How to Start a CBD Oil Business in 2024

CBD business is flourishing. CBD products are becoming increasingly popular as more customers realize the benefits of taking a holistic and natural approach to their health.

The global CBD market size was worth USD 3.86 billion in 2022 and is predicted to grow at a high revenue CAGR of 28.3% during the forecast period.

However, CBD is only to be sold as a dietary supplement, not a medicine, so some individuals will need convincing. Nonetheless, there is a growing market for the products due to the range of benefits and increased awareness regarding CBD products among the customers.

Before you can begin selling, there are a few things you must do if you want to get into the CBD oil industry.

Also, the number of states legalizing CBD is increasing day by day. But, starting a CBD oil business is not a cakewalk. It requires comprehensive planning, abiding by laws, partnering with the right suppliers and the list goes on.

If you are looking for a simple guide to start your CBD oil business, then this blog is curated for you. We will be adding everything you need to about getting started.

Let’s get started.

Is CBD Legal to Use in the USA?

This is the most frequently requested question, yet it is also the most frequently answered incorrectly. CBD can be entirely lawful in one state while being prohibited in another.

According to the 2018 Farm Bill, CBD with less than 0.3% THC on a dry weight basis is permitted because it doesn’t get consumers “high,” but rather is thought to have several medicinal and health advantages.

Having said that, the topic of whether CBD is legal in the United States of America has no clear answer. CBD products made from hemp are lawful in the majority of states; CBD products made from marijuana are still working toward legal status. Therefore, before starting a business, it is highly recommended that you familiarize yourself with the legislation of your particular state.

Because it was believed to be psychotropic, cannabis has experienced tremendous pushback over the past 50 years. But things are starting to change, including how people view CBD and its products in general.

Every nation, and every state after it, has different laws about CBD regulation. The Food and Drug Administration (FDA) in the USA has approved CBD as legal; however, state-specific legislation will differ depending on your state, area, and the legalization of CBD. As a result, you must conduct some independent research before getting started.

Also Read: How to Get a CBD License?

8-Step Guide to Start Your CBD Oil Business!

Step 1: Researching & Strategy Development

The very first step to starting your CBD oil business is comprehensive research and making a strategy. By investing time and effort into researching your market, analyzing competitors, and developing a robust business plan and strategy, you can lay a solid foundation for launching a successful CBD oil business to meet the needs of your target audience and achieve long-term profitability and sustainability.

1. Market Research: Begin by thoroughly researching the CBD market to understand its size, growth potential, and key trends. Identify your target audience and their needs, preferences, and pain points related to CBD products.
2. Competitor Analysis: Conduct a detailed analysis of your competitors to identify their strengths, weaknesses, and market positioning. Evaluate their product offerings, pricing strategies, branding, marketing tactics, and customer reviews to gain insights into what works well and where there are gaps or opportunities for improvement.
3. Business Plan: Curate a comprehensive business plan that outlines your vision, mission, goals, and strategies for launching and growing your CBD oil business. Define your target market, product offerings, pricing strategy, distribution channels, marketing plan, and sales projections. Include detailed financial forecasts, budgeting, and resource allocation to ensure you have a clear roadmap for success. Your business plan serves as a blueprint for your operations and guides decision-making as you navigate the complexities of the CBD industry.

Also Read: Marketing Ideas for CBD Business

Step 2: Choose between manufacturing or getting it from suppliers

Deciding whether to manufacture your own CBD oil products or source from a supplier is a pivotal choice for launching a CBD oil business.

Manufacturing your own CBD Oil products: When you opt for manufacturing your CBD oil products, it offers you full control over product quality, allowing you to carefully select hemp sources, extraction methods, and ingredients to ensure consistency and efficacy.

Additionally, manufacturing your own products enables customization of formulations, facilitating tailored offerings that meet specific market preferences and needs. However, this route demands substantial upfront investment in equipment, facilities, and personnel, along with ongoing costs for production, testing, and compliance, but it offers more profit shares as well.

Getting it from reliable suppliers: On the other hand, when you decide to source it from a reputable supplier – it can be more cost-effective, particularly for startups with limited capital, as it leverages existing infrastructure and economies of scale but it has limited control. By partnering with a trusted supplier, you can save time on setting up manufacturing facilities and navigating regulatory requirements, enabling a quicker launch.

