How to Start a CBD Business

Introduction

CBD has recently been a buzzword, attracting increased attention from customers, business owners, and the market as a whole, resulting in a significant surge of investment in CBD and extraordinary growth in the market. If you are wondering how to start a CBD business, then you are not alone. 

Entrepreneurs are interested in entering the CBD market because of the industry’s recent explosive expansion. The CBD market grew by more than 80% between 2019 and 2022, and through 2027, the industry will lead to 10% annual growth. 

Everyone is increasingly interested in CBD products as more and more people become aware of the possible health advantages of CBD and grow less and less put off by its association with the marijuana plant. But, when it comes to starting a CBD business there is a lot of misconception and confusion about everything that goes into setting it up.

If you are looking to clear up this confusion and are looking to find out how to get started – then this comprehensive guide on how to start a CBD business has got you covered.  

So, let’s get started.

Also Read: Guide to Start a CBD Business

Comprehensive 8-Step Guide on How to Start a CBD Business!

If you’re new to the CBD industry and eager to start your own business, you’re in the right place! Our comprehensive 8-step guide is crafted specifically for beginners like you. We’ll take you through each essential point in detail, providing actionable steps and insights to help you navigate the complexities of starting a CBD business. 

Understanding the CBD & its Basics! 

Before making any decision, you should properly educate yourself on the basics of CBD and its fundamentals.

What precisely is CBD?

Cannabidiol, or CBD for short, is a ‘wallflower’ cousin of the more potent delta-8-tetrahydrocannabinol. These two chemicals, as well as around 100 additional cannabinoids, can be found in the Cannabis plant.

CBD, unlike marijuana, is derived from industrial hemp, a marijuana plant variation that has less than 0.3% THC by dry weight. It is grown under a USDA-approved license and contains a chemical compound derived from the hemp plant (lat.: cannabis sativa) that is thought to have several health benefits and does not make you high.

CBD helps those who are suffering from a variety of serious diseases, including cancer and other long-term health issues like epilepsy, anxiety, and sleeplessness have shown encouraging outcomes.

It is important to emphasize that THC (tetrahydrocannabinol) and CBD are not the same thing. THC is an additional chemical component of cannabis and is a psychoactive compound. But CBD doesn’t have any of these characteristics. Consequently, more and more nations throughout the world have relaxed their laws against the use of CBD.

Also Read: Guide to Start a CBD Business

Legal Considerations and Licensing 

Starting a CBD business necessitates strict adherence to regulatory procedures and registration. The legal requirements may vary depending on where you live and the kinds of products you intend to sell. It will validate your business and guarantee that you are prepared to adhere to legal requirements and ensure your business operations smoothly.

• Select a structure for your business: Select the legal structure for your CBD company: corporation, LLC, partnership, or sole proprietorship. Each has unique tax and legal consequences.
• Register your business name Make sure the name of your company is unique and not already in use. Register with your local or state business authority to ensure its security.
• Obtain the required licenses and permits: Selling CBD products may require special approvals in your area. Consult the cannabis control board or health agency in your state and get all the required licenses and permits necessary to start your CBD business.
• Get an Employer Identification Number: Most organizations are required to get an Employer Identification Number (EIN). It is required for tax purposes and to establish a business bank account.
• Recognize CBD laws and regulations: To make sure your company complies with all legal requirements, educate yourself with the Farm Bill, applicable state legislation, and FDA regulations.
• Research your local and state laws: Recognize the unique laws governing CBD sales in your community, as they might vary greatly. To obtain a business license, apply: To operate lawfully, register your company with your state and get a general business license.
• Look out for specialized licenses: Based on your business model- whether you are operating an online store, a brick-and-mortar store, or both altogether- you might require further licenses, such as a retail or e-commerce license.
• Comply with the FDA regulations: If you intend to sell CBD products, be sure they follow the Food and Drug Administration’s requirements for dietary supplements and food additives.

FYI: To ensure compliance, stay up to date on legislative changes and make any necessary adjustments to your licenses and permits. 

Also Read: How to Get a CBD License? 

Choose your product niche 

CBD has so many different types of products. So, choosing and offering the right one to your target market as per their preferences is important for your business success. 

In that case, what should you sell—the “classics” or the trendy items? That’s up to you to decide, though. Investigate the general niches first when evaluating the prospects for the market as a whole. 

