Do you want to start a CBD oil company legally? If YES, here is a detailed guide on how to start a CBD oil business with no money and no experience.
No entrepreneur who would want to go into a business if they know the chances of making profit from the business is slim hence the need to start a business whose products or services is generally accepted by all and sundry and one of such business is cannabidiol (CBD) business. It is a fact that cannabidiol CBD oil is one of the hottest products to sell in retail stores and online in the united states.
To start this business, it is important that you conduct detailed research in order to find out all it will take to setup a cannabidiol (CBD) oil production company, how to leverage on the existing market to sell your products and also how to create new market channels.
Cannabidiol (CBD) oil production company can be considered to be capital intensive, but it is indeed money – spinning if you are able to create a robust distribution network. You can start your business in a small town in the United States and if you put the proper structures in place, it won’t be too long before your brand becomes recognized and your products sold all across major cities in the United States of America and other countries of the world.
How to Start a CBD Oil Business – A Detailed Guide
- Industry Overview
CBD stands for cannabidiol and it is made by extracting CBD from the cannabis plant, then diluting it with a carrier oil like coconut or hemp seed oil. It is the second most prevalent of the active ingredients of cannabis (marijuana). While CBD is an essential component of medical marijuana, it is derived directly from the hemp plant, which is a cousin of the marijuana plant.
While CBD is a component of marijuana (one of hundreds), by itself it does not cause a “high.” According to a report from the World Health Organization, “In humans, CBD exhibits no effects indicative of any abuse or dependence potential.
Interestingly, cannabidiol (CBD) oil is readily obtainable in most parts of the United States, though its exact legal status is in flux. All 50 states have laws legalizing CBD with varying degrees of restriction, and while the federal government still considers CBD in the same class as marijuana, it doesn’t habitually enforce against it.
In December 2015, the FDA eased the regulatory requirements to allow researchers to conduct CBD trials. Currently, many people obtain CBD online without a medical cannabis license.
The government’s position on CBD is confusing, and depends in part on whether the CBD comes from hemp or marijuana. The legality of CBD is expected to change, as there is currently bipartisan consensus in Congress to make the hemp crop legal which would, for all intents and purposes, make CBD difficult to prohibit.
Research shows that the United States cannabidiol (CBD) oil market size was treasured at USD 3.36 billion in 2015 and it is anticipated to witness a predictable growth rate of 9.0 percent from 2016 to 2024. This industry is thriving and as a matter of fact, about 200 different types of cannabidiol (CBD) oils are used all over the world annually, and the United States of America plays a main role in total demand.
Going forward, the additional health profits of cannabidiol (CBD) oils are anticipated to trigger their demand in pharmaceutical and medical applications as well. These oils do not exhibit any recognized side effects unlike conventional medicines and drugs; this will probably be a significant boosting factor for the market.
Please note that the barriers to entry for the cannabidiol (CBD) oil extraction business are moderate, with the most significant barrier being the ability to secure permits and raise capital. Capital investments are needed to purchase machinery and equipment and purchase or rent facilities. While the amount of capital needed to enter the industry depends on the scale of operation an entrant is pursuing, even small – scale facilities require significant capital.
Other barriers include securing supply contracts with upstream suppliers of cannabis plants and other ingredients used to extract cannabidiol (CBD) oil. The well-entrenched position of the leading processors in the industry can also represent a barrier to entry for prospective entrants.
The cannabidiol (CBD) oil business is profitable and it is open for any aspiring entrepreneur that has the capacity to compete with other players for the available market share to come in and establish his or her business.
Table of Content
- Starting a CBD Oil Business – Market Research and Feasibility Studies
- Starting a CBD Oil Business – Legal Matters
- Is Professional Certification Needed to Run a CBD Oil Business?
