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How to Start a CBD Oil Business

A CBD oil business will sell and/or manufacture CBD oil for a variety of purposes. This may happen either online or in stores, though most people won’t open up a specific retail location selling CBD. Most businesses will sell the oil for general purposes (e.g., anxiety, chronic back pain, etc.), though some will concentrate purely on cosmetic uses, with others even blend CBD oil and coffee.

Learn how to start your own CBD Oil Business and whether it is the right fit for you.

  • 9 Steps to Start your CBD Oil Business
  • Who is this Business Right For?
  • Take the Next Step
  • Useful Links

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Last Updated: 2020-10-14

Start a cbd oil business by following these 9 steps:

You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple guide to starting your cbd oil business. These steps will ensure that your new business is well planned out, registered properly and legally compliant.

STEP 1: Plan your business

A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:

Luckily we have done a lot of this research for you.

What are the costs involved in opening a cbd oil business?

If you grow your own hemp and turn it into CBD oil, then your costs to start will be low. You can begin selling your product online with little more than a website made for a few hundred bucks with Squarespace and commercial liability insurance in case a customer sues you after using your product. You can also consider partnering with an established farmer to grow their business and your own.

What are the ongoing expenses for a cbd oil business?

Owners need to account for the cost of farming, insurance, and staff salaries. They may also want to hire a lawyer to keep up on the rapidly changing laws.

Who is the target market?

Practically anyone can use this product. CBD oil is used to relieve anxiety, soften skin, and reduce chronic pain. Most famously, it’s given to kids who have severe seizures to reduce their frequency and severity. It can even be taken by people for general relaxation at any time. CBD oil is derived from cannabis, but it does not cause a psychoactive effect like THC will.

How does a cbd oil business make money?

CBD oil businesses will create their own profit margin for their products, based on the scope of their operation, quality of their product, and demand for CBD oil among their target demographic.

How much can you charge customers?

It’s not unusual to see CBD oil sold for $60 for just 30 mL. 100 mg in a 2 oz bottle of skin lotion can be sold for $85.

How much profit can a cbd oil business make?

CBD oil businesses can make a good deal of profit once their customer base is established. If you charge an average of $60 per product at a 50% mark-up, you’ll need to sell 200 products every month to make $6,000 in profit. This goal can be easier to meet than you may think given the exceptional demand.

How can you make your business more profitable?

CBD oil owners can branch out to different types of products to boost their profits. From skin care to make-up to tinctures to vaping to edibles, there are a lot of different options available.

What will you name your business?

Choosing the right name is important and challenging. If you don’t already have a name in mind, visit our How to Name a Business guide or get help brainstorming a name with our CBD Oil Business Name Generator

If you operate a sole proprietorship, you might want to operate under a business name other than your own name. Visit our DBA guide to learn more.

When registering a business name, we recommend researching your business name by checking:

  • Your state’s business records
  • Federal and state trademark records
  • Social media platforms
  • Web domain availability.

It’s very important to secure your domain name before someone else does.

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STEP 2: Form a legal entity

Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your cbd oil business is sued.

Read our Guide to Form Your Own LLC

Have a Professional Service Form your LLC for You

Two such reliable services:

  • ZenBusiness ($39 + State Fees)
  • LegalZoom ($79 + State Fees)

You can start an LLC yourself and pay only the minimal state LLC costs or hire one of the Best LLC Services for a small, additional fee.

Recommended: You will need to elect a registered agent for your LLC. LLC formation packages usually include a free year of registered agent services. You can choose to hire a registered agent or act as your own.

STEP 3: Register for taxes

You will need to register for a variety of state and federal taxes before you can open for business.

In order to register for taxes you will need to apply for an EIN. It’s really easy and free!

You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.

Learn how to get an EIN in our What is an EIN guide or find your existing EIN using our EIN lookup guide.

Small Business Taxes

Depending on which business structure you choose, you might have different options for how your business will be taxed. For example, some LLCs could benefit from being taxed as an S corporation (S corp).

You can learn more about small business taxes in these guides:

There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.

STEP 4: Open a business bank account & credit card

Using dedicated business banking and credit accounts is essential for personal asset protection.

When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.

Additionally, learning how to build business credit can help you get credit cards and other financing in your business’s name (instead of yours), better interest rates, higher lines of credit, and more.

Open a business bank account
  • This separates your personal assets from your company’s assets, which is necessary for personal asset protection.
  • It also makes accounting and tax filing easier.