The following are the most popular ones and the majority of them vary according to how CBD is consumed:

• Drops and sprays: Both contain CBD oil, which is decarboxylated from hemp/hemp flowers and combined with a carrier oil. Drops and sprays can additionally include flavoring ingredients and other chemicals that make them more appealing to consume.
• Pills and capsules: Wrapping a cannabis dose in gelatin or a soft gel capsule improves its digestibility. Furthermore, a lot of people use CBD instead of over-the-counter medications. So it’s more familiar and appealing to them.
• CBD vapes and cartridges: Inhalation devices are popular among recreational marijuana users and those who love the social component of vaping. Furthermore, this approach is frequently preferred by CBD users for pain management because it is more quickly absorbed into the bloodstream.
• Tinctures: Cannabinoids are combined with alcohol or another potent solvent to create CBD-based tinctures, just like pharmaceutical tinctures. CBD tinctures occasionally include other botanicals. That is, nevertheless, well-liked by those who wish to experience CBD’s advantages right away.
• Topicals and patches: CBD patches and topical ointments are popular among customers who dislike the taste of hemp or who prefer external applications for various reasons. They work best for specific effects such as joint, back, or menstrual pain.
• Other trendy CBD products: Trendy CBD products include a variety of new options for people looking to try CBD. There are skincare products like creams and serums, drinks like teas and coffees, and even products for pets like treats and oils. You can also find makeup with CBD, like lipsticks and foundations, and wellness items like bath bombs and supplements. 

Also Read: How much Does it Cost to Open a CBD Dispensary? 

Choose your Business Model

There are now popular four types of business models in the CBD market. Not only do they need different capital, but they also require different strategies.

• Private Label – items made by a third party but sold under your retailer’s brand name. You have total control over the ingredients, the packaging, and the content of the label in this model.
• White Labeling: White labeling is similar to private labeling but with one key difference, the product itself is often not customized for the purchasing company. In white labeling, a manufacturer produces generic products that can be sold to multiple companies under their respective brand names. 
• Wholesale: Wholesale refers to the sale of goods in large quantities, typically at a discounted price, to retailers or other businesses for resale. In the context of CBD products, wholesale involves manufacturers or distributors selling CBD products in bulk to retailers, dispensaries, or other businesses. 
• Dropshipping – Similar to wholesale, you advertise other firms’ products through your own retail location. The primary distinction is that you don’t keep track of their product inventories. Instead, you pass the sale on to the supplier and receive a portion of the profit.

These are the major business strategies that most CBD brands start with. Of course, you always have the option of starting from scratch, growing the hemp, extracting the CBD, and selling the products by yourself.

Also Read: 10 Best Website Builders for CBD Businesses 

• Build Your Brand 

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. This is how to develop an iconic CBD brand:

Determine what makes your products stand out from those of your competitors in terms of quality of components, production process, or particular health advantages. This is known as your unique selling proposition, or USP.

To develop a brand that speaks to your target audience’s requirements and preferences, define them by taking into account elements like age, lifestyle, and wellness objectives.

• 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 consistently through all marketing materials and media.
• Verify legal compliance by familiarizing yourself with local CBD branding laws, particularly those about health claims and labeling specifications.
• Create a quality website and a presence on social media platforms that relates to your target audience and showcases your branding elements to enhance visibility and direct engagement with your customers. 
• Keep this in mind throughout your offline marketing and branding efforts as well, such as signage, pamphlets, menus, etc. 

Also Read: How to Market your CBD Business on Facebook

Sourcing High-Quality CBD Products 

There are two approaches you can take with your CBD business. The first step is to formulate your own CBD products. As a result, you’ll have more freedom and power to build brand loyalty.

The second option is to collaborate with a reliable supplier. This is an excellent option if you want to start a CBD business without incurring significant upfront fees. You can buy things in bulk or even just do the dropshipping without keeping any inventory. If you go this path, make sure you do your research and look for a reliable company to collaborate with.    

Here are some of the tips that will help you in choosing the right CBD supplier: 

Analyzing the CBD content & its derivation: If you are selling CBD nationwide, be sure it is sourced from hemp plants rather than marijuana plants. The latter is only authorized in a few states due to its higher THC content. Reputable wholesalers will have lab test reports and be able to provide certificates of analysis (COA) that list the contents of the product. Make sure you get it.

Other necessary certifications: In addition to the product’s general contents, you need to reach out to view the results of: 

• Pesticide testing (a “clean” product is what you desire).
• Microbiological testing (demonstrating the absence of mold or bacteria in the sample).
• Testing for residual solvents (which indicates whether any stray compounds from the extraction procedure are still present).

Beware of fake products & fraudulent suppliers: Because the manufacture of CBD is still not properly controlled, a lot of “fake” products—those devoid of cannabidiol—end up on store shelves. As a result, you should be wary of these fraudulent brands and producers, which is another justification for carefully comparing various CBD producers. Beyond obtaining or executing an independent certification of analysis, assess a potential wholesaler based on:

• Origin and sourcing strategy for hemp
• Method of extraction
• Evaluations by other business owners 
• Pricing

Check out the quality of the products: The quality of your products will affect both the reputation of your CBD business and client happiness. After all, 24% of CBD consumers stated that their main reason for purchasing the product was its ability to provide the “desired effect.”

