How to Start a CBD Business in 13 Steps

Here are the most crucial things you need to consider when starting a CBD business:

1. Licenses and permits — Some states or localities might require a specific license to sell CBD products, especially if your products contain any form of THC. These licenses can vary widely, so you’ll need to check your local state regulations. Although the FDA has not fully legalized the addition of CBD to food products or dietary supplements on a federal level, they have issued guidelines. Ensure you understand these guidelines and how they apply to your products.
2. Niche or product type — There are many ways to stand out in the marketplace and one of the best is to pick a niche such as wellness and supplements, beauty products, pet care, sports and recovery, or specific health issues. 
3. Packaging — Ensure your packaging complies with all local, state, and federal laws. This includes proper labeling, which must often include specific information about the CBD content, ingredient list, dosage recommendations, manufacturer details, and a batch number for traceability. It’s also important to state whether the product contains THC and the amount if it does.
4. Franchise — There are a few franchises to choose from such as Your CBD Store, CBD American Shaman, Discover CBD, and CBD Authority.
5. Register your business — A limited liability company (LLC) is the best legal structure for new businesses because it is fast and simple. Form your business immediately using ZenBusiness LLC formation service or hire one of the best LLC services on the market. We’ve identified the top budget-friendly options for forming your LLC.
6. Legal business aspects — Register for taxes, open a business bank account, and get an EIN.
7. Supplier — Find a reputable supplier with hemp that’s grown in a country with strict agricultural regulations to guarantee quality. Look for suppliers who use independent, third-party labs to test their products. 

Step 1: Decide if the Business Is Right for You

Pros and Cons

Before starting your CBD business, it’s important to weigh the pros and cons.

CBD Industry Trends

Industry Size and Growth

• Industry size and past growth — CBD sales in the US reached $4.4 billion in 2023, up from $4.17 billion in 2022.((https://www.statista.com/statistics/1067467/cbd-product-dollar-sales-us/))
• Growth forecast — The global CBD market is set to grow 10% annually through 2029.((https://www.mordorintelligence.com/industry-reports/cannabidiol-market))

Trends and Challenges

Trends

• Initially, CBD was primarily sold in oil or tincture form, but today, it is available in a variety of products, including gummies, lotions, capsules, and even bath bombs and makeup!
• As CBD and marijuana usage increases, the stigma associated with it is disappearing. The benefits of CBD are now backed by scientific research, with evidence that it reduces anxiety, relieves chronic pain, and alleviates cancer-related symptoms. 

Challenges

• Although the Farm Bill passed in 2018 made hemp sales legal, CBD companies still have to go through hoops to distribute their products. Shipping products across state lines poses challenges, as states can differ in their regulations.
• Accepting payments for CBD products can be difficult. Some banks and merchant services providers still view the sales and distribution of these products as a high-risk venture and refuse to do business with them.

Consumer Spending

• Average consumer spend — The average CBD consumer spends $318.88 on products each year.
• Average age of consumers — Consumers aged 34–44 spend the most on CBD products.((https://www.businesswire.com/news/home/20200930005133/en/))
• Average prices — Costs for CBD oil range from $0.78 to $4.18 per milliliter serving.((https://www.forbes.com/health/body/best-cbd-oil/))

How Much Does It Cost to Start a CBD Business?

Startup costs for a CBD business range from $6,000 to $16,000. Costs include inventory, packaging and shipping supplies, and a website. 

If you’re interested in taking a course on how to run a CBD business, Udemy offers courses for around $100. You can also view free instructional videos on sites like YouTube.

Start-up Costs	Ballpark Range	Average
Licenses and permits	$300–$1,000	$650
Insurance	$500–$1,000	$750
Marketing and advertising	$1,000–$3,000	$2,000
Website	$1,000–$3,000	$2,000
Computer	$800–$1,600	$1,200
Inventory of CBD	$2,000–$5,000	$3,500
Packaging and labeling	$500–$1,000	$750
Shipping supplies	$300–$500	$400
Total	$6,400–$16,100	$11,250

You’ll need a handful of items to successfully launch your CBD business, including: 

• CBD products
• Branded packaging and labeling
• Shipping supplies
• Website
• Computer

How Much Can You Earn From a CBD Business?