Recommended: Read our Best Banks for Small Business review to find the best national bank, credit union, business-loan friendly banks, one with many brick-and-mortar locations, and more.

Get a business credit card
  • This helps you separate personal and business expenses by putting your business’ expenses all in one place.
  • It also builds your company’s credit history, which can be useful to raise money and investment later on.

STEP 5: Set up business accounting

Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.

STEP 6: Obtain necessary permits and licenses

Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.

Federal Business Licensing Requirements

Although CBD oil does not produce psychoactive effects like the THC found in marijuana, the two products are associated closely enought that the production and sales of CBD are currently in a legal grey area. Before starting your CBD oil business, it is important that you make sure to read up on both state and federal laws regarding CBD products. This will help ensure your business functions smoothly and avoids legal trouble.

State & Local Business Licensing Requirements

Certain state permits and licenses may be needed to operate a CBD oil business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits .

Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.

For information about local licenses and permits:

  • Check with your town, city or county clerk’s office
  • Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources .
Certificate of Occupancy

A CBD oil business is generally run out of a place where the oil is manufactured. Businesses operating out of a physical location typically require a Certificate of Occupancy (CO). A CO confirms that all building codes, zoning laws and government regulations have been met.

  • If you plan to lease a location :
    • It is generally the landlord’s responsibility to obtain a CO.
    • Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to a CBD oil business.
    • After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.
  • If you plan to purchase or build a location :
    • You will be responsible for obtaining a valid CO from a local government authority.
    • Review all building codes and zoning requirements for your business’ location to ensure your CBD oil business will be in compliance and able to obtain a CO.

STEP 7: Get business insurance

Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.

There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.

Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers’ Compensation Coverage.

Recommended: Learn what business insurance for your CBD Oil Business will cost.

STEP 8: Define your brand

Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.

Get a logo using Truic’s free logo Generator No email or sign up required

How to promote & market a cbd oil business

CBD oil is popular enough that you’re going to have some stiff competition. Most people are going to be looking for CBD oil online — especially if they’re looking for the more concentrated, medicinal products. Paid online ads, organic blog content, and social media can help attract people to your product. If you’re selling general, lower-intensity sprays, then you can develop relationships with general health stores or even grocery stores to stock your products.

How to keep customers coming back

Customers are going to need to feel relief after taking your products. While research is few and far between, you can do your own analysis of which products are working for different demographics by asking for feedback. This can help you suggest the right product so that there’s less experimentation (and frustration) on the part of your customers.

STEP 9: Create your business website

After defining your brand and creating your logo the next step is to create a website for your business.

While creating a website is an essential step, some may fear that it’s out of their reach because they don’t have any website-building experience. While this may have been a reasonable fear back in 2015, web technology has seen huge advancements in the past few years that makes the lives of small business owners much simpler.

Here are the main reasons why you shouldn’t delay building your website:

  • All legitimate businesses have websites – full stop. The size or industry of your business does not matter when it comes to getting your business online.
  • Social media accounts like Facebook pages or LinkedIn business profiles are not a replacement for a business website that you own.
  • Website builder tools like the GoDaddy Website Builder have made creating a basic website extremely simple. You don’t need to hire a web developer or designer to create a website that you can be proud of.

Using our website building guides, the process will be simple and painless and shouldn’t take you any longer than 2-3 hours to complete.

Recommended: Get started today using our recommended website builder or check out our review of the Best Website Builders.

Other popular website builders are: WordPress, WIX, Weebly, Squarespace, and Shopify.

Start A CBD Oil Business In Your State

Select your state below for an in-depth guide on completing each of these steps in your home state.

Is this Business Right For You?

This business is great for people who have a genuine interest in how cannabis can be used to bring relief to users. Owners should understand the complexities of the plant and how different strains can help treat certain ailments.

Want to know if you are cut out to be an entrepreneur?

Take our Entrepreneurship Quiz to find out!

What happens during a typical day at a cbd oil business?

It’s rare there will be a ‘typical’ day in the CBD oil business because this business is so new and there are few established business models. An owner may be doing anything from managing inventory to dealing with new regulations to running lab reports for their product. Owners should also be devoting time on a regular basis to keep up with changing trends in their industry (as they can change extremely quickly.)

What are some skills and experiences that will help you build a successful cbd oil business?

People should have some experience with the cannabis market. Owners should understand the basic public demands as well as the public fears and residual stigma of cannabis. There’s a lot to learn about cannabis due to the variety of the product. Understanding the different terpenes and strains can make it easier for your company to stay ahead.

What is the growth potential for a cbd oil business?

