9 Questions to Consider If You Want to Try in the Cannabis Business
Newbies into cannabis business: Where do you start? Have you picked a community where you are going to serve your unique product or service? If you have the answer to this question, the rest of the answers are easier to follow.
"Find a job you enjoy doing, and you will never have to work a day in your life." Mark Twain could not have said it better, and he wasn't even high. Smoking pot and relaxing on your comfy sofa in the living room, you must have thought at some point: how wonderful this world would be if you could do this... eeerm, all of your life?
In Mark Twain's times, owning a cannabis business was a far-fetched idea, but today it's the reality of more than 30 thousand Americans, according to Statista. The number of these businesses has created hundreds of thousands of jobs, which means more opportunities than ever to enter the cannabis business sphere and engage in learning-by-doing (before actually launching your own business).
What's stopping you from getting into the cannabis business? In most cases, it would be legalization, and you all waiting for your state government to greenlit the produce, recreational use, and medication with cannabis. But even if legalization is a settled issue, there are many other obstacles or rather open questions that need to be resolved on the stairway to heaven. SO, get practical and rational, and see what are the most common issues you as a potential business owner need to address before launching a cannabis business.
1. How will money flow in and out of my company?
Our capitalistic system is — whether you like or not — formed by three foundations:
- Profit from sales;
- equity investments and
- taking out debt.
With any business you run, you become part of this system, and cannabis is no exception.
Earning profit means that the revenue you generate as a retailer or service provider should exceed the combined costs of providing for your product and/or service. It takes time before the profits go up. And for that to happen, equity and debt are the ways to go for any aspiring person who wants to join the business.
Equity is the money that owners invest into the business. You need friends or family to grow the capital in exchange for percentage ownership or to cover expenses. We sincerely hope that your business will grow and the profit will be either reinvested in the business or divided among the owners. We don't have to explain what debt is: it is probably not the best route for early-stage companies, but for some, it will be the inevitable way to move on up. Saving money for operating expenses is more than advisable. Having a solid business plan is a must so you can visualize how money flows in and out of your company.
2. How can I get a license to run a legal cannabus business?
This might not be the hardest part, but it is definitely the part where you begin to lose your nerves. There are different cannabis licenses depending on the type of cannabis business you are trying to open, including different options for dispensaries, delivery, distribution, leasing, cannabis lab, cultivation (outdoor, indoor), or manufacturing (flower, edible, etc.) as some of the most attractive options.
Having a friend who is a lawyer will help. If you have this person in your life, ask them to translate all the formalities and delicacies of the different laws in the different states. Let's say you want to get your business going in Arizona. For that, you must apply for a license so you can run the business locally. The procedure can be lengthy, not to mention there are costs to it. Then, depending on what company you launch, there are other particularities. For instance, if you are going to run a dispensary, you must have an Arizona-licensed doctor on staff. This must be well communicated to the authorities. Not only in Arizona, but anywhere you apply to run a legal cannabis business.
Arm yourself with patience, a good business plan, real estate, and of course well-written application, and you will enchant even the most rigid bureaucratic heart.
3. Which cannabis business model to choose?
The cannabis industry does not consist of dispensaries or plantations only. These are merely two of the many types of businesses in the cannabis industry. To be successful in any business means to be a fast and enthusiastic learner, to have a bit of experience in the field, and to learn from mistakes (preferably on other people's mistakes). It's crucial to know yourself, your skills, and your capabilities: perhaps you are an awesome botanist and know every aspect of growing. Or, you are well acquainted with the medical qualities of the Cannabis Sativa plant. Or you just might be an extraordinary sales manager. Follow your instinct, but also prepare to hear what the others have to say. Take advice but also question everything so that you can evaluate every aspect of the giant mosaic. It's imperative to success to be well-clued about the market and that your business plan fits well that particular market you choose.
