hemp

3 Tips for Starting a Business in the Hemp Industry

Latest posts by Matthew Wolf (see all)

The hemp business is a budding industry, projected to more than double in revenue by 2022 to $2.6 billion. Since the federal ban on hemp was lifted in 2018, there has been a surge in the number of startups in this industry.

Thinking of starting a business in this space and taking advantage of the massive opportunity? There are several factors you should keep in mind before going all in.

Familiarize yourself with government regulations

The 2018 Farm Bill legalized much of the industry across the country. However, startups must immerse themselves in the state-by-state regulations.

For example, in Iowa, both marijuana and hemp-derived CBD are jointly considered a Schedule I controlled substance (and, therefore, illegal, with some exceptions). This is the law until the Iowa Hemp Act becomes fully implemented in 2020. Until then, farmers cannot legally grow hemp in Iowa and production will likely not be legalized until the 2020 growing season.

States also differ (and veer from the federal government) when it comes to the types of products can legally be sold with CBD.

For example, Colorado allows hemp to be legally added to food, while Missouri allows it to be added to alcohol. Other states, like Georgia and California, side with federal authorities and ban it from foods.

When considering starting a business in this industry, a hemp entrepreneur should seek the guidance of an industry lawyer to help navigate the shifting rules of each individual state.



Have a solid business plan

It takes a good amount of startup capital to enter the hemp industry. Startups are seeking investments from $6 million to $30 million or more. With this being a brand-new market and with regulatory still nascent on a state-by-state basis, banks may still be a bit apprehensive about lending to hemp or CBD businesses.

Investors (who may not be well-versed in the industry) will seek organizations that have a strong team and visionaries who can provide a detailed plan of action, starting from product development to a go-to-market strategy. It may be beneficial to stay close with key legislators in states in which you plan to operate as well.


Sign Up: Receive the StartupNation newsletter!

Create competitive advantages

Startups in the hemp space must create competitive advantages that are more than simply product features. Oftentimes, startups will have ideas for products that, at the time, are equipped with a feature that’s a competitor product does not have. However, the competitor could simply copy the idea and add it to their existing product. The competitive advantage is, thus, lost.

One method to differentiate is through brand value (e.g. we are the first in the industry, we are the only one, etc.). These aspects can’t easily be copied or replaced by a competitor, giving you a truly competitive advantage.

Differentiating features are good to have. Competitive advantages are even better.

Companies with a comprehensive plan in place often have the best chance of raising money. With the hemp industry being brand new for everyone, now is the time to educate yourself, be prepared, make smart decisions and capitalize on this booming business.

Total
39
Shares
Previous Article
generate sales

15 Proven Ways to Generate Sales

Next Article
Hispanic entrepreneurs

How Hispanic Entrepreneurs are Making an Impact in the Startup Community

Related Posts
supply chain
Read More

How to Keep Vendors and Clients Happy During Supply Chain Hiccups

Supply chain breakdowns are happening due to global disruptions, rising costs and increased consumer expectations. Businesses can't always stop supply chain hiccups, but they can learn from them and limit their impact on vendors and clients. How a business responds to a supply chain issue can have far-flung effects. A company that is proactive and...
home-based businesses
Read More

The Value of Home-Based Businesses to Economic Recovery

The challenge of America’s economic recovery, in the wake of the COVID-19 pandemic, is to spread it to every community – and especially those that have been historically excluded. The key to meeting that challenge is to appreciate the civic and economic value of an overlooked resource: home-based businesses. There are about 16 million home-based...
Read More

How to Support Employee Mental Health and Avoid Startup Burnout

When it comes to finding the right job — and staying there — candidates are looking for a lot, especially in a virtual setting. Gone are the days where foosball tables and free snacks constituted benefits. Of course, we still love them, but there has to be more that matters. People are primarily looking to...
Read More

WJR Business Beat: Job Switchers Rewarded with Higher Pay (Episode 406)

On today's Business Beat, Jeff Sloan talks about how it's going to be more difficult and costly for small businesses to hire the best talent because job switchers during the pandemic have seen significant salary hikes. Tune in to today's Business Beat for more:   Tune in to News/Talk 760 AM WJR weekday mornings at...