So, You Want to Start a Cannabis Business?
Before you start your own cannabis business, it is important to know the industry you intend to enter. There are a few things that you need to consider, like how the market looks like, what your earning potentials are, who your competition is, where you’re getting your supplies, or if there are risks involved.
Looking at the history of the marijuana industry, no one can say they are fully confident in how this industry is going to unravel and how these businesses will turn out. One important factor to consider is where you’re planning to start your cannabis business and how you can stand out among your competitors.
The cannabis industry is proving to be a profitable business, especially now with more states legalizing its use and sale. To date, 18 states have legalized the use of recreational cannabis, including Washington D.C. and Guam. The use of cannabis for medical purposes is now legal in 37 states, including Alaska, California, Florida, and Hawaii.
Business Insider says that the cannabis industry in the United States may achieve $32 billion in sales by the end of 2022. Every year, analysts release their predictions of how much the cannabis industry will be worth, and they are impressed by the numbers each year. For 2021, the sales reached $26.5 billion and they are expecting another great number this year.
The cannabis industry is indeed a lucrative career choice. However, starting a business, any business for that matter, would require a lot of hard work, both in preparations and operations. Here are some of the things that you need to consider:
Decide on the kind of cannabis business you want to start
You are expected to come up with your own business idea. If it’s the cannabis business, you’ll need what aspect of the business you wish to start. Are you going to grow the plant? Or are you opening a dispensary? Or would you just like to be a distributor of a particular producer? Probably you’re considering doing it all.
This is the initial step; you should know what kind of business you want to start.
Write a business plan
Every start-up business should have a detailed business plan, especially if there are legal matters to consider. The first thing you need to establish is if your state has legalized its use. Find out all related laws and regulations. Then you need to have a list of suppliers, and all are operating with state laws.
One company that you are assured of is Industrial Green Solution. They offer free consultation. You can get the equipment you need to start your own business from them. They can also supply you with the seeds you need.
- Business costs
- Location
- Suppliers
- How your business will stand out
- Your competitors
Register your cannabis business and obtain the necessary permits and licenses
Keep in mind every state has its own laws on the sale and use of marijuana. You need to make sure that you know all the different business licenses, permits, and registrations needed. If possible, you might need to get legal help on this to make sure that you cover all the bases. You must fulfill all the legal requirements of starting a cannabis business to avoid issues in the future.
Take note that the sale and use of cannabis are legal on a local level. You’ll do business on a smaller scale, but you may still choose to become a business entity. This means you’ll be paying the necessary taxes and your business will be exposed to possible risks. You may opt to open a limited liability company or an LLC, or you can choose to start a corporation. Either way, you shield yourself from personal liability. A legal professional would be able to help you with this.
If you are going to register your business, you’ll also need to come up with a business name. There might be a small fee if you want to reserve a business name while you try to find out if that particular business name already exists.
Get funding
As a new entrepreneur, you should be ready to deal with business start-up expenses. Do you intend to use your own money, or will you be looking for funding to start your business? This is an important consideration, and this should be included in your business plan.
If you intend to put up a dispensary, there are licenses that you need to get to be able to sell medical cannabis. You’ll also have to take note of which state has legalized medical marijuana. Typically, you’ll pay $5,000 as an application fee to start your cannabis business, and often, it is non-refundable. For New Jersey, the start-up fee is $20,000, while in Louisiana, it’s just $150. The fees may differ from state to state, so you’ll need to know the regulations in your state.
Aside from the application expenses, you’ll need to consider the materials and equipment you will be purchasing. You’ll also have to think about marketing and advertising expenses. Do you have a location in mind? Are you going to rent a place, or do you already have your own property?
It might be more challenging finding small business loans for your cannabis business. For one, it is still a federally illegal business. Hence, only a few business financing companies, or even banks, give out loans to finance such businesses. Most federal banks are bound by federal banking laws. It would be harder to secure a loan from them since most of them aren’t willing to take a risk of being perceived to be financing federally illegal businesses.
You may be able to find alternative lenders, but you’ll have to make sure that you deal with legitimate companies.
There are a lot of things to think about when it comes to start-up expenses. If this is the first time you are putting up a business, make sure that you get all the help you can get, whether for the legal aspects, marketing, or operating the business.