Read our detailed guide about a cbd oil business business. Typical target market, growth potential, startup costs, and more for this small business! How to Sell CBD Online: A Guide for Success Over the last half-decade, sales of cannabidiol — better known by its acronym CBD — has exploded in popularity, becoming one of the fastest growing
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.
Start a cbd oil business by following these 10 steps:
- Plan your CBD Oil Business
- Form your CBD Oil Business into a Legal Entity
- Register your CBD Oil Business for Taxes
- Open a Business Bank Account & Credit Card
- Set up Accounting for your CBD Oil Business
- Get the Necessary Permits & Licenses for your CBD Oil Business
- Get CBD Oil Business Insurance
- Define your CBD Oil Business Brand
- Create your CBD Oil Business Website
- Set up your Business Phone System
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 .
It’s very important to secure your domain name before someone else does.
Find a Domain Now
Powered by GoDaddy.com
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 ($49 + State Fees)
- LegalZoom ($79 + State Fees)
You can form 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
Besides being a requirement when applying for business loans, opening a business bank account:
- Separates your personal assets from your company’s assets, which is necessary for personal asset protection.
- Makes accounting and tax filing easier.
Recommended: Read our Best Banks for Small Business review to find the best national bank or credit union.
Open net 30 accounts
Net 30 accounts are used to establish and build business credit as well as increase business cash flow. With a net 30 account, businesses buy goods and repay the full balance within a 30-day term.
NetMany net 30 credit vendors report to the major business credit bureaus (Dun & Bradstreet, Experian Business, and Equifax Business Credit). This is how businesses build business credit so they can qualify for credit cards and other lines of credit.
Recommended: Read our best net 30 vendors, guide and start building business credit.
Get a business credit card
- Separate personal and business expenses by putting your business’ expenses all in one place.
- Build your company’s credit history, which can be useful to raise money later on.
Recommended: Apply for an easy approval business credit card from Divvy and build your business credit quickly.
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.
Make LLC accounting easy with our LLC Expenses Cheat Sheet.
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.
- 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.
If you aren’t feeling confident about designing your small business logo, then check out our Design Guides for Beginners, we’ll give you helpful tips and advice for creating the best unique logo for your business.
Recommended: Get a logo using Truic’s free logo Generator no email or sign up required, or use a Premium Logo Maker.
If you already have a logo, you can also add it to a QR code with our Free QR Code Generator. Choose from 13 QR code types to create a code for your business cards and publications, or to help spread awareness for your new website.
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.
Still unsure about what kind of business you want to start? Check out the latest Small Business Trends to help inspire you.
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.
STEP 10: Set up your business phone system
Getting a phone set up for your business is one of the best ways to help keep your personal life and business life separate and private. That’s not the only benefit; it also helps you make your business more automated, gives your business legitimacy, and makes it easier for potential customers to find and contact you.
There are many services available to entrepreneurs who want to set up a business phone system. We’ve reviewed the top companies and rated them based on price, features, and ease of use. Check out our review of the Best Business Phone Systems 2022 to find the best phone service for your small business.
Recommended Business Phone Service: Phone.com
Phone.com is our top choice for small business phone numbers because of all the features it offers for small businesses and it’s fair pricing.
Start a CBD Oil Business in your State
TRUiC’s Startup Podcast
Welcome to the Startup Savants podcast, where we interview real startup founders at every stage of the entrepreneurial journey, from launch to scale.
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
For fun informative videos about starting a business visit the TRUiC YouTube Channel or subscribe to view later.
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.
Learn from other business owners
Want to learn more about starting a business from entrepreneurs themselves? Visit Startup Savant’s startup founder series to gain entrepreneurial insights, lessons, and advice from founders themselves.
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:
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.
How to Sell CBD Online: A Guide for Success
Over the last half-decade, sales of cannabidiol — better known by its acronym CBD — has exploded in popularity, becoming one of the fastest growing industries within the United States.
See how BigCommerce can grow your CBD or Hemp business online
Featured CBD Resources
Selling CBD Wholesale
CBD Shipping 101
CBD Banking and Financing Your CBD Venture
How to (Successfully) Sell CBD Online
CBD Marketing 101
Finding the Best CBD Payment Processors
Selling CBD Wholesale
CBD Shipping 101
CBD Banking and Financing Your CBD Venture
How to (Successfully) Sell CBD Online
CBD Marketing 101
Finding the Best CBD Payment Processors
Selling CBD Wholesale
CBD Shipping 101
CBD Banking and Financing Your CBD Venture
Give your business the green light and begin selling today.
