How to Start a CBD Home Business

Though a potentially profitable venture in a growing industry, starting a CBD home business can be difficult due to the legal requirements of selling products online or physically from your home. So, what is needed to start a CBD home business?

Starting a CBD home business requires having the licenses needed to legally store, sell and/or extract CBD for products at home or online. When starting a home business, another consideration to keep in mind is separating your work and home premises, especially if you want foot traffic.

To legally sell CBD products online or in your home, you will need the proper legal certificates for storing, selling and/or extracting CBD hemp legally. Let’s look at that first, and then we will discuss business plans.

What Are the Legal Requirements for Selling CBD From Home?

While the 2018 Farm Bill legalized industrial hemp on a federal level, and by extension, hemp extractions such as CBD oils, there are still statutory regulations that need to be complied with. [1]

While no longer a banned or criminal substance, hemp is now under the authority of the U.S. Food and Drug Administration (FDA).

The FDA is in the process of finalizing regulations on a federal level. This means that states have a significant level of control over the sale of CBD products from home premises.  

CBD cannot be harvested from hemp products that contain more than 0.3% THC due to its psychoactive effects on users.

However, despite state control, this grey area on a federal level means that home CBD business owners are uncertain how to market their products.

Furthermore, CBD home business owners are unclear whether FDA approval is needed to infuse products with CBD.

It is recommended that home business owners err on the side of caution and not advertise any supposed health benefits of CBD in their marketing campaigns.

The FDA strictly prohibits advertising health benefits in a product that still requires research to confirm any/all health benefit claims.

With this information in mind, new CBD home businesses should opt to acquire CBD licenses with the assistance of lawyers who are familiar with the laws at both state and federal levels.

What Steps Should Be Taken to Start a CBD Home Business?

CBD is a growing industry valued in the billions of dollars, and the increased consumer interest has led to unprecedented growth and competition.

Here are six simple steps you can take to give yourself a competitive edge in the CBD home business market: [2]

1. Identify Your Market and Products

The popularity of CBD products has led to CBD home businesses further specializing in the following: [3]

  • CBD-infused food and beverages.
  • CBD pet products.
  • CBS supplements and wellness products (subject to strict marketing laws).
  • CBD-based cosmetics.

These individual markets typically stock the following products:

  • Drops and sprays with key cannabinoid ingredients, such as CBD oil and dried hemp flowers.
  • Pills and capsules housing CBD wrapped in a soft shell or gelatin.
  • CBD vapes and cartridges typically for purposes of pain relief and social smoking.
  • Tinctures that combine CBD, cannabinoids and alcohol.
  • CBD edibles that usually come in the form of treats for either human or animal consumption.

Though there is a diversity of products and consumers in each CBD market, you should focus on one particular market sector.

Marketing and selling CBD products to a dedicated consumer base is recommended over trying to capitalize on the CBD industry in its entirety.

The smaller nature of a home business will benefit from specializing in one of the smaller, niche markets within the CBD industry.

A home business will not be able to attract the amount and diversity of customers commercial spaces enjoy. But by specializing in a specific niche, you will build a loyal and dedicated consumer base.

When you know who your market is and how you wish to reach them, use multiple platforms for advertising your home business.

This is vital, as you don’t have the benefit of a third party’s marketing to help you, such as being located inside a busy shopping mall.

Lastly, because there is still confusion around CBD products and a continued stigma in some communities, it’s recommended you have educational resources on your website and social media pages, or printed pamphlets readily available for in-person customers.

2. Create a Home Business Plan 

Before embarking on any business venture, it is vital to consider your:

  • Long and short-term goals.
  • The costs of operating a home business.
  • How you will need to physically restructure your home.

Method of Business

Depending on whether your store will operate in a strictly online, physical or hybrid space will vastly change how your home business will be run.

Additionally, whether you decide to operate via a physical space or a purely online storefront, you must have an e-commerce platform to improve your sales.  

Each e-commerce platform needs to be researched to make sure a CBD home business is permitted under each service’s rules and regulations. [4]

The following three services have been identified as popular platforms for e-commerce traders in the CBD home business space:

  1. BigCommerce
  • Shift4Shop
  • Shopify

Funding a CBD Home Business

Typically speaking, a bare minimum of $5,000 should be set aside to begin a small home CBD business. More may be needed depending on the context and scope with which you hope to begin your business.

A particular consideration for home businesses is the construction of a separate:

  • Storefront.
  • Storage space.
  • Growing space separate from living spaces (if you opt to have physical foot traffic instead of a completely online business).

Refurbishing your home can be an expensive endeavor.

You will need secure storage space, equipment for home growing hemp and the possibility of extra security features, such as security cameras in the storefront.

It’s important to note that the addition of security cameras and other safety features may be a necessary expense for securing business insurance.

3. Choose a Home Business Name That Stands Out

When choosing a name for your home business, it is important to select a name that illustrates your expertise in CBD distribution and speaks to your target audience.