Furthermore, working with an established supplier mitigates risks associated with manufacturing, such as equipment malfunction and product quality issues, while offering scalability advantages to adjust inventory levels and product offerings based on market demand.

Based on your interest, the capital you have, and other things – you can make the right move.

Step 3: Get the required licenses and permits

Starting a CBD oil business requires several licenses and approvals from the local, state, and federal governments.

Starting a business requires federal rules, licenses, and permits, including doing business as (DBA), health permits and permissions from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other forms of intellectual property, as well as industry-specific authorizations and permits. In addition, local county or city licenses and permits may be necessary at the state level.

For Manufacturing Facility:

• State-issued hemp cultivation license
• CBD manufacturing license
• Food establishment permit (for CBD-infused food products)
• Business registration with state and local authorities
• Zoning permits or land use approvals
• Compliance with federal regulations, including permits from the Drug Enforcement Administration (DEA) if handling controlled substances.

For Partnering with a Supplier:

• Retail license (for direct sales to consumers)
• Business registration with state and local authorities
• Zoning permits or land use approvals
• Compliance with federal regulations, including permits from the Drug Enforcement Administration (DEA) if handling controlled substances.

Visit the websites of your state, city, and county governments to learn about the various license requirements and how to get it for your company. It could be a good idea to employ an expert to help you check all the legal boxes if you feel overwhelmed by this phase or are unsure of where to start.

Also Read: Guide to Start a CBD Business

Step 4: Choose and sell the right types of CBD oil products

To get started with your CBD oil business, you need to choose your niche and sell the right types of products that will attract your customers. However, you can sell more than one product, but it is recommended to determine your niche and send products accordingly.

Here are some of the best and most common CBD oil products: 

1. CBD Oil Tinctures: Tinctures are one of the most common and versatile types of CBD oil products. It has various strengths and flavors, so customers can customize their dosage and experience. Users need to place it under the tongue for rapid absorption into the bloodstream for fast-acting relief.
2. CBD Oil Capsules: Capsules offer a convenient and discreet way to consume CBD oil. Each capsule contains a pre-measured dose of CBD oil, typically in gelatin or vegetarian capsules. Capsules are swallowed orally and metabolized through the digestive system, resulting in longer-lasting effects. They are ideal for users seeking a consistent CBD experience without the taste of oil.
3. CBD Oil Topicals: CBD oil topicals are applied directly to the skin and provide relief for targeted areas of discomfort or inflammation. These products typically include balms, salves, creams, or lotions infused with CBD oil and other soothing ingredients like essential oils, shea butter, or aloe vera. CBD topicals are absorbed through the skin and interact with cannabinoid receptors, offering potential benefits for muscle soreness, joint pain, skincare, and more.
4. CBD Oil for Pets: CBD oil products formulated specifically for pets are becoming increasingly popular among pet owners seeking natural remedies for their pets. These products typically come in tincture form and are specially formulated with pet-friendly flavors and dosage strengths. CBD oil for pets may offer similar benefits as human CBD products, such as relief from anxiety, pain, inflammation, and age-related issues.

Also Read: How Much Does Average CBD Store Make in 2024? 

Step 5: Source or Manufacture the High-Quality CBD Oil Products!

One of the most important components of starting a CBD oil business is getting high-quality CBD suppliers for your customers. Whether you are sourcing the products from your suppliers or manufacturing your own CBD oil products, you need to ensure that your supplies are safe and of the greatest quality.

Providing customers with low-quality and harmful items completely violates the ethics of the industry – and while you are starting your business you don’t want that. So, the CBD products you provide should be safe, organic, and effective.

There are some steps your business may take to guarantee this quality. Your brand and the moral principles underlying your goods may be reflected in the manner you procure or manufacture your ingredients.