- List of Legal Documents You Need to Run a Cannabidiol (CBD) Oil Extraction or Distribution Business
- Financing Your Cannabidiol (CBD) Oil Extraction or Distribution Business
- Choosing a Suitable Location for a Cannabidiol (CBD) Business
- Starting a CBD Oil Business – Technical and Manpower Details
- The Business Services Process Involved in Cannabidiol (CBD) Oil Extraction or Distribution
- Starting a CBD Oil Business – The Marketing Plan
Starting a CBD Oil Business – Market Research and Feasibility Studies
- Demographics and Psychographics
The demographic and psychographic composition of those who make use of cannabidiol (CBD) oil cut across people with chronic pain, inflammation, cancer-related symptoms, anxiety and depression; retailers, pharmacies, dispensaries, alternate medical facilities and medical clinics et al. So, it will be safe to say that the demographic composition for a cannabidiol (CBD) oil business is all encompassing.
List of Niche ideas Within Cannabidiol (CBD) Oil Business That You Can Specialize in
If you intend starting a cannabidiol (CBD) oil business, then you should consider choosing from the following niche ideas;
- Cannabidiol (CBD) oil extraction business
- Cannabidiol (CBD) oil distribution business
The Level of Competition in the Cannabidiol (CBD) Oil Industry
There is hardly any industry in the world where there is no competition. As a matter of fact, it is competition that brings creativities and innovations in the business world.
If you are looking towards starting a cannabidiol (CBD) oil production company OR cannabidiol (CBD) oil distribution business, then you should brace up for competition in the industry. This is why most cannabidiol (CBD) oil production companies are leveraging on creativity in terms of packaging and marketing to continue to stay afloat.
The fact that there are relatively increasing competition in the cannabidiol (CBD) oil industry is not hampering the performance of new entrants; most of them know how to strategize to reach out or attract more customers even if it is just dispensaries and pharmacies in their immediate community.
List of Well – Known Brands in the Industry
It is the norm that in every industry, there are always brands that perform better or are better regarded by customers and general public than others. Some of these brands have been in the industry for a long time, while others are best known for how they conduct their businesses and the results they have achieved over the years.
These are some of the leading cannabidiol (CBD) oil production companies in the United States of America and in the globe;
- Receptra Naturals
- Green Roads
- Infinite CBD
- Bluebird Botanicals
- Green Gorilla
- CBD American Shaman
- Highland Pharms
- Green Garden Gold
- Lazarus Naturals
- The CBDistillery
- Pure Hemp Botanicals
- 4 Corners Cannabis
- Koi CBD
- Kat’s Naturals
- Johnny Apple CBD
- Real Scientific Hemp Oil
Starting a cannabidiol (CBD) business can’t be said to be difficult, but at the same time, it requires thorough economic and cost analysis – feasibility studies and market survey et al if you are looking towards making profits.
Part of what you need to focus on in this business is how to build a standard cannabidiol (CBD) oil extraction plant, robust distribution networks, branding and of course how to maintain your machinery and equipment and to take care of your overhead before your business breaks even.
Other costs that should be considered during planning and budgeting are supply of cannabis/marijuana plants if you don’t have your own farm. Lastly, in other to play safe with your investment, it is important that you hire the services of experts to help you carry out thorough economic and cost analysis before committing your resourcing to the business.
Starting your Cannabidiol (CBD) Oil Extraction or Distribution Business from Scratch vs Buying a Franchise
There are loads of factors that should be considered before choosing the option to follow. Some of the factors to consider are the cost of starting from the scratch or buying a franchise, your financial capacity, your vision, and your business skills and experience.
If your intention of starting a cannabidiol (CBD) oil extraction or distribution business is to grow beyond one city, if you want to have presence in key cities in the United States, then starting your cannabidiol (CBD) oil company from the scratch is your best option.
But if you just want to start a business with the aim of just making profits and you don’t have the required finance and experience to build a business from the scratch, then it will pay you to buy the franchise of a successful brand in the industry if you are lucky to come by one.
Please note that most of the successful cannabidiol (CBD) oil extraction or distribution companies around started from the scratch and they were able to build a solid business brand. It takes dedication, hard work and determination to achieve business success.
Possible Threats and Challenges You Will Face When Starting a Cannabidiol (CBD) Oil Extraction or Distribution Business
If you decide to go into cannabidiol (CBD) oil extraction or distribution business today, one of the major challenges you are likely going to face is the presence of well – established brands in the industry both in the United States of America and from other parts of the world.
