How Can I Start My Own CBD Oil Company?

woman visioning her cbd oil company

Thanks to the legalization of cannabis and the increasing acceptance of cannabis-based products, the CBD market is booming. According to experts, the CBD industry will hit an estimated $20 billion by 2024, making it the perfect sector to invest in right now.

In the past, CBD oil companies had to overcome hurdles, such as the stigma of cannabis products and the shady legality of selling CBD. Luckily, many of these hurdles no longer exist. Hemp-based CBD products are legal, and as the medical benefits of CBD become clear, more and more people are willing to try out CBD for a wide variety of ailments.

So whether you want to manufacture or resell CBD oil, now is the time to get in on the action. If this is your first time starting a company, you may find yourself overwhelmed and intimidated by the process. That’s why we’ve compiled this useful guide to get you started.

What is CBD?

Before you start any business venture, it’s essential to understand the market you’re getting into fully. If all you know about CBD is that it’s not THC, then read on.

CBD is a compound found in members of the Cannabis family, including marijuana and hemp. The class of compounds known as cannabinoids interacts with the human endocannabinoid system, which regulates many functions ranging from pain perception to immune and inflammation responses.

The most well-known cannabinoid is THC, which is the compound responsible for the hallucinogenic and intoxicating effects of smoking marijuana. While THC does have some medicinal value, many researchers have focused on CBD as the primary beneficial therapeutic compound in cannabis.

The Difference Between Hemp and Cannabis

Both hemp and cannabis contain CBD, and both plants can be used in the extraction process to produce CBD. While there is little to distinguish hemp and cannabis botanically, the legal definition differentiates between the two depending on THC content. Industrial hemp must have a THC concentration of less than 0.3%, at which point it is legal to cultivate and process into CBD products.

The situation becomes slightly more complicated when you factor marijuana into the mix. Marijuana is still a controlled substance, despite its legal status in many states. While it may be permissible to produce CBD oil from cannabis, you can’t trade it over state lines without breaking the law.

CBD Products

One of the main advantages of the CBD market is the sheer variety of products available. This range allows companies to either specialize in one or two high-quality products or to provide a wide range of options to target a broader demographic.

The most commonly bought CBD products on the market right now include:

  • Edibles: edibles include candies, baked goods, and many other foods that provide a known dose of CBD in a delicious, easy-to-use form.
  • Vape concentrates: as vaping becomes increasingly popular, so too are CBD-based vape products. These can include CBD oils and waxes that vaporize easily in standard vaping devices.
  • Sublingual tinctures: these tinctures are usually in the form of CBD oil dispensed under the tongue. Many users consider this the fastest way to get the benefits of CBD due to rapid absorption.
  • Topical creams: many users suffering from arthritis, psoriasis, or other skin conditions prefer to apply CBD directly to the skin through a cream or gel.

Full Spectrum vs. CBD Isolate

If you decide to start a CBD manufacturing business, you need to consider whether you want to produce full-spectrum or isolate CBD products. This choice will influence your extraction process as well as your testing set-up.

Full-spectrum CBD oil contains all the other cannabinoids found in the plant, including THC, as well as flavor compounds are known as terpenes. Recent scientific evidence suggests that there may be a complementary effect between various cannabinoids that may enhance the medicinal benefit of CBD, which can make full-spectrum CBD oil appealing to many customers.

The main drawback of full-spectrum CBD is that you may have trouble with varying CBD and THC concentrations. As such, you’ll need to keep a close eye on your purity and concentration levels and change the labels accordingly per batch.

CBD isolate, on the other hand, is pure CBD with nothing else. This purity is appealing to people looking for medical benefits, and it’s easier to ensure consistency over different batches.

Starting a CBD Oil Company

people talking about cbd business plan
Launching a CBD oil company is very similar to launching a company in any other market. While CBD oil companies may have to face a shifting regulatory landscape, the steps you take to get started are the same.

While you may want to dive straight into the fun stuff, it’s worthwhile to plan and launch your company correctly. This initial preparation may be time-consuming, but it will ensure that you will avoid costly mistakes that may affect your business in the future.

Draw Up a Business Plan

Before you even register your company, it’s a good idea to have your business plan in place. Doing this heavy lifting now will ensure that you’re prepared for the challenges ahead, and will also help you decide if your business is viable or not.

Your business plan should be as comprehensive as possible, covering every facet of the organization, the market, and the product. We’ve compiled a list of the main questions you should aim to answer in your plan.

What are the Initial Costs of Starting a CBD Oil Company?

Your initial costs will depend on the type of business you want to run and your location. At the very least, you need to have money for your initial supplies and inventory. You’ll also need to invest in website development and hosting and getting liability insurance up-front.

Try to factor in as many costs as possible. The more accurate your estimates and the closer you stick to your budget, the more time you’ll have to get your company off the ground.

What are the Ongoing Costs of a CBD Oil Company?

Apart from ongoing supplies, shipping costs, and marketing, you need to consider any salaries you need to pay. You may also want to find an experienced attorney to help you keep on top of all the regulatory changes that may impact your business.

How Does My Business Make Money?

