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 a few things to bear in mind before diving headfirst into this exciting new industry.
For one, the legal status of cannabis is constantly in flux, with federal and state laws contradicting each other to the 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, you need a solid cannabis business plan and 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 has affected the industry significantly.
Cannabis Legalization and CBD Products
It is crucial to rapidly review the rules surrounding marijuana legalization as they differ from state to state. Three categories of marijuana legalization exist: recreational, medical, and proscribed.
CBD oil is legal only for patients with medical marijuana cards in Florida, New York, and other states. However, anyone is free to possess and use CBD Oil derived from hemp. New York cannabis laws allow the use of beauty products made of cannabis extracted, provided they only have 0.3% delta-9-tetrahydrocannabinol (THC).
Under the Controlled Substances Act of 1970, cannabis is still classified as possessing a high potential for abuse, and no recognized medicinal application 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 significantly at the state level; in some states, they even conflict with federal law. Thus, we have different legal statuses and prohibition levels on both state and federal levels.
Here is the current state of the cannabis law 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. The FDA approves some, some are not, but enforcement and legality vary from state to state.
The Niche to Specialize In
Any business savvy person will tell you that you must clearly define your niche before establishing your business plan. In simpler terms, you need to be very specific about which exact aspect of the cannabis industry your company will focus on..
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 to 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 mistakenly assume 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 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 for 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 are required?
Finally, one should account for the COVID-19 situation and all the ripples it has created in the industry. Its effects have considerably 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.
The distribution of cannabis-related information is something the world could always use more of. Starting a website, blog, or 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 Cannabis 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 a significant role in the success of your business.
Here’s a tip: It is usually best to leave choosing your business name until after you’ve chosen the niche and 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 the general perception you would like your consumers to have of your business.
How to Finance Your Cannabis Business
How you finance your business depends on the business type and the upfront investment you will require. For example, setting up a website where you will offer info on marijuana, advising people on how to start a marijuana business, following up on all the latest trends, legalization, and so on, is perhaps the cheapest of all the options out there. You need to pay for your website’s costs (domain and hosting), and you’re good to go.
As for other business types, most experts who have advised on starting a weed business usually warn people that it is capital intensive. This is because, apart from the usual business start-up fees and costs, there is the whole aspect of acquiring permits, jumping through legal hoops, and paying fees to regulatory bodies.
It can be quite a significant portion of your start-up fees, and more often than not, these fees will deter many potential entrepreneurs from entering the space.
Furthermore, qualifying for loans and other forms of mainstream finance can be particularly challenging for these 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 directly impact your business performance. Your marketing strategies influence not just how you communicate and interact with your consumers but 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 For Your Cannabis Business
Last but not least, most people offering advice on starting 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 information, 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 information on the subject and build a rapport with your customers. Try to engage with them without trying to sell to them all the time. People are wise to 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.