Because hemp has been legalized at a federal level, the opportunity to get a foot in on the CBD industry is larger than ever. Demand for CBD is exploding, with millions of enthusiasts even celebrating National CBD Day every year. With proper planning, you can start a CBD business according to legal regulations and set it up to thrive in a short time.
The following steps will guide you through everything you need to know about how to start a CBD business, including how to navigate the laws, market your brand, establish consumer trust, and set yourself and your brand up for success.
Here are tips from one of the manufacturers who have been in the business for over a decade:
Table of Contents
Research Local and Federal Regulations
Before you can get started with your business plan or building your CBD brand, ensure that you have a solid understanding of regulations regarding CBD, both at a federal, state, and local level. Federal regulations may be easier to access since most of the guidelines are laid out in the 2018 Farm Bill.
There are several parts to this bill that are important to highlight upfront. First, CBD products are deemed legal so long as they are produced from legal hemp, defined as “industrial hemp.” Industrial hemp, by the legal definition, contains less than 0.3% THC. Therefore, legal CBD products will also contain less than 0.3% THC.
CBD, as a whole, is not FDA approved. In fact, CBD is currently being scrutinized by the FDA in an attempt to place much-needed regulations on the cannabinoid, especially as consumers are jumping on the bandwagon, but don’t really understand its benefits.
To date, only one CBD-based medication has been officially approved by the FDA, rightfully so after undergoing rigorous safety and efficacy trials. This medication, a drug called Epidiolex designed by GW Pharmaceuticals, was approved for several severe forms of epilepsy.
CBD brands must run a tight ship when it comes to claims and marketing. The FDA prohibits CBD brands from making claims that their products cure or treat any illness. That’s not to say that brands cannot use supporting scientific claims to explain how CBD products work. Many brands find creative ways to introduce CBD to consumers without crossing the FDA’s established boundaries and it’s good to research your competition and see how they do it
You’ll also want to contact your local legislators and research their sites. As in starting any business, establish the proper licenses before setting up shop. That can actually be a cumbersome process, just like any business, but research your local legislation.
For CBD brands, it’s beneficial to employ a lawyer, specifically one with experience in cannabis, CBD, or a wellness-related industry. Having an attorney who knows the national, state, and local legislation also is highly recommended for the start of your business and for ongoing counsel.
Design a Solid Business Plan
Design a business plan that mirrors any other industry. The CBD industry is now established and it’s imperative that you start with a plan that accommodates the predicted growth of the cannabidiol industry and future expansions to your CBD line. A business plan, just like in any industry, will help you solidify your business goals, differentiation, and ultimate outcomes.
Cover all your bases, but also be flexible if some things have to change along the way. If you’ve never been a business owner, consider looking up business plan templates. Or consulting with experienced entrepreneurs to help you.
Sometimes people may hire a professional, especially if you need to use the plan to apply for loans or grants. Some things that you should consider when designing your business plan include:
- Identify an Overall Strategy: Decide what kind of CBD business you want to run. Do you want to use a proven model by starting a CBD franchise, or would you prefer to create your own brand and products from scratch?
- Choose the Products Your CBD Brand Will Offer: The first most important step to your business plan may be to determine exactly what products and services you’d like to offer.
When you start a CBD business, you may want to start with only a few products, but make sure to leave room to expand your horizons. Make sure you have a differentiator in what you’re going to offer to consumers, whether it’s more quality ingredients, a certain brand positioning, or just unique products that are not on the market. CBD brands typically offer a few different options, and you can easily find private label CBD tinctures, gummies, hard candies, topicals, tablets, and you can even consult with our team on product ideas that you have and what it would take it create them.
- Plan Your Finances: Determine where your financing will come from. If you plan to front all the money yourself, no problem. However, loans or financing is available as the industry further is legitimized. Just make sure you have a reasonable plan to cover all of your startup expenses and have a plan for covering extra expenses that may pop up along the way.
- Develop a Solid Marketing Strategy: If you haven’t determined a name for your CBD business, think about what is catchy and what consumers will like. This might mean doing a hefty amount of research which may include focus groups along with a number of other marketing resources to help guide your marketing plan. Then, determine how you’re going to market your business. This is one of the most important steps to success, so we covered it in more detail below.
- Set Realistic Goals and Strive to Reach Them: No CBD business plan is complete without a set of goals, both long and short term. Setting goals will help you stay on task, evaluate your success, understand your shortcomings, and will overall improve your chances of success. These goals can be big or small and can deal with anything from sales to marketing and more. Just figure out what goals are personal to you, set reasonable goals, and then strive to reach them!
Find a High-Quality Manufacturer
If you don’t have the expertise, facilities or team to get started on a product right away, you will need to turn to a manufacturer who knows what they’re doing. Take time in this area. Many companies claim to manufacture, but they are really just brokers. Here is a list of questions to ask a potential partner in manufacturing that you want to ask:
- Where do they source their hemp from and how is it extracted?
- What other ingredients are used and what kind of quality is it?
- Does the hemp product come with a certificate of authenticity from a licensed farm?
- Do they have third-party lab results with every step of the production process?
- Does the manufacturer adhere to GMP (Good Manufacturing Practices) in their operations?
