA) that details the product’s ingredients’ potency.

To make sure you have a high-quality product to sell to your clients, your selected supplier should also be able to provide you with the results of tests for bacteria, mold, and pesticides.

The legitimacy of the products: The CBD you get from your provider needs to have the effects that consumers are looking for when they come to buy CBD products they are looking for. Regrettably, a lot of counterfeit CBD products are available in the market and you don’t want to lose out on your customers; trust while starting or even while expanding.

Also Read: Top 100 CBD Names Ideas 

Choosing your product niche 

After you have a clear idea of why you want to launch your own CBD company, you’re prepared to choose a niche and the items you wish to offer. Although it would be ideal, it is simply not feasible to sell something that would appeal to every single customer.

Targeting a specialized niche and focusing on a smaller set of consumers will greatly increase your company’s chances of standing out from the crowd and succeeding.

According to a Statista survey, 58% of participants stated that they utilize gummies or other edibles as their preferred CBD product, followed by capsules, oils/tinctures, and lotions.

The various categories of CBD goods to think about for your own business are as follows:

• Pills and capsules: Popular in particular among those who find it more comfortable to regularly ingest CBD or who choose to take it instead of over-the-counter drugs. 
• Drops and sprays: These solutions blend CBD oil with carrier oil and frequently include flavoring ingredients to enhance the ingestion experience.
• Food items: It includes CBD-infused treats such as candies, chocolate, and gummies—ideal for folks who want to get the advantages of CBD but don’t like the taste of hemp.
• Sublingual tinctures: These are advised for customers who wish to experience the benefits of CBD faster. It enables the user to administer CBD oil (mixed with alcohol or another solvent) beneath the tongue for quicker absorption.
• Topical products: CBD-based lotions, ointments, gels, and patches applied directly to the skin are excellent for certain body parts to relieve pain and/or discomfort.
• Vapes and cartridges: People who use CBD for medicinal purposes and those who appreciate vaping for its social component both frequently enjoy these products because inhaling the substance allows for faster absorption.
• Pet Products: In addition to the huge popularity of CBD products among people, the market for CBD-related goods for animals is constantly expanding. So, you can also jump on to this opportunity and start selling your cannabis product.

Deciding Your Pricing Strategy 

After deciding your product niche, you need to determine the cost of your CBD products. It is quite a crucial step since you want to make sure that your prices are both lucrative and affordable for the customers.

But, at the same time, you don’t want to overcharge for your goods. You must locate the sweet spot that is beneficial to both customers and your company’s profitability.

At this point, you’ll have completed your market analysis and discovered what your competitors charge for their products. This might be a terrific beginning point for developing your own pricing plan, even though you might not be charging the same price for your goods.

You will, of course, need to examine all of the costs connected with your business operations, including everything from product creation/purchasing to store or website development, maintenance, managing your store, packaging, marketing, shipping, storage, and more. Consider how much profit you plan to make from the sale of each item.

Here’s the general pricing guide that might help: 

CBD gummies cost between $10 and $20, whereas oils cost between $20 and $100 each bottle. You may charge between $20 and $50 for lotions and salves.

CBD products might have a markup ranging from 30 to 60% above wholesale rates. A profit margin of roughly 50% should be anticipated after deducting product costs, shipping, and packing.

Also Read: Secure Payment Processing for CBD Ecommerce

Quick-Tip: You might also consider other strategies for increasing the profitability of your CBD business. For example, if you can’t go above a specific price point for individual products, you could consider offering product bundles to entice customers and improve your average cart value.  

Brand Development 

Creating a distinctive brand for your CBD goods is essential to standing out in an expanding market. A powerful brand builds consumer loyalty, appeals to your target market, and communicates the values of your business.

The process of building a brand involves understanding the demands and expectations of your target market, identifying your unique selling proposition, and leaving a lasting impression on your target audience in order to keep customers.

Don’t be generic and curate your brand story! 

You don’t want to enter the market as just another generic CBD provider. You must have a story that makes you stand out. The most obvious example of this might be found in Charlotte’s Web, a company named after Charlotte Figi, a young woman who suffered from Dravet Syndrome and only found relief from CBD oil. 

A story like this is important because it demonstrates that your company 1.) provides products/services with substantial benefits and 2.) is driven by a vision and mission that is beneficial.

