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In 2020, CBD sales reached more than $4 billion. It’s a far cry from the projected sales of $8 billion in 2020, but that doesn’t make the industry less viable. In fact, the CBD industry is going to grow over the next four years.
Does it make this moment the moment to start a CBD oil business? You bet it does. You need to know what it takes to run a successful CBD business.
There are a lot of steps to build a great business, but once you know what they are, you can tackle them one at a time. Read this guide that shows you the ins and outs of starting a CBD oil business.
1. Know the Regulatory Requirements
Yes, hemp-derived CBD is legal thanks to the Farm Bill of 2018. CBD is no longer a Schedule I drug, which opened the door for CBD products.
Marijuana is still classified as a Schedule I drug, so it’s illegal under federal law. However, states are choosing to legalize recreational marijuana. Federal legislators in Congress are trying to catch up, but nothing has passed to date.
Where does that leave CBD? CBD is legal, but there are massive regulations around the products. The Food and Drug Administration is charged with oversight of CBD products.
The FDA takes the stance that CBD can’t be sold as a supplement or advertised as having certain health benefits.
Congress is attempting to change that with House Bill 841. It was recently introduced to allow CBD sellers to sell products as dietary supplements. Keep an eye on this bill because it has the potential to be a game-changer.
There may be additional requirements to sell CBD in your state. Don’t rely on internet forums to gather information. Call the departments that oversee CBD businesses.
2. Create a Business Plan
Your business plan is the reason why your business will be successful. This is where you take an objective look at the business and the growing CBD market.
A business plan reveals the risks and opportunities for the business. In the case of a CBD oil business, you’ll discover that it’s a growing market, but it’s also competitive.
There are external threats to the business that you have to prepare for. COVID-19 meant a drop in income for many people. They couldn’t afford to spend money on CBD products. That’s why the industry didn’t grow as much as initially projected.
Your business plan needs to outline the long-term vision of the business. Do you plan to sell CBD oil only, or will you expand into other CBD products?
The business plan needs to contain the financial projections of the business. You need to figure out your startup costs and operations costs. Then you need to create sales projections and determine how long it will take for the business to turn a profit.
3. Register Your CBD Oil Business
Your next step is to register the business and make it official. You need to name your business if you haven’t already.
Your business name is an important part of your brand. It’s how people will remember your business and know what you promise to deliver.
You also want to keep the future in mind, too. Don’t make CBD oils part of your name if you plan to expand into other products.
Keep your name simple and memorable. Check to make sure that someone else didn’t already take that name.
Register the business with your secretary of state’s office. You may need to register it locally as well. You can take a step and register the domain name for your business, which is where people find you online.
4. Get a Team Together
You don’t need to hire employees right from the start, but you do need to have a team of people who can help you launch your business.
Starting a business requires expertise in everything from accounting to labor laws. There’s a good chance that you know a lot about CBD oil, but you don’t know a lot about the other aspects of running a business.
An accountant and bookkeeper are essential to have on board. If you can’t manage the finances, then hire people who can.
You may want to work with someone who knows the challenges of running a CBD business. Since you’re technically dealing with a narcotic, you may have trouble opening a bank account.
The other professionals to include on your team are a business lawyer, HR consultant, and mentor.
5. Find Vendors for CBD Oil
There are a number of ways to produce CBD oil. You can produce it yourself, which gives you total control over the process.
This method costs a lot to do because you have to purchase the plants, extraction machines, and create a brand around the product.
The alternative is to white label CBD oil. You contract with a manufacturer that already has the systems in place to produce CBD oil. You purchase the CBD oil and sell it under your own brand.
This is going to be less expensive than doing everything yourself. However, you don’t control the final product. You have to find the right vendor that produces the best CBD oil products, and you can learn more about that here.
If you do decide to process CBD yourself, then you’ll need to decide which extraction method to use. The most common extraction methods are oil or an alcohol-based solvent.
You need to price out the extraction methods and weigh that against the quality of the product. Then make sure you can sell the final product for a profit.
6. Build Your CBD Oil Brand
There are tons of CBD oil products on the market. You have to understand what makes your product and business better than the competition.
That’s the selling point and the essence of your brand. The brand isn’t the logo of the business, but it’s how people remember your company.
Some companies are remembered for being inexpensive, while others are a good value. Then there are luxury companies that are out of reach.
Define what you want your business to be known for and make that your brand. You can then design a logo that reflects that.
7. Market Your CBD Oil Business
Some business owners think that if they open a retail location or build a website, that’s enough to start a CBD business.
Market your business by focusing on the customer. If you have a CBD niche, then make sure you choose places to reach people in that niche.
Approach the road to a sale like a journey. Customers rarely learn about a product and decide to make a purchase that day.
They know that they have a problem. Many CBD users have issues with sleep, anxiety, and stress. They’ll look up ways to resolve those problems.
A customer might discover CBD, which leads them to research CBD products for sleep or whatever the issue may be.
They learn about products and compare them. Eventually, they’ll make a decision and purchase.
You want to align your marketing strategy with customer behavior. You’ll get their attention early in the buying cycle and turn them into a customer.
8. Know When to Scale
You may decide that starting small is the best policy for your CBD business. It allows you to focus on the quality of your product and giving customers an outstanding experience.
Once your business gets to a certain point, you can scale your business. You can hire an assistant or employee to help you run the business.
This is the most difficult thing for business owners to do. They scale too quickly, then the quality of products and service suffers.
Think of scaling as reaching certain benchmarks consistently for a certain period of time. Once you reach a benchmark, you can expand your growth just a little.
If you’re afraid that you’re going to lose business because a lot of people want your product and you can’t produce enough, that’s actually a good thing.
You build exclusivity into the product, which means that you can charge a higher price.
Take Advantage of CBD Business Opportunities
This is a great time to start a CBD oil business. The market is poised to grow over the next several years as it reaches maturity.
There are a lot of other people jumping into the world of CBD products, so you have to position your business to be successful.
Surround yourself with smart experts who can help you build the business. You can then turn your focus to your customers.
Do you want more tips to help you start your business? Check out the blog today.