There’s a lot of confusion out there when it comes to CBD. From its legality to what it actually is, cannabidiol (better known as CBD) leaves a lot of people scratching their heads. Is it marijuana? Is it even a drug? Where can I buy it (if I can legally purchase it at all)?
It doesn’t matter if you’re trying to launch a start-up or simply wish to refine your existing CBD business – this seven step guide provides actionable advice for anyone looking to succeed as a CBD merchant. From marketing strategies to honing your website’s policies, we’re here to lay it all out for you so you can thrive in this growing industry.
CBD Business Success in 7 Steps
- Learn About CBD’s Legal Status
- Understand How to Comply With the Law
- Create a CBD Business Plan
- Get a High Risk Payment Processor
- Optimize Your Website
- Write CBD-oriented Legal Policies
- Build & Strengthen Your Brand Name
Step 1: Learn & Understand CBD’s Legal Status
First things first: CBD extracted from marijuana is illegal at the federal level. While there are numerous reasons to believe the tides are turning here, it’s still risky getting involved in an industry that isn’t fully understood by the government yet. However, there are loopholes and gray areas, and they all involve hemp.
What’s the difference between CBD and THC?
CBD (cannabidiol) and THC (tetrahydrocannabinol) are both chemical compounds found in the cannabis plant – the two most famous examples of cannabis being marijuana and hemp. THC has psychoactive properties (it gets you high). Cannabidiol has zero mind-altering effects, and instead has been primarily used over the years as a natural remedy for headaches, insomnia and other ailments of the body. Hemp-seed oil has negligible amounts of THC and greater (but still minor) quantities of cannabidiol, whereas marijuana has substantially more of both.
Hemp-seed oil and hemp-extracted CBD products are deemed legal by state and federal officials if they were produced using industrial hemp. As long as THC levels remain below 0.3%, any oils, supplements, or edible products are safe from scrutiny. Companies like Charlotte’s Web and Green Mountain are all over the news for marketing such products, and they’re making a lot of money (some in the industry even charging 10 cents per milligram for “hemp oil extract”, which is two times the price of gold).
CBD oil extracted from marijuana exceeds this 0.3% THC threshold, which makes it illegal in the eyes of the U.S. government. For now, it remains a substance exclusively marketed in states that have passed recreational marijuana laws. If you’re trying to sell this at a store or online, you will:
- Need a creative banking solution (many operations struggle with this)
- Want to be in a state where recreational marijuana is legal
- Make sure your policies are clearly hashed out and transparent
Step 2: Understand How to Comply With the Law
Even if you play by the book, there are still inherent risks as long as the industry is operating in a legally gray area. Follow the laws set by your state government and be honest about your business. Not doing so could cripple your reputation – as it did several “CBD” companies that lied about the ingredients in their products.
Also, make sure you acknowledge that CBD has not been cleared by the FDA as an efficacious substance somewhere on your website (assuming you’re integrating ecommerce into your business, which we highly recommend). While there are numerous studies outlining the benefits of cannabidiol consumption, it’s still not medicine in the eyes of the American government.
Place a small disclaimer somewhere in a clearly visible location on your site to avoid trouble.
One way many merchants have managed to operate within this space is to list all of their products as “hemp oil” or “hemp-seed oil.” While all derivatives of marijuana remain Schedule I substances for the time being, industrial hemp products that fall below that 0.3% THC level are legal and marketable online.
Step 3: Create a CBD Business Plan
The legal hemp industry in America is projected to grow from $688 million in 2016 to $1.8 billion by 2020, with hemp CBD products showing a 53% AGR (adjusted gross revenue). The opportunities are there, but you need a plan of attack. Especially in this market, where you’ll be under more scrutiny than if you were opening a bakery, for example.
If you want to get your business started on the right foot, it’s critical to lay everything out beforehand. This is where having a comprehensive business plan comes in.
There are two primary ways entrepreneurs usually lay out their course of action – either through business plan software or via the help of a professional writer. Either way, investors will be looking to see that your plan is sound – so be sure avoid rushing things. It will be easier for you to move forward when everything is down on paper. Key things you need include:
- Financing Methods
- Products & Services
- Customer & Market Analysis
- Marketing Plan
- Strategy & Implementation
- Sales Forecasts
Step 4: Get a High Risk Payment Processor
One of the biggest challenges facing entrepreneurs getting into the hemp oil market is finding a payment processor willing to work with them. Stories of marijuana merchants carrying thousands of dollars in cash because they couldn’t find someone to handle their transactions are popping up in the media, and CBD’s association can make things tricky.
The good news is, as CBD is better understood and further differentiated from THC, there are more opportunities to work with legitimate payment processors for people selling it. There are even solutions for start-ups available, who until recently struggled to establish themselves in this market.
Until the day cannabidiol reaches full legality throughout America, it will be deemed a risky industry by banks everywhere – requiring a dependable high risk merchant account provider to simply keep the doors open. However, there are more options now than ever. Do your homework so you can find a processor that believes in you and your business, because they do exist.
Step 5: Optimize Your Site
Having an ecommerce website up and running is important if you want to maximize revenue opportunities. However, you need to make sure your website attracts users and turns them into paying customers. There are many sites in the CBD market that are simply unattractive and poorly optimized. Here are some ways to separate yours from the competitors:
Write blog posts
Many companies are too busy or too lazy to produce free content for their users. If you put together pieces that are useful for your target audience, it will help you build authority and generate traffic (which means more customers). These posts can even be used for your social media accounts if you plan on going down that path.
Use Google Tools
Things like Google PageSpeed and Google Analytics are free, and with a little research they can help you improve your website. Speed up your pages, fix places on your site that aren’t getting traffic, learn more about user demographics and target them when marketing. You’d be surprised how many businesses out there aren’t taking advantage of these free resources to fine-tune their websites.
Hone your conversion funnel
Make it a habit to check Google Analytics so you know your users are converting. Making it easy for customers to get to the checkout page is an essential part of running a successful website, so tweak things as necessary to facilitate this. Things like having plenty of links and buttons across your site that drive traffic to product pages can help move people in the right direction.
Step 6: Write CBD-Oriented Legal Policies
Letting users know the data you collect and the conditions for making purchases on your site will help legitimize the sales of your industrial hemp oil and other hemp-related products. Including a section about adhering to U.S. law is a great addition to your terms, for instance, because many people worry about the legality.
While privacy policies are mandated by law, having a terms of service is optional in the United States. However, operating in the CBD industry makes it an essential addition to your website. If you don’t know how to write your own terms and conditions, there are people (and programs) out there to help you get the job done.
Step 7: Build & Strengthen Your Brand Name
Once you’ve taken care of the legal nuances and have a great website ready to go, it’s time to establish your brand name (if you hadn’t started already). A great way to begin is to write pieces related to CBD and pitch them to other websites. Getting your name out there (not to mention valuable links back to your site) will help you build authority in the industry.
Another great way to get people visiting your site is through Google’s Pay Per Click (PPC) advertising. This can get expensive, so make sure you do your research before diving too deep into it. If done correctly, you can make money, boost brand awareness, and increase your customer base.
The world of hemp oil & CBD products is a relatively new one, and could explode if the U.S. government lightens its restrictions on cannabis-related goods. Things are pointing that way, but it’s hard to say until it actually happens.
Succeeding in any industry can be a challenge, but with the steps included above you’ll be well on your way to making a splash as a CBD business. Are you ready to make it happen?