I have questions and would like guidance from an ecommerce expert.
TABLE OF CONTENTS
Over the last half-decade, sales of cannabidiol — better known by its acronym CBD — has exploded in popularity, becoming one of the fastest growing industries within the United States.
The total U.S. CBD product sales jumped from $108 million in 2014 all the way to $1.6 billion in 2021 — with the number expected to reach nearly $2 billion by end of year 2022.
With the coronavirus pandemic affecting industries nationwide, it is no surprise that most of this growth has been driven by online sales, which accounted for by far the most sales of CBD products in the United States in 2020.
The growth of online sales, combined with the increased popularity of CBD in general, presents an exciting opportunity for CBD online businesses — particularly those looking to move further into the world of ecommerce.
In fact, the movement to CBD ecommerce has already begun. In the United States alone, cannabidiol (CBD) sales in the ecommerce channel are forecast to increase to more than six billion U.S. dollars by 2026.
However, for new and growing business owners, selling CBD oil and other CBD-infused products online presents a few obstacles that must be overcome before launching a website and kick-starting the marketing process.
From the legalities and rules that encapsulate the CBD industry to the keyword research, SEO-optimized content and link-building that is required to stand out in this already-saturated market, it is well worth brushing up on your knowledge.
A well-informed business can feel confident about embarking on a digital journey that is sure to be as lucrative as it is enjoyable, so allow some time to further enlighten yourself on the ins and outs of how to sell CBD online.
What is CBD?
Cannabidiol, widely known as CBD, is a popular natural substance reportedly used to help with a wide range of conditions. It is added into tinctures, edible foods like gummies, oils and body products like balms and lotions.
Unlike THC (tetrahydrocannabinol), the primary mind-altering substance in cannabis, CBD is non-psychotropic. The cannabinoid can be extracted from both the hemp and marijuana plants, with industrial hemp plants proving to be the most popular for CBD extraction.
Miraculously, the human body is equipped with something called an endocannabinoid system (ECS). This complex system produces its own cannabinoids and is responsible for achieving homeostasis by receiving and transmitting signals sent by cannabinoids, like CBD. Cannabinoids work by binding with receptors scattered throughout the brain and immune system.
Numerous scientific studies have successfully demonstrated the way in which the ECS reacts when a dose of cannabinoids like CBD is administered. For example, a study published in the journal Neurotherapeutics suggests that CBD may actually inhibit or activate compounds found in the ECS. A prime example of how CBD may benefit the body is by stopping the absorption of anandamide. According to a study on The Profile of Immune Modulation by Cannabidiol(CBD), the plant may also trigger a number of other immune system responses.
Types of CBD.
Prior to starting, businesses will have to determine which type of CBD to sell online. With so many different kinds of CBD out there, deciding on one can be a tricky proposition.
We have narrowed down the number to three main types of ingredients that contain CBD, including:
CBD isolate is widely considered the purest form of CBD, which means no other ingredients are present. It is also refined, lacking any discernible taste or odor.
Full-spectrum hemp differs from isolate most evidently in that it contains all cannabis plant compounds, including other cannabinoids and essential oils.
All of these compounds work together to enhance the potency, producing what is called the ‘entourage effect.’
Broad-spectrum hemp is the middle ground between isolate and full-spectrum CBD. It contains the additional cannabis plant compounds of full-spectrum while also having little or no amounts of actual THC.
Like full-spectrum, broad-spectrum hemp has the ability to deliver the ‘entourage effect.’
CBD Industry by the Numbers
Due to the reported health benefits — partially because of the close affiliation with the cannabis plant — consumer interest around CBD products has been steadily rising since 2016.
In 2018 — considered CBD’s breakout year — the number of US CBD consumers doubled, from 2.6% to 4.8% with Baby Boomers leading the pack.
This number has only increased steadily since, with the projected estimated annual CBD usage rate to jump to an astounding 35%.
According to a January 2020 Consumer Reports survey, almost one-third of U.S. adults tried CBD in the past 24 months. Twenty percent of Americans 65 and older said they’d tried CBD, up from 14 percent in a January 2019 CR survey.
CBD oil is now infused in many different products across the board, especially in the wellness, food, beverage and beauty industries. Consumers now have a bevy of CBD products to explore, from tinctures and topicals to gummies and even lattes.