Focus on your core branding story and design elements accordingly! 

The vibe of your brand will heavily influence how you stand out. While there are many different routes you could take in the cannabis industry, you must tailor your designs, colors, typefaces, and other elements to your target audience.

Which niche market do you operate in? (If relevant)

If you operate in any specialized market, be sure that the items, services, and clientele you serve are tailored to that particular niche in your branding elements, story, and vibe. For instance, Foria Wellbeing focuses on sexual well-being in their product range, even if they sell normal CBD products. Some businesses choose to target athletes who experience injuries that CBD can help with. Some create a CBD brand targeted towards pets only.

Therefore, you must decide “why” and “to whom,” and then stick to that decision. You have a decent chance of succeeding if you prioritize the needs of your customers, uphold your brand, don’t skimp on product quality, and maintain concentration.

Also Read: How to Market your CBD Business on Facebook?

Some more tips around branding that will help CBD business owners: 

• Select a name for your brand that captures the essence of your CBD products, is distinctive, and is simple to pronounce.
• Create a logo and packaging that complements the messaging of your company, is eye-catching, and sticks out on store shelves or digital media.
• Develop a brand voice and messaging plan that explains your company’s advantages and values in a consistent way through all marketing materials and mediums. 

Navigating Banking and Finance Issues 

Creating a business bank account and obtaining capital are essential measures in building your CBD company’s financial base. A dedicated business account, apart from your personal capital, will help you manage finances more effectively and is typically required for certain transactions.

The fact that starting a business requires finance is one of the largest obstacles faced by entrepreneurs. Considering that CBD is still regarded as a prohibited substance that is illegal under federal law, most banks will not provide financing for the establishment of a CBD business.

The amount of capital required varies depending on the business plan you choose. However, CBD startup businesses often require funding of $50,000 to $100,000 to get off the ground.

Here’s the important thing: Even though new laws have made hemp-related firms eligible for SBA and bank loans, many conventional lenders are still wary of lending to CBD companies. If you want to fund a CBD business, your greatest options—aside from friends and family—are probably personal fundraising and bootstrapping. If you have an innovative idea, you might also consider crowdfunding.

More tips to keep in mind while getting finances and opening up a bank account: 

• Look for credit unions and banks that are accepting CBD deposits, and be aware of the particular regulations and risks that apply to this sector of the market.
• To open a commercial bank account, gather the required paperwork, such as your business license, incorporation papers, and EIN (Employer Identification Number).
• A strong business plan is essential for your CBD company to show to potential lenders or investors, outlining your business strategy, financial predictions, and unique selling qualities.
• For assistance in securing the best funding choices and ensuring compliance with financial regulations, you should connect with a financial advisor or a lawyer with experience in the CBD sector.

Also Read: How to Open a CBD Business Bank Account? 

Establishing a Sales and Distribution Network 

Establishing a robust sales and distribution network is a crucial step in launching and growing a successful CBD business. This involves strategically selecting sales channels, whether online or offline, building strong relationships with retailers, and implementing efficient logistics and fulfillment strategies. 

Let’s find out how you can do it: 

Sales Channels Selection:

Determining the most effective sales channels for distributing your CBD products is essential for reaching your target audience. You’ll need to decide whether to focus on online sales, offline sales, or a combination of both. Consider factors such as your target market’s preferences, competition, and resources when selecting your sales channels.

• Online sales channels offer the advantage of reaching a wide audience and providing convenience to customers. 
• On the other hand, offline sales channels, such as brick-and-mortar retailers, allow you to provide an immersive experience at the store and it builds the credibility of the brand. 

Online Sales Strategy:

To establish a successful online sales strategy, you’ll need to invest in building a robust e-commerce platform or leveraging existing online marketplaces. Ensure that your website or online store is user-friendly, secure, and optimized for selling CBD products. Implement digital marketing tactics such as search engine optimization (SEO), social media marketing, and email marketing to drive traffic to your online store. 

Offline Sales Strategy:

When developing an offline sales strategy, focus on building strong relationships with brick-and-mortar retailers that align with your brand and target market. Offer incentives such as promotional discounts, marketing support, and favorable payment terms to encourage customers to come down to your store and make a purchase. 

