Start Your Cannabis Business and Turn Your Cannabis-Industry Dream into Reality
As nationwide legalization begins to seem inevitable, more and more people are looking to make money in the cannabis industry. Turn on the radio in New York, a state with a very restrictive medical program and a new Democratic legislature ready to legalize recreational cannabis, and you’ll former Republican House Speaker John Boehner advertising his statewide seminars on the art of cannabis investing. Go to Massachusetts to visit one of the state’s two brand-new recreational dispensaries and see the customers lined up in the rain, waiting to get in. When Canada legalized recreational cannabis in 2018, Bloomberg reported the value of the global cannabis market at around $150 billion. The message is clear: the cannabis industry is just waiting to make you rich.
In practice, the dream of cannabis entrepreneurship encompasses many smaller dreams. You can be a baker, gardener, graphic designer, chef, salesperson, architect, or engineer, to name a few -- put the word “cannabis” in front of almost any job, and it’s potentially worth a lot more money. Skills, though, are only a small part of what you need to succeed in the cannabis industry. You’ll also have to meet more regulations than you ever knew existed, and raise startup funds without using a traditional bank loan. However, if you have the stamina, it’s certainly possible to start your own cannabis business and make good money.
Cannabis remains federally illegal, but the federal government views it as a states’-rights issue. As long as businesses meticulously meet state and local rules and regulations, the federal government is unlikely to intervene. The first step for those considering starting a cannabis business is studying the laws in the area in which you want to operate. If the laws as you understand them are in your favor, consult a cannabis-law attorney to help you understand the details. Developing a good relationship with a trusted attorney will be crucial as you go forward.
Along with legal counsel, consider hiring a cannabusiness consulting firm to help you complete the copious amounts of paperwork your permit applications comprise. Permits aren’t easy to get, and availability is limited, as is real estate that meets zoning requirements. You will be required to apply for state, and local governments for different permits and licenses, along with completing paperwork for a federal tax identification number. There will be a lot of competition, and it will take an enormous amount of work.
Your team will make or break your business. As the owner, you’ll need to be well-versed in marketing and financial management, and you may need to meet residency requirements for the state or city. At least one person on your team should have extensive experience in the cannabis industry. Because cannabis is still federally illegal, all members of your team must be ready face arrest and prosecution in the event that it occurs. Unlikely doesn’t mean impossible.
As with any kind of business, you’ll need startup funds. Finding these funds is challenging, but it’s even more so for cannabis businesses because of federal prohibition. Banks who do business with dispensaries, shops, and other cannabis enterprises can find themselves facing federal money-laundering charges; therefore, you won’t be able to get a traditional bank loan. If you’re not already wealthy and can’t shoulder startup costs on your own, or borrow from friends and family, you may need to rely on equity investments to open your business. Equity investors give money to startups with the expectations of getting a return on their investments, such as dividend or interest payments. Another option is a short-term loan that will eventually turn into equity.
Be prepared to pay your bills in cash, including your taxes, due to banking restrictions. The cash-only nature of dispensaries and shops, as well as the risk of theft of product, means these businesses need very tight security. Do not underestimate the cost of security systems and guards. Protecting your assets is crucial in any industry, but is especially complicated in the cannabis industry. Educate yourself thoroughly about the risks of running a cash-only business, and be sure you’re up to the task.
Drawing up the Standard Operating Procedures for your business will be another time-consuming undertaking. Standard Operating Procedures, or S.O.P.s, outline how every aspect of your business works, including the chain of command. This lengthy document details the job positions within your business, and the responsibilities for daily tasks from opening to closing. They outline who will do each task, and who answers to whom. S.O.P.s will be a necessary part of your business plan.
Opening a cannabis business is a challenging undertaking that requires long hours over a long period of time, so ask yourself what aspect of the industry you feel most passionate about, and what kind of business best fits your skills and the skills of your potential teammates. Once you’ve assessed your skills and passions and determined what kind of business you want to open, it’s vital to know about the community in which you plan to open it. What are the needs of that community, and how can your business help meet them? What unique contributions can you and your team make to the well-being of your clients? For example, some dispensaries accept donations of school supplies, and hold back-to-school events at which they distribute them to neighborhood kids. Some offer classes, workshops, and support groups. Continued education of not just consumers, but of neighbors, police officers, and healthcare providers will be essential to your success. Above all, remember that cannabis legalization is a social-justice issue, so your business must engage in activism on behalf of victims of prohibition. Starting a cannabis business isn’t just about making money; it’s also about honoring the people who fought for your right to do so. You must continue to fight for federal legalization and justice for the convicted.