What makes them tick the most? According to a study by Statista, the leading cannabidiol product types among adults in the United States as of 2020 are:
By 2025, the US’s retail market for CBD products is expected to hit $16 billion, up from $2 billion in 2018. Compound the above with the fact that, among those who are familiar with CBD, 80% support its usage — even if they are not personally using it — and it becomes clear that CBD is an up-and-coming niche for starting an online business.
Conquer the High-Risk CBD Vertical with Influencer Marketing
Marketing in high-risk verticals comes with challenges. Watch Chris Van Dusen of CBDistillery share tips on leveraging influencer marketing, brand ambassadors and more to fuel success.
9 Steps for Starting a CBD Business Online
If you are interested in exploring the high-growth niche of CBD sales, here are the nine main steps for starting an online CBD business:
- Identify your CBD niche and products.
- Understand the laws and regulations around CBD.
- Generate a thorough CBD business plan.
- Get your business documents in order.
- Find your CBD supplier.
- Discover the perfect ecommerce platform.
- Build up your site.
- Determine shipping and payment terms.
- Market your business.
1. Identify Your CBD Niche and Products.
A quick sweep through the (digital) shelves of any wellness store will prove that you can now buy CBD anything. Creams and ointments, human and pet chewies, hemp clothes and accessories — when consumer interest is high, entrepreneurs will try to capitalize on the hype.
What should you sell then: the trendy stuff or the “classics”? Well, that’s for you to decide. When assessing the overall market prospects, look into the general niches first.
Here are the most popular ones:
- CBD-infused foods/beverages.
- Supplements/wellness products.
- CBD-based cosmetics.
- CBD pet products.
Next, you should zoom in on your product types. Most of these differ based on the CBD consumption method:
- Drops and sprays: The key ingredient in both is CBD oil, decarboxylated from hemp/hemp flowers and mixed with a carrier oil. Drops and sprays can also include flavoring agents and other compounds that make them more pleasant to ingest.
- Pills and capsules: Wrapping a dose of cannabinoid in gelatin or soft gel capsule makes it more digestible. Also, since many people take CBD as an alternative to over-the-counter medicine, this form may seem more familiar and thus appealing.
- CBD vapes and cartridges: Inhalation products tend to be popular among recreational MJ users and people who enjoy the social aspect of vaping. Also, this method is often preferred by consumers using CBD for pain relief as it gets absorbed faster by the blood system through inhalations.
- Tinctures: Just like medicinal tinctures, CBD-based ones are made by combining cannabinoids with alcohol or another strong solvent. Sometimes CBD tinctures also contain extra herbs. While most may not have great flavor, tinctures are popular with people who want to quickly feel the effects of CBD.
- Topicals and patches: Reportedly best suited for targeted action such as joint, back or menstrual pain, topical ointments and CBD patches appeal to consumers who don’t like hemp flavor or prefer external applications for other reasons.
- CBD edibles: With gummies, candy, chocolate, honey sticks, there’s a wide variety of munchable CBD products on the market. Most of them make hemp look less ‘medicinal’ and more of a wellness treat. In 2019, 3 out of 4 chefs identified CBD-infused food as a hot trend.
2. Understand the Laws and Regulations Around CBD.
Legality is a big part of CBD marketing, and failure to follow the rules — whether it be state or federal laws and regulations — could result in significant penalties.
Classification of the cannabis plant as a Schedule I narcotic has hindered progress in the legal department. FDA regulations pose a concern for CBD merchants, and if you are hoping to start selling CBD online, you may be wondering what your options are in regards to advertising and marketing.
Let’s answer some questions that may be on your mind:
Is CBD Officially Legal Now?
The answer to this question depends on the state in which you reside, whether you want to start selling CBD online that has been extracted from a marijuana or hemp plant, and what products you intend to sell. Only hemp-derived CBD products may be sold online.
The passage of the 2018 Farm Bill did not alter or change the FDA’s authority to regulate food, drug, cosmetic, device, pet food and dietary supplement products. Many states amended their state drug law to remove hemp from their state-controlled substances act while adopting the FDA’s position on selling certain hemp-derived CBD products. Certain states prohibit the sale and consumption of CBD. Other states limit the types of CBD products sold in the state or require a specific license.
If you are selling or planning to sell CBD products online, you must have systems in place to ensure that you are fully compliant with each state’s laws around CBD. Implementing product-based shipping restrictions on your store will help you stay within safe shipping zones.
What Rules and Regulations Do I Need To Follow?
The Farm Bill passed at the end of 2018 legalized the commercial production of hemp in the United States. This means you can grow industrial hemp with a license from the state or the USDA and then sell products containing hemp-derived CBD where state laws and regulations allow.