The average cost of CBD products is around $30. After the cost of wholesale products and packaging, expect a profit margin of around 50%.

In your first year or two, you could sell 3,000 products per year at $30 each, bringing in $90,000 in annual revenue. This would mean $45,000 in profit, assuming a 50% margin. As your brand gains recognition, sales could climb to 6,000 per year, and you could increase your price to $45. At this stage, you’d hire staff to help, reducing your profit margin to around 40%. With an annual revenue of $270,000, you’d make a handsome profit of $108,000.

What Barriers to Entry Are There?

There are a few barriers to entry when it comes to a CBD business. Your biggest challenges will be:

• Finding a viable wholesaler to partner with
• Competition with other CBD retailers

Step 2: Hone Your Idea

Now that you know what’s involved in starting a CBD business, it’s a good idea to hone your concept in preparation to enter a competitive market. 

Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important because it can help you understand your customers better, who your competitors are, and your business landscape.

Why? Identify an Opportunity

Research CBD businesses in your area and online to examine their products, price points, and customer reviews. You’re looking for a market gap to fill. For instance, maybe the local market is missing a CBD subscription box service or a CBD cosmetics company.

This could jumpstart your word-of-mouth marketing and attract clients right away. 

What? Determine the Type of CBD Products You’ll Be Selling

You’ll be creating and selling CBD-infused products within a specific niche that appeals to your target market. Today’s most popular CBD products include oils, lotions and salves, foods, and supplements. 

How Much Should You Charge for CBD Products?

Prices for your CBD products will vary, depending on what you decide to sell and the quality of the ingredients. Costs for CBD gummies range from $10 to $20 whereas prices for oils range from $20 to $100 per bottle. You could charge $20 to $50 for lotions and salves. 

The markup on CBD products can be anywhere from 30 to 60% above wholesale prices. After product costs, shipping, and packaging, expect a profit margin of around 50%.

Once you know your costs, you can use our profit margin calculator to determine your markup and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.

Who? Identify Your Target Market

You’ll be selling CBD products to a wide variety of customers. Many people use CBD for relief from chronic pain and mental distress. Children who suffer from seizures have found tremendous relief from CBD. Even pet parents looking to calm their anxious furry babies have turned to CBD! Spread your marketing efforts across social media platforms like Facebook, Instagram, and TikTok. 

Where? Choose Your Business Premises

In the early stages, you may want to run your business from home and sell products exclusively online to keep costs low. But as your business grows, you’ll likely need to hire workers for various roles and may need to rent out a physical storefront. You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.

When choosing a commercial space, you may want to follow these rules of thumb:

• Central location accessible via public transport
• Ventilated and spacious, with good natural light
• Flexible lease that can be extended as your business grows
• Ready-to-use space with no major renovations or repairs needed

Step 3: Brainstorm a CBD Business Name

Here are some ideas for brainstorming your business name:

• Short, unique, and catchy names tend to stand out
• Names that are easy to say and spell tend to do better 
• Name should be relevant to your product or service offerings
• Ask around — family, friends, colleagues, social media — for suggestions
• Including keywords, such as “CBD oil” or “CBD products,” boosts SEO
• Name should allow for expansion, for example, “Innovative CBD Solutions” over “CBD Skincare & Beauty Products”
• A location-based name can help establish a strong connection with your local community and help with the SEO, but might hinder future expansion

Once you’ve got a list of potential names, visit the US Patent and Trademark Office website to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool below. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these. 

Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that sets your business apart. Once you pick your company name and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.

