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How Do I Start My Own CBD Oil Company?

With more and more farmers planting hemp and the CBD industry on its way to hitting $20 billion in sales by 2024, lots of entrepreneurs are asking: how do I start my own CBD oil company?

The boom of the CBD market follows the signing of the 2018 Farm Bill, which paved the way for legalizing industrial hemp in the United States. Though the production of industrial hemp is no longer an issue at the federal level, each state is developing its own laws surrounding the crop. Additionally, CBD products now fall under the jurisdiction of the Food and Drug Administration.

By applying solid business practices and an in-depth understanding of the CBD industry, you can tap into the lucrative market and answer the question: how do I start my own CBD oil company?

Understand the CBD Industry and the Market

The first step to establishing your CBD oil company is going to require research — lots of research.

The goal is to become an expert in the field of CBD products and industrial hemp. You need to not only be fluent in talking about the industry to expertly interface with your clients but also because it will increase your chances of onboarding investors when it comes time to expand your operations.

Your research can start with some Google searches to create a foundation of understanding with regards to the different extraction processes, health benefits, market trends, history, and so on. However, at some point, you’ll need to directly reach out to CBD oil experts and other industrial hemp-based companies to have a real understanding of what you’re getting yourself into.

While doing this research, you want to focus on giving yourself the necessary ammunition to secure the right supplier — avoiding low-quality producers and scam artists.

Create a CBD Brand

Under most circumstances, your CBD oil supplier will be working with more companies than just yours. With this in mind, you should think about how to establish a brand that will be able to dominate in a market where you are — at least in theory — selling the same product as other companies.

The first step to creating your brand is establishing which segment of the CBD oil market you’re going to target. Keeping your target market in mind, you’ll want to come up with a brand name, logo, and theme line that will resonate with that market.

Your CBD Oil Brand Name

Though you will want to develop a brand name that speaks directly to your target market, you should avoid creating something that will prevent you from expanding into other markets.

If Nike had gone with a name or tagline to the effect of ” The Best Basketball Shoes in Eugene” — they would have potentially done very well in that community but might have found it hard to dominate the international sporting goods market.

Another thing to keep in mind with regards to your brand is how closely you want to associate it with the words “CBD”, “hemp”, or “cannabis.”

Times are changing fast. However, there is still a real possibility that you will run into hurdles when it comes to creating a business account with a bank if such references exist in your name. If you have a name that you think might be too edgy, don’t hesitate to reach out to your bank ahead of time and make sure it won’t cause an issue.

Your CBD Oil Logo

Long gone are the days where developing a great logo has to cost a fortune. Online marketplaces, including Fiverr and 99 Designs, give you access to hundreds of freelance designers ready to work with you (and your budget). Take advantage of them.

Establish an LLC for your CBD Company

Most likely, you’ll want to establish your company as an LLC — only under specific, rare circumstances might you consider some other classification.

Ideally, you’ll contact a lawyer to help with your LLC formation and to determine if an LLC is the ideal structure for your CBD company. However, it’s also possible — and often much cheaper — to establish your LLC through a service like LegalZoom.

When using LegalZoom, or a similar company, it can take less than 30 minutes to establish your LLC.

Find a Reputable CBD Payment Processor

With the CBD market still being so young in the US, it can be challenging to find merchant accounts that will process CBD payments. This is expected to change in the near future, but until it does, finding the right company to process payments is important. Unlike many businesses, you can’t even use popular services like Square to process CBD payments.

Given this, expect to put in some time and energy to find a US-based company that will be able to open a merchant account for you and process payments for CBD products.

Know Your CBD Supplier

A great brand name and exemplary customer service won’t keep your business afloat if you’re providing a low-quality product. A consistent, high-quality product is essential to your company’s success. Given this, as a distributor, you will need to find a CBD wholesaler that meets your needs.

When deciding on a wholesaler, you will want to pay attention to where they are sourcing their product, what extraction methods are being used, the certificate of analysis, any medical claims they might be making, services they provided, and their pricing.

The price is especially important, because, in the CBD industry, you get what you pay for.

Meeting in-person with a CBD wholesaler to talk about the goals for your product and brand is important for nearly any business.

All that said, yes, it’s plausible to follow a drop-shipping model and never know your supplier. However, if you’re wanting to build a stable company, having personal relationships with those you are relying on is essential.

No matter what, make sure you talk to a number of wholesalers before settling on a contract with anyone. You will want to ensure that you have the best deal possible for the highest-quality product.

Focus on What’s Popular

Though you might have an ingenious, new CBD oil product, you will want to establish the foundation of your business on products that are already market-proven. The most popular products at the moment are sublingual tinctures, CBD edibles, vape concentrates, and CBD topicals.

Once you’ve established a loyal customer base, only then should you start to expand your product inventory and introduce new ideas.

But no matter what CBD products you are offering, you want to ensure that you aren’t falling on the wrong side of the law. The FDA is still developing regulations with regard to the CBD industry. Though nothing is written in stone, the FDA has signaled that it will not tolerate marketing CBD products as having health benefits.

To make sure you don’t run afoul of the FDA, you will want to include the FDA disclaimer on your website, as well as on your packaging.

Final Thoughts: How Do I Start My Own CBD Oil Company?

Tackling everything from brand and LLC formation to payment processing and product sourcing might seem overwhelming. However, given the potential of the CBD industry, going about establishing your business the right way will pave your way to prosperity — or at least give you the best opportunity.

Still asking yourself: how do I start my own CBD oil company? Think about it this way: the bottom line is to go by the book when adjusting to the rapidly changing regulatory landscape and establish a brand that both connects with a segment of the CBD oil market and leaves room for growth. By doing these things, you will give your businesses — and yourself — the best chance at tapping into the multi-billion dollar industry.

Fallon Hanley

View posts by Fallon Hanley
Fallon boasts 15 years of experience in growing and breeding cannabis and hemp, and managing grows.