There are some restrictions, however:
- The hemp you are using to produce CBD cannot contain more than 0.3% THC. Any cannabis plant with a higher concentration of THC is automatically considered a marijuana plant, and stronger regulations kick in. Some states further restrict THC content to 0.0%.
- CBD produced from marijuana plants is legal in 15 states for recreational cannabis usage and in 36 states for medical use when produced and sold through regulated marijuana markets.
When it comes to cannabinoids as a substance, the regulatory matter gets complicated. To date, FDA has approved only one CBD-based prescription drug, Epidiolex. The FDA prohibits making any drug or health claims about CBD products. The FDA also prohibits adding cannabinoids into food or marketing anything with it as dietary supplements.
What about the array of edible CBD products currently on the shelves? Are they illegal?
The answer is that the legal status of CBD products isn’t consistent across federal and state laws and regulations. Certain CBD products, such as foods and dietary supplements, may be legal under some state laws, while the FDA prohibits these product types.
While FDA doesn’t allow CBD in food or to be marketed as a dietary supplement, to date, enforcement actions against CBD sellers have been limited to warning letters directed at sellers that make egregious drug or health claims about their products.
While hemp-derived products with no more than 0.3% THC are no longer considered controlled substances, the FDA prohibits adding CBD to food or marketing it as a dietary supplement. However, enforcement has been limited so long as no drug or health claims are made about the products.
Statewide laws differ. Several states allow the sale of all CBD products, while others may limit the types of products that can be legally sold. Some states prohibit CBD products with any amount of THC, even if it is below the allowed federal limit of 0.3%. There may also be requirements for product labeling and testing, as well as licensing requirements for retailers and registration requirements for products.
It’s best to cross-check with a local legal specialist if there are any restrictions or requirements regarding CBD product sales in each state you plan to sell.
3. Create a Thorough CBD Business Plan.
Jumping into a business without a solid business plan is like driving without a rearview mirror — you can do it, but you may miss an obstacle heading your way.
When it comes to the CBD niche, your business plan is also your navigator for staying on top of changing regulatory policies, conflicting operational priorities and new business opportunities, fueled by market demand. Plus, it’s the document your financial supporters and other stakeholders will want to see.
Here’s what should go into your business plan for ecommerce CBD operations:
- Start with market analysis: The goal of a market analysis is to supply you with sufficient information about your industry size, customers, competitors and other market variables so that you can make more informed decisions regarding your product positioning, pricing and overall go-to-market strategy.
- Create a Compliance Plan: State and federal laws and regulations surrounding CBD products are changing rapidly. It is important to have a plan in place that will allow your business to stay on top of regulatory changes and maintain compliance with applicable laws and regulations.
- Pick your brand name and confirm product range: Explain how your brand name, along with other brand assets, differentiates you from the competition — recap which CBD niche you plan to target and why. Briefly describe your product range, focusing on the product quality and competitive parameters.
- Determine your financing: Estimate how much cash you’ll need to launch your operations. Break them down as one-time pre-launch investments (e.g., commerce website development, inventory purchase, product design/branding) and ongoing monthly costs ( e.g., inventory restocking, handling/packaging, shipping, marketing, taxes, etc.). Always add extra padding for ‘unplanned’ expenses because these will happen. Then look into how much time and how many sales you’ll need to make to break even monthly. If you are self-financing, estimate how much of a runway you’ll end up having. If you are planning to secure investment later on, prepare figures describing your anticipated expenses vs. profits. You should also set targets for CPA (cost per acquisition), AOV( Average order value), sales conversion rates, customer retention rate, customer lifetime value (CLV).
- Include a realistic marketing plan: A marketing plan details your strategy for growing awareness around your CBD brand, acquiring new customers and fostering repeat purchases. It’s a cornerstone document that should be a) data-backed, b) realistic c) channel-specific. Yes, writing a solid marketing plan will take a ton of time and research. But this early investment pays off in terms of reduced budget waster and better marketing results later down the road.
You can also learn more about business plan writing for ecommerce from our previous guide.
4. Get Your Business Documents in Order.
To sell CBD online, you need to obtain several licenses:
- A regular business license: get incorporated and register a business with your state to start operations. Make sure to request an EIN/TIN for your newly created company from the IRS.
- Reseller license: If you plan to purchase CBD from wholesalers, you may also need to get a Reseller’s license (certificate) from your state. This document is important because it allows you to buy products wholesale without paying sales tax. The license also lets you collect sales tax from your customers afterward.
