How to Launch a CBD Business

I’m Gonna Be Rich!

There is a misconception that when you launch a CBD business or join the cannabis industry you will be instantly rich. Just like any other business, there will be an initial investment, research, sacrifice, and hard work. Make sure your interest in the industry is more than a “cash grab” because it may be a while before you start profiting. Don’t get me wrong, there is money to be made but I think it’s more important to focus on where you can add value and where you best fit in the cannabis ecosystem. The cannabis industry is broad with many opportunities. I encourage you to give yourself the freedom to consider all your options before you jump into learning how to launch a CBD business.

Where do you fit in?

Do you want to join the cannabis industry but you aren’t sure which route to take? I suggest completing the following exercise to help determine where you can add value and narrow your focus:

  1. Create a spreadsheet itemizing your skills (what you are good at) and passion (what fulfills you)
  2. Study the cannabis industry ecosystem
  3. Write down the actors of the ecosystem (e.g. growers, processors, cannabis consumers, testing laboratories, dispensaries, CBD companies, etc.)
  4. Think about and write down the needs/interests of the actors in the ecosystem, for example:
    • Cannabis Consumers – need access to the product, may be interested in cannabis accessories
    • Dispensaries – need real estate agent, tax accountant, event planner, security, IT services, product to sell
    • Online CBD company – need content marketing, fulfillment services, packaging
  5. Align your skillset/passion with the actor(s) of the ecosystem you can best support

I hope that exercise helped you learn more about the cannabis ecosystem and where you can add value. Did you come up with any ancillary business ideas? An ancillary business is a great way to enter the industry because you don’t have to deal with the limitations (regulations, tax implications, marketing constraints) that come with owning a dispensary or online CBD business.

Why I Chose an Online CBD Business

I made the personal decision to launch an online CBD business because it checked all my boxes:

  • Helping people improve their wellness with an all-natural alternative fulfills me
  • Learning about cannabis science interests me and I want to be involved in normalizing the plant through education
  • My background and skillset is in IT – Product Management which transitions nicely into managing my own product offering
  • The initial investment is significantly less than opening up a dispensary
  • I wasn’t smart enough to think of an ancillary business that excited me more than CBD

If you have similar interests then a CBD business may be a great fit for you. Continue reading to learn what I did to launch a CBD business.

#1: Research

Photo by Kimberly Farmer on Unsplash

I’m a strong believer in becoming a subject matter expert (SME) in cannabidiol (CBD) and cannabis in general. A lot of people may have heard of CBD but they don’t fully understand what it is. You will be responsible for explaining what CBD is and how it can benefit your customers. Becoming a SME will require time and dedication. It took me 10 months to launch and I researched my ass off during all of it and I still do.

Podcast

I listened to the CBD School podcast every day during my hour commute to work. Vadim, the owner of the podcast interviews a lot of CBD businesses from start-ups to national brands. This is important because you are provided with valuable insights on the temperature of the market, the pitfalls of running a CBD business and it helped me consider my first product offering (tincture oils).

Online Resource

A trusted resource that I continue to reference often is Project CBD. They have a large library and is a good place to start your research, becoming familiar with what CBD is, and how it interacts with your endocannabinoid system. What is great about their site is you can easily search the full catalog with a keyword and read related articles.

Formal Cannabis Training

You can also consider completing formal training and earning a cannabis-related certificate. I completed the Healer certificate and I thought it was really helpful. Additional reputable training options you can consider include Advent Academy and Green Flower (I haven’t personally completed these but I plan to one day). Training is not cheap and is an investment in your cannabis education. You can launch a CBD business without earning a cannabis certificate.

FDA Regulations

Currently, hemp-derived CBD products are not regulated by the FDA; however, they have guidelines you need to be familiar with. For example, when you are marketing CBD products you cannot make any health claims and you cannot sell CBD products infused in food or beverage. Make sure you review the FDA guidelines to ensure you are adhering to their guidelines.

#2: Brand Identity

Company Name

I came up with so many names before I landed on Be Jubie. I had a list of names and I would check to see if the domain was available, you can check domain names here. If the domain was no longer available then I crossed the name off my list and continued my search. I sat with Be Jubie for a while, used it a lot around my house with my family. I also considered how I could use it for social media posts.

User Experience Design

I hired a user experience design professional to help me come up with a brand logo, color palette, font, website design, and product packaging. This was a lot of fun and I enjoyed the collaboration. It was really dope watching “my baby” come to life during a series of design iterations. Investing in a great designer is priceless in my opinion. Tip: Make sure you interview the designer, find out what their design process is, and review their previous work. You want to ensure the process is engaging and iterative because it will take a couple of rounds to get it right.

#3 Manufacturer/Farm

I spent a lot of time searching for a manufacturer. I learned there are a lot of “middlemen” reselling wholesale products. It was important to me that my manufacturer has a direct relationship with the hemp farm that uses sustainable farming practices. Once I found a manufacturer I was interested in I set up an appointment to meet with them face to face. I needed to know they were a real company that was ethical and had processes in place that will provide a consistent product.