Building Relationships with Suppliers:

Building strong relationships with your suppliers is crucial for your CBD business. Make sure you communicate your needs clearly and listen to theirs too. Choose suppliers who consistently provide quality products on time. By fostering trust and cooperation with your suppliers, you can create a solid foundation for your business to thrive.  

Logistics and Fulfillment:

Developing efficient logistics and fulfillment processes is crucial for ensuring customer satisfaction and repeat business. Partner with reliable shipping carriers or fulfillment centers to handle order processing and shipping logistics. Implement inventory management systems to track stock levels, manage reordering, and prevent stock outs. It helps you streamline operations and deliver a seamless shopping experience to your customers. 

Marketing

Once you’ve completed all the legal requirements, chosen your product niche, created your brand, and are ready to start selling, it’s time to put your marketing strategy to work to promote your CBD business and reach as many potential customers as possible! 

It might be challenging to draw the proper customers to your store, and this difficulty increases when you sell CBD goods. This is due to the fact that there is frequently some misunderstanding surrounding these products, which may discourage customers from making a purchase. That’s when effective marketing becomes crucial. It informs clients about CBD, increasing brand awareness for your business, bringing in new business, and encouraging repeat purchases.

Also Read: How to Market CBD Business on Social Media

Here are some of the marketing ideas to get started for your CBD business: 

• Direct Outreach: Talk to practitioners of alternative medicine, yoga studios, and health and wellness centers about introducing your products and looking into joint ventures.  
• Professional Websites and SEO: Make a website with comprehensive information about your CBD products, your brand, its story, consumption directions, lab findings, and sourcing details. Use SEO best practices to enhance your website’s visibility for pertinent keywords associated with health and CBD goods.
• Social Media Engagement: Use channels such as Instagram, Facebook, and LinkedIn to educate your audience about CBD, provide customer testimonials, and promote your product line.
• Instructional Blog: Write posts regarding the advantages of cannabidiol (CBD), how to utilize CBD products, potential legal consequences, and the most recent findings in the field.
• Workshops and Seminars about CBD: Organize instructional workshops about CBD’s benefits, advice, and legal implications.
• Collaborations with Wellness Influencers: Join forces with wellness and health-related influencers who can recommend your goods on social media.
• Loyalty Programs: Provide a Loyalty Rewards Program wherein loyal consumers are rewarded with special offers, early access to new items, or unique content.
• Referral Bonuses: Reward clients who recommend friends and family with incentives to promote word-of-mouth advertising.
• Paid Online Advertising: To reach your target audience, choose to run paid online advertisements on search engines like Google and Bing as well as on platforms like Instagram, Facebook, and YouTube.
• Email marketing: Stay in touch with your clients by sending out newsletters with information on new items, exclusive deals, and instructional articles about CBD.

Customer Service and Retention 

focusing on customer experience, support, and retention is crucial for success in the CBD industry. Here’s how you can tailor these efforts specifically for a CBD business:

1. Customer Experience: In the CBD industry, where customers often seek guidance and information, providing an exceptional experience is key. Provide comprehensive product information, including details about CBD concentrations, ingredients, and usage instructions. Ensure a seamless ordering and checkout process with secure and multiple payment options, both on online and offline channels. Most importantly, prioritize transparency and authenticity to build trust with your customers.
2. Customer Support: Given the nuanced nature of CBD products and potential customer inquiries, offering reliable customer support is essential. Train your support team to be knowledgeable about CBD, including its legal status, potential benefits, and usage recommendations. Provide prompt and helpful responses to customer inquiries and address any concerns or issues with empathy and professionalism.
3. Customer Retention: Retaining customers is critical for long-term success. Implement strategies to encourage repeat purchases and foster loyalty among your customer base. Offer loyalty programs, discounts, and exclusive offers to reward customer loyalty. Stay engaged with customers through regular communication actively solicit feedback from customers to understand their preferences and continuously improve your products and services based on their input.

Conclusion

In summary, our 11-step guide provides a comprehensive roadmap for starting your CBD business on the right foot. From researching your market to ensuring product quality and customer satisfaction, each stage is vital for success. 

By following these steps and staying committed to excellence, entrepreneurs can lay a solid foundation for their CBD business to thrive and succeed in a competitive market. 

If you are still confused and are looking for expert guidance, make sure to reach out to a business consultant or expert in this field who can help you out.