- CBD distributor license, retailer license and/or product registration: Several states require CBD retailers to obtain a CBD or hemp product license before selling CBD products to consumers in the state. Some states also require individual CBD products to be registered or approved by regulators. These licenses and registrations may be required even if you are selling products online directly to consumers without a physical presence in the state.
5. Find Your CBD Supplier.
Arguably, the most critical step of your ecommerce operations is finding a reliable CBD supplier. There are a few reasons for that.
First, you need to ensure that you are selling CBD derived from hemp plants, not marijuana ones. The latter contains a higher THC dosage, making them legal only in a handful of states when produced and sold through regulated marijuana markets. Federal and state laws require that all hemp grown in the United States be tested for THC concentration. Be sure that any supplier you choose to work with can provide an independent third-party certificate of analysis (COA) for each batch of hemp, hemp-derived ingredients, or a finished product that shows a THC concentration of no more than 0.3%.
Reputable wholesalers typically do lab testing and can provide a COA detailing a product’s THC content and showing that the product is free from contaminants. This is important because several states require that products be tested for various contaminants in addition to THC content. Not being able to provide a detailed COA is a major red flag.
States may require that CBD products be tested for:
- Residual solvents.
- Heavy Metals.
Secondly, your product quality will impact customer satisfaction and your CBD brand reputation. After all, 24% of CBD users named the ability of the product to generate the “desired effect” as their primary purchase driver.
Being able to provide a detailed certificate of analysis for each product sold will increase consumer confidence in your brand. Other buying priorities include ingredients quality, price, concentration and consumption method (e.g., oil, edible, vape).
Considering that CBD production remains underregulated, some products on the shelves may not have the CBD content advertised — there may be some containing no cannabidiol at all.
Such sham brands and manufacturers, speculating on CBD’s sweeping popularity, are making it harder for honest CBD companies to break into the industry. As The New York Times feature on the origins of CDB popularity sums it up:
“As a result, the compound is often caricatured as snake oil, a scam, even as promising research into the full potential of CBD is starting to pick up.”
As a new CBD brand, you don’t want to end up on the sham side. Again, this is another reason you should do careful due diligence when assessing different CBD manufacturers. Beyond requesting or performing independent product testing, also evaluate a potential wholesaler based on the following criteria:
- Hemp sourcing method and origin.
- Required licenses and certifications.
- Use of current Good Manufacturing Practices (cGMP)
- Extraction method.
- Reviews from other entrepreneurs.
- Extra services (e.g., labeling, dropshipping).
6. Discover the Perfect Ecommerce Platform.
Apart from finding a trustworthy CBD supplier, you’ll also need to identify the (best) ecommerce platform for your operations. Just like quality products, your tech infrastructure will positively contribute to your customers’ satisfaction with your brand.
However, not every ecommerce platform allows creating an online CBD store due to CBD’s regulatory status. Still, you have some outstanding options.
“BigCommerce by far has the best solution for selling CBD products online. Their platform, coupled with our FDA compliance solutions for regulated products, has proven to be a success for dozens of Vaping websites and has, in turn, attracted numerous CBD companies to the platform. Simply put, BigCommerce is light years ahead of other platforms when it comes to preparing you with everything you need to sell CBD online.”
BigCommerce offers a bevy of B2C and B2B ecommerce features for CBD retailers, wholesalers and manufacturers. From drag-and-drop page builders to limitless customization opportunities to 0% transaction fees and 99.9% uptime, we provide global CBD businesses with an integrated ecommerce solution they need to start their operations fast and scale— without constraints.
CBD brands and suppliers place their confidence in BigCommerce to properly market their product and reach a broad audience, so why not do the same? Our Saas platform merges everything you need to run an online store. You won’t need to worry about arranging payments, and best of all, you can customize your very own CBD store.
BigCommerce takes out the guesswork by combining everything you might need for an online business to thrive, from branding and design aspects to marketing and optimization. We provide payment gateways for simple online transactions, outstanding support and a mobile-friendly design. What’s more, the BigCommerce platform allows CBD marketers to easily manage returns when selling their products, which can be featured on numerous websites.
If you are eligible, you gain access to a nice set of core commerce features for launching your digital operations, including design templates, integrated shipping, marketing tools and payment processing.
The proprietary Shopify Payment method isn’t available for CBD products, so you’ll need to get approved by a third-party payment processor.
