The cannabis industry’s recent rebirth can be attributed to a group of determined cannabis and medical advocates; professionals armed with statistically valid data in support of their cause. These modern-day cannabis pioneers understood that their scientific data offered evidence of the true medical benefits of the cannabis plant, including how the cannabis plant would be valuable in the treatment of certain medical conditions.
The cannabis industry’s recent extraordinary growth/demand has caused investors, bankers, lawyers, entrepreneurs, and the government to sit-up and take notice. Each was curious as to how the overwhelming consumer demand for a product (prohibited for use since the early 1900s), would translate in terms of investment opportunities. However, the first national restriction of marijuana didn’t happen until the passage of the Marihuana Tax Act of 1936.
Starting a cannabis business requires time, cash-money, and serious commitment. Remember, before you can create that clever business name with a funky matching logo, you must first set up a business to operate lawfully. It is then that the business can operate profitably!
How to Start a Cannabis Business
The 21st Century cannabis industry is still in its infancy. There are many crosscurrent laws (between states and the federal government) that have complicated the industry’s playing field. And until this somewhat conflicting legislation is resolved, cannabis business owners are advised to move forward with legal representation.
Work with an Attorney
It is vital to know how to start a cannabis business, however, it is equally essential to rely on professional advisors to support the day-to-day operations of your cannabis business.
Recommend Provider for Legal Services
LegalShield can help you start your cannabis business with ease. All you have to do is answer a few simple questions and a lawyer will call you back within 4 hours to assess your unique business needs. Legally register your cannabis business in your state for as low as $145.00 (plus state filing fees).
Complete Your Business Plan
A well-thought-out, detailed business plan is critical to managing the first few months/years of business. A business plan is one of the main components when learning how to start a cannabis business. Don’t go at it alone. Speak with marketing experts, IT techies, accountants, and other industry consultants to ensure your business plan includes all aspects of business planning.
Prepare to Fund Your Cannabis Business
Starting a cannabis business can cost as much as $250,000 or more (depending on the type of cannabis business you are starting). For those who maintain a good/excellent credit profile, a cannabis loan/line of credit should be obtainable. However, for those with less than perfect credit, there may be time to help boost your credit score by managing your credit use appropriately –
- Pay off debt as quickly as possible.
- Pay monthly payments on time.
- Lower utilization ratio — calculated as total debt/total available credit.
- Avoid unnecessary credit inquiries.
- Close active credit cards that are not being used to reduce your risk of identity theft.
Apply for Financing
Before you can start a business, there needs to be enough financing in place to accomplish your business objectives. To learn how to start a cannabis business, one must know first how to finance it. Consider these financing options –
- Cannabis Dispensary Loans.
- Cannabis Business Loans.
- Unsecured Cannabis Line of Credit.
- Cannabis Equipment Leasing & Financing.
As you explore these funding options, you will begin to realize that many financing options can be obtained without the provision of tax returns or business financials. These financing products have been created by lenders who recognize the uniqueness and risk of cannabis funding scenarios. As such, the usually rigid ‘business loan underwriting criteria’ has been loosened to accommodate entrepreneurs in need of capital to open a cannabis business.
Fund the Cannabis Business with Your Own Money
If borrowing money isn’t your thing (or you want to use multiple source to fund your cannabis business), using an approved retirement account (such as a 401K) to fund your business is an option. There is a process called Rollover for Business Startups (ROBS) that legally allow you to fund your new cannabis business with your 401K (or other retirement account) without facing IRS penalties or other tax obligations.
States Where Cannabis Businesses Operate Legally
One can only open a cannabis business in those states that legalized its use — be it medicinal or recreational. Remember though, there is pending legislation in many states.
Medical Marijuana is Broadly Legalized in These States
|Delaware||Rhode Island||New Jersey|
|New Hampshire||New York|
Marijuana Has Been Legalized for Recreational Use in These States
10 Cannabis Business Startup Ideas
Industry pundits and the general investing public agree that the cannabis industry is still in its infancy, and has yet to fully develop. BDS Analytics released its latest cannabis market industry report (2018) which revealed the following analytical 2022 predictions –
- Consumer Spending on Cannabis Products will reach $23 billion.
- Growth will create nearly one-half a million full-time jobs.
However, these are statistically generated expectations. Many other industry experts anticipate an even faster (and more robust) growth for the cannabis industry in the near future.
#1 Cannabis Production — The Growers
Cannabis producers cultivate cannabis plants in accordance with the recently modified legal boundaries. Cannabis growers are most successful when they have experience or education in the areas of horticulture and agriculture.
#2 Cannabis Production — The Extractors
Cannabis extractors are tasked with processing raw plants into oils and other concentrates. These highly potent concentrates extract important cannabis components like CDB and THC that have many uses.
#3 Cannabis Distributors
Most states require cannabis distributors to strictly comply with state cannabis laws. This includes both wholesale and retail cannabis distribution operations.
#4 Cannabis Dispensaries — The Sellers
Cannabis dispensaries are highly-regulated. These licensed retail outlets sell medical cannabis patients or, to adults where the law permits recreational use.
#5 Cannabis Edible Businesses
Cannabis edible companies creatively transform cannabis extracts into delectable treats. Edibles are quite popular as they offer an alternative way to deliver the benefits of cannabis without vaping or smoking cannabis. Cannabis extracts are now available in candy, baked goods, coffee, ice cream, and even lip balm.
#6 Cannabis Beauty Products
Cannabis extracts are also used to infuse soap and lotions. Many consumers rely on the inflammatory properties of CBD (a component of cannabis) to reduce a body’s aches and arthritic pain.
Cannabis Industry Ancillary Businesses
Ancillary businesses create ways in which to support the primary industry of cannabis.
#7 Cannabis Accessories
Manufacturers and retailers of cannabis accessories offer equipment for those who use cannabis legally. Examples include filters, pipes, and grinders, among others.
#8 Cannabis Public Relations
The cannabis industry has yet to fully define itself. Appropriate PR is important to address the industry’s flawed stigma.
#9 Cannabis Security Services
As a result of an ambiguous federal legal status, the cannabis industry remains mostly a cash business; hence, the need for extra security.
#10 Cannabis Packaging
Packaging of cannabis must provide the product with protection that is childproof, and a way in which to keep it fresh.
During that time, Judi began contributing to financial education endeavors and authoring CEU coursework to meet state/ARELLO standards. Judi has held a mortgage broker's, real estate, NASD Series 6 & 63, and LCAM licenses during her career. Recently completed two terms as the President of the condominium where she resides.
She is a passionate photographer/videographer/artist - skills she chooses for a variety of business ventures. When not writing about facts and figures, she remains balanced through the practice of Reiki and kindness.
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