The only way to avoid this challenge is to create your own market (distribution network) by concentrating on retailers, pharmacies, dispensaries, alternate medical facilities and medical clinics et al in your immediate community. So also, state regulations for cannabis / marijuana related products and bad press may also pose a threat to the business as well.
Starting a CBD Oil Business – Legal Matters
- Best Legal Entity to use for Cannabidiol (CBD) Oil Extraction or Distribution Business
If you have plans to launch a cannabidiol (CBD) oil extraction or distribution business, the legal entity you choose will go a long way to determine how big the business can grow.
You can either choose a general partnership, limited liability company, or even a sole proprietorship for your cannabidiol (CBD) oil extraction or distribution business. Ordinarily, sole proprietorship should have been the ideal business structure for a small – scale cannabidiol (CBD) oil extraction or distribution business especially if you are just starting out with a moderate startup capital in a small neighborhood.
But if your intention is to grow the business and have distribution networks spread across the United States of America and other countries of the world via franchising, then choosing sole proprietorship is not an option for you. Limited Liability Company, LLC or even general partnership will cut it for you.
Setting up an LLC protects you from personal liability. If anything goes wrong in the business, it is only the money that you invested into the company that will be at risk. It is not so for sole proprietorships and general partnerships. Limited liability companies are simpler and more flexible to operate and you don’t need a board of directors, shareholder meetings and other managerial formalities.
These are some of the factors you should consider before choosing a legal entity for your cannabidiol (CBD) oil extraction or distribution business; limitation of personal liability, ease of transferability, admission of new owners and investors’ expectation and of course taxes.
If you take your time to study the various legal entities to use for your cannabidiol (CBD) oil extraction or distribution business, you will agree that limited liability company; an LLC is most suitable. You can start this type of business as limited liability company (LLC) and in future convert it to a ‘C’ corporation or a ‘S’ corporation especially when you have the plans of going public.
Upgrading to a ‘C’ corporation or ‘S’ corporation will give you the opportunity to grow your cannabidiol (CBD) oil extraction or distribution business so as to compete with major players in the industry; you will be able to generate capital from venture capital firms, you will enjoy separate tax structure, and you can easily transfer ownership of the company.
Catchy Business Name ideas Suitable for a Cannabidiol (CBD) Oil Extraction or Distribution Business
When it comes to Choosing a name for your business, you should be creative because whatever name you choose for your business will go a long way to create a perception of what the business represents. Usually it is the norm for people to follow the trend in the industry they intend operating from when naming their business.
If you are considering starting your own cannabidiol (CBD) oil extraction or distribution business, here are some catchy names that you can choose from;
- Up Town® CBD Oil Distribution Company, Inc.
- Don Barros™ CDB Oil Extraction Company, Inc.
- Pure Gold® CDB Oil Extraction Co
- Green Life® CDB Oil Extraction Company, Inc.
- Little Droplets® Cannabidiol (CBD) Oil Distribution, Inc.
- Lara Brown™ Cannabidiol (CBD) Oil Extraction, Inc.
- Pinker Lane ™ CDB Oil Extraction Company, LLC
- Jane Hollow© Cannabidiol (CBD) oil Distribution, Inc.
- Simply Natural© Cannabidiol (CBD) Oil Extraction, Inc.
- Eco Life® CDB Oil Extraction Company. Inc.
In the United States and in most countries of the world, you can’t operate a business without having some of the basic insurance policy covers that are required by the industry you want to operate from. So, it is important to create a budget for insurance and perhaps consult an insurance broker to guide you in choosing the best and most appropriate insurance policies for your cannabidiol (CBD) oil extraction or distribution business.
Here are some of the basic insurance covers that you should consider purchasing if you want to start your CBD business in the United States of America;
- General insurance
- Health / Medical insurance
- Liability insurance
- Building Insurance
- Workers Compensation
- Overhead expense disability insurance
- Business owner’s policy group insurance
Intellectual Property Protection/Trademark
If you are considering starting your own cannabidiol (CBD) business, usually you may not have any need to file for intellectual property protection/trademark because the nature of the business makes it possible for you to successful run it without challenging anybody in court for illegally making use of your company’s intellectual properties.