3dcart is another ecommerce platform that allows hosting digital CBD and vape-related businesses. They offer similar ecommerce solutions — shopping cart software, embedded ‘buy’ button and full-scale ecommerce website builder, featuring themes, unlimited bandwidth, payment processor support and more.
However, their website backend comes with a learning curve, so 3dcart may not be the optimal choice for non-coding beginners.
7. Build Your Website.
By opting for an ecommerce platform over open-source ecommerce tools, or custom development, you reduce the website development timeline.
Since the solution provider handles hosting, infrastructure, etc., all you have to do to get your CBD operations off the ground is work on your store design and list products.
Customize your design.
Have you ever painted by numbers? Design experience on modern ecommerce platforms is pretty similar to that. Instead of starting with a blank canvas, you rely on a website theme — your set of pointers, pre-mapping the final store look.
You can still be creative, though, changing colors, layouts, fonts and other visual elements or adding new elements to your online store.
When it comes to CBD ecommerce store design, make sure that:
- Key product information has a prominent spot: Most of your customers will want to know the critical product specs: dosage/strength, hemp origin, and extraction method. Make sure all of this information is displayed in a digestible manner for each type of product and ensure that no health or drug claims are made about your products. CBDistillery goes straight to business and highlights product ingredients, and suggested use:
- Mind the navigation: Since CBD is still a somewhat new niche, expect to see an influx of first-time buyers. These folks will need some extra hand-holding, unlike regular users. Design your on-site navigation to accommodate their customer journey. Create descriptive product categories and sub-categories, organizing your products by consumption methods and cannabinoid content. Add products and descriptions.
In the CBD space, your product descriptions should be more than just convincing. They also need to be:
- Accurate and fact-based.
- Devoid of any health or drug claims.
- Cliché and jargon-free.
When it comes to CBD marketing, FDA does not allow businesses to suggest that any of their CBD products can “diagnose,” “cure,” “treat” or “prevent” any medical condition. Even if it’s tempting, don’t go making any big claims. It is also important to note that customer reviews that mention any drug or medical claims about your product are also prohibited. Make sure to monitor any reviews and remove those that make inappropriate claims.
Lastly, don’t write overly complex product descriptions. Not every store visitor will be a CBD connoisseur, familiar with industry jargon. So while you should always provide ‘technical’ product information, avoid niche chemical terms, industry jargon and odd CBD pop culture references.
Shoot and upload product photos.
Ecommerce photos do two important things:
- Act as an extension of your brand.
- Help sway customers’ purchase decisions.
For example, 90% of Etsy shoppers said that product image quality is a purchase trigger. If you have the budget, hire a professional photographer to shoot a series of product-only and lifestyle images for your brand. Those short on cash can also snap amazing ecommerce pictures on a budget.
8. Determine Shipping and Payment Terms.
After designing your store layout and organizing your product catalog, you need to sort out how your products will reach their new owners.
Determine your shipping policy.
Shipping is essential to ecommerce consumers — you don’t want to let them down in that department. To work out the optimal shipping policy for your CBD business, ask yourself these questions:
- What’s the threshold I set for ‘free shipping’? For 79% of US consumers, “free shipping” is a strong prompt to buy online more. But do people get upset when there isn’t such an option? In general, yes, over a third of consumers will be upset if there’s no complimentary shipping for an order valued above £135 ($150). Determine a reasonable threshold for your brand based on the anticipated average order value.
- Do you plan to offer a variable fee? Destination-based or weight-based shipping fees can help a smaller retailer reduce logistics costs. However, they may alienate some customers too: 50% of abandonments happen when the shipping/tax costs are too high. The fix? Provide estimated shipping costs or a delivery calculator option pre-check out if you plan to use variable fees.
- What delivery timeline is feasible? Most people are spoiled by Amazon Prime next-day deliveries, but few smaller brands can pull off the same levels of service nationwide. So choose your battles. Limit same-day delivery to your city/state only. Set the right expectations regarding priority/express delivery if you plan to offer such.
- Which logistics carrier works best? Not all carriers have straight policies regarding CBD shipments. Do your research carefully. For example, while UPS allows shipping hemp and CBD-infused products, they also state that they “reserve the right to dispose of any shipment containing Marijuana, Hemp or Hemp products tendered for shipment which Shippers are prohibited from shipping, which UPS is not authorized to accept, which UPS states that it will not accept, or which UPS has a right to refuse.” That’s not very reassuring.
