You might have heard that the CBD business is growing at an exponential rate. The market is starting to level out. Hemp producers declined by 80% because of falling hemp prices.
Because of that, the competition is increasing. Investment-backed startups are taking advantage of the open market.
It’s intimidating to go up against big companies, but it is possible to find your way. It takes a passion for your work and a plan.
That’s the basis of how to start a CBD business. What else do you need to start a business? Keep reading to find out.
1. Pick Your CBD Business Idea
There are so many types of CBD businesses that you can start. You can create a CBD oil company, a company that sells edibles, or a topical CBD business. You can start a retail CBD store.
The first step in starting a business is to clarify what your idea is. It’s an exciting step because you get to formulate the vision for your business.
Start dreaming and write it down. Write down what you want to sell and to whom.
After you write down your vision, validate it. Validating your idea ensures your idea will make money.
Ask yourself why you think your business will be successful. Those are your basic assumptions about your cannabis company.
You have to do research to prove yourself right or wrong. Take surveys of your prospective market and learn about their needs.
2. Know Your Legal Risks
Starting a CBD business or any type of cannabis company is far from starting a regular business.
There are many legal implications that you don’t realize when starting a business. There are a lot of unknowns in this area because CBD is regulated by the Food and Drug Administration.
There isn’t a clear set of rules regarding CBD products. Those regulations may or may not occur anytime soon.
Since there isn’t a clear set of rules around CBD, companies are hesitant to do business with CBD producers.
For instance, you can’t advertise your business on social media accounts. It’s virtually impossible to sell on platforms like eBay and Amazon.
There are also additional tax burdens that you have to be aware of. Tax laws vary by state, so hire an accountant in your area that is well-versed in the CBD industry and tax obligations.
3. Write a Business Plan
The business plan takes the work that you’ve done in the previous two steps and formalizes the vision of the business.
It summarizes your brand, management team, target market, competition, and risks. You’ll also provide an in-depth financial analysis of the business and a marketing plan.
What this shows is that you’ve done your homework to prepare yourself for running a business. You can anticipate issues in sales and put yourself in a position to navigate them.
A good example of this is found in industry research. Recent figures show that CBD-only product sales declined in states where marijuana is legal.
This could mean that the market is saturated or demand is declining. It could indicate that you have a problem if you choose to open a CBD-only shop and your state legalizes recreational marijuana.
This information enables you to see the problem ahead of time and take a proactive approach to improve your business.
4. Find Vendors and Suppliers
How will you obtain CBD and produce your products? How will you accept payments? What are the other types of equipment you need to start and operate the business?
These are all things you have to figure out before you accept your first customers. One of the challenges you’ll face is finding a bank and payment processor.
Many financial service providers are reluctant to work with CBD companies, even though it’s a legal product.
5. Get Insurance
Small businesses across many different industries find themselves underinsured. They assume that basic liability insurance is just fine.
What they don’t realize is that it only covers so much. This type of insurance covers injuries that occur on your property. You might need to get a separate product insurance policy.
Your best option is to find insurance agents that can help you cover your entire business. You don’t want to be left in a situation where your business is at risk because you didn’t have the right insurance policy.
6. Close the Customer Feedback Loop
Communication with you and your customers happens in a loop. They first see your brand online. They’ll respond with social media engagement and website visits.
You’ll communicate with them more and they’ll make a purchase. That’s where most businesses leave the communication loop.
They don’t get feedback from customers unless something is wrong with the product. They then react to issues or blame customers for the problem.
If you’re an ecommerce CBD company, you have no excuse not to send follow-up emails to your customers. Ask them to review the products they purchased, ask for feedback, and encourage clients to make referrals.
That’s the simplest way to grow your CBD brand and business revenue.
How to Start a CBD Business
The CBD industry is more competitive as startups with heavy investment jump into the fray. The cannabis industry does present a great opportunity to start a business, but it’s rife with problems.
There are legal issues and it’s hard to find the right vendors. If you know these risks and plan your business carefully, you’ll be able to make smart decisions and create a successful business.
Samantha Gaines wrote this article on behalf of FreeUp. FreeUp is the fastest-growing freelance marketplace in the US. FreeUp only accepts the top 1% of freelance applicants. Click here to get access to the top freelancers in the world.
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