Hemp-derived Business Entrepreneurs, the Gold Rush is Here!
July 1, 2019
By: Janet Rodríguez
Entrepreneurs are setting their sights on the new Gold Rush: hemp-derived oil processing. Since the Farm Bill passed late last year, the market segment has grown exponentially and is proving to be a sound business venture.
According to Hemp Business Journal, $820 million worth of legal hemp-derived products were sold in the United States in 2017 and are forecasted to reach 1.9 billion by 2020, which presents significant growth and investment opportunities for hemp-derived business entrepreneurs.
But as with any business, where do you begin?
Have a plan
Every business should have a plan that takes into consideration all the variables that may affect its deployment, growth, and therefore, its success.
For a hemp-derived extraction business, crafting a plan will help identify mission-critical details such as: what type of licensing is required and what regulatory constraints may exist, to either grow or purchase biomass, what products to manufacture, how much of each product to manufacture, what extraction methods to use, what post-processing methods to use, how much post-processing equipment is needed, what pre-processing and extraction equipment is needed, when to decarb, how to run a CGMP process and facility, how to size the equipment in order to maximize production, what size facility is required, what are the licensing/permitting needs, how long does it take to construct, time frames to complete the facility, what are the power requirements needed to run a facility, what are the staffing requirements, what level of education or experience is required to recruit the best human resources and what QA and reputable 3rd-party lab testing partners to do business with, amongst many other details.
This is all just to get started, assuming funding is in place, and all you need to do is manage the operation successfully.
Should You Farm, Manufacture, or Sell?
Farmers entering the Hemp space have too many hurdles to overcome. From selecting the best genetics, selecting pesticide-free farmland, refitting or purchasing equipment to prepare the seedlings, automate planting, irrigation, feeding, quality control, and 3rd testing to harvesting, drying, bucking and grinding, to say the least.
Taking into consideration that Hemp prices have dropped over 50% in the last 3-5 years from $7.00 – $10.00 to $3.00 – $4.50, a percentage point for biomass, farmers are at a competitive disadvantage in the coming years if they fail to automate and lower their cost of goods sold (COGS).
The best use of a farmer’s time should be focused on decreasing the cost of production through automation. Unfortunately, as margins decrease, farmers have started looking elsewhere to make up losses and grossly underestimating how difficult it is to enter the Hemp-derived manufacturing business instead of focusing on decreasing the farming COGS. Scaling their business toward manufacturing or B2C Sales would be more beneficial.
Model Your Business
Have you modeled or forecasted your Hemp-derived extraction business?
Have you considered hemp cost, capex, human resources, and process loss to project profitability?
If your answer is no, you have no plan!
Only what you can measure, can you manage. Starting with projections is fine. Modeling your Hemp-derived extraction business with a return of investment by-product is the way to go! Khrysos Industries can help shape your Hemp-derived extraction business.
Hire for excellence
The Hemp-derived extraction industry is complicated. To avoid costly errors, consider building a team comprised of PhDs in engineering, horticulture and chemistry, experts in project management, finance, sales, customer service, marketing, and human resources.
Could you imagine what would happen if you didn’t have a plan when trying to determine which team members to hire first and when? I can assure you it would take much more capital than if you did have a plan in place.
Consider contracting companies that have the technical prowess, intellectual capital, equipment manufacturing ability, and experience to take your Hemp from biomass to isolate or distillate. If you’re lucky they may even be able to sell it for you as well.
The ability to have a company help you scale your business until it becomes economically feasible to do it on your own could be something to consider.
There are very few companies that have the ability to do this. Khrysos Industries has PhDs, Engineers and Chemists on staff to streamline your operations through simple, yet advanced automation and production processes. We will help you maximize yield and minimize cost.
Additionally, our Khrysos Industries team of experts can also provide process consulting, facility design, and project management to maximize your potential for success.