Step 4: Create a CBD Business Plan

Here are the key components of a business plan:

• Executive summary — A concise summary of the business plan, outlining key details such as the business concept, goals, and financial projections
• Business overview — An overview of the CBD business, including its mission, vision, and the problem it aims to solve in the market
• Product and services — Detailed information about the specific CBD products and services offered, emphasizing their unique selling points
• Market analysis — Examination of the CBD market, including target demographics, market size, trends, and potential growth opportunities
• Competitive analysis — Evaluation of competitors in the CBD industry, highlighting strengths, weaknesses, and differentiating factors
• Sales and marketing — Strategies for promoting and selling CBD products, encompassing advertising, branding, and sales channels
• Management team — Introduction to the key individuals leading the CBD business, emphasizing their relevant experience and skills
• Operations plan — Details on how the CBD business will operate, including production, supply chain, and logistics
• Financial plan — Projections and analysis of the CBD business’s financial performance, including income statements, balance sheets, and cash flow forecasts
• Appendix — Supplementary materials, such as supporting documents, charts, or additional information that provide context and credibility to the CBD business plan

If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.

Step 5: Register Your Business

Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business! 

Choose Where to Register Your Company

Your business location is important because it can affect taxes, legal requirements, and revenue. Most people register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to CBD businesses. 

If you’re willing to move, you could really maximize your business! Keep in mind that it’s relatively easy to transfer your business to another state. 

Choose Your Business Structure

Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your CBD business will shape your taxes, personal liability, and business registration requirements, so choose wisely. 

Here are the main options:

• Sole proprietorship — The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
• General partnership — Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
• Limited Liability Company (LLC) — Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
• C Corporation — Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation.
• S Corporation — This refers to the tax classification of the business but is not a business entity. Either a corporation or an LLC can elect to be an S Corp for tax status. Here, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.

We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have.

Step 6: Register for Taxes

The final step before you’re able to pay taxes is getting an Employer Identification Number or EIN. You can file for your EIN online or by mail/fax. Visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN. 

Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.

It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.

Step 7: Fund Your Business

Securing financing is your next step, and there are plenty of ways to raise capital:

• Bank loans — This is the most common method, but getting approved requires a rock-solid business plan and a strong credit history.
• SBA-guaranteed loans — The Small Business Administration can act as a guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
• Government grants — A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
• Venture capital — Venture capital investors take an ownership stake in exchange for funds, so keep in mind that you’d be sacrificing some control over your business. This is generally only available for businesses with high growth potential.
• Friends and family — Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
• Crowdfunding — Websites like Kickstarter and Indiegogo offer increasingly popular low-risk options in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
• Personal — Self-fund your business via your savings or the sale of property or other assets.

Although recent legislation has made hemp businesses eligible for bank and SBA loans, many traditional lenders are still hesitant when it comes to CBD businesses. Personal fundraising and bootstrapping are probably your best bets, other than friends and family, for funding a CBD business. You might also try crowdfunding if you have an innovative concept.  

Step 8: Apply for CBD Business Licenses and Permits

Starting a CBD business requires obtaining a number of licenses and permits from local, state, and federal governments.

Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits. 

You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more. 

You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.

If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.

Step 9: Open a Business Bank Account

Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.

Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your CBD business as a sole proprietorship. Opening a business bank account is quite simple and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.

Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account. 

Step 10: Get Business Insurance

Business insurance is an area that often gets overlooked, yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.

Here are some types of insurance to consider:

• General liability — The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
• Business property — Provides coverage for your equipment and supplies.
• Equipment breakdown insurance — Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
• Worker’s compensation — Provides compensation to employees injured on the job.
• Property — Covers your physical space, whether it is a cart, storefront, or office.
• Commercial auto — Protection for your company-owned vehicle.
• Professional liability — Protects against claims from clients who say they suffered a loss due to an error or omission in your work.
• Business owner’s policy (BOP) — This is an insurance plan that acts as an all-in-one insurance policy, a combination of the above insurance types.

Step 11: Prepare to Launch

As opening day nears, prepare for launch by reviewing and improving some key elements of your business. 

Essential Software and Tools

Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.  

