Although business plans are considered an important part of any business, business plans for CBD operations are of particular importance over a five-year period due to the challenges related to licensing, funding, and the ever-changing CBD market [1]
There are eight essential steps to a CBD business plan: [2]
- Executive summary,
- Business description,
- Market and competitive analysis,
- Operational structure,
- Product description,
- Raise capital,
- Financial analysis and projections,
- Appendix.
Business plans are flexible and should ideally be drafted by professionals.[3] Following the above basic steps will help give both yourself and those assisting you an idea of your CBD business’s five-year plan. Let’s explore these steps now:
1. Executive Summary
Although this may be step one/the first section of a business plan, a lot of people recommend that you write your executive summary once you have fleshed out all other sections of your business plan.
There is a temptation to front-load the introduction of your business plan with extensive information. But, the purpose of an executive summary is to act as an introductory hook for why your business will succeed for investors.
Consequently, your executive summary should not be longer than two pages long. [4]
While an executive summary can include various points, the following points are important to highlight. They should all be closely linked to the specifics of a CBD business while also being readable/not including industry jargon: [5]
- Business information and vision,
- Business opportunity (word this as a “problem” or “question” that your business will solve)
- Target market,
- Business model (very important, as retail, home, and online CBD businesses all have different rules and regulations!)
- Competitors and your differentiators,
- Financial analysis (start-up capital, projected five-year earnings, etc.)
- Staff and management (positions and structures, not actual staff members you have employed/intend to employ.)
2. Business Description
Not to be confused with the executive summary, which highlights a business plan in its entirety, a business description allows you to go in-depth as to how your business will operate. This description contains in-depth details about the business, and why it will succeed.
More importantly, this is a space where you can highlight why you are passionate about entering the CBD industry. How you believe your goals, ambitions, and strategies will translate to a successful business! [6]
3. Market And Competitive Analysis
Market analysis requires an open and honest reflection of your findings of the market your business will be entering into.
Consequently, while using external sources is a fantastic way to paint a picture of the overall CBD industry and the challenges it faces, it is essential that you perform your own individual research. You need to put your objective findings into writing. [7]
The reason for performing individual research is that you need to understand the market in terms of localized jurisdictions and direct competitors in whichever space you intend to operate, be it retail, online, or home businesses.
Therefore, market research must include objective and honest reflections of your competitors. It should include, but not be limited to, their successes, failures, and their place in the market.
Finally, you must outline your target market in greater detail than simply “CBD consumers” by giving a brief outline of your products, access to your products, pricing point, and the general appeal/nature of your business. [8]
4. Operational Structure
The operational structure includes the following:
- Day-to-day operations of your business
- Employer/employee structure
- Business hours
- How your business will distribute products
- Any/all legal obligations – important for CBD businesses
In the event of multiple stakeholders and third parties, it is recommended to put all details in an organization chart, something akin to the following: [9]
Requirement/Feature Interested Party/Third – Party CBD Supplier Gaia Herbs CBD Trading License Clyde, Bernstein, and Doyle Attorneys
5. Product Description
Closely linked to “target markets” outlined above, product descriptions need to be detailed information about products such as the quantity of stock housed, the types of CBD products housed, the pricing of these products, etc.
Furthermore, the reputability of suppliers in terms of the quality of their products, the efficiency of supply chains, and the legality of their CBD content are all vitally important information for shareholders and investors. [10]
6. Raise Capital
In the event that your business plan is being presented to potential investors, shareholders, and/or banks, this is a vital section to include. It puts your capital requirements into writing. [11]
Be clear on exactly the funds you require as a clear figure rather than a vague, suggestive amount while as clearly highlighting a projected return on investment that you intend to outline in detail under “Financial analysis and projections”.
7. Financial Analysis And Projections
Financial analysis and projections should be an objective, easy-to-read breakdown of your five-year plan. It should be subject to realistic returns of investment relative to the findings of your market analysis (including where your business may be in a deficit.)
Your first year should be broken down both monthly and quarterly, while subsequent years are analyzed annually. Whereby your financial statements must include the following: [12]
- Income statements (otherwise known as a profit and loss statement, which tallies projected income versus known/unexpected expenses)
- Balance sheets (a breakdown of the value and costs of your assets and liabilities)
- Cash flow statement (because this is a breakdown of the cash flow needed for you to being your business, this must be closely linked to your “raise capital” subheading mentioned above.)
8. Appendix
It is tempting to use your appendix as a “document dump” of all your information and sources. However, it should instead be used as a space for the legitimate documentation needed to begin your CBD business. [13]
Examples of important documents may include: [14]
- Lease agreements,
- Purchase agreements with suppliers,
- Legal documentation/licenses,
- Insurance quotes,
- Equipment quotes.
Conclusion
Although business plans are evolving documents that should never remain static, having a clear, concise plan from the start, especially in an evolving industry like CBD, allows you to make altercations and changes organically and with ease!