But if you just want to protect your company’s logo and other documents or software that are unique to you or even production concepts, then you can go ahead to file for intellectual property protection.
Is Professional Certification Needed to Run a CBD Oil Business?
When it comes to cannabidiol (CBD) oil extraction or distribution – business, you do not need to have any formal training or special certification before you can be allowed to start the business. All you need is informal training that will give you the needed skills, coupled with your own inbuilt business drive.
On the other hand, if you come across any form of certification that can aid you to conduct your cannabidiol (CBD) oil business, then by all mean try and pursue such certification.
List of Legal Documents You Need to Run a Cannabidiol (CBD) Oil Extraction or Distribution Business
The essence of having the necessary documentation in place before launching any business in the United States of America cannot be overemphasized. It is a fact that you cannot successfully run any business in the United States without the proper documentations.
If you do, it won’t be too long before the long hand of the law catches up with you. These are some of the basic legal documents that you are expected to have in place if you want to legally run your own cannabidiol (CBD) oil business in the United States of America;
- CBD Products Dispensaries License
- Business and liability insurance
- Tax Payer’s ID
- Fire certificate
- Certificate of Incorporation
- Business License (licensed cannabis processors)
- Business Plan
- Non – disclosure Agreement
- Employment Agreement (offer letters)
- Employee’s Handbook
- Operating Agreement for LLCs
- Insurance Policy
- Company Bylaws
- Memorandum of Understanding (MoU)
- Building License
- Franchise or Trademark License (optional)
Financing Your Cannabidiol (CBD) Oil Extraction or Distribution Business
It is often said that money is the blood of any business. Raising startup capital is perhaps one of the major concerns of entrepreneurs as it can be challenging raising capital to launch a business idea. Your idea must be workable and promising for you to secure finance from financial institutions or from angel investors.
The first thing to put in place before sourcing for startup capital for your cannabidiol (CBD) oil business is to draft a detailed business plan. With a good business plan, you can easily convince investors to invest in your business. The truth is that no bank can give you a loan if you don’t have a good and workable business plan.
Besides, investors will not take you seriously if you don’t have a business plan on ground. Here are some of the options you can explore when sourcing for startup capital for your cannabidiol (CBD) oil extraction or distribution business;
- Raising money from personal savings and sale of personal stocks and properties
- Raising money from investors and business partners
- Sell shares to interested investors
- Applying for Loan from your Bank
- Pitching your business idea and applying for business grants and seed funding from donor organizations and angel investors
- Source for soft loans from your family members and your friends.
Choosing a Suitable Location for a Cannabidiol (CBD) Business
When it comes to choosing a location for your business, there are key questions you should answer and key factors that must be considered. You are expected to choose a location that is easily accessible especially as it relates to your distribution network. Affordability, availability of labor and safety are also some of the factors that you should consider.
Despite the fact that cannabis/marijuana cultivation is highly regulated, it is important to choose a location that will give your economy of scales; a location that will give you leverage to favorably compete in the industry as a new entrant and also to make reasonable profits et al.
It cannot be overemphasized that the location you chose to launch your cannabidiol (CBD) business is key to the success of the business, hence entrepreneurs are willing to rent or lease a facility in a visible location; a location where the demography consists of people and businesses with the require purchasing power.
It is important to note that a business facility in good location does not come cheap hence you should be able to allocate enough fund for leasing/renting in your budget. If you are new to the dynamics of choosing a location for a cannabidiol (CBD) business, then you should feel free to talk to a business consultant or a realtor.
Starting a CBD Oil Business – Technical and Manpower Details
If you are considering starting a cannabidiol (CBD) business, then you should make plans to build a standard cannabidiol (CBD) oil extraction plant. A standard cannabidiol (CBD) oil extraction plant includes oil extractors, vessels, tanks, and conveyor belt system et al. You are expected to put all this equipment and machine in place and also purchase standard distribution trucks.
Although you can get fairly used of the above listed equipment and machines, but it is advisable to go for new and latest machines and equipment that can serve you for a long time especially if you have the money to make the purchase. Even if you don’t have the required amount, you can enter an agreement with the suppliers of such machines and equipment and spread the payment over a period of time.
