Cannabis legalization is a trend that continues to sweep the nation, and as a result, more and more people are thinking about starting their very own cannabis business. However, there are definitely a few things that to bear in mind before diving headfirst into this exciting new industry.
For one, the legal status of cannabis is in a constant state of flux, with federal and state laws contradicting each other to a point where it seems not even the politicians fully understand what is going on.
There are many things you must wrap your mind around if you are to enter the industry successfully. First of all, you need a solid cannabis business plan, and for that, you need to know the game, the rules, and the players. Also, one should consider all types of cannabis businesses and how they function before choosing to go with one or coming up with a new idea. This is especially important during the current COVID-19 situation, as the pandemic affected the industry greatly.
The Set Complex Rules and Regulations
While many of you may be under the impression that cannabis is legal in the U.S. because of the many businesses and online trends you see springing up, it is actually still illegal under federal law.
Under the Controlled Substances Act of 1970, cannabis is still classified to possess a high potential for abuse and no recognized medicinal application that has been formally accepted. This means cannabis is currently a Schedule I substance.
This means that the possession of cannabis is prohibited for both recreational and medical use. However, these policies vary greatly at the state level, and in some states, they even conflict with federal law. Thus, we have different levels of legal status and prohibition on both a state and federal level. Kind of a headache, right?
Here is the current state of affairs across the nation:
- 35 U.S. states allow medicinal cannabis use with a doctor’s recommendation
- 13 other states have a law that limits the THC content in products
- 14 countries allow legal recreational use
- 16 states have decriminalized the use of cannabis
We strongly suggest you check with official sources for a more accurate and up-to-date list of the legal status of consuming cannabis in your area. The main thing to note is that the legalization and prohibition levels do not only concern cannabis but all derived products. Some are approved by the FDA, some not, but enforcement and legality again vary from state to state.
The Niche to Specialize In
Any business savvy person will tell you that you need to clearly define your niche before establishing your business plan. You need to be very specific about what exact aspect of the cannabis industry your company will focus on in simpler terms.
However, the concept of specializing and restricting your market to a select group of consumers who are uniquely interested in what you have to sell can often seem to be contradictory to the goal of reaching as many people as possible while beginning a company.
But the thing is, clearly defining your niche allows you to deliver the absolute best value to your particular target market. You need to ask yourself, what is the sweet spot you can offer that will keep your customers loyal for years to come?
The Types of Cannabis Businesses
So, what type of cannabis business will you set up? Most people make the mistake of assuming the marijuana industry is divided into two categories, cultivators and dispensaries, but there’s much more to it than that. The cannabis industry has its own thriving ecosystem packed with opportunities and unmet needs. Find where you can deliver the most value for the best chance to succeed. With that said, here are a few ideas of the different types of businesses you can focus on:
- Growing cannabis
- Cannabis packaging
- Digital marketing and advertising
- Concentrates and oils
- Medicinal applications
When you have your idea, you need to ask yourself:
- What is the legal status in your area?
- How saturated is the market in that niche?
- Does it have the potential to grow?
- What kinds of capital is required?
Finally, one should account for the COVID-19 situation and all the ripples it has created in the industry all over. The effects of it have greatly changed the balance of opportunity, acting as the great equalizer. While dispensaries and farms were perhaps the primary choices before, now distribution, packaging, delivery, and other services have never been more popular due to the recent changes in consumer buying patterns and the influx of digital purchases.
And, the distribution of cannabis-related information is something the world could always use more of. Starting a website blog or a book dispensary on the topic of marijuana where you will cover many of the important topics surrounding consumption could well prove lucrative in the long run.
How To Choose A Business Name?
Choosing a suitable name can be tricky, but the key here is not to overthink it. Some people spend weeks or even months trying to come up with an appropriate name for their business, yet in reality, it doesn’t play too much of a significant role in the success of your business.
Here’s a tip for you – it is usually best to leave choosing your business name for after you’ve chosen the niche and have formulated your cannabis business plan. The name of your business, be it a website, a farm, a dispensary, or any other type, should reflect the nature of your product or service or your general perception you would like your consumers to have of your business.
How To Finance Your Cannabis Business
The way you finance your business depends on the business type and how much upfront investment you will require. For example, setting up a website where you will offer info on marijuana, advise people on how to start a marijuana business, follow up on all the latest trends, legalization, and so on is perhaps the cheapest of all the options out there. All you need is do is pay for your website costs (domain and hosting), and you’re good to go.
As for other business types, most experts who have ever given advice on starting a weed business normally warn people that it is capital intensive. This is because apart from the usual business start-up fees and costs, there the whole aspect of acquiring permits, jumping through legal hoops, and paying fees to the regulatory bodies. It can be quite a significant portion of your start-up fees, and more often than not, these fees alone will rule out many potential entrepreneurs from entering the space.
Furthermore, qualifying for loans and other forms of mainstream finance can be particularly challenging for these kinds of businesses, but there are options. Some ideas that might be viable are:
- Venture capitalists
- Regular loans for land (real estate loans)
- Equipment financing
- Business accelerators/incubators
How To Market Your Cannabis Business
Whatever sector your business will operate in, your marketing efforts’ success will have a direct impact on your business performance. Your marketing strategies influence not just how you communicate and interact with your consumers, but they also affect your ability to create and sustain long-term relationships in the industry. With that in mind, here are a few quickfire tips for your marketing efforts:
- Focus on building digital channels of communication
- Regularly engage with your consumers
- Fully understand your target market and buyer personas
- Set up great ads
- Build a social media following
How To Build Trust
Last but not least, most people offering advice on how to start a weed business forget to mention how important it is to build trust with your consumers – regardless of your niche. If you are building a website to distribute info, gaining trust from your readers is equally as important as reaching them.
One way to build trust in the cannabis industry would be through transparency. Another would be to offer expert advice and info on the subject and build a rapport with your consumers. Try to engage with them without trying to sell to them all the time. People are wise to the companies that are solely focused on profits, and this can create a breakdown in trust and loyalty.
Building trust with your clients, suppliers, and friends in the industry can be a lifeline to your business in a time of need, so it’s well worth putting in the effort to protect your brand image from the get-go.