10 Steps to Starting a CBD Business in 2020
Are you thinking about starting a CBD business in 2020? Todd Smith, co-founder of Joy Organics, shares some insight about when he, Joy, and their son started the company. He loves helping people, whether they are consumers of CBD products or partners who want to take advantage of the ever-growing CBD industry. That’s why he’s sharing 10 important steps to starting your CBD business in 2020.
1. Name Your Business
The first thing you need to do in starting your own CBD business is to determine what name you’re going use. Smith advises that you do not include CBD, hemp, or cannabis in your name as it can create red flags for your bank and cause other completely unnecessary problems for you.
In addition, you don’t know where your business is going to be five years from now. Right now, less than 5% of the plants worldwide have been tested for their benefits, so your business may evolve over the next several years to a point where you’re not just selling CBD. You don’t want a name that’s going to limit you.
Another thing Smith recommends picking a name that’s easy to remember and easy to spell. Imagine one of your customers telling their friend about your brand. You want to make sure that when they tell their friend about your brand, it’s a name that their friend can remember and easily spell. He recommends your name not include more than two words (for example, Joy Organics).
There are a lot of ways you can go about choosing a name. You can brainstorm with your family and friends, but once you narrow down a list of names, go to GoDaddy.com and make sure the .com domain is available for your name.
If your domain is taken and there isn’t a website yet, you could go to the WHOIS database at the bottom of the GoDaddy webpage to see if the current domain name owner would be willing to give or sell the domain name to you. Make sure it’s easy to remember and easy to spell, but also make sure it’s something “evergreen” or that it can be more than just CBD.
2. Set Up Your Business Entity
Next, you’ll want to set up your business entity. Joy Organics started our business entity through LegalZoom, where we set up an LLC for the company. Smith set up the LLC on their platform in less than five minutes, so it’s a lot easier than trying to find a lawyer and spending three times as much setting up your business entity.
Smith’s advice is to set up the entity as the same name as the business. For example, Joy Organics was set up as Joy Organics, LLC. A lot of people choose names and then get a DBA (“Doing Business As”), which may be unnecessary. Once you’ve got your business name, set up your LLC under the same name to save on additional paperwork.
3. Design Your Logo
The third step is to design your official logo. Now that you’ve got your paperwork going, you want to get a logo designed. Smith recommends 99Designs.com for the versatility and sheer options available through it. Of course, you can also find freelance designers in a variety of places.
On 99Designs, you give them your name, any special colors or design requests and then designers all over the world will design your logo. You can indicate which ones you like, which is made visible to all the designers. The other designers, seeing which ones you like, can sharpen their logo to try to fit your creative vision more precisely. After a few days, you’ll have an exceptional logo that ends up being far less expensive than hiring a single designer to design your logo.
4. Open a Bank Account
Hopefully, by now you have your logo designed, your LLC is getting set up and you have gotten your EIN (Employee Identification Number). You’ll want to go to your bank and explain that you’re in the health and wellness industry before setting up a business bank account. It’s important not to mention that it’s a CBD or hemp-related business as that sets off many red flags for banks.
5. Apply for a Merchant Account
Once your bank account is set up and you have your EIN, you can apply for a merchant account. Make sure you have a special CBD merchant processor. Smith provides specific advice on how you can learn more about merchant processing, but you want to make sure you get your merchant processor with a bank that specifically does CBD processing. Keep in mind that it likely won’t be your bank that does this type of processing, so it’s best not to speak about it with them.
6. Select a Solid Partner from Whom to Purchase CBD Product
This is where Joy Organics can come into play. You want to make sure you’re offering a line of high-quality CBD products that result in a high reorder. If not, you’re going to have some problems. If you’re not selling a high enough quality CBD product, you’re going to have a higher return or refund request rate. You’ll have people returning the product or making disputes with your merchant processor.
If your chargebacks hit 1%, you run the risk of getting shut down in the CBD business. Your merchant processor will shut you down and, once rejected from one CBD merchant processor, you get rejected from them all.
Nothing speaks higher of Joy Organics products than the reorder rate. After the four or five month mark of being open, over 50% of the people who entered the store were return customers, with the next highest percentage being people from referrals. Doctors, personal trainers, chiropractors, and every professional out there are recommending Joy Organics.
Understand, cheap is cheap. And that results in returns, chargebacks, and a nightmare of a business you don’t want to have. With quality comes value that makes the product worth it.
7. Build a Website
The next step to starting your successful CBD business is to build a website. Smith recommends using a website template. You can pull it up on your phone, tablet or a computer and it looks good. Using a template means just dragging and dropping your original media and written content in the right places. Smith even encourages using content similar to the Joy Organics website if you’re not sure how to personalize your brand. However, make sure to rewrite the information in a way where you’re not just clearly copying and pasting the content, as Google will make a negative strike on your website.
8. Secure Social Media Handles
Just as important as securing the domain name for your business is securing the social media names. Make sure you have a social media handle that will stick out but stay consistent across social media platforms. It’s best if you can use exactly what your business name is, but if it’s already taken, you might try adding a word to it that’s relevant (such as “hemp,” “CBD” or even just “official”).
Make it a priority to secure all the social media platforms that you want to market your business on. This includes Facebook, Instagram, Twitter, Pinterest, Reddit, YouTube, and countless others. Just as important, though, is to remember not to stretch yourself too thin. Stick to a select number of social media platforms that you can consistently and often engage on rather than trying to use them all.
9. Find a Fulfillment Company
If you’re marketing the Joy Organics brand already, this step is easy. We’ll ship the product to you, and you’ll distribute it however you want to distribute it. If you want to develop your own line of branded products with Joy Organics, then you would need to find a fulfillment company that can ship those products. You can either ship them from your home or you can find a fulfillment company.
10. Build a Marketing Strategy
The tenth step to starting your business is to put together your marketing strategy. The number one question Smith often gets is, “Hey Todd, how can I market my products?”
However, there are thousands of ideas and ways to market. The best part of the CBD industry is you can use pretty much all of them. A wide-open industry, it all boils down to you and how you can be creative with your marketing methods.
To start, build a list of 20 ways to market your company — really, 20 ways. The first four or five ways are going to be easy, but as the list gets longer you’ll start struggling to come up with marketing methods that are still effective and can work for your brand. Once you hit close to 20, you’ll end up finding the marketing method that’s going to be bigger than any other method you use. There’s no set formula for marketing in the CBD world as of yet, so challenge yourself to be creative and think outside the box.
Think of all the different possibilities for how you can market your business. If you do, you’ll stumble along the real money-maker that works. Remember, you can be great at anything, but you can’t be great at everything. Pick a marketing method or two that works for your brand and specialize in that to watch your CBD business thrive.
Connect with Joy Organics
Do you have any further questions about starting a CBD business in 2020? Connect with us today!