As regard acquiring a facility, if you have the required finance, it is to your advantage to acquire a property or lease a facility to be used for your cannabidiol (CBD) oil extraction plant; it usually gives you the freedom to design the facility the way you want to it to be and install gadgets as you so desire. But if you are low on cash, then you don’t have any option other than to rent a facility.
When it comes to creating a workforce structure for a standard cannabidiol (CBD) oil business, then you should look towards getting qualified and competent people to fill the following roles; Chief Executive Officer (Owner), Plant Manager, Quality Control Officer, Human Resources and Admin Manage, Merchandize Manager, Sales and Marketing Manager, Accountants/Cashiers, Production Workers/Machine Operators, Distribution Truck drivers, and Cleaners.
You will need a minimum of 15 – 20 staff members to successfully run a small scale but standard cannabidiol (CBD) oil extraction or distribution business.
The Business Services Process Involved in Cannabidiol (CBD) Oil Extraction or Distribution
Basically, cannabidiol (CBD) oil extraction or distribution process includes: hemp / cannabis seeds/plants preparation, pressing and crude cannabidiol (CBD) oil refining. The starting point involves taking the hemp/cannabis seeds and plants through a thorough cleaning process in order to remove sand, stalk, plant debris and any other unwanted particles.
Thereafter, the seeds and plant have to be prepared for pressing, which usually involves size reduction by breaking them and then conditioning by adjusting their moisture content and temperature, while keeping the seeds hot for a period of certain minutes.
The next stage is that, the well – prepared seeds are conveyed via conveyor belt system to the screw pressing machine, which is the most popular method of cannabidiol (CBD) oil extraction. The machine screw warm presses the hemp/marijuana plant and seeds as it moves to advance where the space is smaller and smaller. Due to strong frication and high pressure, cannabidiol (CBD) oil is pressed out.
In addition, as the temperature in the machine’s pressing chamber rises, the output rate of cannabidiol (CBD) oil also increases. Finally, the fresh cannabidiol (CBD) oil comes out through the small openings in the bottom of the pressing chamber.
Lastly, the fresh crude cannabidiol (CBD) oil obtained from the pressing machine is elucidated in a setting tank and then pumped through the filter press. The filtered crude cannabidiol oil is then channeled to the refinery for stages of refining and then filling into the required container, packaged and ready for distribution.
Please note that quality control is enforced at every stage of the process in order to ensure that only healthy cannabidiol (CBD) oil are produced and sold to the public.
It is important to state that a cannabidiol (CBD) oil extraction or distribution business may decide to improvise or adopt any business process and structure that will guarantee them efficiency and flexibility; the above stated business process is not cast on stone.
Starting a CBD Oil Business – The Marketing Plan
- Marketing ideas and Strategies
Running a business requires that you should be proactive when it comes to marketing your goods or services. If you choose to launch a cannabidiol (CBD) oil extraction or distribution business, then you must employ strategies that will help you attract customers or else you will likely struggle with the business because there are well – known brands that determine the market direction for cannabidiol (CBD) oil industry.
These are some of the marketing ideas and strategies that you can adopt for your cannabidiol (CBD) oil extraction or distribution business;
- Introduce your cannabidiol (CBD) oil extraction or distribution business by sending introductory letters alongside your brochure to households and all players in the line of business such as retailers, pharmacies, dispensaries, alternate medical facilities and medical clinics et al throughout the city where your cannabidiol (CBD) oil extraction or distribution business is located and distributed.
- Advertise on the internet on blogs and forums, and also on social media like Twitter, Facebook, LinkedIn to get your message across
- Create a basic website for your business so as to give your business an online presence
- Directly market your products (cannabidiol (CBD) oil)
- Join local cannabidiol (CBD) business associations for industry trends and tips
- Advertise our business in community based newspapers, local TV and radio stations
- List your business on yellow pages ads (local directories)
- Encourage the use of Word of mouth marketing (referrals)
Factors That Will Help You Get the Right product pricing for Cannabidiol (CBD) Business
One key factor that will help you sell your cannabidiol (CBD) oil at rock bottom prices is to purchase your raw materials (supply of hemp/cannabis seeds and plants and packaging materials) et al directly from wholesalers in pretty large quantities. The truth is the higher the quantity of items that you purchase directly from wholesalers, the cheaper you tend to get them.