You should choose a name that meets the standards of online analytics and search engine optimization (SEO).

Fortunately, Google AdWords and GoDaddy provide data that can help you find a suitable and catchy name.

4. Get a Business Account

Having a business account is essential for tax purposes and keeping business and personal expenses separate.

A business account is also important for legal purposes.

This is because purchasing large amounts of CBD via personal accounts may violate FDA rules and regulations (even though you may be operating the store from a residential/personal space).

5. Ensure Your Home Business Is Legally Registered

Standard rules and regulations regarding the establishment of a business all need to be met, including but not limited to:

  • Complying with residential and/or communal rules and regulations, such as body cooperate or complex rules.
  • Registration of the home business, which must include an EIN/TIN request from the IRS.
  • A reseller’s license. This is vital if you plan on purchasing CBD products from wholesalers, as it negates the requirement to pay sales tax while allowing you to reclaim sales tax from your customers.
  • Any other bylaws that need to be complied with as per your city or town’s regulations.

6. Buy Products From Reputable CBD Suppliers

Due to the popularity and variety of CBD products available, there are thousands of distributors globally you can use to source products for purposes of home or online sale. [5]

When embarking on a partnership with a CBD supplier, make sure a legally compliant and enforceable contract between your home business and supplier is signed.

Further legal and professional considerations must be considered before you enter into a contract with a CBD supplier:

  • The legitimacy and reputation of the CBD supplier.
  • The quality of the products on offer and whether they can be bought for a fair price.
  • Their logistics networks and their accompanying customer reviews, with special attention to distributor reviews over customer reviews.
  • The ease at which the supplier can be reached via legitimate social media and communication channels.

Some handy checks and balances to put into practice when looking for a reputable CBD supplier are to make sure the supplier can supply your home business with certificates of analysis (COAs).

COAs provides face value proof, data and statistics that show whether the products bought were tested in a reputable lab to ensure they:

  • Are traceable.
  • Are made from hemp.
  • Do not contain more than 0.3% THC.

Suppliers that cannot produce COAs or who produce COAs with information that is not from reputable lab tests should be avoided.

Apart from general product contents, COAs should display the following results to indicate safety and quality:

  • Pesticide testing.
  • Microbiological testing.
  • Residual solvents testing.

Given the unregulated nature of CBD production, product infusion and the growing number of scam suppliers, it is vital that further steps are taken to assess the quality of the products being bought and sold by your home business.

Methods of evaluation, in conjunction with COAs, include but are not limited to:

  • The method of hemp sourcing and growth.
  • The method of CBD extraction and infusion.
  • Reviews from other businesses (especially home and online businesses).
  • The pricing of products.

What Are the Challenges Facing CBD Home Businesses?

There are four challenges that you are likely to face in the starting and running of a home CBD business. They include: [6]

  1. Banking and finance
  • Home business insurance
  • Differentiation from the competition

1. Banking and Finance

Banks and financial institutions typically label CBD home businesses as high-risk ventures.

Some institutions and banks offer more favorable loans to CBD home businesses than others.

You must be prepared to spend time either negotiating with these institutions or sourcing business finance privately.

2. Payment Processing

Having the correct payment process for your home business is essential.

You cannot rely on third-party methods of payment that may have been afforded to you had you gone into a commercial, shared space, such as a shopping mall.

Consequently, time should be taken to research credit card facilities, e-commerce payment platforms, etc., to see if they can assist CBD home businesses.

3. Home Business Insurance

Home business insurance is considered essential for all business owners.

Especially since it will have a major bearing on your home insurance premiums and the content of your home insurance contract.

Unfortunately, numerous insurers hike up premiums to dubious amounts for CBD home businesses or do not provide any insurance plans whatsoever.

It is advisable that your broker in charge of your home insurance either organizes home business insurance with a reputable insurer or works closely with a third-party broker to ensure both your personal and business insurance needs are covered.

4. Differentiation From the Competition

Many entrepreneurs are looking to capitalize on the growing demand for CBD products by starting their own home businesses. It is essential to differentiate yourself from the competition.

Consequently, there are a few key factors you should be aware of that will legitimize your home business and help you stand out from the competition:

  • Transparency about your products, service providers, pricing and communication channels.
  • Accuracy about all information regarding the effects and safety concerns of ingesting CBD.
  • Storytelling that provides engaging and honest information about your venture into the CBD home business and why your home business and its products can help consumers.

Conclusion

While starting a home business may seem like the simplest and easiest method of entering the CBD market, it is in many ways harder than operating your business from a commercial space.

Consequently, compliance with all rules and regulations and the importance of legal marketing and insurance contracts cannot be overstated.

References

[1, 6] How to Start a CBD Business

[2] How to Start a CBD Business: The Ultimate Guide to Getting a Green Light

[3] Selling CBD Wholesale: CBD Distributor Opportunities & Getting Into the CBD Business

[4] Overcoming The Challenges Of Marketing And Selling CBD

[5] How To Become A CBD Oil Distributor

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