7 Things You Must Consider Before Starting a CBD Business

7 Things You Must Consider Before Starting a CBD Business

CBD has become more and more popular in recent years, and its increasing popularity means that the demand for the substance is on the rise. CBD is a huge cash crop, and there are a lot of people considering trying to turn a profit on this booming business.

Unfortunately, there are still many difficulties that can plague those interested in marketing CBD. Things like its legality, its pharmacology, and the stigma surrounding it are confusing to some people, and it’s important to understand what you’re getting into before you start selling it.

In this article, we’re going to address some of the most common issues regarding the marketing of CBD. Afterwards, you’ll be much better informed and more capable of starting your CBD business.

#1 The Difference in Legality of CBD Products and Important Legalities

The most obvious and potentially dangerous aspect of selling CBD is the fact of its questionable legal status. You are probably already aware that CBD – a compound that’s extracted from marijuana – is technically federally illegal.

But there are ways to work around this. The easiest way to work around this is to use hemp for the extraction of CBD, or source your product from a company that uses hemp. The reasons for this are fairly simple.

Marijuana, the plant which is federally illegal, contains a number of active compounds referred to as cannabinoids. The most prominent cannabinoids found in the plant are CBD and THC. These compounds, despite being nearly identical in molecular structure, act quite different in the brain and body.

  • THC is highly psychoactive and is largely responsible for the ‘high’ that people get when they smoke marijuana. THC is known for causing a wide number of effects ranging from time distortion to lethargy.
  • CBD, on the other hand, is not psychoactive. Instead, it can cause a number of benefits without actually causing any significant changes to mindstate.

This is important because hemp-based CBD extracts come from a plant that contains less than 0.3% THC. If they’re produced by using industrial hemp instead of recreational marijuana, thanks to the Farm Bill that Trump signed back in December, these products are generally considered legal.

#2 The Challenge of Setting Up a Payment Processor

If you’re getting into the CBD industry, you might have a hard time finding a payment processor that’s happy to serve you. CBD is associated with marijuana, a plant that’s led some retailers to be forced into carrying their profits around in cash due to the unwillingness of payment processors to work with them.

Fortunately, the more popular CBD comes and the better the industry comes to understand this compound and its legality, the more payment processors are becoming willing to accommodate marketers.

Regardless, CBD’s close ties with cannabis mean that it’s a high-risk compound, and as such you’re going to need to find a high-risk payment processor if you want to do things safely.

#3 The Average Price of CBD Products and How Volatile Those Prices Are

CBD is an expensive product, there’s no way around it. Some companies, such as Charlotte’s Web, sell their CBD for upwards of 15 cents a milligram – more than three times as much as what gold is currently selling for.

Even cheaper brands of CBD are pretty expensive, and you’re likely going to be looking at around $40 for a lower-end bottle of CBD product. There are reasons for this.

One of the most prominent issues leading to the high price of CBD is the extraction process. The most common CBD extraction method is known as the supercritical CO2 extraction, which we won’t describe in detail here. Rest assured, the process is complicated and expensive.

The other main reason that the prices of CBD are so volatile is because the market is expanding at such an explosive rate. The Bank of America estimates that people are spending $1.9 billion on CBD annually in 2019, but suspect that the number will raise to $11.5 billion by 2032.

#4 The Importance of Lab Testing and How to Understand Them

One thing that you’re going to need to learn about is lab testing. Consumers want to ensure that they’re getting good products, and they’re going to do this by not only reading reviews and reports on your product but by checking lab results.

Even if you’re capable of doing the testing on your products yourself, you’re going to want to make sure that you get third-party lab testing done. Testing your own product is deemed suspicious, whereas third-party results guarantee that there’s no bias.

There are a number of things that your lab test results will provide. These are the things you’ll have to understand:

 

  • CBD. Obviously your results will provide you information on the amount of CBD that’s actually found in your product.
  • THC. It’s important to have the levels of THC tested to ensure legality.
  • Other cannabinoids. Getting tested for other cannabinoids such as CBG, CBN, and CBDA will help users find out whether or not your product can be considered a full-spectrum extract.
  • Microbes. Microbes, such as E.Coli and Salmonella, are living organisms and are one of the last things that you’ll want to find in your product.
  • Pesticides, herbicides, etc. Tests will report back on the type and amount of any pesticides and herbicides found in your product. This ensures that any product marketed as organic or pesticide-free lives up to the claim.

 

#5 The Difficulties of Marketing CBD Products

CBD is a very promising market, but there are a lot of difficulties that one might encounter when selling the product.

  • Legal issues, such as those we’ve already discussed, could be a deterrent for many.  Furthermore, ,the law surrounding CBD is changing on a regular basis, and a small change to its legality could implicate your business.
  • Brand stories can be difficult to ideate. Since the market is booming, new marketers are quick to capture the most obvious brand stories – CBD for old people, CBD for sick people, CBD for anxious people, and similar stories are all taken.
  • There’s a massive amount of competition. New CBD businesses are popping up left, right, and centre, and it can be difficult to get your foot in the door.
  • The FDA still hasn’t decided how to regulate CBD, and as such there are difficulties marketing it as a supplement or medicine.

#6 The Demographics of Consumers in the CBD Market

Any marketer will want to know the demographics of their consumers, and in a market like CBD – with as many as 40% of Americans interested in trying the medicine – it’s important to learn about who you want to appeal to.

A cross-sectional study of CBD users revealed much about the status of CBD users. The study was done mostly on American users (91.23%) and can paint a good picture for marketers interested in selling CBD in the United States.

  • 45% of the men sampled used CBD for their general health and 55% used it to treat a medical condition
  • 33% of the females sampled used it for general health, 67% used it for medical conditions.
  • The majority of users were between 25-34 years old or between 55-64 years old.
  • The vast majority of users had at least a college degree.

#7 How to Gauge the Quality of CBD Products

If you’re going to be redistributing CBD products or making your own from another company’s product, you will want to be sure that you can properly gauge the quality of CBD products.

 

  • Consider how the product is manufactured. Cheaper brands are more likely to use riskier, cheaper extraction methods such as those using butane or propane. Look for companies that use organic, pharmaceutical-grade ethanol for their extractions.
  • Consider the source. Try to get CBD extracted from organic, pesticide-free hemp that’s grown in areas with low pollution and rich soil.
  • Check lab tests. As mentioned above, the best way to get a conclusive understanding of many different aspects of a CBD product is to look at third-party test results.

 

Following these guidelines will help to ensure that you only deal with high-quality CBD products.

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