- Are there legalities around shipping hemp/CBD-based products across state lines that you should be worried about? It is legal to ship CBD oil across state lines as long as it comes from hemp, not marijuana, and has a maximum THC content of 0.3%. However, there are some states where the THC limit is even lower than that. Before shipping across state lines, research each individual state’s regulations. Carriers also have their own requirements in terms of product types and paperwork.
Select an ecommerce shipping solution.
Your next step is to select supporting shipping and fulfillment software — a tool that will help you set shipping rates, manage logistics, print labels and auto-dispatch updates to customers.
To minimize hassle and mistakes, your app should integrate directly into your ecommerce platform. You can discover different shipping and fulfillment apps on the BigCommerce marketplace.
Don’t forget to check if your pick also iterates with the carrier you plan to use.
Choose a payment processor that works with CBD.
The CBD industry is deemed “high risk” due to the ongoing regulatory debacle. Thus, many payment processors choose to exclude CBD sellers to minimize their operational risks.
Despite this, you are not entirely out of options. To accept payments from customers, you can work with a specialized payment processor who knows how to handle high-risk businesses.
For example, BigCommerce lets CBD businesses choose among 65 payment gateways that can be used to do business in over 100 countries, employing some 250 local payment methods. Get to know more about how payment processing works for CBD companies.
9. Market Your CBD Company.
Once you are up and operational, you need to focus on customer acquisition. While the CBD industry is trendy right now, shoppers won’t flock to you on autopilot unless you set yourself up with a solid marketing system.
Focus on content.
CBD products are still largely misunderstood, often due to shady marketing from other brands or bogus medical claims made by self-proclaimed gurus. Build your initial customer base by seeding accurate content.
Educate the interested, but cautious, buyers about:
- Different product types.
- CBD extraction methods.
- Potential side-effects.
- Correct usage/dosage.
- The hemp industry as a whole.
Invite industry experts to create more comprehensive content than your competition. Focus both on your blog and social media, as that’s where most younger consumers go looking for both product inspiration and information.
Publishing well-researched content is key to dominating the search engine results. Especially with the latest Google update called ‘passage indexing.’ By honing its AI algorithms, Google now indexes individual passages from a web page (rather than just the entire page) to help users find needle-in-a-haystack info.
For instance, if I’m googling something like “What’s the best strength of CBD oil?”, I’m redirected to a highlighted result on the page:
This SEO change is an excellent opportunity for CBD businesses to attract top-of-the-funnel customers and convert them with educational content. Since SEO competition around CBD-related keywords is pretty intense, going after long-tail, less-searched keywords can help you build the initial traffic while working on further optimizations.
Partner with influencers.
Much of CBD’s current popularity comes as a direct result of patients’ advocacy.. First-hand stories from people, whom CBD helped cope with chronic pain and seizures, initially spurred the mass interest in the plant both for therapeutic and wellness purposes.
Today, many celebrities and public figures are outspoken fans of the CBD — some of them have even launched their CBD businesses. So finding credible advocates for your brand shouldn’t be an issue. Just ensure that you partner with people who share your brand beliefs and can speak about CBD with authority. Also, make sure no health or drug claims are made about your products and don’t forget about mandatory FTS disclosures. Lastly, keep close tabs on the latest federal laws and regulations as well as individual states’ and local governments’ laws and regulations to ensure your communication aligns with any requirements.
4 Evergreen Issues CBD Businesses Are Facing
While entrepreneurs in the CBD industry can capitalize on the industry’s rapid boom, they should also brace themselves for unique challenges. With a lack of FDA regulation and differences in CBD laws and regulations on the state level, running a CBD business can feel particularly gruesome at times.
This is especially true when it comes to:
1. Banking and financing.
Sadly, CBD businesses are considered ‘high-risk’ by many financial service providers due to the aforementioned gaps in state laws and regulations. Be prepared to do some walking and negotiating when opening a merchant account. Securing additional financing via business loans can be challenging, again thanks to the bad reputation the cannabis industry has among certain FIs.
Don’t despair, though. There are still some hemp-friendly banks and investors in the field too.
2. Payment processing.
The CBD industry is deemed “high risk” due to the ongoing regulatory debacle. Thus, many payment processors — including most major credit cards and Paypal — choose to exclude CBD sellers to minimize their operational risks.
That doesn’t mean you are entirely out of options. To accept payments from customers, you can work with specialized payment processors who know how to handle high-risk businesses.
Payment processors that accept CBD transactions include:
BigCommerce lets CBD businesses choose among 55 payment gateways that can be used to perform business in over 100 countries, employing some 250 local payment methods. Get to know more about how payment processing works for CBD companies.