When your product fails to deliver on the ‘effects’ promise owing to insufficient content, you will struggle to gain repeat customers. Quality of ingredients, cost, concentration, and mode of consumption (e.g., oil, edible, vape) are additional considerations when choosing the supplier. 

Also Read: How much does an Average CBD Store Make? 

Setting Up a POS System for Your CBD Business 

A Point of Sale (POS) system is vital for CBD businesses due to its role in streamlining transactions, managing inventory, ensuring regulatory compliance, and providing valuable insights through reporting and analytics. With features such as real-time inventory tracking and age verification capabilities, a reliable POS system helps maintain product availability and adherence to regulations, minimizing legal risks. 

Additionally, POS systems enable businesses to analyze customer behavior, optimize sales strategies, and foster customer loyalty through personalized marketing initiatives. 

• Regulatory Compliance: Ensure the POS system is compliant with regulations governing the sale of CBD products, including age verification requirements and adherence to labeling guidelines. 
• Inventory Management: Look for a POS system with robust inventory management capabilities, including real-time tracking, low-stock alerts, and batch tracking for CBD products.
• Security Features: Prioritize POS systems with strong security measures to protect sensitive customer data and ensure compliance with industry standards such as PCI-DSS. 
• Ease of Use: Select a user-friendly POS system that is intuitive for both staff and customers to use, minimizing training time and reducing errors during transactions.
• Integration: Cohesive management is a must in today’s digital competitive environment. So, make sure you choose a POS system that integrates seamlessly with other software or platforms you use, such as accounting software, e-commerce platforms, or loyalty programs.
• Customer Support: Ensure the POS provider offers reliable customer support to address any technical issues or concerns that may arise, including 24/7 assistance if needed.

Also Read: Why do CBD Business Struggle With Payment Processing

Online Sales and Marketing Strategies

A successful CBD business startup requires a significant financial, time, and energy investment in marketing. Marketing requires you to establish your target market. You have a clear vision for your ideal customer. Now, how will you present it to them?

First, determine where you want to sell:

• Online?
• Offline?
• Both?

The marketing landscape in the CBD sector is very different from other industries. Unfortunately, since CBD has not yet received FDA approval, those straightforward pay-per-click Facebook ads will not function here. Even if marketing has been simpler in recent years, CBD businesses still have to overcome several obstacles. 

• Professional Website and SEO: Establish a website with comprehensive details about your CBD products, such as lab findings, sourcing details, and usage recommendations. Implement SEO best practices to improve your website for CBD and wellness product-related search keywords. 
• Social Media Engagement: Share client testimonials, showcase your product line and inform your audience about CBD on social media sites like Facebook, Instagram, and LinkedIn.
• Blogs & educational content: Many companies take an educational approach, creating educational websites with CBD-related material and blog entries. It raises your Google ranking and displays more information about your CBD items.
• Affiliate marketing, in which other businesses are paid to promote your products, is another successful tactic. While there are several approaches to affiliate marketing, coupon codes, and discounts rank among the most widely used. Approximately 81% of brands also use affiliate marketing.
• Engagement in Trade Exhibits and Wellness Expos: Showcase your products at trade exhibits and health fairs, and interact with prospective consumers face-to-face.  
• Collaborations with Wellness Influencers: Join forces with wellness and health industry influencers who can really recommend your goods.
• Start a loyalty program: Provide a Loyalty Rewards Program wherein loyal consumers are rewarded with special offers, early access to new items, or unique content.
• Referral Bonuses: Provide rewards to clients who recommend friends and family to promote word-of-mouth advertising.
• Email marketing: Stay in touch with your clients by sending out newsletters with information on new items, exclusive deals, and instructional articles about CBD.

Conclusion 

Here’s a wrap on the ultimate guide on how to start a CBD business and we hope it has helped you get started on a successful journey. 

We know that starting a CBD business can feel overwhelming, from sourcing reliable suppliers to getting licenses and sorting out the finances. However, it’s essential not to let these challenges stop you. 

Here’s the thing that helps you keep going: Regulatory changes and local legislation are increasingly favoring the CBD industry, making it easier for businesses to offer safe and reliable CBD products to consumers. Moreover, the growing trend of consumer interest in CBD indicates a promising future for the industry. 

You can navigate the complexities of starting and growing your CBD business by staying informed about regulations and market trends, diligently sourcing reputable suppliers, and investing in reliable CBD merchant services. 

With determination and strategic planning, you’ll be well-positioned to capitalize on the opportunities within this expanding market and achieve success in the years to come.