Legally or illegally, marijuana has always been in high demand. (No pun intended!)
During the year 2017, Americans spent about $9 billion on legal cannabis. That’s a tremendous amount considering that cannabis was legal in only seven states and one district at the time.
Today in 2020, there are 47 states who have legalized cannabis. 11 of those states are fully legal while the remaining 36 are only medically legal. This brought sales up to about 13 billion in 2019, with projections rising to $30 billion by 2023.
With those numbers and the rising profit predictions, now is the perfect time for budding entrepreneurs to open up shop. So, if you’re wondering how to start a marijuana business, keep reading.
How to start a marijuana business
The first step to starting any business is to know what type of business you want to start. That may seem like a redundant statement, but when you’re starting a marijuana business, you’ll want to be absolutely sure about what you’re doing.
The different realms of the weed business are as follows:
- A). Grower
- B). Dispensary owner
- C). Product manufacturer
- D). All of the above
Once you figure out which end of the business you want to be on, You can move forward with the rest of your planning. It’s also a good idea to seek out advice from those who’ve been through the process before, especially if you plan to do all of the above.
Research the industry
The weed business is still in its infancy, so it’s important to do your due diligence. Federal and state laws remain in flux pertaining to the plant, which means that anything can happen at any time.
Marijuana is currently illegal on the federal level. The DEA classifies it as a Schedule I Controlled Substance due to its intoxicating effects. This means is that individuals who are caught illegally possessing it, distributing it, or crossing state lines with it are subject to federal prosecution.
You may also be penalized for selling more than the legally specified amount per person depending on your state regulations. There are a lot of restrictions and nuances that come with the industry. So, do yourself a favor and research:
- All federal cannabis laws
- Your state’s cannabis laws—all of them
- Your state’s compliance laws for growing, storing, and distribution
- Business licensing, permits, etc.
In addition to researching all of the legal stuff, research the market and types of products out there. You’ve got a lot of competition out there.
Establish a cannabis business plan
Once you’ve got an understanding of legal system in terms of cannabis, you can hone in on the details of your business. That means establishing a clear-cut cannabis business plan:
- Location Location is everything, especially if you’re opening a dispensary. You want to be as accessible as possible to your target audience. This, of course, means you’ll have to know where your target audience hangs out or runs their errands.
- Operating space This pertains mainly to growers and manufacturers, but overall, you want a space that fits your needs with room for growth.
- Marketing How you market your business is everything. Research your target audience and how to reach them. Research your competitors, market trends, products, etc.—and align all of it with attainable goals.
- Financial projections Get a good grasp on what your start-up costs will be, the revenue you can expect, operational costs, and other expenses. You most likely won’t have the start-up funds, and getting loans for a cannabis business can be tricky. We suggest you learn about the Safe Banking Act as part of your preliminary research.
- Staffing You’re going to have to hire staff eventually. Figure out how many people you can afford to hire, how much you can afford to pay them, and set up standard operating procedures.
- Partnerships If you want to be successful, you’re going to have to build healthy relationships with other business owners. You’re also going to need vendors, contractors, distributors, wholesalers, cultivators, etc.
These are no small details, so don’t gloss over them. Without a good business plan to execute, you run the risk of failing miserably.
Get your permits and registration taken care of
With marijuana still federally illegal, interstate business can’t be conducted. This is good news for small, local business owners. Of course, even small businesses need to choose a business entity to protect themselves. This entity will determine your business’s legal structure, your level of protection, and the taxes you’ll have to pay.
Once you’ve chosen your new business entity and the name, you can file the appropriate paperwork. You’ll have to do your research on any licensing or permits that align with your state’s laws. You’ll also have to register to pay taxes.
Even if you don’t start with employees, register for an Employer Identification Number (EIN) anyway. You can register directly with the IRS and get approval within minutes. trust us, you want to get this step out of the way.
When you have all of your legal and other necessary documentation in order, you can register your business name and entity. Many people advise registering your business name first to reserve it. For a fee, of course.
Find yourself a good lawyer
You’ll want to consult with a lawyer during the preliminary stages of starting a marijuana business. The legal aspects of the marijuana industry can be difficult to navigate. They’re also always changing. So, whether you need advice or help to file paperwork, you want to protect yourself at all costs.
If you can afford to keep a lawyer on retainer, even better. Remember, it’s all about protecting what you’ve built.
Business is booming
So far, there are only profits to be made from the legal marijuana industry. Now that you understand how to start a marijuana business, you can get to work on that cannabis business plan you’ve been dreaming up. Just remember to do your research.