It's never easy to become a cannabis business owner. There's no way to know if you'll be successful. Moreover, there's no way you'll be prepared to deal with all the dangers and hurdles that will inevitably arise along the way.
However, for new entrepreneurs and people looking to cash in on the recent “green rush,” the prospect of launching a cannabis business from the ground up can be enticing. Furthermore, having the freedom to set your own working hours, not having to report to your supervisors daily, and the opportunity for unlimited growth are all important considerations.
Every aspiring entrepreneur nowadays fantasizes about launching their own company. Only a handful, though, are successful in completing this task. This is because rookie business owners have no idea how much money, experience, or understanding it takes to get their cannabis business to the point where it will break even or start to profit.
So, on that note, let's look at some crucial takeaways before starting your cannabis business. These will help you do whatever you can to ensure your cannabis business's success.
A Business Plan Is Critical
Many experts and experienced business owners agree that the first step a prospective business owner should take to ensure their business idea becomes a reality is to create an effective business plan. This is especially important in an unforgiving sector like the cannabis industry.
A business plan usually consists of a business idea, a marketing and sales strategy, financial forecasts, an executive summary, and a hiring strategy, to name a few.
When launching a new company, a business plan allows you to anticipate any changes and hurdles. So, suppose you're establishing a cannabis business. In that case, you'll need to think about local and state marijuana laws, the quantity of capital you'll need, the location of your company, and the type of talent you'll need to hire, among other things.
Setting up a successful cannabis business requires a lot of thought, and a business plan will help you find all the answers to questions that may emerge during your ascent to the top of such a competitive sector. It is one of the most important takeaways before starting your cannabis business!
Don't Forget About Your Cannabis Business's Legal Structure
It is critical to comprehend the significance of a legal structure. The four most common legal structures are a C/S Corporation, an LLC (limited liability corporation), a general partnership, and a sole proprietorship.
You'll have to pay taxes as a distinct entity if you form a C corporation. On the other hand, S corporation enterprises are ideal for small businesses wishing to avoid double taxes.
An LLC is a legal organization that limits the responsibility of partners, stockholders, and owners. They can also take advantage of the same tax advantages as a partnership. An LLC will protect you if no one can prove that you acted irresponsibly or illegally while performing business activities.
For businesses with several owners, a partnership is ideal. On the other hand, general partners are required to file state returns and federal tax form 1065. However, you will not be required to file individual income tax returns.
Owners who wish to test a business idea before turning it into a formal one should start with a sole proprietorship. You will, however, be responsible for all of your company's debts and profits.
You should see a corporation attorney or a business accountant if you need additional assistance deciding on the right legal structure for your company. They will give you an idea about which legal structure is better for a cannabis business. It is one of the most critical takeaways before starting your cannabis business.
The Product And Services You Offer Are Critical
You also need to provide thorough information about the services and goods your company intends to offer now and in the future. This will help your customers be aware of what they will get when they give you their business. You must provide detailed information about:
- The pricing of each product
- How they work
- The target audience
- How do you intend to sell and distribute them
- Why your products are superior to those of your competitors
In addition, information regarding any existing or pending patents and trademarks connected to your products and services should be shared with potential investors and business partners.
Financing Is Of The Utmost Importance
Another one of the many key takeaways before starting your cannabis business is knowing how you're going to finance it. For example, you'll need licenses to sell medical marijuana at your cannabis business. In areas where medicinal cannabis is already legal, you may be required to pay a 5000-dollar non-refundable application fee before you even think about opening your doors.
However, this amount can vary from state to state. For instance, The application price in New Jersey is 20,000 dollars, while it's a mere 150 dollars in Louisiana. That being said, you need funding to pay these legal fees.
That said, as many banks that offer small business loans are allied with the federal government, obtaining funding for your cannabis business through this channel is almost impossible. Fortunately, several alternative financial possibilities exist, including crowdfunding, specialized cannabis investment organizations, business accelerators, and incubators.
Remaining Compliant is Critical
Another one of the many key takeaways before starting your cannabis business is knowing how to maintain compliance. To ensure this, you must:
- Fulfill labeling and packaging requirements
- Keep accurate records and documentation
- Install surveillance devices to ensure customer and employee security
- Keep track of your inventory
- Ensure your business location is properly zoned for business activity
- Keep your permits and licenses up-to-date
- Learn about the regulatory agencies you need to work with, including the Department of Public Health and the Bureau of Cannabis Control
Please note that the list shared above should not be considered a substitute for proper legal counsel. But, it will undoubtedly give you an idea of what's required to remain compliant in the cannabis industry. It would be better to hire a compliance officer for your cannabis business to ensure you maintain compliance with state and federal rules and regulations.
This sums up our list of key takeaways before starting a cannabis business. However, take our advice with a grain of salt and look up laws and regulations yourself. After all, cannabis laws are changing with every passing day, and it can be difficult to maintain compliance if you're not up-to-date with the latest cannabis industry-related news. So, do your due diligence and ensure you do whatever you can to take your cannabis business to the heights of success you always wanted!