Questions for the Manufacturer

Below are a few questions that you should be asking the manufacturer:

  • Do they have a direct relationship with the hemp farm or are they reselling wholesale products?
  • Is the hemp sourced domestically or internationally? I preferred domestic
  • What are the product ingredients?
  • Do they test for cannabinoid potency and harmful chemicals (pesticides, heavy metals, solvents) during the manufacturing process?
  • Can they provide a certificate of analysis (COA)?
  • Do they offer full spectrum, broad spectrum, and/or CBD isolate? (you will need to determine which type of CBD you want to sell for your brand)
  • Can they email you a price list?
  • Can they mail you a sample? It is critical you taste and feel the effects of the product because you will be investing a decent amount of money so make sure they are good quality
  • Can you meet them in person? (this is optional but was important to me)

I can’t urge you enough to do your due diligence and research the hell out of the manufacturer, look for reviews and go meet them if that’s possible.

#4 Website Platform

My website was built in mid-2019 and at that time only certain platforms were accepting CBD companies. Initially, I was interested in building my site on Shopify because it’s intuitive for people like me who aren’t developers. However, I discovered that Shopify will shut your website down because you cannot use their payment gateway to transact CBD products (this may have changed since last year). Based on my research I landed with WordPress + WooCommerce and I haven’t had any problems. The message here is – confirm your desired platform accepts CBD companies. The last thing you want to do is build your site (especially if it requires you to pay a developer), launch your CBD business, and get shut down.

#5 Payment Processor

In order for you to sell CBD products online you will need the following:

  1. Business Account with a financial institution (bank/credit union)
  2. Payment Gateway (typically the payment processor will tell you which gateway is compatible with your platform and their service)
  3. Merchant Account/Payment Processor – payment processors allow you to transact credit card payments online and they deposit the funds to your business bank account. This is where it gets sticky!

Although hemp-derived CBD was removed as a Schedule 1 drug during the 2018 Farm Bill traditional financial institutions are still not providing merchant accounts for CBD businesses. As a result, many CBD companies have international merchant accounts with really high transaction fee’s and they take the risk of never receiving the deposit owed to them. I do not recommend signing up with an international merchant account because you will have very little recourse if they don’t send you your money. Other CBD companies take the risk of integrating Paypal with their website to later get shut-down. Once Paypal realizes you are selling CBD products they will freeze your funds for a period of time and shut you down – I don’t recommend taking the risk.

CBD Merchant Account Options

A merchant account is critical to your online business here is what I suggest:

  • Check with Square and inquire about their “CBD Beta Program”
  • Google “CBD merchant account” and options will come up. Be sure to vet whoever you decide to work with. I had a good experience with TaskerPaymentGateways
  • Consider alternative payment options like Zodaka who provide customers the option to pay online with their bank account (instead of a credit card); similar to how Paypal functions for non-cannabis products

Whoever you decide to use make sure they are domestic and try to negotiate your fees. Keep in mind that your merchant account could be shut down at any time until traditional financial institutions start to support the cannabis industry.

#6 Third Party Laboratory Testing

Photo by chuttersnap on Unsplash

If you want to differentiate yourself in the CBD market as a trustworthy CBD provider then you will get your products tested by a 3rd party laboratory. Be Jubie products are tested during the manufacturing process. Once I receive the shipment of the final product I send samples off to the lab for the final test. I use ProVerde Labs and they were really helpful. Testing isn’t cheap but in my opinion, it will set you apart from a lot of the other CBD companies in the market. It feels good knowing the products your customers are consuming are high quality and you have the proof to back it up.

#7 Marketing

Personally, marketing has been the largest learning curve for me and it’s so critical to the success of your brand. As a CBD company, you cannot buy paid ads on Google, Facebook, or IG. It’s crucial that you have a rigorous content marketing strategy to build your following and customers. When I started I relied heavily on pop-ups, events, and markets to bring awareness to Be Jubie here in my city (Baltimore). I genuinely enjoy connecting with people in person, hearing their stories, and educating them on how Be Jubie can help improve their life. Unfortunately, vending at events and hosting pop-up shops will not make you a national brand. It is a must you focus on your digital assets to bring awareness of your brand to a wider audience.

I am camera/video shy and the idea of posting videos of myself on social media gives me a lot of anxiety but I do it (I take a dropper full of Be Jubie before I record, every time!). You can too. I promise the more you do it, the more comfortable you will become – you got this! Develop an editorial calendar to help organize your social media and blog posts. If marketing isn’t your thing and you can afford to enlist help from an expert then do it. I haven’t mastered this part of the business myself but I’m learning 😉

I sincerely hope this post provided tangible insights you can use to launch a successful CBD business. Please comment below or DM me on Instagram I welcome your feedback.

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