When it comes to small business opportunities these days, few phrases give people the old dollar sign more than legal cannabis.
From states like Michigan, where cannabis is approved for medical and adult use, to places like South Carolina, where legalization is a popular topic with voters, cannabis is slowly becoming one of America’s biggest businesses.
You don’t have to tell us – according to Investopedia (as of November 2020), there were more than 340,000 jobs in the U.S. working with factories at various stages of the retail cycle, and in 2019 the industry was worth more than $13 billion.
Not bad for a plant that is still technically prohibited by federal law, right?
If you’ve read this so far, it probably means you’re hoping to be one of the lucky ones who can get rich with their own cannabis business. A noble goal, but are you really ready to make your mark? In a sector as competitive – and sometimes difficult – as the cannabis sector, you really need to play to your strengths and be as prepared as possible for the various challenges of a relatively new sector.
With that in mind, here’s a list of five things you should check and have access to before starting your new business.
Stowage racks and appropriate equipment
This is often the case for small businesses, but also for independent manufacturers. Many people think all they need to do is buy some shelves in a greenhouse, line the walls of their shop with them and that’s it, right?
Offering rare or unique cannabis strains is a great way to stand out from the competition.
This approach usually leads to problems. Besides the primary concern of growing your plants safely (and productively!), the type of equipment you use should reflect the type of business you’re trying to run. For example, a cannabis shop requires different shelving and tables than a dispensary or cultivation centre, because the work done there is completely different.
It takes some research, but it’s helpful to know that many companies are now starting to offer lockers specifically designed for different cannabis operations. See if any of the larger warehouse vendors in your area are interested in cannabis – Shelving Inc, Metro, and Rack & Shelf are just a few of the names of the larger shelves that carry cannabis at the time of this writing.
A strong brand image
The days when all you needed to have success with cannabis was a stall at a flea market, a play on words and a big sign saying Head Shop to confuse the authorities are long gone.
Too many cannabis businesses throw themselves into a business plan without thinking about a good name or settle for the first thing that comes to mind. As the market gets crowded quickly, it may be worth paying someone to help you design a solid logo and branding – that way you can stand out from everyone else with a green font. Online platforms like High Hopes offer these services specifically for cannabis businesses. This way you can be sure that they will find what you are talking about faster.
Understanding your customer base
The exact type of work your cannabis business does will affect your potential clientele – and vice versa.
Brands are focusing more and more on modern design
Make sure you determine exactly who you are going to sell to early in the planning process, as this will affect almost every other decision in your business. Want to sell directly to customers or work as a distributor for CBD/cannabis stores? Are you ready to manage and operate your own store, or just want to rent a storage unit to sell your plants to other retailers? If so, do you know anyone in your area with whom you could work? Or, if you’re thinking about going retail, do you know how many other cannabis businesses may be operating in your desired geographic area? Finding an audience can be the hardest part of starting a business, but it’s important work.
A bank that understands your business
Perhaps the biggest drawback of a new industry like cannabis is that the old ways of doing things aren’t really available. Many financial institutions of various sizes are limited in their help in financing cannabis businesses, whether it is because they don’t understand the rules and needs of your industry or because they can’t help finance cannabis businesses at all.
It can be difficult to find the right banking service.
It may be helpful to research banks, credit unions, or finance companies in your area that specifically offer banking services (e.g., business accounts, etc.). Examples include the Aery group in New Mexico and Seed to Sale in Michigan. (It’s important to note that many of these companies, like the Aery Group, may only cover the state in which they are located due to various state regulations – do your research ahead of time to a site that can help you find one).
Knowledge of required permits and regulatory requirements
Getting a license to open a business is not an easy prospect on a good day, but for an industry as large and diverse as cannabis, getting a license can take a lot of work.
Even if you’re lucky enough to open a shop in a state that allows the sale of cannabis, the process for obtaining a license can vary greatly from state to state. In New Mexico, for example, getting a license can take months due to the large amount of paperwork, research and records required to consolidate your business. Before starting a business, take the time to study and understand the various local and state regulations you must comply with to start your business.
Of course, there are many other hurdles and requirements to starting a business, but if you remember these five things, you will have a better start than many others.
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