Starting a marijuana business is now a legitimate option in the states where cannabis is legal. A study by Arcview Market Research and BDS Analytics predicts that recreational and medicinal users are going to spend $57 billion on legal cannabis by the year 2027. The North American market alone should grow to $47.3 billion. It’s time to get in on the ground floor, but you’ll need a business plan first.
To start any business — including a marijuana business — it’s essential to have a business plan you can refer to at all stages of the process. This document will outline the logistics for operating and scaling the business. Your plan will help you prepare for success not only because it helps you pin down details, but because it helps you secure funding from investors.
Each plan is different based on the nature of the business in question. However, in general there are two types of plans: a traditional or lean startup plan. A traditional plan is more comprehensive, while a lean plan is a shotgun document that reflects how a lean startup can and will change as the business jumps feet first into the water.
If you were launching a cannabis dispensary app, a lean plan would suit you well, but for all intents and purposes, your cannabis dispensary will probably need a traditional plan. It’s similar to an SBA pharmacy business plan or a tobacco retail plan from Bplans, but with some important differences. Read on to find out what these differences are.
Any business plan should be adaptable to changes as the business model and market evolve. This may apply to a cannabis dispensary plan most of all. More than almost any other industry, the cannabis industry is evolving as laws, perceptions, and technology change. That being the case, consider the following guidelines to be the opposite of set in stone.
According to the U.S. Small Business Administration, your executive summary should include the following:
A good executive summary will give the reader a basic understanding of the major considerations for opening a dispensary. Don’t bog the reader down in minute details. Give them a general take on what you’re looking at and why it’s realistic.
The market outlook is extremely important because it speaks to the viability of your business. In the cannabis industry, the intense growth rate and high level of consumer demand are points that make opening a dispensary an attractive proposition. At the same time, it’s important to dive deep into the data to increase your own knowledge and to be able to show potential investors your competitive, detailed grasp of the market.
Do comprehensive research, present charts and tables, and be as upfront about your findings as possible. Investors want to know you’re taking an unflinching look at the market and are prepared to make inroads.
Here’s where you tout your team and map out each person’s role. Do you have any partners or are you pursuing any? How many employees will you need? Will you need more than one manager at the outset? What are the various duties your employees will undertake?
Demonstrate that you have intimate knowledge of the business so that, in effect, you could take on any of the essential operating responsibilities. If you already have some people on board as partners and potential employees, talk about what they bring to the table.
Cash flow is the crux of running a small business. Entrepreneur, business planner, and angel investor Tim Berry points out that cash flow isn’t intuitive: some 82 percent of small business failures are the result of poor cash management. Your financial summary must grapple with the realities of cash management by presenting the following:
To provide some context about costs, you could be looking at up to $2 million depending on the size of your operation, according to Dispensary Permits. Banking is tricky in the marijuana business, and you could end up paying $2,000 in monthly holding fees. Moreover, licensing could cost up to $120,000. Be aware of all costs and look into inventory management software that will help keep operating costs low.
Here’s where you talk about what you need in order to be compliant with state and local laws and regulations. You’ve already discussed licensing fees in your financial summary, but now you’ll need to go into detail about which licenses are necessary in your state. How long will it take to get them?
Additionally, there’s the legality issue that all cannabis businesses currently face. Since it’s not legal on the federal level, you need to think about being completely above board in every possible way. Your bookkeeping and accounting must be airtight, meaning you’ll probably want to employ a CPA who can help you navigate the tricky business of filing federal taxes. It’s also not a bad idea to retain a lawyer who can help you stay abreast of any regulatory hurdles and changes.
In your compliance summary, make it clear how you plan on checking off each box to achieve full compliance with state, county, and city regulations.
In the execution section, you’ll outline your step-by-step plan for getting started and maintaining operations. You’ll summarize everything preceding this section in a kind of narrative that includes the fund acquisition process, licensing and compliance, contracting with professionals who deliver essential services, procurement of real estate and supplies, staffing, logistics, and marketing. Which growers and suppliers do you plan on partnering with? Which inventory control method do you plan on using? Do you plan on using a bank for revenue and profits, or will you be a cash-only business with a safe in a secure location?
With all the considerations that will go into running your dispensary, it’s best not to have to worry too much about something as complex as inventory management. The cannabis industry is growing so fast, you’ll want to make sure you’re well-stocked and ready to cater to the needs of your customers. Create the best business plan you can, put it into action, and then hang on for the ride. This is an industry that won’t slow down anytime soon.