Did you know that the cannabidiol (CBD) market in the US has grown by 706% in 2019? Ever since the Agriculture Improvement Act was passed in December 2018 and CBD extracts have been legalized in the United States, forecasts for the CBD sector have been optimistic. Today, CBD is available in several forms: soft gel capsules, sublingual drops, topical creams, and oils.
Fourteen percent of Americans use CBD for a variety of reasons. Forty percent say they use it for pain, 20% for anxiety, 11% for insomnia, 8% percent for arthritis, and 5% for migraines.
As such, CBD is a budding industry that makes for a brilliant business opportunity. If you are planning to have your own CBD store or franchise, here’s what you need to know before you begin your venture.
Where to Start: Franchise or Start-Up?
You can build a CBD business from scratch or buy a franchise from reputable CBD establishments.
If you choose to obtain a franchise, here are some advantages:
- You can have a small, independent business that is supported by a larger business network
- Experience is optional, as franchisers can train you and your employees to operate their business model effectively
- Historically, franchises are more likely to be successful than start-ups
- You can take advantage of the established reputation and proven work practices of the franchiser
- Financing is easier to secure, as it generally costs less to buy a franchise than to start your own business
On the other hand, if you opt for a startup, you can reap the following benefits:
- You have the freedom to innovate
- You can experiment on your creative ideas and make them a reality
- There’s no need to submit reports to a franchiser; you are your own boss
Regardless of your choice, there are essential factors that you need to consider when you want your CBD business to become a success. Here are some tips:
- Do your research
CBD businesses come in many forms, and the legal status can vary for each type. Although hemp-derived CBD is now federally legal across 47 states in the United States, you still need to consult your state laws before possessing or selling CBD products.
There are still existing restrictions for vendors and buyers. One example is that CBD products should not have over 0.3% THC. Make sure to conduct extensive research regarding the legalities of the products your business carries for smooth, hassle-free transactions.
- Don’t make outrageous claims
The CBD industry is unfortunately riddled with misinformation. As a recently legalized product, it is the responsibility of CBD manufacturers, distributors, and marketers to remain honest in their practices. In addition, the fact that CBD is being accepted in the medical community should make ethics paramount in disseminating information.
Furthermore, false claims can hurt customer satisfaction and, in effect, your bottom line. When customers receive products that are not as advertised, they can file a chargeback. Worse, your shop can get a bad rating in a world where customers rely on reviews before making a purchase. ; As a result, you’ll lose both money and credibility.
- Include payment processing in your plans
In the time of COVID-19, being able to accept multiple payment methods is vital to businesses. However, payment processing for CBD transactions differs from others, especially when you’re selling them online. This is because CBD is a regulated industry, and as such, falls under the high-risk merchant category.
A high-risk label means your business belongs in an industry where these situations apply:
- Poor credit score or nonexistent business financial history
- Excessive cases of fraud and chargebacks
- Controlled substances and other products that are regulated
- Minimal business experience, such as a start-up company
- Businesses selling high ticket items
- Businesses with subscriptions or recurring billing
When your high-risk business applies for merchant services, such as payment processing, you may be rejected by traditional banks and financial institutions. The solution is to find high-risk merchant account service providers that specialize in your industry. Done right, your business can take advantage of the features of this special account, including:
- Flexible payment options
- Increased allowance for sales volume
- Risk management and security features, such as fraud and chargeback protection
Make sure to figure out whether you need alternative payment processing options for your CBD business. As the shelter-in-place orders led to the increased use of innovative payment methods to encourage people to shop at home, it is imperative that your business can adapt. This doesn’t only benefit customers who want to buy your products at their convenience. It also improves your cash flow when you allow customers to pay in the method they prefer, be it cash or credit card.
Key Takeaways
Franchises and start-ups have their own unique appeal, and it all boils down to the route you want to take. Are you open to the challenges of launching a start-up? Do you want the easier route? ;
The future of the CBD industry looks bright. Being one step ahead of the game can help you win against the competition and reach your business goals. Whatever you decide, it always pays to gain more knowledge about CBD, its medical significance, its legal details, and its place in the U.S. market.