Because of its versatility and rapid rise in popularity, CBD oil is predicted to hit $1 billion by 2020 in the US alone (some say even closer to $2 billion.)

TRUiC’s YouTube Channel

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Take the Next Step

Find a business mentor

One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.

Having a support network in place to turn to during tough times is a major factor of success for new business owners.

Resources to Help Women in Business

There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:

  • Funding
  • Events
  • Guides
  • Support

If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.

What are some insider tips for jump starting a cbd oil business?

Understanding the industry is going to be key to getting started. CBD oil is a legal gray area — no matter how you manufacture it. You’re far less likely to run into authorities if you extract your CBD from pure hemp instead of marijuana, but cannabis can be confusing to people who have no experience with it. This can lead to being taken off the shelves or being shut down until local authorities figure it out — which could be a while.

Hemp and marijuana are both from the cannabis plant, but they’re used for very different purposes. CBD oil has enough legal implications that there hasn’t been a lot of official research on it. While this appears to be changing now that the FDA has recently approved a CBD oil drug, it’s unclear how quickly widespread acceptance will happen. In states like California and Washington, your pushback is likely to be low. But in states like Indiana and Kansas, you may have a very difficult time meeting the official regulations of the state.

You should also be extremely honest with your customers whenever possible. Because there isn’t a lot of research on CBD oil, it’s impossible to really say that CBD oil can ‘cure’ anything. While the evidence may be extremely compelling, you want to present both sides of the story whenever possible. The good news is that side effects are extremely mild and it’s impossible to overdose on CBD oil.

One good way to show people that your business is legitimate from right off the bat is to become Clean Green Certified. This certification is essentially the equivalent of the organic label in grocery stores. You’ll need to go through some rigorous testing in order to pass, but these tests help assure people that they’re getting pure CBD oil and not the synthetic, illegal products that may make them ill.

How and when to build a team

You don’t necessarily need to build a team right away if you’re growing the hemp yourself. However, if you’re partnering with other people, you should consider hiring someone to help you decipher the legal puzzles and marketing strategies of the CBD oil business.

Sign up at the Business Center to access useful tools for your business.

Our guide on starting a cbd oil business covers all the essential information to help you decide if this business is a good match for you. Learn about the day-to-day activities of a cbd oil business owner, the typical target market, growth potential, startup costs, legal considerations, and more!

How to Start a CBD Oil Business

While CBD oil is still relatively new to the mainstream, it is already becoming a household name, thanks to its health benefits.

A recent market research by BDS Analytics and ArcView projects that the United States’ CBD sales will surpass $20 billion by 2024. On another report, the annual growth rate of hemp-derived CBD products is forecasted at 55%.

Considering such CBD market analytics, aspiring entrepreneurs have an ample chance for making some green in the industry.

It’s also especially important to use a trustworthy provider like Zamnesia.com that carries the top CBD brands to ensure repeat business.

But how do you go about setting up a CBD business? This piece has everything you need to know, including information about legal compliance, challenges within the industry, and the average return on investment.

What is CBD?

Cannabidiol (CBD) is one ofthe over one hundred compounds (cannabinoids) found in the best hemp oil and cannabis plants. Unlike the famous cannabinoid known as tetrahydrocannabinol (THC), CBD does not have psychoactive effects. Instead, it is touted for its exceptional therapeutic and health benefits that have been proven through research.

CBD products are created through several steps. This starts with the cultivation and harvesting of the raw materials (hemp or cannabis). From there, CBD oil is extracted using an array of methods, including supercritical CBD extraction, steam distillation, or solvent extraction.

After extraction, CBD oil is sold as a concentrate or used to infuse a range of products. Some of the most prevalent CBD products in the market today are sublingual CBD oil tinctures, topicals, infused edibles, gels, creams, vapes, and pet treats.

Hemp CBD

Although CBD oil can be extracted from either hemp or cannabis, there is a crucial difference between oil extracted from the two plants: THC.

While CBD oil derived from cannabis is illegal at the federal level, hemp-derived CBD is legal. Industrial hemp contains less than 0.3 % THC and is considered legal to cultivate, harvest, and process under the federal law. On the other hand, cannabis contains over 0.3% THC and at times higher levels, which makes it illegal.

Cannabis and hemp are closely related. Actually, industrial hemp is Cannabis sativa L. The name difference is mostly a legal definition function that sets the THC content threshold. Hemp flowerscontain no THC, unlike those of cannabis. You can check this hemp oil vs CBD oil comparison guide for other details you must know and should understand.

