2019 has been quite a year for the CBD industry. Ever since the headlines were flooded with the news that the 2018 Farm Bill legalized hemp-derived products on a federal level, entrepreneurs and consumers alike have been clamoring to either launch a business around it, add it to their inventories, or obtain CBD products for their use. While it’s still a ways away from being considered fully mainstream, especially since all marijuana-derived products are still not considered legal across the board, it is certainly heading in that direction. At the moment, you can find anything from CBD in coffee and ice cream to products designed for seniors and even pets. The versatility of CBD in isolate and oil forms has made it the perfect commodity to build businesses around. Reports are projecting the CBD industry to reach over $5 billion in worth by the end of 2019, which would represent a 706% increase since 2018. Even more exciting are the projections for the industry reaching a worth of $20 billion by 2024. Starting a CBD company will involve all the hard work that starting any other business involves, with the added caveat of If you’re looking to get in on this fast-growing sector, here’s a step by step guide on how to begin.
Decide on a Business, its Name and Set it Up
The first thing you need to do is figure out what sorts of CBD products you’re going to sell. Are you going to sell CBD oils and oil blends? Salves, soaps, creams and other wellness items? Or are you going to create a line of CBD infused edibles such as chocolates, gummies, beverage enhancers and more? Whichever types of products you decide to incorporate CBD oil in, you’ll also need to understand everything that comes with that industry, too. Selling edible items made for human consumption has its regulations, as does selling items for pets, items in the beauty and cosmetic industry and so on. Be sure to fully research all the proper procedures and required regulations that go with whichever product type you choose.
Once you’ve decided whether your business will be a beauty and wellness CBD company, a pet CBD product business, or if you’re going to sell a wide range of many different CBD products spanning multiple industries, you’ll need to decide on a name. Experienced CBD business owners have shared pro tips such as not including an indicator of CBD involvement in the business name; it could end up complicating things for you when seeking business loans or it could prompt red flags for your bank. Also, it is not conducive to growth – if in a few years, you decide to change the inventory, you could be pigeonholing your brand by including CBD in the name. Be sure to name your business something easy to remember and spell so people can find your brand, even if they hear of it through word of mouth. Check GoDaddy.com to make sure the name you want for your website domain is available. If it’s taken, you’ll need to purchase it from the current owner on the WHOIS database.
You’ll then need to set up your business entity – enter the LLC name, apply for a Federal Tax ID number with the IRS and complete and file your forms and pay any registration fees. Websites like Legalzoom are useful in helping you complete all the necessary steps.
Work on your Branding and Logo
Next, you’ll need to design your brand’s official logo and brand colors. You can opt to use websites that offer a selection of logo designers or hire one that you know of. The colors, fonts, and shapes surrounding your brand should match the demographic you’re going after. Take time to develop something that looks great, is captivating and conveys what your brand will be all about.
Set up your Bank Account and Merchant Account
Head to the bank and set up your account; avoid mentioning the term CBD as this could complicate the setup process. Refer to it as a health and wellness product line to ensure a smooth and easy process. With your bank account set up and an EIN or Employee ID Number, you can apply for a merchant account. You’ll need to have a CBD merchant processor.
Select a Source
Unless you’re looking to grow and manufacture the products yourself, you’ll need to find a solid partner who will handle this for you. You should be very choosy when it comes to this part and do extensive research before deciding on a partner. The success of your business depends on it. That is because consumers demand high quality and you will need to be sure you can deliver that quality by working with a company that offers it. If you try to skimp on quality, customers will start engaging in bad reviews, returns, and chargebacks – a problem that if it reaches one percent, you might just get shut down and rejected by the CBD merchant processor. Take the time to solidify out your supply chain and secure a relationship with a quality manufacturer. If you’re selling great quality products, you’ll begin seeing an organic word-of-mouth or referral based customer influx as your customers learn they can trust your brand to deliver great quality. They’ll take care of marketing your reputation as a retailer that offers top quality products.
Create your Website and Social Media Pages
Next, you’ll need to set up your website. Depending on your budget, time and skill level, you can try to take this on yourself – there are many website design templates out there that can help make it easier and that automatically makes your website responsive or compatible with different devices. If you don’t want to take it on yourself, there are many talented freelancers and web development agencies you can enlist to make the whole process more turnkey. Enlisting an agency or freelancer that is also experienced at implementing SEO best practices can help you start strong with an SEO foundation as your website is being built that will help your business gain visibility online. However, you can always optimize after the site is already launched. Your website content should be original copy – duplicate content will be flagged and your website will be suppressed in the search results.
Once your website is live, it’s time to create your social media pages. This is just as important as your website because they are beacons for bringing traffic to your website and vehicles for your brand awareness. They are also freebie offsite links that will contribute to your SEO. On these pages, it is a good idea to include CBD in the name so that when people are searching for CBD products, your page is in the running to come up. You need to connect the icons on your website to these pages and also include a link to your website on the social pages. Be sure to hit the majors – that means Facebook, Instagram, Twitter, Pinterest, and Youtube. Be sure to come up with a social media content strategy that will convey your brand image effectively, create engagement and interest in your brand. You will also be able to advertise from these pages.
Securing reliable fulfillment is very important; if you have faulty fulfillment, you will very quickly start seeing the bad reviews pouring in and your business can go under before ever taking off.
Some private label manufacturers who work with startup merchants are equipped to provide fulfillment for a fee. But If your manufacturer/ doesn’t already offer fulfillment, or you prefer to handle it yourself to avoid the fulfillment fees, you’ll need to come up with your fulfillment system. Figure out where you’ll be warehousing your CBD products and managing your inventory over time as well as how you’ll ship your products to your customers. If your operation is starting small, there’s nothing wrong with storing the products in your home. But as your company grows and your orders increase, you’ll need to transition to larger storage space and a more streamlined way of fulfilling orders. Look into fulfillment centers and signing warehouse leases or outsourcing fulfillment. Be sure to make the transition as soon as you see any growth in sales – the logistics and details of fulfillment can get very time consuming and it could end up taking up all your time, leaving other aspects of your business neglected if you are not careful.
Build your Marketing Strategy
Once all the aforementioned steps are ready, you are ready to focus on marketing and tell people about this great new business you have to offer. Marketing your products is a vast world that requires constant work, maintenance and research to stay ahead of the latest trends. Staying in the know about the legality of CBD products and the entire industry is paramount to you being able to navigate confidently. Sign up for alerts and subscribe to reliable news sources to stay in the know. For your brand’s marketing, understand that you’ll need to invest a great amount of time and funds into creating brand awareness. You can’t sell something no one knows they want or no one knows exists. Since there are so many ways to market, you’ll need to research and brainstorm to come up with a strategy. You can also enlist an agency, hire a freelancer or hire someone in-house to dedicate themselves to marketing. There is no one way to market a business and you shouldn’t be putting all your eggs in one basket anyway – the trial and error period is important to collect data about what works and what doesn’t and build on that. Over time, you’ll begin to identify patterns and strategies that work. Does social media advertising work better? Do Google Adwords or Display ads seem to be bringing in higher traffic to the site? Or does being present at farmer’s markets or pet fairs seem to be working better? Get creative and find new, innovative ways to get the word out about your business and you’ll start seeing the growth in your company faster than you expected!