- Can they offer you a tour of the facilities?
- What quality of service do they offer along and is it every step of the way?
- Do they have a good reputation?
- Ask for client references. Do they consistently provide good service, products, and advice for their customers?
- Can they accommodate a variety of product offerings?
- Does the company offer marketing, packaging, and business advice?
- When it comes to pricing, consider why a manufacturer might charge more for their services. If they are a true in-house producer, they likely have the expertise to know what it takes to produce what you’re looking for?
- Do you have access up the chain, all the way to leadership?
- Does the manufacturer consider sustainability and environmentally friendly practices?
- At the end of the day, do you jibe with the team and founders that you’re speaking to?
At CBD Nationwide, our facilities are GMP-compliant. We’ve always done manufacturing at a pharmaceutical-grade level. We are in the process of that certification but have always adhered to it, since day one.
Going beyond that, track the chain of custody for every batch of CBD products, all the way from seed to sale. That means that you can see documentation proving the high quality of our organic starting material, as well as documents tracking every step of the manufacturing process. Not every manufacturer offers that.
We also provide proof of purity and potency testing, executed by a qualified third-party laboratory. That rules out contaminants like mold, pesticides, residual solvents, and other harmful toxins.
If the company that manufactures your CBD products doesn’t provide these basic requirements, keep looking. Although there are no federal regulations that require these tests, the best manufacturers who know what they’re doing — and care about quality for the consumer — adhere to these standards.
Your Website Matters
Unless you plan to only operate a brick and mortar store, you’ll probably need to consider creating a website for your CBD brand pretty early in your business plan. This is true even for local distributors, as you’d be surprised at how much traffic you can get online when using local SEO tactics or advertising.
Even if you don’t intend to engage in e-commerce, a website is a great way to direct consumers to the information you want on your brand. A website offers you an opportunity to talk about your brand, play on your strong suits, describe what makes your products unique, and otherwise market your CBD products in more detail.
If you do decide to create a website for your brand, you may want to hire a freelance digital marketer or a digital marketing agency.
If you aren’t already adept in the ways of web design, though, your time may be better spent managing your brand than trying to learn a new skill. You can do some of the basic website maintenance on your own for the sake of a smaller budget, but you’ll definitely benefit from the help of a professional at times.
Learn to Effectively Market Your Brand
You’ll probably find that you spend the majority of your time on marketing your CBD site and brand, especially given how many new businesses and brands are entering the market. Here are a few tips for understanding and effectively executing a marketing plan:
Determine Your Target Audience
You need to know who you are marketing to. Ask yourself—who are your CBD products designed for? Do you have a unique niche in the marketplace? Many CBD products are designed to target a specific group, like seniors, men or women, athletes, and more.
However, evidence suggests that cannabidiol could be useful for any demographic. Once you’ve determined your target audience, do research. Some things that could come in handy include where your audience shops, where they spend their leisure time, or what draws them to your products. You can use google for this, or you can spend a predetermined budget from your business or marketing plan that can identify a place to focus on in the industry.
Play on Your Potential
You can’t make any concrete health claims about CBD, so don’t design your marketing plan around “Cannabidiol cures cancer!” That’s a quick way to being shut down by the FDA.
However, you should try to outline the potential health potential of your products based on what the current research states. Provide a reference to some of the scientific studies that explain CBD’s health potential.
SEO is Imperative
Given the current challenges with regards to Facebook and Google advertising, organic search marketing and SEO is imperative to make sure your website is actually seen. That means relevant and informational content on your site. You can outrank an extremely competitive market by ensuring that the information on your site is keyword ranked, relevant, and purely informational and educational for your consumer base.
You’ll want to employ a professional SEO expert, preferably one who is schooled in the world of CBD, to help you with optimization and keywords in your content.
Master Social Media
Another effective means of engaging with your consumer base is through social media.
The same concept for SEO and content applies here. You want to ensure that your content matches your brand identity and that it offers something relevant and informational for them.
One way to get around the strict restrictions on social media is to also engage in influencer marketing. You can provide your product to influencers, some of which come with a hefty fee, some of which come with just product reviews and no fee, and they will promote it to their audiences. Just make sure it’s a natural partnership with the right influencers and be prepared to have a hefty budget to make it really effective here.
Customer Service is Equally Important
This one may be hard to understand, but it’s a great way to build consumer confidence and increase your chance of sales, or even repeat sales. In addition to marketing your brand ups, make sure that you have the right customer service operations in place. If you mess up, social media will call you out on it and it could be a life and death situation for your brand.
Take time to talk to consumers, and make it easy for them to contact your through all of your marketing outlets. Have a dedicated customer service team that can do this for you. Put together a template of talking points and responses they can use in communications. Answer questions thoroughly, help them make decisions and make sure you only upsell when it makes sense. Being honest and helpful for your customers will quickly improve your customer retention.
Get Started with Your Private Label CBD Business Immediately
Succeeding in the industry can be a challenge, but it doesn’t have to be in this budding time. Of course, the same can be said for any lucrative industry, but you can increase your chances of success with a few good business tips and close attention to the steps we’ve just laid out. If you are ready to get your new private label CBD line started and have questions, contact the experts at CBD Nationwide.