Another strategy that will help you retail your cannabidiol (CBD) oil at the right price is to ensure that you cut operational cost to the barest minimum and channel your efforts towards marketing and promoting your brand name. Aside from the fact that this strategy will help you save cost, it will also help you get the right pricing for your products.
You can also try as much as possible to work with independent contractors and marketers, it will help you save cost of paying sales and marketing executives.
Possible Competitive Strategies for Winning your Competitors in the Cannabidiol (CBD) Oil Industry
The availability of different sizes of cannabidiol (CBD) oil under your production line, your business process and of course your pricing model are is part of what you need to stay competitive in the industry.
Another possible competitive strategy for winning your competitors in this particular industry is to build a robust distribution network and clientele base. Over and above, ensure that your organization is well positioned, key members of your team are highly qualified and your cannabidiol (CBD) oil can favorably compete with the some of the best in the industry.
Possible Ways to Increase Customer Retention for Cannabidiol (CBD) Oil Business
When it comes to business, no matter the industry that you choose to pitch your tent in, one of the easiest ways to increase customer retention and perhaps to attract new customers is to produce results and satisfy your customers always. If your customers are satisfied with your products and services delivery, they can hardly source for alternative service providers or products.
As a newbie, in order to attract more sales, ensure that you offer your customers incentives if you want to retain them and of course continue to generate repeated sales from them and also to attract new customers.
Part of what you need to do to achieve this is to track progress, results or outputs with the aim of improving on them quickly as the case demands. When it comes to managing your customers, and building loyal clientele base, you should purchase a customized CRM software.
With a customized CRM system, you can easily stay in touch with your clients (you can carry out quick surveys, you can introduce new products and prices to them without any hitch, you can felicitate with them on their birthdays and other anniversaries, you can keep track of their progress, you can send bulk sms and customized e – mails and above all, you can easily receive compliant and feedback from them).
Strategies to boost your brand awareness and Create Your Corporate Identity
If you are in business and you are not deliberate about boosting you brand awareness and communicating your corporate identity, then you should be ready to take on whatever the society portrays your business to be. One of the secrets of larger corporations is that they are willing to spend fortunes to boost their brand awareness and to continue to communicate their corporate identity the way they want people to perceive them.
If your intention of starting a cannabidiol (CBD) oil extraction or distribution business is to grow the business beyond the city where you are going to be operating from to become a national and international brand by opening chains of distribution networks and exporting your products, then you must be ready to spend money on promotion and advertisement of your brand.
No matter the industry you belong to, the truth is that the market is dynamic and it requires consistent brand awareness and brand boosting cum promotion to continue to appeal to your target market. Here are the platforms you can leverage on to boost your brand awareness and create corporate identity for your cannabidiol (CBD) oil extraction or distribution business;
- Place adverts on both print (newspapers and health magazines) and electronic media platforms
- Sponsor relevant community based events/programs
- Leverage on the internet and social media platforms like; Instagram, Facebook, Twitter, YouTube, Google + et al to promote your cannabidiol (CBD) oil extraction or distribution business – brand
- Install your Bill Boards in strategic locations all around your city or state
- Distribute your fliers and handbills in target areas
- List your cannabidiol (CBD) oil extraction or distribution business in local directories / yellow pages
- Advertise your cannabidiol (CBD) oil extraction or distribution business in your official website and employ strategies that will help you pull traffic to the site.
- Position our Flexi Banners at strategic positions in the location where cannabidiol (CBD) oil extraction or distribution business is located.
- Ensure that all your staff members wear your branded shirts and all your vehicles and trucks/vans are well branded with your company logo et al.
- How Much Money Do 1 MW Solar Farms Make Yearly? - August 9, 2020
- How Much It Cost to Lease Land for Cattle in Texas? - August 7, 2020
- How Much It Cost to Buy a Keller Williams Franchise - August 7, 2020