Cannabis is one of the fastest-growing industries. The global legal cannabis market is now worth over $25 billion as of 2021, with analysts predicting it will expand to $176 billion by 2030.
With cannabis businesses posting record profits, prospective cannabis entrepreneurs and new companies are sprouting daily. If you’re thinking about entering this exciting new field, understanding your options and how to get started helps you make the right decisions.
This beginner’s guide to starting a cannabis business covers everything you need to know about venturing into the booming cannabis market. Read to find out!
What You Should Know Before Starting a Cannabis Business
Before you start building a business plan or hiring employees, you should know the challenges of running a cannabis business. The significant risks facing the cannabis business are:
- Strict laws. Cannabis businesses are not like many other businesses, the sector is heavily regulated, and slight mistakes might get you prosecuted. Follow your state’s rules and regulations to the letter.
- Risk of employee theft. Working with a controlled substance means handling a lot of cash. This can lead to employee theft, so have ways of dealing with this in your business plan.
- Tax compliance. Running a cannabis business can also mean dealing with a highly complex tax situation. The tax code’s complexity makes it hard to navigate, and you may need a specialist to ensure you pay taxes correctly.
- Stiff competition. As more players enter the market, supply could exceed the demand, and only businesses that are well prepared for the trends will succeed. You’ll need to offer premium products like premium CBD capsules to outshine your competitors.
How to Get Started in the Cannabis Business
Before you leap into cannabis entrepreneurship, you’ll need to decide which segment of the industry you want to operate in. Many options are available, including growing, manufacturing, retailing, distributing, and providing auxiliary services.
These main cannabis business types have their advantages and disadvantages. Your decision will depend on your personal goals, the market gaps in your area, and most importantly, your strengths and weaknesses.
Choosing a Cannabis Business
Growers specialize in producing cannabis plants, from growing the seeds to harvesting them for processing. The growing sector is one of the largest in the cannabis industry, and it’s likely to remain so because outfits high demand.
Manufacturing entails converting the harvested cannabis into consumable products like oils, edibles, or tinctures. You can choose to buy processed products and infuse them with other products that improve value.
Distributors sell cannabis products to retailers and other businesses. This is an excellent option for people who have a knack for sales and don’t want to be in the public eye. However, the cannabis industry is known for ruthless competition, and the companies that succeed are often willing to take risks others won’t.
Retailers sell cannabis directly to consumers online or at brick-and-mortar locations. This is the most common business that’s easy to start and a good option for people who like interacting with the public.
Calculate Your Startup Costs
Calculating your startup costs is one of the most critical steps in starting any business. Cannabis businesses are no different. You’ll need to assess how much money you need to get your business off the ground. This includes not just your initial investment in equipment and supplies but also the costs of licenses, taxes, and other required fees.
Startup costs vary widely depending on which sector of the cannabis industry you choose to enter. Growing, for example, often require large amounts of land, electricity, equipment, and initial investment in seeds and starter plants. On the other hand, distributors and retailers are smaller operations that can often be started with little more than a smartphone, a vehicle, and a valid license.
Find a Cannabis License
In states that have legalized cannabis, you’ll need to obtain a cannabis license before operating a business. Licenses vary widely, but most states require cannabis growers to obtain an agriculture license. Distributors typically need a license that permits them to handle cannabis. Retailers need a special license to sell cannabis.
State governments regulate licenses, so it’s essential to know your state’s rules for obtaining a license before starting a cannabis business. It can be challenging to obtain a license, even with a clean criminal record. Some states have strict rules for licensing and may deny applications for minor infractions.
Running A Cannabis Business
Once you’ve obtained the necessary licenses, you’ll need to decide how to run your business. This doesn’t just mean writing a business plan and hiring employees. It also means making sure you comply with state and federal law. Doing so is crucial to success.
Compliance is crucial for two reasons: It keeps your business out of trouble and ensures customers get a high-quality product. It’s also the best way to protect yourself from federal prosecution.
The best way to comply is to be as transparent as possible. This means keeping meticulous records, following strict product-labeling rules, and constantly communicating with regulators. Building a team of dedicated employees and using effective marketing strategies will help you grow your business.
Cannabis is one of the fastest-growing industries in the United States. With analysts predicting the market is on an exponential trajectory, now might be the best time to jump in. Luckily, this beginner-friendly guide provides you with all you need to know from planning to launching your first cannabis business. Use these insights to make informed decisions in your new venture.