1. Source High-Quality Hemp: If you’re sourcing CBD oil from hemp suppliers, make sure to get it from reputable and licensed hemp suppliers. Look for suppliers who provide transparent information about their cultivation methods, including soil quality, cultivation techniques, and extraction processes. Verify that the hemp is grown in compliance with state and federal regulations and undergoes third-party testing for potency, purity, and contaminants.
2. Verify the credibility of the supplier: In order to get the best quality CBD supplies, you need to check all the certifications and ensure that the CBD oil is extracted using safe and efficient methods that preserve the integrity of the cannabinoids and other beneficial compounds in the hemp plant. Avoid products extracted using potentially toxic methods like butane or ethanol extraction.
3. Choose Natural Ingredients for Manufacturing: If you’re manufacturing CBD products in-house, carefully select natural and organic ingredients to complement the CBD oil and enhance its therapeutic effects. Avoid synthetic additives, preservatives, or artificial flavors that may compromise the purity and potency of your products.
4. Invest in Quality Control: Implement rigorous quality control measures throughout the production process to ensure consistency, purity, and safety of your CBD products. Conduct thorough testing to verify the reliability, quality, and absence of harmful substances like pesticides, heavy metals, and microbial impurities.
5. Maintain Compliance: Stay up-to-date with regulations governing the CBD industry to ensure compliance with applicable laws and guidelines. Adhere to labeling requirements, THC limits, and other regulatory standards set by federal, state, and local authorities.

Step 6: Raise the Needed Startup Capital

Money, as they say, is the lifeblood of any firm. Raising startup finance is one of the most common concerns of entrepreneurs, as it can be difficult to raise capital, particularly in the CBD industry. To acquire funding from financial institutions or angel investors, your project must be viable and promising.

First things first: create a thorough business strategy before looking for startup funding for your cannabidiol (CBD) oil company. With a solid business strategy, you can easily persuade investors to invest in your business. The truth is that without a strong and feasible business strategy, neither a bank nor an Investor will be willing to lend you money.

Besides, without a solid business plan, investors won’t consider you seriously. When you are looking to start a CBD oil extraction or distribution company, you might consider the following options:

• Raising money through personal savings and the sale of personal stocks and properties.
• Raising capital from investors and business partners
• Applying for loans from traditional banks or small business administration.
• Pitching your business idea and appealing for business grants and seed capital from donor groups and angel investors.
• Get soft loans from family members and friends.

Step 7: Build a Solid Brand

When starting your CBD oil business, establishing a strong brand presence is crucial for differentiation and attracting customers. Begin by defining your brand identity, including your unique value proposition, target audience, and brand personality.

Develop a compelling brand name, logo, and visual elements that resonate with your target market and set you apart from competitors.

For example, let’s say you’re launching a CBD oil business focused on premium, organic products targeted toward health-conscious consumers. Then, everything – right from colors, logo, content, marketing channels, etc should be targeted towards the same.

Whether you are selling your products through a website or store or targeting both, it should reflect your branding elements. It gives you an edge over your competitors.

By prioritizing brand development and digital presence with a structured approach, you can establish a strong foundation for success in the competitive CBD oil market.

Also Read: How to Market CBD Business on Social Media?

Step 8: Curate an effective Marketing Plan

Running a business requires that you should be proactive when it comes to marketing your goods or services.

If you choose to launch a cannabidiol (CBD) oil extraction or distribution business, you need to understand your target market and choose the right platforms. You also need to incorporate the right marketing strategies to attract customers, improve sales, and improve your bottom line.

These are some of the marketing ideas and strategies that you can adopt for your cannabidiol (CBD) oil extraction or distribution business:

• Website & SEO: Develop a stunning website, keeping your target audience in mind, and optimize your website for search engines by using relevant keywords related to CBD and its benefits to boost your rankings and brand viability.
• Content MarketingL Create blog posts, videos, and infographics and add them to your website and third-party websites that educate consumers about CBD, its benefits, usage, and potential side effects.
• Social Media Marketing: Engage with your audience on social media platforms like Instagram, Facebook, and Twitter. Share educational content, product updates, customer testimonials, and behind-the-scenes glimpses to build brand awareness and foster community engagement.
• Influencer Partnerships: Collaborate with influencers and bloggers in the health and wellness space who have a following interest in CBD products to further boost brand visibility and credibility among their followers.
• Email Marketing: Build an email list of interested subscribers and send regular newsletters with product updates, promotions, and educational content.
• Networking and Events: Attend industry trade shows, conferences, and local events to network with other professionals in the CBD industry and potential customers. Hosting or sponsoring events related to health and wellness can also help increase brand visibility.
• Loyalty programs: Start loyalty programs to motivate customers to purchase your products and also encourage customer retention.
• Referral Programs: Encourage satisfied customers to refer their friends and family to your business by offering incentives such as discounts or free products for referrals. Word-of-mouth marketing is quite powerful, especially in the CBD industry.