3. Business insurance.
Insurers are slow to act on the recent legalization of hemp and hemp-derived products. Like conservative banks, they often bar CBD companies altogether or burden them with high premiums.
A solid insurance plan is crucial for your company’s liability, so don’t skim on getting a good plan from a CBD-friendly insurer.
4. Differentiation from the competition.
With a slew of businesses touting ‘cannabis’ as a customer attractor, it may be challenging to stand out even when you sell genuine, high-quality cannabis products.
A 2017 Penn University study found that 70% of cannabinoid products sold online had issues with labeling. Over 42% of CBD products were under-labeled, meaning they contained more CBD than stated. Some 26% were over-labeled — they had a lower condensation of cannabinoids than said.
Such happenings — along with misleading marketing and grossly overstated claims regarding CBD’s effectiveness — can make new customers skeptical of recent market entrants. Gain their trust by being positively different when it comes to:
- Transparency: From telling where your hemp plants grow to display proper analysis certification, explain to your customers what they are about to purchase and munch.
- Accuracy: Avoid unverified scientific statements (even if they look promising for marketing). Check your sources and invite known experts to help you create content and educational brochures. Make sure advertisements, marketing materials, and labels are free of health and drug claims.
- Storytelling: Your unique story, cementing your brand mission and values, can help you build a stronger emotional connection with your target audience. .
4 Core Tips for Nurturing Your CBD Business
New ecommerce companies are very tender. If you want your CBD business to grow, evolve and always be ripe, here are three things you should consider doing.
1. Ask for help.
New CBD business owners will have a lot of their platter between murky regulations and operational issues. While everything is Google-able these days, the information you find may not be accurate. You shouldn’t underestimate the value of a mentor, aka someone who already walked the same walk before you.
“That’s the rub of excelling in the cannabis industry: there’s no model of excellence right now. It’s a fluid and shifting industry that didn’t really exist just a few years ago.” That makes finding a good industry mentor somewhat challenging. Yet, not impossible. Non-profit organizations such as CBD Alliance, National Hemp Association and Vote Hemp are great places to find new industry connections and support.
2. Have patience.
Fast traction is often viewed as a given in the ecommerce industry. You have probably heard of literal overnight success stories where some “$500 Instagram ad drove $50,000 in sales in a day”.
In the CBD industry, paid ecommerce ads are usually not an option. Click-bait marketing can cause compliance issues, while content marketing and SEO both take time to work. There are plenty of restrictions for marketing in the CBD industry, so take a deep breath as you navigate what can work and where.
3. Understand the industry.
Despite (or because of) slow FDA response, the CBD industry keeps evolving in somewhat contradictory directions. While some states like Texas removed the ban on selling edible CBD products in 2019, others banned CBD-infused foods and beverages last year.
Market trends and consumer trends change from week to week too. Subsequently, it can be difficult for any CBD business to stay on top of the latest trends and fads. But they need to keep close tabs on emerging tendencies among their clients, changes in compliance requirements and other major industry happenings.
Thankfully, there are websites that can help you keep up to date with the latest in CBD industry news. These sites include more CBD-based options like Way of Leaf or traditional staples such as Forbes.
4. Listen to your customers.
As you grow your CBD business, make sure that you are still listening to the voice of your customers. Build your brand around what your customers like by asking for feedback and paying attention to social channels to see what users like or don’t like about your products and the industry itself.
The CBD industry is growing fast and quickly becoming a crowded market. Buyers are growing savvier as their options increase. If you want to stand out from the crowd and find success, the best way to do that is by crafting a trustworthy, quality brand that customers can rely on.
Your guide to CBD ecommerce success.
Download The Complete Guide to CBD Ecommerce to learn about industry trends, challenges CBD merchants face online, and how to overcome them.
The Final Word
CBD is an exciting product to trade. On the one hand, you can make a genuine difference by supplying your customers with life-improving goods. On the other hand, you also need to constantly educate the general public — along with some B2B partners and other stakeholders — about your products’ legal status and lack of connection with THC-dominant marijuana.
That can be a difficult battle, but it looks to be well worth it when you look at the CBD industry sales prospects again. Grandview Research estimates that the CBD market will swell by a compound annual growth rate of 22.2% between 2019 and 2025.
You can also be part of that revenue pool if you launch your online CBD business today.
This material does not constitute legal, professional or financial advice and BigCommerce disclaims any liability with respect to this material. Please consult your attorney or professional advisor on specific legal, professional or financial matters.