It’s projected that U.S. consumer sales of CBD will reach around $1.8 billion USD by 2022 (up from a little over half a billion in 2018), following the trend of total legal cannabis in the U.S., which is projected to reach $23 billion by 2025. With such astonishing growth, it’s no wonder many people want to get their slice of the pie - and there is plenty to go around.
Learn About the Legalities
Many industries have rules and regulations they must follow, and CBD is one of them. Under federal law, CBD products that contain 0.3% or less THC are legal, though in the state of Virginia, for instance, a prescription is required. Learn about the legalities in your local area, and determine whether you’re better off setting up an online-only shop, doing pop-up shops, or finding a retail location.
Online-only shops are often the most cost-effective way to start because you do not have to pay for rent or booths and you don’t need to carry inventory. Instead, you can find a vendor to work with as your manufacturer, create a private label brand, and have them drop-ship the product directly to the customer.
Research the Competition
One of the most important parts of starting a business is knowing about the competition. With as many CBD businesses as there are out there now, you’ve got to do your part to stand out. Whether you do it by offering more products, such as 300mg CBD gummies in addition to smaller doses, by providing a better product guarantee or establishing a loyalty program to keep customers without undercutting pricing and negatively impacting your profits.
As you research, look at what their audience responds to. Look for ways you can make your content better. Look for elements of branding you can use to make your brand stand out from the rest.
Determine Your Business Structure
Before you can start selling anything online or from a traditional brick-and-mortar store, you’ll need to make sure you’re set up with the right legal business structure. A sole proprietorship is the easiest to set up but does not separate you from your business. This means if you get sued, your personal assets such as your home or vehicle could be used to settle any lawsuit.
It’s best to speak to a lawyer to determine the business structure you should use for your venture. Setting up your business structure also involves choosing your business name, so you’ll want to research what’s available. Remember, there are fees associated with filing to become a legal business entity that varies by state. These fees are in addition to what you’d pay a lawyer to help you complete the necessary applications and other required documentation.
Develop Your Business and Marketing Plans
After you’ve established your legal business, or while you’re in the process of getting the structure set up, you’ll need to write your business and marketing plans. These documents can be considered “living and breathing” because they will change and require updates over the course of business as you grow.
These documents help get you set off on the right foot, and are vital if you wish to seek any investments from venture capitalists or banks. Investors want to know that you’ve done your homework - and are aware of the costs associated with starting and maintaining a CBD business in 2020 and beyond.
You’ll need funding to get your legal entity established, build your brand assets, and place orders with your supplier. If you don’t plan on bootstrapping the business with your own funds, you’ll need to secure funding. There are several ways you can do this including:
- Peer-to-peer lending sites like LendingClub
- Bank loans (personal loans will require a good credit score, business loans will require a good credit score along with varying requirements depending on the lender/SBA program.)
- Friends and family
Choose and Source Your Products
Your CBD business can include more than just CBD oil and tinctures. You may wish to offer a selection of edibles, pills, topicals, and vaping liquids. No matter how many products you decide to offer, you’ll need to find a supplier. Unless you have your own supply of hemp and the equipment necessary to extra the CBD from the hemp plants, you’ll likely end up with a white-labeled solution, also known as a private label brand.
In these situations, companies that manufacture CBD products use your label and brand, then ship the products directly to your customers so you don’t have to carry any kind of inventory or pay production costs. Because the equipment for CBD extraction, bottling, etc. is quite expensive, many CBD businesses opt for the private label solution.
These private label companies also make it possible for you to customize your blend so you’re not sending people the same thing as someone else with a different label.
Build Your Brand
Though building your brand is a subject that’s big enough to warrant its own article or series of articles, here’s a quick crash course. People won’t buy your product if they don’t recognize your brand - and they won’t pay attention to your brand if it’s not cohesive or doesn’t make sense.
Think you can design a logo, or pay to have one made for you and call that your brand? Nope! You need to think about your company’s story, who your customers are, and what your goals are, then create content that speaks to that.
You’ll need to build a social media presence on the main platforms where your target customers are already hanging out on a regular basis. You’ll need to create content that resonates with them, whether it is a video series, a podcast, or blog posts. You may need to include all those types of media in your content strategy.
Launch Your Website
After building your brand and creating a backlog of content for your website and social media properties, it’s time to launch your website. From there, you’ll want to focus on social media advertising (but be careful because CBD itself is against a lot of terms and conditions on social media websites.) You’ll also want to ramp up efforts on building your email list so you can share company news and specials with your subscribers.
Market Your CBD Business
Once everything is running smoothly and you have a process down pat to handle everything in the business, increase your marketing efforts. Market both online and off - using as many tactics as your budget allows.
Pay attention to website analytics and customer feedback. Make adjustments as necessary to foster growth and customer loyalty.