Considering starting a marijuana business?
You’ve chosen a good time.
The marijuana industry is in a state of rapid growth right now. Marijuana sales in North America hit $6.73 billion in 2016, a 34% growth over 2015. The industry is expected to continue to grow rapidly every year and could even reach $21.6 billion by 2021. It is truly the fastest-growing industry in the U.S.
That doesn’t mean it is easy to start a successful marijuana business. It is quite the opposite. Marijuana businesses are subjected to more regulations and legal requirements than most businesses and those laws are still in a constant state of change. The disconnect between state and federal laws also leaves many legal pitfalls for cannabis businesses.
Types of Marijuana Businesses
There are many ways to profit from the booming marijuana industry. Here are the four most common we’ve found.
- Cannabis Growhouse: The cultivation of cannabis remains one of the most profitable areas of the cannabis industry. However, opening a cannabis growhouse also has the most regulations, highest initial investments and requires the most advanced knowledge.
- Edibles Manufacturing Facility: Rather than direct cultivation, edibles manufacturers could focus on a variety of edible marijuana, tinctures, salves or other infused products. There currently isn’t a single edibles brand that has established itself as a leader in the market, mainly due to the difficulty to get through federal restrictions.
- Cannabis Lab: Offering lab testing services to cultivators and other cannabis businesses is a great way to capitalize on the need for those companies to verify their products meet certain regulations. Cannabis labs are also required to follow strict guidelines.
- Marijuana Dispensary: Essentially a retail store, marijuana dispensaries can be the most difficult to start due to cost and location concerns. Without the added cannabis issues, retail in general can be a challenging business.
Regulations on Marijuana by State
No matter what type of marijuana business you decide to start, it’s important you understand the specific regulations of your state. Most cannabis businesses fail, or fall into serious legal trouble, because they aren’t properly educated on what licenses are needed, what safety regulations apply and what the legal requirements are in your state.
If you’re planning on opening a business in a state that has legalized marijuana, understand that some states require you to establish residency before you can obtain licenses. It doesn’t matter that you’ve found the best state for your marijuana business if you don’t live in that state.
Things to Consider to State a Marijuana Business
Once you’ve chosen your type of business and educated yourself on the laws of your chosen state, the real work can begin. Here are a few things to consider:
- Business Plan: Like any successful business, you need a clear and detailed business plan for how your business will be organized, funded and when you expect to become profitable.
- Costs: How much does it cost to open a marijuana business? There are many diverse costs involved in marijuana businesses from the rent and equipment to the more specific licensing, safety and security costs. It’s important to note that due to federal regulations, banks will very rarely finance marijuana businesses. Most of your capital will need to come from private investors, who all need to be listed on your licenses.
- Location: While it seems like a simple thing to find, getting a good location for your marijuana business has it’s own challenges. Regulations restrict marijuana businesses from being within a certain distance of schools, parks and other specific locations. Landlords are also hesitant to rent to marijuana businesses because of federal asset forfeiture laws which could lose them their property.
- Compliance and Safety: Maintaining compliance with all of the different regulations surrounding how you must operate your business is another major challenge to consider. Safety regulations include the proper handling of cannabis, sanitation guidelines and employee safety all require you to be educated and prepared. Supply your employees with the information and safety equipment they need to comply with these safety regulations.
If you want to start a marijuana business in 2018, you have a fair number of hurdles to jump over, both legally and operationally. However, if you do your research and put a good plan together, you can join and become profitable in one of the most exciting industries in the country.
For more information about starting a marijuana business and avoiding safety concerns, check out our free report, "7 Safety Pitfalls Every Cannabis Business Needs to Know."