Despite the hype, the cannabis business is not a get-rich-quick environment
Every time a state initiates or expands a regulated cannabis program, there’s a license application process for entrepreneurs who want to be involved. Prospective cannabis business owners must navigate a complicated, arduous and potentially expensive path through that process.
Because every state has its own version of the licensing process, it’s easy to believe your journey toward establishing your own cannabis business begins with the license application. But if you’re thinking that way, I’ve got news for you — you’re already behind.
Before you even start putting pen to paper for an application, you need to lay a foundation for success. And that starts with four key steps.
1. Get Smart
No matter what your expertise is, the cannabis world will throw you a curveball. No one can expect to compete successfully without getting educated and up to speed. That means learning everything you can about the rules surrounding the cannabis industry in your state. If it’s a new program, read the ballot initiative or legislative orders that established the program. If the state has set up regulations already, read those too. In a highly controlled industry like cannabis, details are everything. Become a master of those, and you’ll set yourself up for success.
2. Stand Up for the Industry
Without decades of dedicated advocacy for cannabis policy reform, the industry we see emerging today wouldn’t exist. And just because we’re seeing dramatic changes in marijuana laws doesn’t mean the fight is over. If you want to lead a cannabis business, it’s important that you make your voice heard as an advocate — and bring your wallet to the table, too. In states where cannabis programs are just beginning to be considered, hearing supportive voices from all walks of life makes a big difference for voters and elected officials.
In any case, your advocacy will provide multiple benefits. First, you will be on the front lines helping to build support for the program. Second, you will meet like-minded people who may become team members or supporters of your efforts.
3. Find Your Place
Knowing you have a passion for cannabis or for business is not enough. Like in any other industry, you’ll have a much better chance of success if you leverage your strengths and understand your competitive advantages.
In cannabis, the three primary licensed business sectors are cultivation, manufacturing (or processing) and retail sales. Some states require licensed businesses to be vertically integrated, meaning they must handle cultivation, manufacturing and retail, all within the same company. Other states prohibit vertical integration, forcing licensees to focus on one area only. Still others allow a mix. Many states also offer additional licenses for distribution, transportation and delivery, and some break down license options by size (craft versus industrial) or geography (apportioning licenses to different parts of the state).
Before you choose which license to pursue, do your homework. Think you want to grow cannabis? Better have a passion for horticulture. Considering opening a dispensary? Understand the challenges of retail. Cannabis companies are not immune to the basic dynamics — and sometimes drudgery! — of running a business.
4. Build a Business Plan
When the legal cannabis industry first began to emerge, it may have been possible to start your business with a backpack and a dream. But those days are long past.
In this increasingly complicated and competitive space, you will need a well-thought-through business plan, with detailed financial modeling, to make your dream a reality. And you’ll need it sooner rather than later.
This isn’t just a theoretical exercise. A thorough and well-presented business plan can be the key to recruiting business partners, building community support, pursuing investors and securing a location. It also lays the foundation for what will ultimately become your license application.
Despite the hype of the last several years, the legal cannabis industry isn’t a get-rich-quick environment. Success in cannabis requires a substantial commitment of time, energy and resources up front, long before an application process begins. Whether you approach it on your own or with professional consultants, a strong cannabis business grows from these fundamentals. Be sure you’re building your business on a solid foundation.
Bob Wagener is the vice president of business development for Canna Advisors. He works with incoming clients to understand their needs and develops working plans to shape and achieve their goals. He helps clients identify their market potential through extensive forecasting and financial modeling. He is a veteran strategist with more than 25 years of experience and 12 years of executive-level service at public and private companies. He has successfully grown both small business startups and Fortune 100 companies with international services.