Challenges of starting a CBD Oil Business

It takes time and public education to make this difficulty more manageable for business owners.

It’s possible that you’ll run across some challenges when you start your CBD business. With many government rules that vary by state and that are constantly changing, this business can truly be a challenge, and you’ll most likely face the following challenges:

1. Banking problems: Unfortunately, many banks are hesitant to conduct transactions with cannabis businesses. This is a result of the risk and the dynamic regulatory environment that comes with operating this kind of business. As a result, a large number of CBD firms are frequently required to switch banks, which can have a significant impact on the company.To address banking challenges, you need to establish good relationships with the banks or you can explore working with credit unions or financial institutions that specialize in serving the cannabis industry.
2. Insurance: Finding the right insurance company for such a high-risk and regulatory business (according to insurance providers) can be problematic. Although the hemp plant has become legal quite quickly, the cannabis plant is still stigmatized in the market.However, not all insurance companies restrict CBD businesses. So, you need to make sure you follow all the legal requirements and research the right ones for you that cater to the CBD businesses and cannabis industry. These providers have a better understanding of the risks involved and can offer tailored coverage options.
3. Payment Processing: Credit card payment processing is another barrier for cannabis businesses. That is, the costs are substantial. Furthermore, it appears that Visa has stopped accepting payments from any CBD shops; as a result, they may only accept payments from MasterCard and Discover.You can partner with payment processors that specialize in high-risk industries that can provide more reliable and cost-effective payment processing. For the payments, you can also opt for options such as cryptocurrency or ACH transfers. Diversifying payment methods and staying informed about changes in payment regulations can also help mitigate risks.
4. Availability of funds: The majority of business owners turn to investors since banks frequently reject funding requests for businesses that sell CBD oil. They do, however, also need a strong business plan and a predictable annual growth rate, which may be hard to forecast in this sector with unclear legal requirements.You can compile a strong business plan and strategy and pitch it to investors. It is good if you are partnering with someone who has experience in the cannabis industry and understands its unique challenges and opportunities. Exploring alternative financing options such as crowdfunding or strategic partnerships can also help
   you.
5. Marketing Restrictions: Due to limitations set by social media sites like Facebook, Instagram, and Google, marketing CBD products can be difficult. With the marketing limits, it will be difficult to reach out to your customers and improve your brand visibility.To overcome marketing restrictions, CBD businesses can leverage marketing channels such as social media, influencer partnerships, content marketing, and email marketing to reach their target audience. You can also opt for SEO optimization to boost your rankings and improve brand visibility.
6. Customer Education: Despite increased knowledge, there are still a lot of myths and misunderstandings about CBD. Additionally, in a crowded market, it might be challenging to inform consumers about the advantages, applications, and possible drawbacks of CBD products due to marketing constraints.Use the right channels that target your potential customer base and by focusing on educational content and providing transparent information about CBD products, you can address customer confusion and misinformation – while enhancing your brand identity. You can also organize free webinars or podcasts to spread out the right information.

To Conclude

Here’s the wrap that you need to know about for starting your CBD oil business. It is a high-risk business, with all of the regulations – but a very profitable one as well. You just need to take the right steps and follow all the legal procedures to ensure compliance and stay away from legal problems in the future.

By conducting thorough market research, developing a solid business plan, sourcing high-quality products, and implementing effective marketing and distribution strategies, you can position your business for success in the competitive CBD market.

Additionally, prioritizing transparency, quality, and customer satisfaction can help build trust and credibility with consumers, fostering long-term growth and sustainability.

Also, it is recommended to stay updated about the new regulations, challenges, and trends in the industry to cope with and ensure the longevity and successful operations of your CBD Oil business.

So, get started, lay a solid foundation, and stay updated, throughout. Best wishes for the same.