The CBD industry grew by 700% in 2019. The industry is expected to grow to over $23 billion by 2023.
That kind of growth makes this a good time to start a CDB business. You’re far from the only person who thinks that’s a great idea.
The CBD industry is much more competitive and regulators are trying to figure out how to regulate CBD. It’s not an easy path to start a CBD business and find success.
Do you think that starting a CBD business automatically leads to success because you’re knowledgeable about CBD?
You need to go into the venture with your eyes wide open. There are a lot of things to consider before starting a business.
You’re in luck because this article has you covered. Read on to find out what you need to know before starting a CBD company.
1. State and Federal Regulations
CBD is legal under federal law. There is confusion around how much THC a CBD product can contain.
CBD from cannabis plants with more than .3% THC is a schedule 1 drug, making it illegal. However, if it contains .1% or less THC, it is a schedule 5 drug.
If you sell CBD edibles, the FDA doesn’t make it clear if the products are legal or not. You should check with an attorney to make sure you can legally sell CBD products in your state.
You can’t say that you didn’t know about the laws and regulations of CBD businesses. That doesn’t work. You can’t even blame your advisors.
It’s ultimately your responsibility to manage your business.
2. How to Write a Business Plan
All business owners need to write a business plan before they start their business. A business plan covers all aspects of your business, from the company structure to the long-range vision of the business.
You create your initial strategy for running the business and figure out how much money you need to start and operate the business.
Formal business plans are necessary to get investors. You could just start with an informal business plan and continue to work on it if you need outside investment.
3. Financial Management and Taxes
The main reason why businesses shut down is that business owners don’t know how to manage money.
Financial management is essential in running a business.
One complicated aspect of running the business is around taxes. Be sure that you know about payroll tax deadlines, sales taxes, and business taxes.
Hiring a CPA with experience working with CBD and cannabis companies is a smart move.
4. The Differences Between CBD Products
People rely on high-quality CBD products to manage pain, anxiety, and other ailments. If you want your business to succeed, you have to know the difference between the different CBD products.
Ultra broad spectrum distillate contains no THC. It does contain a high percentage of CBD while adding additional profiles of cannabinoids.
Why don’t you just get products that contain only CBD? Emerging science says that a range of cannabinoids, including CBD, assists with pain relief better than just CBD.
It helps you explain to customers why your high-quality products are worth the price.
The extraction methods also determine quality. You should know the differences between solvent extraction, CO2, steam and olive oil methods.
5. How to Find Reliable Suppliers
You might want to create your own CBD products or sell white-label CBD products. No matter what you choose, you need to find reliable suppliers.
Take your time to find the right supplier. The integrity of your CBD products depends on the supplier.
Check the contract to see if there are order minimums or if you need to meet. Check payment terms and shipping methods.
An additional step is to visit the manufacturing facilities of the suppliers. You can see first-hand how CBD gets produced.
6. The Common Challenges for CBD Companies
It helps to know about the common challenges that CBD companies face so you can prepare for them. For instance, it might be hard to get a business bank account because of your industry.
CBD businesses also have difficulties in finding a payment processor. Same with business insurance. If you do find service providers, expect to pay much more than the average rate.
CBD businesses remain a high-risk businesses. It’s largely a cash business, which means you face greater scrutiny from the tax authorities.
If you need to find outside investment, you’re unlikely to get a loan to get started. You’ll need to find investors who understand the risks of running a CBD business.
That requires you to give up a percentage of your business and control in exchange for the investment.
7. Marketing and Sales
Marketing and sales skills ensure that you have a steady stream of customers. Good marketing is more than posting a pretty picture on Instagram.
It means that you understand your customers and why they should buy CBD products from your business. You have a consistent brand look and messaging.
You use the right channels to educate and entertain your customers. Many are just learning about the benefits of CBD. Your content should give them the information they need.
What No One Tells You About Starting a CBD Business
Do you feel like you’re more prepared to start a CBD business? There’s so much more to it than basic CBD knowledge.
That only gets you so far. You need to know the responsibility that comes with starting a business. Learn as much as you can about regulations, financials, and marketing.
Your business won’t be perfect, and your skills will develop over time. As they develop, your confidence grows with your CBD business.
If you want more tips about getting your personal finances in order before starting a business, click on the Personal Finance tab at the top.