As cannabis becomes legalized for recreational purposes in several states around the country, more and more people are thinking about venturing into this industry.
Entrepreneurs, investors, and even the average joe see opportunity and potential when looking at the cannabis market. With a projected value of nearly $74 billion by 2027, it seems as though the legal marijuana market is only going to grow over the next few years. Now, it’s arguably the best time to enter as the market is still relatively young and fresh, especially in states where cannabis legislation has recently passed. Before starting a canna-business, there are some important things to consider. Here, are 10 things to know before starting canna-business.
Understand the current rules and regulations
The first step to starting a cannabis business is familiarizing yourself with the current rules and regulations. Although many states have legalized recreational cannabis, there are still rules that sellers must follow. Some tend to be more lenient when handing out licenses while others remain rather restrictive. You might have to show proof of savings and have a clean criminal record.
The rules surrounding the selling of cannabis can be convoluted and confusing, so it’s important to check on the city, county, state, and even federal level to see how everything works in conjunction. This will help you decide whether or not you’re eligible for starting a recreational cannabis business and what you need to do in order to remain on the legal side of things. Having a reliable attorney is always a good choice to simplify the legal aspect of the business.
Find your personal niche
As with any major industry, the cannabis world has several smaller niches from which you can choose. Finding the right niche can help you stand out by filling a unique need. Unfortunately, there are also regulations governing what you can and can’t do in a niche whether that’s selling, growing, or manufacturing. Here are some potential niches:
Within the cultivation niche, you’ll be experimenting with various strains, naming different plants based on various characteristics, and much more. This is a niche that’s highly regulated even within the cannabis niche, and it requires a significant investment. You also need to have sufficient knowledge about the field in order to qualify for a license.
Stores that sell cannabis in a retail environment are known as collectives and dispensers. This is a profitable niche, but it still requires some due diligence when it comes to selling legally.
Cannabis isn’t only sold it’s raw, plant form. There are several products that are infused with cannabis, such as food. You can potentially reach a larger target audience within this niche since some people enjoy cannabis without smoking it. There are tight restrictions when it comes to the amount of cannabis being put in these products, however.
If you want to get involved in the world of cannabis but don’t want to grow or sell, you could always start an auxiliary business. Whether you’re selling cannabis products such as pipes, bongs, or grinders, or developing cannabis technology like apps, the possibilities are endless…and profitable.
The legal entity of your business.
Once you’ve decided what kind of literal cannabis business you want to start, you still need to decide what kind of legal entity you want to create. Sole proprietorships and partnerships will be more affordable to operate, but you’re left legally vulnerable since you’re the owner of the business. On the other hand, an LLC or corporation offers some protection to the members. The cost to start these legal entities are relatively low and only require some paperwork.
The name of your business
Once you have all of the legal areas of your business covered, now you have a chance to flex your creative muscles. When naming your business, you don’t want to end up losing valuable time, but you also don’t want to end up with an unappealing name. Here are some tips when coming up with a name for your cannabis business:
- The name needs to be short and memorable
- It needs to represent or describe what you offer
- The name can’t infringe upon any other copyrighted or trademarked names
- It should reflect the theme or culture of your business
Secure funding for your business
Financing is one of the more pressing considerations for staring your cannabis business. Not only do you need to figure out where to get capital, but you also need to determine how much you’ll need. Getting money directly from banks can be difficult since these financial institutions are typically related to the government. However, you might have a better chance of receiving funding from special groups that have a track record for investing in cannabis businesses such as business accelerators, incubators, and crowdfunding groups.
Advertising and marketing your business
Once your cannabis business is established both legally, financially, and physically, it’s time to get the word out! Social media has proven to be one of the most accessible and effective forms of marketing due to its ease of use, low cost, and sheer popularity. Within a few minutes, you have the ability to reach millions of potential customers. YouTube, Twitter, Instagram, and Facebook are among the most popular options. Having a website is also an important component of marketing your cannabis business so users have an official place to interact with you virtually.
Establish trust within the community
An intangible component of any cannabis business that too many entrepreneurs overlook is trust. With so many rules and regulations surrounding this industry, buyers aren’t going to deal with companies that aren’t well established with a legitimate reputation. To build a sense of trust within your business, it’s important to be transparent about how you’re following the law, available for questions any customers may have, and generally interactive with the industry at large. Establishing yourself as a leader in the niche can help people associate your business with knowledge and trust.
Change with the industry
The cannabis market is uniquely prone to swings since it’s a relatively new market that’s still open to regulatory changes. As a cannabis business owner, it’s important to know how to roll with these punches both in terms of business and marketing. Your current strategy might work perfectly fine until a new regulation comes into play or an old one is removed. Having the ability to pivot quickly and implement a new, sound strategy can mean the difference between short-term and long-term success.
Pay your taxes
All law-abiding and legally sound cannabusiness needs to pay taxes in a timely manner, so be sure you stay on top of your legal requirements. Study the tax system in your city and state or consult a lawyer to ensure that your operations comply with all tax regulations. The type of legal entity that we talked about setting up before will play a large role in what kind of taxes you must pay and how much. It’s important to keep this in mind when mid-April roles around.
It’s still a business
While the confusing rules and regulations and relative newness of the market can make a cannabis business feel unique, it’s important to keep in mind that it still needs to be run like a classic business. Everything from setting up a legal entity and trademarking your name to establishing a marketing technique and paying taxes, your cannabis business, despite it’s uniqueness, still needs to be operated as a standard business. Try not to get caught up in the ways in which this industry is different than others to the point where you start feeling the need to change how you approach it.
Starting cannabusiness is an excellent opportunity for those looking to enter into a burgeoning market with a lot of potential moving forward. Despite being in its infancy, the cannabis market is diverse with many different potential niches to focus on. As more legislation is passed to legalize recreational cannabis around the country, there’s nearly a guarantee that the market will continue to expand. Even within the state-wide markets, there appears to be consistent growth. Before you embark on your cannabis business journey, it’s important to know what you’re getting yourself into. This list of 10 things to know before you start a cannabusiness can help you get off on the right foot.