Last year blockchain was the major business trend, but in 2019 it seems that CBD and legal marijuana is all people can talk about. Before rushing into a new business, make sure you think through all of the potential steps needed for success and consider the likelihood of things working out. CBD is an exciting space, but it can come with its own challenges.
Many blockchain entrepreneurs saw that the market tides can turn quickly and leave ventures high and dry. CBD is exciting but is equally as volatile. Only just in December 2018 did the substance get a more or less green from the United States federal government, with the Farm Bill. However, the DEA was quick to say that CBD is still considered an illegal substance, just a less severe one. It was moved from a Schedule 1 (most severe) to Schedule 5.
As you explore the idea of starting a CBD business, these are some of the important steps to think through.
1. Understand Legal Implications
Easily the most important step to take under your belt is to understand the legal implications of starting a CBD business. The law is developing quickly and each new announcement could have a major impact on your business’s viability. For instance, the former Speaker of the House John Boehner went from being a harsh critic of marijuana to a strong supporter of legalization. However, government agencies have stated the substance is not as close to legalization as many people think.
Additionally, various aspects of your business operations will come under close legal scrutiny. For instance, different ad networks like Google and Facebook have banned ads for CBD and social media platforms like Twitter have limited what claims you can make about the medical benefits of CBD. This could potentially prevent your business from reaching consumers or simply raise your cost of customer acquisition.
2. Research Your Competitors, Supply Chain, And Market Niche
CBD is gaining new industry players quickly and the entire market is evolving rapidly. The substance has a unique proposition for young professionals that do not want to get high, but want the natural medical benefits for anxiety relief. Brands such as Mood CBD, have popped up offering tailored products for this user demographic.
In order to compete, you need to understand all of these players and who they are targeting. From there you need to spot your own unique market niche and be able to capture it. Part of that process will then require researching your entire supply chain. Due to strict government regulations, you need to make sure your CBD is sourced from hemp, not marijuana and if a supplier lies about this to you, it could still result in penalties for your business.
3. Develop Your Brand Story
After you understand what niche of the market you are targeting you have to work through your brand story. Unfortunately, many of the new CBD startups have begun to take the obvious choices. Non-stoner CBD brands, CBD for older people, CBD for professionals, etc. are largely already being capitalized upon and many of the traditional marijuana vibe brands are taken as well.
This means that in order to stand out from the competition your brand story will need to be thorough have its own unique element of differentiation. This might be becoming more specific or it may be purely developing a quality of the product so much higher than the rest that it is noticeable.
4. Create Your Business Plan
After you have done market research and figured out what the story for your brand is, think through all of the components of your business plan. Largely this will require understanding your supply chain, what products you will offer, how you will market them, and where you will sell them.
From there you need to identify any key people to join your team and flesh out their responsibilities. Lastly, make a budget for the project and line-up funding for your initial costs. The more detailed you make this step and the more data you have backing up your assumptions, the more likely you are to succeed.
5. Ideate Product Ideas
CBD is a great product to work with because it can be consumed and used in many different forms. Whether you are making edibles for people to eat, oils to take, or vape fluid, there are plenty of options for product ideas. Start to think through what you are going to sell, how you will make it, and what would be a unique product consumers might want.
6. Establish Quality Control Protocols
Some of the biggest concerns with CBD and marijuana products, comes with quality control. Since people are ingesting, vaping, or smoking these products, any hazardous chemicals or bad tastes can leave people sick and turned off from your brand. Look closely at your supply chain and make sure each step has the necessary quality control protocols in place.
This will require understanding where raw materials are coming from and working with independent third parties to do quality tests. All it takes is for one consumer to test your product and have a stray chemical pop-up and your brand image will be tainted in the eyes of the public.
7. Develop A Legal And Optimal Advertising Plan
Finally, a major step you need to think through is how you will eventually advertise your business. Since major ad networks will not allow CBD products, this leaves you needing to come up with ways to get in touch with your consumers. Some brands are using this as an opportunity to go physical and are using billboards and murals, but others are taking a digital content approach. As long as you have an optimal plan before getting started you can avoid headaches down the line.
Take some time to do research and become familiar with the ins and outs of the CBD industry before rushing to start a business in the sector. There is a lot of opportunities to be had, but failure to prepare and think through operations will likely leave your business high and dry.
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