Running a small hemp business is a rewarding journey, but it comes with unique challenges that require careful navigation. From strict regulations to payment processing limitations and intense competition from larger brands, hemp entrepreneurs must be resourceful to succeed. In this guide, we’ll explore the most pressing obstacles facing small hemp businesses today and share effective strategies to overcome them. By focusing on compliance, differentiation, and connection with your audience, small businesses can establish a resilient and thriving presence in the hemp industry.
Payment Processing Limitations
One of the biggest challenges in the hemp industry is securing reliable payment processing. Many traditional processors hesitate to work with CBD and hemp-related businesses due to regulatory uncertainties. Even with providers that allow CBD transactions, such as Square, hemp businesses must strictly follow compliance guidelines to avoid issues like frozen funds or sudden account suspensions, which can disrupt cash flow and operations.
Key Challenges:
- Compliance Requirements: Payment processors have strict rules regarding claims and descriptions, which, if violated, can lead to account suspension.
- Cash Flow Disruptions: Frozen accounts can severely impact a small business’s financial stability.
Solution:
Partner with payment processors that specialize in hemp and CBD industries. Square, for example, supports hemp products but enforces strict guidelines to maintain compliance. Regularly review your website and product descriptions to ensure they align with processor policies. Avoid health-related claims or language that might imply medical benefits, as these could trigger compliance issues. Working with a legal consultant can help ensure that all your content meets industry standards and keeps your business running smoothly.
Read more on payment processing for CBD businesses from The Atlantic
Navigating Health Claims: Staying Compliant and Informative
The hemp industry faces heavy scrutiny from regulatory agencies like the FDA and FTC, particularly around health claims. Statements suggesting that a product treats, cures, or mitigates conditions can lead to severe penalties, including removal from sales platforms. This regulation can make it challenging to communicate the potential benefits of hemp products without risking compliance issues.
Key Challenges:
- Limited Descriptive Language: Strict regulations make it difficult to convey the potential benefits of products in a straightforward way.
- Risk of Account Deactivation: Non-compliance can lead to deactivation by platforms like Square and PayPal.
Solution:
Use educational and informative language that avoids specific health claims. Instead of “reduces anxiety,” opt for phrases like “promotes relaxation.” Highlight product features and natural benefits without implying medical treatment. Consulting with compliance experts or legal advisors can help create descriptions that are both engaging and safe. Regular content reviews ensure your messaging stays aligned with FDA and FTC guidelines, allowing you to inform and connect with your audience while remaining compliant.
Learn more about FDA compliance from The Hill
Marketing Restrictions and Limited Advertising Options
Marketing hemp products presents unique challenges, as major platforms like Google, Facebook, and Instagram have restrictive policies regarding CBD and hemp-related advertising. Without the ability to use paid ads, hemp businesses must rely on creative organic strategies to reach their target audience. Additionally, larger companies often have bigger budgets to navigate these restrictions through subtle marketing, giving them an edge in visibility.
Key Challenges:
- Advertising Limitations: Limited access to paid advertising on mainstream platforms restricts direct marketing opportunities.
- High Competition: Larger companies with more resources can run creative campaigns that push the boundaries, making it harder for smaller businesses to compete.
Solution:
Develop a robust organic marketing strategy centered on SEO, content creation, and audience engagement. High-quality blog posts, educational content, and active social media presence can help build brand visibility and drive traffic to your website. Collaborating with influencers or publishers in the cannabis space can also expand your reach. Additionally, email marketing is an effective tool for building long-term relationships and directly engaging with customers.
Explore organic marketing strategies from Cannabis Business Times
Competing Against Large-Scale Manufacturers
Small hemp businesses often face tough competition from large manufacturers that can produce similar products at a lower cost. These companies have the resources to offer private labeling and saturate the market with low-cost alternatives, which can make it difficult for small businesses to stand out.
Key Challenges:
- Cost Competition: Larger companies can produce and sell products at lower prices, creating a challenging pricing environment.
- Market Saturation: A flood of similar products makes it difficult for smaller brands to differentiate themselves based on quality or unique attributes.
Solution:
Differentiate your brand by emphasizing quality, transparency, and unique values. Focus on aspects like local sourcing, sustainable practices, and small-batch production to attract customers who value quality over price. Many consumers today prefer supporting small, authentic brands that prioritize ethical practices. By promoting your business’s story and commitment to quality, you can build a loyal customer base that appreciates the added value your products provide.
Read about differentiating your brand in a competitive market from Business of Cannabis
Overcoming the Commoditization of Hemp Products
In a market that treats many hemp products as commodities, small businesses often struggle to convey the unique qualities of their offerings. With regulatory limitations on product descriptions, price frequently becomes the primary decision factor, which can erode margins and make it hard for small businesses to compete.
Key Challenges:
- Regulatory Constraints: Tight restrictions around product descriptions make differentiation difficult.
- Price Sensitivity: In a commoditized market, consumers may prioritize cost over quality, increasing price pressure on small businesses.
Solution:
Lean into storytelling and brand-building. Share your brand’s journey, values, and dedication to transparency. Emphasize the aspects that make your business unique, like rigorous quality testing, community involvement, or a commitment to sustainability. Detailed product information, including third-party lab test results, can also establish trust with consumers and justify higher prices by highlighting the value of quality and safety.
Read more about brand storytelling from The Statesman
Final Thoughts: How Small Hemp Businesses Can Thrive
Operating as a small business in the hemp industry is challenging, but by focusing on quality, compliance, and meaningful customer engagement, success is achievable. From navigating payment processing and regulatory compliance to creating an impactful brand story, hemp entrepreneurs have numerous avenues to stand out and build a loyal customer base. At Door County Cannabis Co., we’re committed to upholding the highest standards in transparency, quality, and compliance. We believe that with the right approach, small businesses can not only survive but thrive in this evolving industry.
Thank you for supporting small hemp businesses like ours. We’re proud to offer responsibly marketed products that meet your needs without compromising on quality. Stay tuned for more updates and industry insights.
