words Al Woods
The CBD industry is booming and expected to grow to $23.7 billion by 2023. The CBD market is already saturated with businesses trying to convince people that they have the best product(s). But with so many companies already occupying the industry, how can new CBD businesses make a name for themselves? If you are looking to launch a CBD gummies business similar to Verma Farms, here is a guide that will help you get started.
Step 1) Construct a business plan
Like with any business, you should start by creating a business plan. You’ll need to consider factors like startup costs, ongoing costs, your niche audience, the amount of time it will take before you turn a profit, and the elements of your brand.
These components are especially tricky in the CBD world. Cannabidiol lives in an unusual legal gray area, so there are more technicalities to navigate. For instance, while CBD is legal at the federal level as long as it contains .3 percent THC or less, each state is free to enforce its own laws. As such, not every state is a good one to try and operate a CBD business out of; some still prohibit CBD in many capacities, and others require medical marijuana cards to purchase CBD (which will limit your customer base). For this reason, many CBD manufacturers stick to selling their products online. Nonetheless, you’ll still want to establish your business in a state that is CBD-friendly.
Where will you source your hemp from? You can buy already-made CBD gummies from other sources and dropship them, but honestly, re-selling CBD comes with all sorts of risks that could get you in trouble—and more importantly, it could be dangerous to your customers. Rather than take shortcuts, it’s better to go the whole nine yards and grow your own hemp, extract the CBD with safe methods, and send your products to third-party laboratories to test them for purity and potency. You should be taking all of these things into account in your business plan.
Step 2) Take care of the legalities
Establish your business as a legal entity, such as an LLC, corporation, DBA, or something else. Register for taxes by applying for an EIN at the IRS website. As stated previously, you’ll have more flexibility if you launch your business from a state where CBD is completely legal.
Even though CBD is not an intoxicant, it is legally considered close enough to marijuana that you’ll have to obtain special permits to get started. Research what kind of federal and state permits and licenses you will need.
If you are going to operate out of a physical location, you will also need a Certificate of Occupancy. This certification affirms that you are complying with necessary zoning laws, government regulations, and building codes.
Note: there are also legalities you will need to comply with when marketing your products. For instance, the FDA has only approved one brand of CBD, Epidiolex, so you cannot make any health claims on the labels, online, or in any other way.
Step 3) Take care of the financials.
There are a few financial challenges you’ll need to address when starting a CBD oil or gummies business. For instance, banking: many banks are hesitant to allow CBD companies to open accounts with them because of CBD’s relationship to marijuana. Some CBD entrepreneurs have been forced to switch banks, or their merchant accounts are abruptly closed. To avoid dealing with such complications, partner with a bank that is cannabis-friendly. On a related note, payment processors can charge you high fees as their means to mitigate what they perceive as a high-risk business.
You’ll also need business insurance, but you will need to search around to find an affordable plan. Even though industrial hemp is federally legal, prices will remain high until insurance providers become more educated on the subject. In addition, banks are generally hesitant to invest in CBD businesses, so acquiring upfront access to capital will require some convincing, or turning to alternative lenders.
Step 4) Differentiate yourself from your competitors
Once you have everything necessary to get up and running, you’ll need to target your niche market and distinguish yourself from your competitors. What do your competitors offer that customers seem to enjoy? You can offer similar perks and more. Publish a blog that discusses the science behind CBD, the story of your business, and other information so that you become an educational resource for people instead of only a merchant. Test your products with third-party laboratories and get certified with the US Hemp Authority organization. Build your social media presence. Connect with customers. Listen to their stories and answer their questions—and price your products reasonably (and even offer discounts to people living in poverty, with disabilities, or veterans, who can benefit from CBD most, like Lazarus Naturals does).
Launching a CBD company can be complicated, but if you are patient and willing to commit to authenticity, quality, and transparency, then you can make a name for yourself.