How to Start a CBD Oil Business

As is the case with any other investment, starting a cannabis business will require much hard work and effort on your part. However, you will pay a higher price complying with the legal aspects of the business and need to brace yourself for the uncertainty of the industry’s shifting regulatory landscape.

Below are the steps you need to follow when starting a CBD oil business.

  1. Identify Your Niche

The hemp industry is broad and has tons of business opportunities. Determining your areas of interest would go a long way towards planning, legal compliance, and business execution.

One of the most rewarding fields in the industry is cultivation, which, according to a report by the University of Kentucky’s Department of Agricultural Economics, generates an average profit of $604 per acre. The Hemp Business Journal reports that when planted for CBD extraction, farmers can get more than $2,500 hemp farming profit per acre.

Other rewarding CBD oil business opportunities include:

  • Hemp extraction
  • Processing
  • Online and physical store retailing
  • Delivery
  • Marketing and consultancy
  • Opening a hemp seed bank
  • CBD events planning
  • Hemp business funding
  • Industry employment bureau
  • And more!
  1. Legal Considerations

The success of your business will, to a large extent, depend on how familiar you are with hemp laws.The most crucial law to understand is that the federal government deems CBD products legal only when they are produced from hemp with no more than 0.3% THC.

The other issue is marketing.

Although CBD has plenty of health benefits, you will need FDA approval on your products for you to claim that they can prevent, treat, cure, or diagnose a disease. Only one CBD drug (Epidiolex) is FDA approved and making such claims on your products could lead you to trouble with the FDA.

Read all federal and state regulations before starting up a CBD business. Afterthis, you can get incorporation and business licenses, as well as employer and tax identification numbers.

To maneuver through this process more easily and have your contracts well drafted, it would be best to hire an attorney, especially if you are putting in a substantial amount of investment capital.

  1. Create a Business Execution Plan

Before investing or as you wait for license approval, come up with a comprehensive business plan to guide you throughout all your operations. Key factors to include are:

  • The products and services you will be selling.Thesecould include health and wellness, personal care, beauty, or pet care products.
  • Financing methods: Identify how much you need and make a plan on ways to raise resources for financing your startup.
  • Marketing plan: Come up with ideal marketing strategies to drive awareness and sales of your new product or service.
  • Sales forecasts: Review your expectations and research to come up with a realistic sales benchmark and a plan on what you will need to do to stay on track and meet this goal.
  1. Find the Right Supplier

If you are interested in processing, distributing, or reselling CBD oil, you will need to have someone to supply you with the raw materials or finished products. The same applies to cultivation and extraction, among other fields. Reputable hemp is available from Europe and America.

Factors to consider when looking for a hemp supplier include current good manufacturing practice and a Certificate of Analysis.

Make sure that you create your own brand, and sell from your own company. Build trust and credibility with your clients and work as hard as you can to get return business. This can be difficult as even trusted brands have a hard time in this niche, for example, CBD on amazon is fake.

  1. Build Your Brand, Market and Sell

Before and after you get everything ready, focus on creating a pool of customers you can rely on. This will require you to run aggressive marketing campaigns, optimize your website, and create a strong media presence.

Since most platforms do not allow CBD advertising, you will need to be creative to get results. Marketing CBD products through customer loyalty programs and organic search strategy is more engaging and safer than paid advertising.

Challenges Facing the CBD Business

Anyone looking to start a CBD business should familiarize themselves with the following challenges that are rampant in the industry:

  1. Banking

With hemp’s fluctuating regulatory landscape, accessing reliable banking services when running a CBD oil business can be complicated. Most banks are hesitant to accommodate cannabis and CBD companies as they fear a huge risk of burdensome oversight.

  1. Insurance

CBD oil entrepreneurs find it challenging to find affordable insurance. Despite the legalization of hemp, insurance prices remain heightened for such investors.

  1. Payment Processing

Many payment processors present unreasonably high charges and other challenges to CBD oil businesses. Some like Visa have cut off CBD businesses, leaving entrepreneurs with limited options like Discover and MasterCard.

  1. Capital Access

Lenders, including banks, are reluctant to finance CBD companies as they view the industry as too risky due to the lack of clear regulatory requirements.

Final Verdict

If you approach it correctly, CBD oil is a big business opportunity. All that you need to do to set up your business for success in the industry is combine creativity and due diligence.

How to Start a CBD Oil Business While CBD oil is still relatively new to the mainstream, it is already becoming a household name, thanks to its health benefits. A recent market research by BDS