You may want to use industry-specific software, such as Flourish, Square, or Lightspeed, to collect payments, fulfill orders, and track shipments.

Accounting

• Popular web-based accounting programs for smaller businesses include Quickbooks, FreshBooks, and Xero. 
• If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences of filing incorrect tax documents can be harsh, so accuracy is crucial.

Develop Your Website

Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism.

You can create your own website using website builders. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech savvy, you can hire a web designer or developer to create a custom website for your business.

However, people are unlikely to find your website unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google. 

Marketing

Here are some powerful marketing strategies for your future business:

• E-commerce optimization — Enhance your website with detailed product descriptions and credible lab results to improve SEO and attract CBD users from both local and broader markets.
• Professional branding — Develop branding that communicates trust and professionalism, crucial for the CBD market.
• Direct outreach — Establish connections with health and wellness centers, yoga studios, and alternative practitioners to introduce and promote your products.
• Social media engagement — Utilize platforms like Instagram and Facebook to educate about CBD, share customer stories, and display your product offerings.
• Educational blog — Provide valuable content about CBD benefits, usage, and the latest research to establish authority in the industry.
• CBD workshops and seminars — Organize educational events to inform about CBD benefits, usage, and legal considerations.
• Wellness influencer partnerships — Team up with well-known wellness influencers to gain authentic endorsements and expand market reach.
• Loyalty rewards program — Create a program that rewards repeat customers with discounts and exclusive access to new products.
• Referral bonuses — Implement a referral strategy that offers incentives for customers to promote your brand through word-of-mouth.
• Targeted online advertising — Strategically place ads on wellness-focused platforms and utilize Google Ads to target potential customers.
• Email personalization — Segment your email list to offer tailored promotions and informational content, enhancing customer engagement.

Focus on USPs

Unique selling propositions, or USPs, are the characteristics of a product or service that set it apart from the competition. Today’s customers are inundated with buying options, so you’ll have a real advantage if they can quickly grasp how your CBD business meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire. 

Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your CBD business could be:

• Relax your mind and body with CBD oil
• High-quality CBD products delivered fast!
• Natural, safe, and affordable relief from chronic pain and anxiety 

Networking

You may not like to network or use personal connections for business gain but your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a CBD business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in CBD for years and can offer invaluable insight and industry connections. 

The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in CBD. You’ll probably generate new customers or find companies with which you could establish a partnership. Online businesses might also consider affiliate marketing as a way to build relationships with potential partners and boost business.

Step 12: Build Your Team

If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a CBD business include:

• Administrative assistant — Packing and shipping products, responding to customer inquiries
• Distribution lead — Managing relationships with wholesalers, purchasing inventory
• Marketing lead — Managing social media sites, generating new business

At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need. 

Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent. 

Step 13: Run a CBD Business — Start Making Money!

Running a successful CBD business takes a lot of hard work, but it’s a rewarding and profitable way to make a living. With the industry expected to grow exponentially, there’s never been a better time to jump in. As a CBD business owner, you’ll improve the lives of your customers while making great money along the way.

Now that you’ve done your homework, you’re well on your way to starting an amazing venture. Get out there and start the CBD business of your dreams. 

FAQs

Is a CBD business profitable?

Yes, a CBD business can be profitable. Just make sure you source high-quality ingredients and offer products at competitive prices.

Can I sell homemade CBD?

Every state has its own laws regarding the sale of CBD. There are often rules about how it can be made, and certain licenses are usually required. 

Can I sell CBD on Facebook?

You can advertise your CBD products on Facebook with some restrictions. You can’t use the words CBD, hemp, or cannabis. Your ads will also have to go through an approval process.

What is the most successful CBD company?

Charlotte’s Web has emerged as a leader in the CBD market. Their annual revenue has grown to nearly $100 million a year.

What CBD products sell the most?

Gummies are the most popular CBD product. Topicals and capsules also sell well. If you start a CBD business, it’s best to offer a variety of items.