4. Who's on your team?
You got the idea, which makes you the leader who needs to spread the mission and the vision to others. Define the goals and values of your company, and find an easy and simple way to communicate those goals and values to everyone who comes into your team. What is a good team made of? Not everybody needs to be a good manager or expert; just find well-intended people who can do something you are not very familiar with or good at. Trust is essential, so be fair if you want reciprocity from your playmates. Hiring is simple if you know what type of candidates you need: qualified workers who can make your business grow.
5. When do you start?
If you have the business model, the license, the money, and the team, you are probably good to start business-related activities. Not like officially launch your business, but take all the technical steps of setting up your business so you can be able to do business. Delaying may be tempting, but it can also cost you business opportunities. You need to be realistic and modest initially: you are probably not the first in this business, and you need to face some questions. Is your product innovative? What makes your product distinct from other products in the same category you are bidding? What value your product brings to the community of cannabis users? How fast are you planning to expand, and how high are you planning to fly? What you never should forget is that you are selling a commodity in a highly regulated, highly-taxed industry.
6. Have you picked a community where you are going to serve your unique product or service?
We count that you are in some location where doing cannabis business is all normal and well accepted. If not, perhaps you are considering moving elsewhere where doing cannabis business is actually legal. Still, you might be surprised at how bureaucracy can overcomplicate even the simplest things no matter where you move to do cannabis business.
Just to give you an idea: the state of Michigan has made it legal for nearly 800 of its towns and cities to sell cannabis, however, almost 40% of those cities voted in rigorous local measures that actually prohibit the operation of cannabis businesses.
You might think it's better in states such as California, lauded for their liberal stances on the use of cannabis. One unpleasant surprise is that not every city in California allows the operation of cannabis businesses either. Less than half of Californian cities allow medical-use cannabis businesses within their borders, and way less for adult-use cannabis businesses.
If you are looking for a winning combination, it's places where your physical location will be met with some local enthusiasm. Where you know that people will respect your business, and where you know that you will love the people that come to your quarters. Where you know building a community is possible. Basically, this is one of the more soul-nourishing questions you get to answer related to your cannabis business.
7. Who's your target?
You have probably heard it thousand times: the customers are always right! Especially if the customer is you. What makes you crave a particular product? What is it that will make you wanna go back to that product all of the time? The quality of weed and the impeccable service might be two valuable answers. But because the cannabis industry is still emerging and being federally illegal, this process can be more difficult for cannabis businesses than it is for companies in other sectors. However, suppose you've picked a supportive community (see the previous question) where you'll grow your business. In that case, this community will probably be more than happy to spread the word (unless you are perceived as competition). Xoxoxo. While you may know your community, you still need to identify targets within that community of people.
8. Is your success guaranteed?
The math is straightforward: growing and sustaining the business. Once you are there, you just need to optimize the prices, quantities, and costs in order to get some profit. Easier said than done. Break from the illusion that you are guaranteed to succeed should you become part of the big cannabis industry family. The community and the competitors are vital here. You need to follow the trends and realize when it's time to negotiate your price or whatever else it is. To help define what's success, always ask yourself why did you start doing this in the first place?
9. What does the future hold?
You certainly are on track with all the legalization changes going on lately. If you aren't, you better catch up. After Alabama introduced its medical marijuana legislation last month, it became the 37th state in the U.S. that has at least some form of medical marijuana law. And more than a dozen of states have adult-use legislation set in place.
At present, the U.S. cannabis industry is estimated to be worth $61 billion. Cannabis capital raises declined 67% in 2020, but that was to be expected given the onset of a global pandemic. While the pandemic turned out to be ruinous for some industries, it was wind in the back for the cannabis sphere. Within the same year, legal sales hit a record high of $17.5 billion, a 46% increase from 2019.
Still, there is a lot to improve around. Minorities and women, for instance, could still far better when it comes to equal access to capital within the cannabis industry. Promoting the diverse ownership of licenses nationwide is an issue that needs to be reconsidered right away. So is legalizing weed federally and voting in the SAFE banking act, which will allow cannabis businesses to use regular banking services just like any other business. Many people are tired of hostile bank attitudes or working with cash, and it's all part of the burden to be part of this industry. So, are you ready to take the initiative?