While the answer to this question may seem obvious, it’s worth your while to investigate deeper. Do you make money by selling to a specific demographic, or will you target resellers instead? Do you want to open up a physical location? If so, how will that make money? By understanding market demand and existing prices, you can position yourself competitively and ensure you become profitable as soon as possible.

How Long Before the Business Becomes Profitable?

Many businesses will take several months to turn a profit. Make sure you plan for this instead of assuming that you’ll start turning a profit in your first month.

Once you’ve run your business for a couple of months, you can use projection features in your accounting software to get an estimate of how well your business is doing and when it will truly take off.

Who Should My Target Audience Be?

One of the most appealing things about the CBD market is that you have a wide array of demographics to target. As CBD becomes increasingly accepted as a therapeutic compound, you can find products for every age group, from children to seniors.

A growing market that is worth paying attention to is the lifestyle market. Unlike people who take CBD for its direct therapeutic value, this group views CBD ingestion as part of a healthy lifestyle. Targeting these customers can net you a loyal base that provides regular, consistent income.

You can even consider targeting the pet market. Many people may not need CBD for themselves, but want to use it to relieve their furry companion’s pain or anxiety. By marketing your product ‘for pets,’ you can tap into this market without changing anything about your product.

What is My Marketing Plan?

You should start marketing your brand as soon as possible. Marketing doesn’t just include social media or designing a website with a blog—it also includes providing excellent customer support and providing the products your customers want.

Establish Your Business

Find Your Name

Your business name is how your customers get to know you, so having the right one is essential. Ideally, you want a name that is simple, easy-to-remember and highlights the unique service you offer.

When establishing your brand, you need to consider the tone you want to project. Make sure that your business name matches that tone, as a mismatch can confuse potential customers who will then go somewhere else.

Once you’ve narrowed down your potential choices, make sure that you can get the business name you want. You can do a trademark search and use a web host to find if someone else has registered a domain under that business name. If it isn’t, try to secure it as soon as possible before someone else can get to it.

Form a Legal Entity

Running your business as a separate entity ensures that you, as an individual, cannot be held liable if someone wants to sue your company. There are many business structures that you can establish, including LLCs and corporations. Which one you choose will depend on the size, scope, and vision of your organization.

Register for Taxes

Once you’ve established your business, you should register for both state and federal taxes as soon as possible. The first step is to get an employer identification number, or EIN, which acts as a numerical identifier for your business.

Open a Bank Account

talking to a banker to open an account
You never want to mix personal and business finances, so your next step is to open up a business bank account. If you combine the two, you may risk losing your individual assets in the event of the company failing. Having a separate business account will also make filing your taxes more straightforward.

Many banks and credit unions offer business banking options, often with lower fees and more flexibility than personal accounts. You can also open up a business-only credit card that will help you build up business credit and keep all your business expenses in one place.

Get the Necessary Permits

There are several state and federal permits you’ll need to get before you can legally run your CBD business. Neglecting to get these permits may cost you severely in the future, both in fines and in the possibility of your business getting shut down.

Federal Licensing

On a federal level, the sale of CBD is still a relatively legal grey area, with new changes happening regularly. Make sure to keep up with the latest developments on both the state and federal level.

State Licensing

Different states have different licensing requirements for the sale of CBD oil. Visit the SBA to find out what your particular state’s requirements are. You may also be subject to local laws and regulations, which you can find out about from the local clerk’s office.

Insure Yourself

Business insurance is a legal requirement to operate a business. Several types of insurance cover different aspects of your business, such as General Liability Insurance to Worker’s Compensation Coverage.

Understand the Challenges

Many CBD companies face unique challenges related to the CBD market. Understanding these challenges and developing strategies to address them can help your business thrive where others fail.

Many of these challenges are financial, as banks and other companies are reluctant to engage with CBD companies until the regulatory landscape stabilizes. You’ll have to deal with issues like payment providers charging high fees for payment processing, banks declining loan applications, and insurance companies flat out refusing to work with CBD oil companies.

If you’re determined to capitalize on a growing trend, starting a CBD oil company may be the right move. Luckily, you don’t have to do it alone. Get in touch with LearningCBD to find out how we can partner up for mutual success!

FAQs About How To Start A CBD Oil Company

Question:How can I start my own CBD oil company?
Answer: Launching a CBD oil company is very similar to launching a company in any other market. One of the things you might take note is the CBD oil legality in your area. Not all states or country approve CBD products. You need to check about it before planning to start your own company.

Question:What are the type of CBD products you can sell?
Answer: There are wide range of CBD products that are available in the market. Some of them include edibles, vape concentrates, sublingual tinctures, topicals, etc.

Question:What are the things you need to consider to start a CBD oil company?
Answer: Some of the things you need to consider when starting a CBD oil company is the company’s name, the initial cost, a good business plan, your target audience, and your marketing plan.

Question:What are the permits you need to apply before you can start your own CBD oil company?
Answer: Depending on your area or country there will be different permits needed, but generally, you need a federal and a state license before you can operate

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Picture of Gene Daniels

Gene Daniels

Gene is the head of the learning CBD Oil editorial team. He has been active in the hemp community for many years publishing works on hemp-based wellness. Mr. Daniels takes great care to ensure all health-related info is pulled from reputable resources and is free of personal bias.