How To Start a Hemp CBD Company

Cannabis is all over the news. It is getting a ton of attention from not only cannabis enthusiasts but business men and women everywhere.

When it comes to cannabis and its many benefits, THC [Tetrahydrocannabinol], the psychoactive component that gives cannabis its “high” it gets the bulk of the attention. But, industry insiders and, increasingly, consumers recognize that when it comes to beneficial cannabinoids, CBD [Cannabidiol] offers the best opportunity for mainstream users eager to experience the plant’s health and wellness properties.

Hemp, the low THC member of the Cannabis sativafamily from which the bulk of CBD-only products are derived, has many uses such as clothing, paper, and even building materials. But CBD is truly the plant’s game changing product, particularly for people eager to join the green rush without the legal ramifications and financial hurdles associated with traditional marijuana products. While marijuana remains federally illegal, CBD extracted from industrial hemp is totally legit and growing.  If offers many of the benefits of a THC-focused cannabis business, with much less risk.

America’s legal hemp market is projected to grow from $688 million in 2016 to $1.8 billion by 2020. With hemp-derived CBD products forecasted at 53 percent annual growth rate, there is ample opportunity for aspiring entrepreneurs to make a little green. Like many lucrative opportunities, there is a blueprint for success. Here are the five factors necessary for successfully launching and running your CBD business.Related: The One Cannabis Investment You Can’t Afford to Miss

1. Understand CBD, the law and comply with regulations.

Hemp-extracted CBD products are deemed legal by the federal government as long as they are produced using industrial hemp. If THC levels remain below the legal threshold of 0.3 percent, any oils, supplements and other CBD products are generally legally safe to sell. Most of the CBD extracted from marijuana, not hemp, exceeds this 0.3% threshold, which makes it federally illegal. If you’re trying to sell CBD products at a store or online, you will need to:

  • Obtain incorporation, business licenses and EIN/TIN for your new CBD business;
  • Build your real science knowledge base about the cannabis plant and the role of CBD;
  • Ensure your CBD products are hemp-derived, especially if you’re in a non-legal marijuana state;
  • Make sure your company policies, packaging and product dosing are transparent;
  • Above all, follow the laws set by your state government

Additionally, do not make claims that state your product will help consumers “prevent, treat, diagnose or cure” a disease. Such statements will put your business at risk of running afoul of the FDA since most CBD health claims lack federally-approved research to support their validity. Instead, use other descriptors to educate consumers and promote products. Consult a lawyer familiar with the industry to keep current.Related: The Cannabis Industry Is Going Global Without Waiting for America to Legalize

2. Prepare a business plan.

Start your business right by creating a business plan, a roadmap that allows entrepreneurs to plan the growth of their ventures and communicate goals and strategies to financial backers and other stakeholders. It’s now easier than ever to produce a powerful business plan. There are guides, software and consultants available to facilitate the process. If you need funding, a business plan is non-negotiable. Key factors include:

Products and services: What does your CBD product assortment look like? What segment of the market will you service? (Beauty, Personal Care, Health & Wellness, Pet Care etc)

Customer and market analysis: Once decided on assortment, who will be your target customer and what does that customer look like?

Financing methods: Where else is the money coming from to fund the business?

Marketing plan: What is your brand or product name? What strategies will drive awareness and sales within your target demographic?

Strategy and implementation: What are the channels for strategic implementation and execution? What digital channels? In-person or In-store events and promotion?

Sales forecasts: What is a realistic sales benchmark and how will you stay on track to meet this goal?

Related: Navigating the Top 3 Post-Startup Challenges for Cannabis Businesses

3. Find the good suppliers.

Whether you are interested in distributing and re-selling CBD products or creating your own, you’ll need to identify a quality supplier. Here’s what to look for:

Certificate of analysis (COA): A COA is a report that confirms the levels of CBD, THC and other molecular compounds in cannabis products. This report should detail exact components in every batch (percentages, purity, etc.). If there’s any doubt, always obtain a third-party test to confirm the purity and potency of the product.

Claims: Manufacturers cannot make medical claims about CBD product. Be aware that the FDA does not support these claims. Therefore, we must treat CBD products as dietary supplements.

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